HOUSE 3rd Reading Unamended April 30, 2015 HOUSE Amended 2nd Reading April 29, 2015First Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 15-0718.01 Esther van Mourik x4215HOUSE BILL 15-1236 HOUSE SPONSORSHIP Winter, SENATE SPONSORSHIP Martinez Humenik and Donovan, House Committees Senate Committees Transportation & Energy Finance Appropriations A BILL FOR AN ACT Concerning income tax credits for improving energy efficiency in certain buildings, and, in connection therewith, making an appropriation. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill creates income tax credits for a limited number of years for: An owner of an existing multi-family home if the owner makes energy efficiency improvements to the multi-family home that result in at least a 20% reduction in energy consumption; An owner of a new multi-family home or multi-family home undergoing major renovation, or an owner of a new commercial building or commercial building undergoing major renovation, if the building achieves at least a specified percentage of energy savings relative to energy consumption and either achieves LEED or green globes certification for the construction or renovation; and An owner, or multiple owners prorated according to ownership shares, of a new affordable housing project or affordable housing project undergoing major renovation, if the building achieves at least a specified percentage of energy savings relative to energy consumption and meets enterprise green community energy efficiency standards for the construction or renovation. The bill requires the owner to provide certain documentation to the Colorado energy office and requires the Colorado energy office to issue credit certificates to the owner for the tax credit. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add 39-22-538 as follows: 39-22-538. Colorado energy efficiency improvement tax credit - legislative declaration - definitions - repeal. (1) The general assembly hereby finds and declares that: (a) Investments in the efficiency with which electricity is consumed remain the least expensive means to meet the demand for the energy services, such as light, heat, and hot water, that electricity enables; (b) Investments in energy efficiency can reduce the costs of energy bills for Colorado energy consumers; (c) Notwithstanding efforts by natural gas and electric utilities, the state of Colorado, and others to promote electric energy efficiency, there remains a large untapped natural gas and electric efficiency resource, especially among commercial and residential sectors and within buildings; (d) This untapped efficiency resource is primarily a result of persistent market barriers; and (e) Providing tax credits to natural gas and electricity consumers is a powerful means to encourage more cost-effective efficiency improvements, thereby lowering the cost of natural gas and electric energy services in Colorado. (2) As used in this section, unless the context otherwise requires: (a) "Affordable housing project" means a project with a minimum term of affordability of no less than five years which has either: (I) Twenty percent or more of the housing units both rent-restricted and occupied by families whose income is fifty percent or less of the area median income as determined by the United States department of housing and urban development, with adjustments for household size; or (II) Forty percent or more of the housing units both rent-restricted and occupied by families whose income is sixty percent or less of the area median income as determined by the United States department of housing and urban development, with adjustments for household size. (b) "Colorado energy office" or "office" means the Colorado energy office created in section 24-38.5-101, C.R.S. (c) "Commercial building" means any building intended for occupancy by one or more businesses and is not a multi-family home or an affordable housing project. (d) "Credit certificate" means a statement issued by the Colorado energy office certifying that a given owner qualifies for the credit authorized in this section and specifying the amount of a credit. (e) "Energy efficiency improvements" means modifications made in each income tax year to a commercial building or a multi-family home or to the equipment in a commercial building or multi-family home where such modifications reduce the energy consumption of the commercial building or multi-family home. (f) "Enterprise green community" means an affordable housing project that meets the energy efficiency standards as set forth in the qualified allocation plan as such plan is defined in section 39-22-2101 (8), or that has been certified by enterprise green communities or such successor organization. (g) "Green globes" means a green building rating and certification program licensed for use by the green building initiative, a nonprofit organization, that oversees the development of voluntary consensus standards for products, services, processes, systems, and personnel in the United States. (h) "Housing unit" means a residence intended for occupancy by a single household. (i) "International energy conservation code" means the 2012 version of the model building energy code issued by the international code council, or its successor organization. (j) "LEED" means a green building certification program established and maintained by the United States green building council, or its successor organization. (k) "Multi-family home" means a building that contains multiple housing units where the heating systems are jointly utilized. (l) "Net installed cost" means the cost in each income tax year after any public utility rebates or funding provided by the state or federal government for energy efficiency improvements. (m) "Owner" means the holder of an interest in a commercial building or multi-family home, including a vendee under a contract for deed to real property, as that