Baltimore County May Replace LEED-Based Residential Property Tax Credit

Date: May 20, 2010

A recently introduced bill before the Baltimore County Council, Bill No. 43-10, would repeal the county's existing residential property tax credit for compliance with LEED for Homes, replacing it with a similar credit based entirely on the home's energy efficiency.

Under the current provision, discussed by Dino La Fiandra last year in an article for the Green Building and Sustainability Newsletter, a residential property owner is eligible for a property tax credit for 40% of the tax assessed for a property attaining LEED for Homes Silver status, 60% for being LEED for Home Gold-compliant, and 100% for LEED for Homes Platinum level compliance. The tax credit runs for three years after the taxpayer files for it.

The LEED for Homes rating system is based on the award of points for a home's performance across eight categories: Innovation and Design Process; Location & Linkages (measuring the sustainability of the placement of the home within a community); Sustainable Sites; Water Efficiency; Energy & Atmosphere; Materials & Resources; Indoor Environmental Quality; and Awareness & Education (measuring the education of the home's occupants about the operation and maintenance of green systems in the home).

In contrast, the new approach would focus solely on energy use. The amount of the new tax credit would be a percentage of the assessed tax equal to the percentage of increased energy efficiency - i.e., a home that achieves a 55% increase in energy efficiency would be eligible for a tax credit of 55% of the tax assessed on the property. A property owner must attain an energy efficiency increase of at least 40% to qualify for the credit.

How would increased energy efficiency measured? For existing structures undergoing renovation, the increase is to be calculated by comparing the actual energy use after renovation to a baseline of such use immediately prior to the renovation. The calculation for new construction is a little more complex. The new bill would require energy modeling at the design phase to compute the anticipated energy use of the new residence, comparing that result to a baseline of the existing requirements of the county code.

This potential move away from reliance on LEED for Homes to a focus on energy use follows criticism of LEED standards as failing to result in reduced energy use in LEED-compliant buildings. The New York Times examined this issue last summer, noting that a USGBC study had found that more than half of the LEED-certified building that had obtained certification prior to 2006 did not qualify for an Energy Star label, and many were the bottom half, in terms of energy use, of comparable buildings nationwide.

The new tax credit, like the current one, would run for three years from application, unless the residence attains carbon-neutral status, in which case the credit would run for five years. The county would be permitted to revoke the credit if the building is altered so that it no longer complies with the bill's energy use requirements. The new bill would not permit revocation simply because it turned out that a new residence used more energy than predicted by design phase energy modeling. Additionally, it would not undo tax credits already earned by residential property owners under the existing LEED-based approach for future tax years.

The council will discuss and hear testimony on the bill at a June 1 afternoon work session and is currently scheduled to vote on it on June 7.