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Oklahoma Watch: Tax Credit Targets Energy-Efficient Homes (Aug 09, 2011)

by Logan Layden for Oklahoma Watch

Oklahoma Watch is a non-profit, independent, government watchdog group made up of journalists from across the state.

Workers assemble the board and concrete skeletons of new homes in the Red Canyon Ranch housing edition. It’s a common site in this area of north Norman. But the insulation between these two-by-fours and the windows that will frame the views of future residents will help them save energy. Ideal Homes is building these houses with energy efficient features like high end heating and cooling systems despite the current moratorium on state tax credits of up to $4,000 per house. The credit is meant to help pay for the added costs of constructing energy efficient homes. Vernon McKown is president of sales and part owner of Ideal Homes. He says building green just makes sense.

"Customers have rewarded us for building good product," McKown said. "And so we’re staying with it because it makes good business sense for us, because the better houses we build the more customers we’re able to attract to our business."

McKown says the state tax credit was a key factor in a dramatic increase in energy efficient homes over the past decade, along with a similar federal credit and the Energy Star program.

"If you look at the number of builders that were building Energy Star and high performance homes pre Oklahoma tax credit, and the ones that were after the tax credit, it just blew up," McKown said.

He says Ideal Homes is big enough to continue building efficient homes, but some smaller companies could go back to building to code, and the homebuyer will be the one to suffer. Tony Nab lives in one of the recently completed energy saving homes. He’s been pleasantly surprised by his recent utility bills.

"You know, it was a deciding factor in there without a doubt, to select them as the home builder," Nab said. "This is the first energy efficient home I’ve lived in and it’s been – again the summer has been scorching hot outside so we’ve had to run the A/C non-stop, but still, the bills are less than what we anticipated them being."

The increased scrutiny of the energy efficiency credit stems in part from an opinion last year by then-Attorney General Drew Edmondson calling this credit and seven others “constitutionally infirm” because they’re transferable. McKown said that means home builders can sell the credit to other taxpayers or businesses whether they have anything to do with the construction of energy efficient homes or not.

"I could only aspire to make enough income to use all the tax credits we created, because that would be a lot of income," McCown said. "Typically other businesses that have big incomes because we sell them at a discount – they don’t pay you full value for them, so it’s a discounted rate. Normally they were big companies that would buy $20,000 blocks or $50,000 blocks. And there are brokers that broker tax credits."

Oklahoma Policy Institute Executive Director David Blatt calls it a secondary market in the purchase of tax credits.

"Where it becomes problematic is that this becomes very murky, very hard to follow where this is going, and those who are purchasing the tax credits often are not held to the same levels of accountability and control as the initial investors," Blatt said.

Public records don’t appear to show what portion of the almost $3.8 million in energy efficient home credits doled out in 2009 were sold to third parties.

Oklahoma Watch will be live blogging from the task force meeting. Carol Cole-Frowe and Warren Vieth contributed to this report.

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