Policy: The IES Goes to Washington

Apr 15, 2021
Policy: The IES Goes to Washington

All the ‘hallowed halls’ where we make our mark

By Alex Baker

IES Goes to WashingtonWhere will the Society have an impact in our nation’s capital on a given day? Here are just a few places to look:

IES in the Oval Office.
Anyone with a keen interest in the intersection of science and policy may enjoy a surge of endorphins released by reviewing recent White House Executive Orders, where science is once again front and center. On Day 1 of the Biden Administration, after signing Executive Orders toward advancing racial equity (E.O. 13985), ensuring an accurate census (13986), organizing the COVID-19 federal response (13987), preventing and combating discrimination (13988), and codifying Executive Branch ethics commitments (13989), the President’s attention was focused on…the IES, of course! Yes, that’s a gross exaggeration, but day one E.O. 13990 Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis directs federal agencies “to immediately review and… take action to address the promulgation of Federal regulations and other actions during the last 4 years that conflict with these important national objectives,” which include “reduc[ing] greenhouse gas emissions” and “bolster[ing] resilience to the impacts of climate change.”

Among other things, the E.O. directs the Department of Energy (DOE) to “consider publishing for notice and comment a proposed rule suspending, revising, or rescinding the… ‘Final Determination Regarding Energy Efficiency Improvements in ANSI/ASHRAE/IES Standard 90.1-2016.’ ” This is curious; at a glance, the energy savings of the Standard 90.1-2016 version versus the 2013 version appears to be in question, and the E.O. directs the same steps for the 2018 International Energy Conservation Code (IECC). Strange as this seems, it may simply be a move to accelerate the Department’s analyses and Final Determinations for the next versions of these energy codes. DOE’s response is due by May.

IES at the IRS.
ANSI/ASHRAE/IES Standard 90.1 plays a prominent role in another matter I’m following closely along with Mark Lien, IES industry relations manager. Federal tax deduction 179D, first codified in 2006, references Standard 90.1 to incentivize commercial building taxpayers to invest in more energy efficient interior lighting, building envelope, heating, cooling, ventilation and hot water systems, for new construction and renovation. Building owners—or the people primarily responsible for the systems’ design in case of government-owned property—have historically received up to $1.80 per sq ft for exceeding Standard 90.1 performance requirements. Compliance is informed by IRS Notices and determined using DOE qualified software. A fully qualifying property is one which saves 50% “of the combined energy for the interior lighting, HVAC and hot water systems as compared to a reference building that meets the minimum requirements of…Standard 90.1-2007 for buildings placed in service on or after 1/1/2016.” A second pathway makes smaller deductions of $0.60 per sq ft available for those undertaking only lighting, or envelope, or HVAC and hot water improvements. A third pathway to the deduction is through the Interim Lighting Rule, wherein “interim” apparently denotes the period between 2006 and the end of time. This rule provides a sliding scale incentive up to $0.60 per sq ft for reductions in LPDs of 25% to 40%, or 50% for warehouses. These are the three longstanding pathways for tax deduction 179D, which was set to expire on December 31, 2020.

Deep inside the mammoth Consolidated Appropriations Act of 2021 (H.R. 133) signed into law the last week of the year, Congress permanently extended the deduction to the delight of many in the energy efficiency community. Not only was the deduction made permanent, and applicable to property placed in service after December 31, 2020, Congress also included an inflation adjustment above the $1.80 per sq ft starting point. Some regard this as an insufficient incentive to move the market, and Congress’ habit in recent years of only funding 179D retroactively has never helped, but at least the deduction will now keep pace with inflation. Hey, it’s better than a kick in the head.

Here’s the problem. Achieving 50% combined energy savings was relatively easy back when the bar was set at the 2007 version of Standard 90.1. But in H.R. 133, Congress also struck the tax code reference to Standard 90.1-2007, and replaced it with “Reference Standard 90.1,” defined as the most recent Standard 90.1 version “which has been affirmed by the [Treasury] Secretary, after consultation with the Secretary of Energy.” Today, Standard 90.1–2016 is the most recent version for which DOE has issued a positive Determination stating that the new version saves more energy compared to the previous version. A positive Determination for the 2019 version is anticipated this year. As you may recall from other LD+A columns, the lighting requirements in the 2019 version of Standard 90.1 vary significantly from the 2016 version in two important ways. First, 2019 lighting power densities (LPDs) are, for the first time, aligned with the illuminance recommendations published in ANSI/IES Recommended Practices. Secondly, and quite importantly: nearly all of the luminaire models studied to establish baseline luminaire performance in the 2019 version incorporate LEDs as the primary light sources.

Calculating from LPDs back to luminaire efficacy, an initial analysis shows that for some luminaire types, besting 90.1- 2019 by just 30% puts the required luminaire efficacy into the bleeding edge performance range. For others, DOE’s projections for SSL luminaire efficacy in the year 2035 fall short of the performance required to meet today’s new 179D deduction requirements. Since the tax code includes no lighting quality requirements, attempts to secure the required percentage savings over 90.1-2019 are likely to be achieved through compromises in proper lighting design, namely by designing below ANSI/IES Recommended Practice levels. This would compromise the safety, security and performance of building occupants, while elevating liability risks for building owners.

IES in Congress.
The solution to this new 179D problem unfortunately lies outside the purview of the Executive Branch; the solution must be legislated. Mark and I are in touch with a wide variety of stakeholders, looking to build understanding of the problem. One adjustment seems obvious: requiring project compliance with ANSI recommended lighting levels—as published by the IES—for building owners claiming the 179D tax deduction. Meanwhile, other stakeholders are considering H.R. 133 a mere down payment toward a grander vision of the 179D tax deduction, angling for an increase of the deduction to $3 per sq ft (with inflation adjustment), and fortunately, more rational percentages over the 2019 version of Standard 90.1.

IES also recently joined two coalitions pressing for other federal legislation. The first is the Build by the Fourth of July coalition, organized by the U.S. Chamber of Commerce. This is not a literal request, but rather an attempt by more than 300 signatories to push “for enactment of comprehensive legislation before July 4, 2021 that will: repair and update our crumbling infrastructure, stimulate our economy and create middle-class sustaining jobs, promote fiscally and environmentally responsible policies, address climate change, improve federal project approvals, and address the digital divide.” The Chamber rightly notes that “each Congress and every new Administration includes infrastructure as a top priority.” Maybe this year ideation will give way to action.

Finally, revisiting the Qualifying Investment Property (QIP) problem (see September 2018 “Policy Points”), IES has joined the E-QUIP Coalition pushing for passage of the bipartisan Energy Efficient Qualified Improvement Property Act (the E-QUIP Act). For a period of five years, the Act would encourage investments in commercial and multifamily building performance improvements by “amend[ing] the Internal Revenue Code of 1986 to allow 10-year straight line depreciation for energy efficient qualified improvement property.” For lighting, “qualified” refers to performance as captured in the latest version of the International Green Construction Code (IgCC). The IES is in good company with co-signers from dozens of other organizations including the Alliance to Save Energy, the American Institute of Architects, the International Code Council, the International WELL Building Institute and the U.S. Green Building Council.