term is defined in section 38-35-126 (1) (b), C.R.S. (n) "Public utility" means a public utility as defined in section 40-1-103, C.R.S., supplying electricity or natural gas at retail. (o) "Qualified taxpayer" means an individual, corporation, or other entity who owns an interest, direct or indirect, in the affordable housing project and is subject to the taxes imposed by this article. (p) "Rent-restricted" means the gross rent for the housing unit does not exceed thirty percent of the imputed income limitation applicable to the housing unit in the affordable housing project. (3) (a) Except as provided in paragraphs (a) and (b) of subsection (6) of this section, for income tax years commencing on or after January 1, 2016, but prior to January 1, 2019, an owner of an existing multi-family home is allowed a credit against the income taxes imposed by this article in an amount set forth in paragraph (b) of this subsection (3) for energy efficiency improvements to the multi-family home if the energy efficiency improvements achieve at least a twenty percent reduction in energy consumption as determined by: (I) Participation in an energy efficiency program under the public utility demand-side management program applications set forth in sections 40-3.2-103 and 40-3.2-104, C.R.S., where the public utility issues, upon the owner's request, the owner's projected energy savings based on participating in the utility's demand-side management program. The owner will have the sole responsibility for providing such projected energy savings and other supporting documentation showing that energy consumption of the multi-family home will be reduced by at least twenty percent to the Colorado energy office in order for the office to issue a credit certificate to the owner; or (II) A credit certificate issued by the Colorado energy office that indicates the energy consumption of the multi-family home was reduced by at least twenty percent for a multi-family home served by a public utility that does not allow for participation in an energy efficiency program through the public utility as described in subparagraph (I) of this paragraph (a). (b) (I) Except as provided in subparagraph (II) of this paragraph (b), the amount of the credit is equal to thirty percent of the owner's net installed cost, not to exceed one thousand five hundred dollars per housing unit per income tax year and not to exceed seventy-five thousand dollars per multi-family home. (II) For an affordable housing project, the amount of the credit may not exceed one thousand eight hundred seventy-five dollars per housing unit per income tax year and may not exceed ninety-three thousand seven hundred fifty dollars per affordable housing project. If there is more than one qualified taxpayer who owns the affordable housing project, the amount of the tax credit must be prorated according to ownership shares, unless otherwise agreed to by the qualified taxpayers. (c) The Colorado energy office shall establish and post guidelines on its web site no later than November 31, 2015, setting forth how an owner of a multi-family home served by a public utility that does not allow for participation in an energy efficiency program through the public utility as described in subparagraph (I) of paragraph (a) of this subsection (3) may obtain a credit certificate. If possible, the Colorado energy office shall work in partnership with and rely upon data and information provided by the public utility serving the multi-family home. (4) (a) Subject to the requirements specified in paragraph (b) of this subsection (4), and except as provided in paragraphs (a) and (b) of subsection (6) of this section, for income tax years commencing on or after January 1, 2016, but prior to January 1, 2019, an owner of a new multi-family home or multi-family home undergoing major renovation, or an owner of a new commercial building or commercial building undergoing major renovation, is allowed a credit against the income taxes imposed by this article for energy efficiency improvements to the multi-family home or commercial building as follows: (I) The amount of the credit allowed is equal to fifty cents per square foot of interior floor area of the multi-family home or commercial building for the first fifty thousand square feet plus twenty-five cents per square foot of interior floor area over fifty thousand square feet, and shall not exceed a total of seventy-five thousand dollars per multi-family home or commercial building per income tax year. The credit is only allowed if the multi-family home or commercial building achieves at least twenty percent energy savings relative to energy consumption based on the commercial energy efficiency standard in the international energy conservation code and achieves either: (A) LEED silver certification or better for the construction or major renovation under the LEED program in effect at the time of completion of the construction or major renovation; (B) A two green globes certification or better for the construction or major renovation; or (C) A comparable numeric rating under a sustainable building certification program as determined by the office; (II) The amount of the credit allowed is equal to one dollar per square foot of interior floor area of the multi-family home or commercial building for the first fifty thousand square feet plus fifty cents per square foot of interior floor area over fifty thousand square feet, and shall not exceed a total of one hundred fifty thousand dollars per multi-family home or commercial building per income tax year. The credit is only allowed if the multi-family home or commercial building achieves at least thirty-five percent energy savings relative to energy consumption based on the commercial energy efficiency standard in the international energy conservation code and achieves either: (A) LEED gold certification or better for the construction or