Congress last year authorized the issuance of up to $2 billion in tax-exempt private activity bonds for environmentally friendly projects on "brownfield" former industrial sites.
In its first guidance on the issue, the IRS said such projects must be large, with at least 1 million square feet of building space or 20 acres of land.
At least 75 percent of the project's building or land area must qualify for the United States Green Building Council's (USGBC) Leadership in Energy and Environmental Design (LEED) certification.
To be LEED certified, a building must score 32 out of 69 possible points by installing a wide range of features ranging from access to public transportation to water-efficient landscaping, renewable energy technology, recycled materials, low-emission carpets and innovation in design.
Detailed information on the certification can be found at http://www.usgbc.org/DisplayPage.aspx?CMSPageID=220&
Michael Ekstract, a spokesman for the USGBC said that most existing buildings that meet the LEED certification gain a lot of points for low energy consumption or on-site power-generation equipment such as photovoltaic cells or wind turbines. Applicants for green bond tax exemptions will be required to describe such alternative generation capacity, which also may include biomass, geothermal, fuel cells or other technology.
Among projects on the drawing boards seeking to qualify for such financing is DestiNY USA, a proposed $2.2 billion, 800-acre resort, shopping and entertainment complex attached to an existing retail mall in Syracuse, N.Y. It pledges to operate with no fossil fuels. Another is Atlantic Station, a mixed-use redevelopment of a 138-acre former steel mill site in Atlanta that will open the doors of a new IKEA furniture store next week.
In aggregate, the projects using the $2 billion in tax-exempt financing are required by Congress to reduce U.S. electricity consumption by more than 150 megawatts annually versus conventional generation, to reduce sulfur dioxide emissions by at least 10 tons compared to coal-fired power generation, and to boost the market for photovoltaic cells by 75 percent over the market's growth from 2001 to 2002.
The IRS also said the net savings from the tax-exempt status of each bond issue must not exceed the issue proceeds to be spent on purchase and construction of the sustainable design features of the project, compliance with the LEED certification or the purchase, remediation and foundation construction of the brownfield site.
In addition, the project also must have support from state and local resources of at least $5 million, the IRS said. In most states, the projects must create at least 1,500 full-time equivalent jobs and 1,000 jobs during construction. In five states designated as rural — Iowa, Louisiana, Maine, North Dakota and West Virginia — qualifying projects need only employ 150 full-time equivalent employees and 100 during construction.
