Deductibility of LEED certification costs.

• Author: Ypma, Joel
• Position: Energy and Environmental Design

Leadership in Energy and Environmental Design (LEED) certification is an increasingly popular distinction demonstrating and recognizing building sustainability. It also demonstrates a commitment to "green" principles through the design and construction of a building. The certification is an appealing form of recognition for building owners dedicated to key environmental principles. However, the cost to obtain LEED certification for new or existing building space can vary depending on the size of the project and the level of certification desired. Tax professionals may be in the best position to support their clients or company in identifying these costs and determining the appropriate tax treatment as either a current-period expense or a capital expenditure.

The LEED Green Building rating systems and certification program were developed by the U.S. Green Building Council (USGBC) in 2000 and are currently administered by the Green Building Certification Institute (GBCI). LEED is an internationally recognized standard for green construction and building designs. LEED certification is an effective and established form of environmental action that continues to be popular with dynamic building owners, developers, and construction companies. According to the USGBC website (usgbc.org), nearly 9 billion square feet of building space have already been certified, and an additional 1.6 million square feet are certified each day.

LEED certification for new construction and major renovation projects is awarded progressively on the following scale: Certified, Silver, Gold, and Platinum. The various levels of certification represent the degree to which the project was designed and built while incorporating strategies for "achieving high performance in key areas of human and environmental health" including sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality.

The intent of this discussion is not to dissect the requirements and intricacies of obtaining LEED certification for a building; however, the certification process can aptly be summarized as administrative-and compliance-driven. Furthermore, the certification must be completed by a LEED-accredited professional.

Building owners that seek LEED certification for their building or project will most likely engage the project's contractor, architect, or a third-party provider to drive the certification process. The certification process is...