Two main Federal tax incentives exist for installation of cool roofing, but as with any Federal government program there are qualifications that need to be met.
At this time, single-ply membranes are not eligible for a tax credit on residential applications. However, if additional insulation is installed during roof replacement, the cost of the insulation can be claimed as a credit.
In general, tax law allows a deduction for part or all of the cost of energy efficient building property that the taxpayer places in service between December 31, 2005 and December 31, 2013. Several conditions must be met to qualify for the commercial tax deduction:
1. The building must be within the U.S. and must meet the requirements of ASHRAE Standard 90.1-2001 – Energy Standard for Buildings Except Low-Rise Residential Buildings.
2. To qualify for the maximum total combined deduction for all lighting, HVAC, hot water, and building envelope property installed, the total annual energy and power costs of the building must be reduced by at least 50 percent. A partial deduction is allowed for each separate building system. The IRS set the following target reductions in March 2008:
- Interior lighting – 20%
- HVAC and hot water – 20%
- Building envelope – 10%
Cool roofing is partially qualifying if it is estimated to reduce the total annual energy and power costs by 10 percent or more. The maximum deduction amount for partially qualifying property is $0.60 per square foot of the building.
3. The Performance Rating Method (PRM) must be used to compute the percentage reduction. Calculations are based on a reference building located in the same climate zone as the taxpayer’s building and containing the new building component that has been incorporated, but is otherwise identical to the reference building. The Department of Energy maintains a list of qualified software to be used to calculate energy and power costs for certification.
4. To claim the deduction, the taxpayer must obtain a certification provided by a qualified individual. The taxpayer is not required to attach the certification to the tax return, but the taxpayer must maintain proper records to establish the entitlement. A qualified individual:
- is not related to the taxpayer claiming the deduction;
- is an engineer or contractor that is properly licensed as a professional engineer or contractor in the jurisdiction in which the building is located; and
- Has represented in writing to the taxpayer that he or she has the requisite qualifications.
A certification must contain:
- the name, address, and telephone number of the qualified individual;
- the address of the building to which the certification applies;
- one of five statements (as outlined by the IRS) explaining the manner in which the building envelope property satisfies energy efficiency requirements.
