Michigan: Tax credits for "Green Buildings"

The push for energy efficient building practices in Michigan is under way with the introduction of legislation such as House Bill 4286 by Representative Bruce Rendon (R-Lake City) in February 2011. This bill seeks to amend the Michigan Business Tax Act (2007 PA 36) by providing tax credits for "green" housing practices. In this bill "green" in reference to building practices means that there is an emphasis on site conservation with sustainable planning, water conservation/efficiency, energy efficiency/renewable efficiency, conservation of materials/resources, and indoor environmental quality. Tax credits are awarded based on the acquisition of a Leadership in Energy and Environmental Design (LEED) certification from the U.S. Green Building Council (Legislature.mi.gov).

House Bill 4286 provides tax credits in two capacities, for the construction or rehabilitation of a green building and for installation of a "green" generator. A "green" generator uses renewable energy or a fuel cell but must not exceed 150 kilowatts and must be approved by the Michigan Public Service Commission. A "green building" must have at least four habitable floors with at least 10,000 square feet or be part of a single or phased multifamily construction plan, be a commercial/industrial building, or any combination of the aforementioned building types. For a green building a 50% tax credit or $50,000, whichever is less, is awarded for the total cost of construction or rehabilitation as well as the expense to becoming LEED certified. Installing an eligible generator would allow a 20% tax credit on costs incurred by the purchase and installation of the generator and equipment used to connect it to the power grid as well as participation in the net metering program. Those credits that exceed the tax liability for the year will be carried forward for one year (Legislature.mi.gov).

A potential issue with this bill is the emphasis on commercial buildings. In Michigan, there is an industry for energy efficient homes. The largest builder of green housing is Sable Homes who have been building hybrid housing since 1996 (Racette). Sable Homes caters to residential housing and a client that has a "monthly mortgage of $700 including taxes and insurance and heating budgets of $500 a year" (Racette). Two other companies in Michigan, Dow Chemical and Cobblestone Homes, have partnered to create a home in which there is zero-net costs for utilities (Dodson). Again, these are companies aiming at residential applications that do not benefit from this tax credit. Along with housing companies, the Michigan Chapter of Habitat for Humanity has begun incorporating energy efficient building practices into their homes (Fusciardi). While the bill would provide benefits for large commercial applications, such as the Social Security Building in Grand Rapids that was LEED-certified in May of 2011, the absence of a provision that would include residential applications may be cause for concern for some lawmakers. This bill will likely need to be revised as Governor Snyder eliminated the Michigan Business Tax in May of 2011 which this bill seeks to amend (Luke). Currently, the bill is in the Committee of Tax Policy where it has been since February 27th, 2011 (Legislative.mi.gov).

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