2004 Finalist
State of Oregon
Innovations in American Government Awards
Innovations in American Government Awards

Any homeowner knows the value of installing low-energy lighting fixtures and other energy-saving measures in trying to keep power bills down. Consumers have long benefited from government rebates encouraging the use of such appliances, as have businesses throughout the country.

In Oregon, the Business Energy Tax Credit Program was established in 1979 as an incentive for businesses to invest in these kinds of energy-saving measures, but it was not available to nonprofits and governmental groups, as they had no tax liability. These groups use an enormous amount of power; the federal government alone uses 1.4% of the nation's energy, making it the largest energy consumer in the country.

Oregon's economy took a downturn in 2001, and an energy crisis in the same year took a toll on the ability of public-sector groups to pay their energy bills, let alone upgrade their energy infrastructure. Ask any hospital director to choose between buying energy-efficient lights and paying a few more nurses' salaries to alleviate overcrowding and they'll tend to choose the immediate payoff of increased manpower, especially if they have no additional incentive to conserve energy.

In an attempt to fix this problem, Oregon's Office of Energy started a Pass-Through Option Program in 2001, which allows non-profits and public entities to use the tax liability of a partnered business to benefit from the Business Energy Tax Credit. The business claims the credit against its own tax liability and pays it as a lump sum to the nonprofit group.

By reducing barriers to the start-up costs of energy-saving measures, the program creates incentives for nonprofits to invest in projects that can reduce their monthly energy bills, leaving more money overall for their core missions. There are environmental benefits as well; for every kilowatt of power saved through this project, 1.4 pounds of carbon dioxide are not released into the atmosphere.

The idea is a fairly new one; the state of Hawaii had a brief flirtation with nonprofit energy tax credits in the mid-1990s, but the program was quickly axed to meet budget cuts. The administrative overhead of Oregon's pass-through program is completely met by application fees of 0.0075% of the eligible project costs. The projects funded have the same eligibility requirements as those of business; they must achieve at least 10 percent energy savings and have a payback schedule of less than 15 years.

The state has been aggressively recruiting both nonprofits and supporting businesses to the program, including major corporations such as Nike, Norm Thompson Outfitters, and U.S. Bank. Businesses have reacted positively, as the program enables them to write a large check for a good cause without devoting any of their own resources to the project.

The program has grown in scope and success over the years; in 2002, the first full year of the program, 30 different nonprofits completed projects under the pass-through option, and in 2003, this number rose to over 100. Over the course of the lifetime of the individual conservation projects, the savings to the nonprofit, and eventually to the taxpayers in Oregon (especially for public entities like schools and government offices), are many times that of the initial investment.