Capitol Hill

Earlier this year, NRCA worked with several key Congressional members to introduce legislation that would help create an estimated 40,000 jobs annually in the roofing industry, make significant strides in energy efficiency and provide tax relief for all types of businesses.

The Roofing Efficiency Jobs Act of 2011 (H.R. 2962), introduced by Reps. Tom Reed (R-N.Y.) and Bill Pascrell (D-N.J.), and the Energy-Efficient Cool Roof Jobs Act (S. 1575), introduced by Sens. Ben Cardin (D-Md.) and Mike Crapo (R-Idaho), are bipartisan bills with a laudable goal. Both bills would correct a longstanding flaw in the Internal Revenue Code by reducing the depreciation recovery period for commercial roof system retrofits from 39 to 20 years if newly installed roof systems meet certain benchmark energy-efficiency standards.

An unrealistic measure

Generally, real property was depreciated over 15 years for business tax purposes as recently as the early 1980s. That depreciation schedule increased incrementally until 1993 when nonresidential real property—a commercial building and its structural components—was assigned its current 39-year recovery period as a way for Congress to raise revenue to pay for government spending.

For commercial roof systems, the current 39-year recovery period is more than double a roof system's average useful life, which is 17 years according to a study by Ducker Worldwide, a global industrial research firm. The requirement for building owners to write off their roof systems over a period more than twice their useful service lives results in a tax burden for businesses and a drag on the commercial roofing sector.

Benefits of change

If this flaw in the tax code is rationalized, building owners will be more likely to forgo the common practice of making only piecemeal roof system repairs and instead elect to perform full roof system retrofits.

Simply put, if roof systems are depreciated at a rate consistent with their life spans, the reduced tax burden for building owners will result in more opportunities for roofing contractors and increased production for manufacturers. The Ducker Worldwide study estimates reducing the current depreciation schedule to 20 years would create 40,000 new roofing industry jobs per year.

The legislation's energy-efficiency components are relatively simple. To qualify for the reduced depreciation schedule, a new roof system must contain insulation that meets or exceeds the requirements in ASHRAE 189.1-2009, “Standard for the Design of High-Performance, Green Buildings Except Low-Rise Residential Buildings,” and, in the case of buildings located in Climate Zones 1 through 5, have a cool roof surface as specified by ASHRAE 90.1-2010, “Energy Standard for Buildings Except Low-Rise Residential Buildings.”

These efficiency standards would save building owners an estimated $86 million in energy costs during the first year and eliminate carbon emissions by roughly 1.2 million metric tons, according to the Polyisocyanurate Insulation Manufacturers Association.

The tax relief provided by this legislation directly benefits commercial building owners and lessees. Many types of businesses are housed in commercial buildings, and the roof systems must be depreciated for tax purposes. As such, depreciation reform for commercial roof systems would benefit an array of businesses.

Getting it passed

A broad coalition of construction, manufacturing, energy-efficiency and labor groups, including NRCA, support H.R. 2962 and S. 1575. The coalition recently wrote to congressional tax writers urging them to consider these bills as part of any jobs legislation or tax reform effort. Although getting tax legislation in the current political and budgetary environments will be difficult, this depreciation reform legislation is well-positioned for consideration given its bipartisan support.

As Congress continues to seek a way to improve job creation and tax reform, NRCA will continue working with lawmakers to help pass this legislation.

Brandon J. Audap is NRCA's director of federal affairs.