Proposal
Congress should amend section 168 of the Internal Revenue Code to provide a shorter,
more realistic recovery period for the tax depreciation of commercial roof systems
and encourage installation of more energy-efficient systems.
Background
From 1981-93, the depreciation recovery schedule for nonresidential property was
increased from 15 years to 39 years to theoretically raise additional revenue.
Problem
The current 39-year depreciation schedule is not a realistic measure of the average
life span of a commercial roof. A 2003 study by the industrial research firm Ducker
Worldwide determined the average life expectancy of a commercial roof to be approximately
17 years. This disparity serves as a disincentive for building owners to
replace failing roofs because an owner who replaces a roof before 39 years have
elapsed must carry that roof on the books even though it no longer exists. The Treasury
Department's Report to the Congress on Depreciation Recovery Periods and Methods
(July 2000) corroborated this quandary, finding "…a 'cascading' effect, where several
roofs are being depreciated at the same time, even though only one is physically
present." This is a disincentive to invest in new more energy-efficient roof systems
in their entirety as opposed to piecemeal repairs of roofs built using dated technology.
Solution
Pass the Roofing Energy Efficiency Tax Act of 2007 (REETA), HR 4126, introduced
by Reps. William Pascrell (D-N.J.) and Ron Lewis (R-Ky.), to reduce to 20 years
the depreciation schedule for commercial roof systems that meet the energy-efficiency
requirements of Standard 90.1 of the American Society of Heating, Refrigerating,
and Air Conditioning Engineers. This would have a positive effect on the environment
and the economy because it would spur demand for new energy-efficient roof systems
and:
- Reduce U.S. energy consumption by 13.3 million kilowatt hours annually
- Create 40,000 new manufacturing and "green" contracting jobs through
increased demand for energy efficient roofing materials and work
- Add $1 billion of taxable annual revenue from the roofing industry
- Save small businesses billions of dollars through a simpler and more equitable system
of taxation and lower energy costs
(Ducker Worldwide study "Comprehensive Nonresidential Building Analysis to Estimate
the Current Reality of Roofing Longevity", September 2003,
www.ducker.com.)
Contact Nick Tindall, NRCA's director of public affairs at (847) 493-7599 or
ntindall@nrca.net with any questions.
(September 2007)