By Bob Hinkle, President & CEO, Metrus Energy

The Phase 3 Recovery Act that President Trump signed into law last week is monumental legislation at a critical time for our country. It is a massive, $2 trillion act that rightly focuses on the near-term needs of our health care response and the economy, delivering near-term stimulus targeted to households and businesses suffering from the wide-ranging impacts of the COVID-19 pandemic. A less discussed tax provision included in the package is worth taking note of: It will generate significant job-creation, has long-term sustainable economic growth benefits and is actually a correction to the Tax Cuts and Jobs Act of 2017. This correction will increase the energy efficiency of the retail, industrial and commercial sectors as well as spur our country’s efforts to combat climate change. 

This tax fix enables Qualified Improvement Property (QIP) to be eligible for the 15-year equipment depreciation category which includes virtually all types of energy-intensive building equipment such as refrigeration, HVAC, lighting and other components. Many efficiency upgrades (such as LED lights) have useful lives of 5 to 15 years but because of a drafting error in the 2017 tax bill were forced to be depreciated at 39 years. This made no sense in terms of the actual useful life of efficiency equipment – and effectively discouraged building owners from replacing old, inefficient equipment with newer, high-efficiency models.

By correcting this error, the Phase 3 Recovery Act Recovery Act provides both economic and environmental stimulus when we need it most. A report by the American Council for an Energy Efficient Economy (ACEEE) found that energy efficiency could cut U.S. greenhouse gas emissions by 50% by 2050, getting us halfway to U.S. climate goals.  Further, this fix provides both immediate liquidity to struggling businesses estimated by some retail industry experts to total several billion dollars, and it will catalyze near-term investments in efficiency upgrades that create new jobs and improve the bottom line of companies nationwide.

The Phase 3 Recovery Act Recovery Act does not include energy-related stimulus such as clean energy tax provisions. But we will need to take a closer look at those in any future stimulus to make sure we are creating economic opportunities that put people back to work. Metrus is proud to work with the Alliance to Save Energy and other clean energy industry stakeholders who worked tirelessly in getting the QIP correction made and are now leading efforts to ensure that our recovery from the COVID-19 pandemic is economically robust and sustainable.