major renovation under the LEED program in effect at the time of completion of the construction or major renovation; (B) A three green globes certification or better for the construction or major renovation; or (C) A comparable numeric rating under a sustainable building certification program as determined by the office; or (III) The amount of the credit allowed is equal to two dollars per square foot of interior floor area of the multi-family home or commercial building for the first fifty thousand square feet plus one dollar per square foot of interior floor area over fifty thousand square feet, and shall not exceed a total of three hundred thousand dollars per multi-family home or commercial building per income tax year. The credit is only allowed if the multi-family home or commercial building achieves at least fifty percent energy savings relative to energy consumption based on the commercial energy efficiency standard in the international energy conservation code and achieves either: (A) LEED platinum certification for the construction or major renovation under the LEED program in effect at the time of completion of the construction or major renovation; (B) A four green globes certification for the construction or major renovation; or (C) A comparable numeric rating under a sustainable building certification program as determined by the office. (b) In order to qualify for the credits specified in this subsection (4), the owner of the multi-family home or the commercial building shall present the energy modeling of the multi-family home or the commercial building to the Colorado energy office, along with documentation of the multi-family home or commercial building's interior floor area and, in the case of an existing multi-family home or commercial building, documentation showing that the multi-family home or commercial building completed a major renovation. If the office determines that the owner of the multi-family home or commercial building meets the requirements set forth in paragraph (a) of this subsection (4), the office shall issue a credit certificate to the owner that sets forth the amount of the credit. (5) (a) Subject to the requirements specified in paragraphs (b) and (c) of this subsection (5), and except as provided in paragraphs (a) and (b) of subsection (6) of this section, for income tax years commencing on or after January 1, 2016, but prior to January 1, 2019, a qualified taxpayer who owns a new affordable housing project or an affordable housing project undergoing major renovation is allowed a credit against the income taxes imposed by this article for energy efficiency improvements to the affordable housing project as follows: (I) The amount of the credit allowed is equal to fifty cents per square foot of interior floor area of the affordable housing project for the first fifty thousand square feet plus twenty-five cents per square foot of interior floor area over fifty thousand square feet, and shall not exceed a total of ninety-three thousand seven hundred fifty dollars per affordable housing project per income tax year. The credit is only allowed if the affordable housing project achieves at least twenty percent energy savings relative to energy consumption based on the commercial energy efficiency standard in the international energy conservation code and achieves either: (A) Thirty-five to forty-five point equivalents as an enterprise green community for new construction; (B) Thirty to forty point equivalents as an enterprise green community for major renovation; (C) LEED silver certification or better for the construction or major renovation under the LEED program in effect at the time of completion of the construction or major renovation; (D) A two green globes certification or better for the construction or major renovation; or (E) A comparable numeric rating under a sustainable building certification program as determined by the office; (II) The amount of the credit allowed is equal to one dollar per square foot of interior floor area of the affordable housing project for the first fifty thousand square feet plus fifty cents per square foot of interior floor area over fifty thousand square feet, and shall not exceed a total of one hundred eighty-seven thousand five hundred dollars per affordable housing project per income tax year. The credit is only allowed if the affordable housing project achieves at least thirty-five percent energy savings relative to energy consumption based on the commercial energy efficiency standard in the international energy conservation code and achieves either: (A) Forty-six to seventy-five point equivalents as an enterprise green community for new construction; (B) Forty-one to seventy point equivalents as an enterprise green community for major renovation; (C) LEED gold certification or better for the construction or major renovation under the LEED program in effect at the time of completion of the construction or major renovation; (D) A three green globes certification or better for the construction or major renovation; or (E) A comparable numeric rating under a sustainable building certification program as determined by the office; or (III) The amount of the credit allowed is equal to two dollars per square foot of interior floor area of the affordable housing project for the first fifty thousand square feet plus one dollar per square foot of interior floor area over fifty thousand square feet, and shall not exceed a total of three hundred seventy-five thousand dollars per affordable housing project per income tax year. The credit is only allowed if the affordable housing project achieves at least fifty percent energy savings relative to energy consumption based on the commercial energy efficiency standard in the international energy conservation code and achieves either: (A) More than seventy-five point equivalents as an enterprise green community for new construction; (B) More than seventy point equivalents as an enterprise green community for major renovation; (C) LEED platinum certification for the construction or major renovation under the LEED program in effect at the time of completion of the construction or major renovation; (D) A four green globes certification for the construction or major renovation; or (E) A comparable numeric rating under a sustainable building certification program as determined by the office. (b) In order to qualify for the credits specified in this subsection (5), the qualified taxpayer who owns the affordable housing project shall present the energy modeling of the affordable housing project to the Colorado energy office, along with documentation of the affordable housing project's interior floor area and, in the case of an existing affordable housing project, documentation showing that the affordable housing project completed a major renovation. The qualified taxpayer shall also provide to the office a copy of a regulatory agreement, restrictive covenant, or other such documentation required by the office to establish that the affordable housing project meets the definition set forth in paragraph (a) of subsection (2) of this section. If the office determines that the requirements set forth in paragraph (a) of this subsection (5) were met, the office shall issue a credit certificate to the qualified taxpayer that sets forth the amount of the credit. (c) If there is more than one qualified taxpayer who owns the affordable housing project, the amount of the credit must be prorated according to ownership shares, unless otherwise agreed to by the qualified taxpayers. (6) (a) The Colorado energy office shall not issue more than twenty-five credit certificates per income tax year, and of those twenty-five credit certificates: (I) At least five must be for affordable housing projects, unless the office receives fewer than five requests for credit certificates for affordable housing; (II) No more than five may be for the credit allowed in subparagraph (I) of paragraph (a) of subsection (4) of this section; (III) No more than five may be for the credit allowed in subparagraph (II) of paragraph (a) of subsection (4) of this section; and (IV) No more than five may be for the credit allowed in subparagraph (III) of paragraph (a) of subsection (4) of this section. (b) If an owner or qualified taxpayer constructs, makes major renovations to, or makes energy efficiency improvements to a multi-family home, commercial building, or affordable housing project that is located where the local government building code or other regulations require energy savings or energy efficiency improvements that meet the requirements for a particular tax credit allowed in this section, then the Colorado energy office may not issue a credit certificate to the owner or qualified taxpayer for such credit. (c) To claim a credit allowed in this section, the taxpayer shall attach a copy of the credit certificate issued by the Colorado energy office to his or her tax return. No tax credit is allowed under this section unless the taxpayer provides the copy of the credit certificate. (7) If the amount of a credit allowed in this section exceeds the amount of income taxes otherwise due on the taxpayer's income in the income tax year for which the credit is being claimed, the amount of the credit not used as an offset against income taxes in the current income tax year may be carried forward and used as a credit against subsequent years' income tax liability for a period not to exceed five years and must be applied first to the earliest income tax years possible. Any credit remaining after the five year period may not be refunded or credited to the taxpayer. (8) In reviewing the planned and actual energy savings achievement of a public utility under the public utility demand-side management program applications set forth in sections 40-3.2-103 and 40-3.2-104, C.R.S., the public utilities commission shall not penalize the energy savings achievement of a public utility because participants in such programs also qualify for income tax credits under this section. (9) No later than January 5, 2018, the Colorado energy office shall submit a report to the finance committees of the senate and house of representatives that details: (a) The quality of the implementation of this section; (b) The amount of energy efficiency improvement estimated to be attributable to this section; (c) The value of the tax credits allowed under this section; and (d) Any problems or issues arising in the implementation of this section. (10) The Colorado energy office shall, in a sufficiently timely manner to allow the department of revenue to process returns claiming the credit allowed by this section, provide the department of revenue with an electronic report of the taxpayers receiving a credit certificate as allowed in this section for the preceding calendar year that includes the following information: (a) The taxpayer's name; (b) The taxpayer's social security number; and (c) The amount of the credit allowed in this section. (11) This section is repealed, effective December 31, 2024. SECTION 2. Appropriation. For the 2015-16 state fiscal year, $127,718 is appropriated to the office of the governor for use by the Colorado energy office. This appropriation is from the general fund and is based on an assumption that the office will require an additional 0.9 FTE. To implement this act, the office may use this appropriation for administering a tax credit for certain residential and commercial building projects that attain certain energy efficiency standards. SECTION 3. Act subject to petition - effective date. This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 5, 2015, if adjournment sine die is on May 6, 2015); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2016 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.