Tier 2 extensions and exemptions: who qualifies and when to apply
Not every Tier 2 building has to file on 1 July 2027. Some qualify for an exemption for the current five-year cycle; others can get two more years. The two have different deadlines, and the exemption deadline comes first.
Exemptions
An exemption takes the building out of the current compliance cycle. Commerce lists eight exemption types. A building qualifies when one of them, or a permitted combination, affects more than 50% of its floor area:
- No certificate of occupancy
- No physical occupancy (a building is treated as unoccupied when 50% or more of its conditioned floor area is not leased or is otherwise vacant)
- Unconditioned and semi-heated space
- Manufacturing or industrial use (Factory group F or High-hazard group H)
- Agricultural
- Demolition
- Financial hardship
- National security
The August 2026 rule change limited which exemptions can be combined to reach the 50% threshold, and Commerce's page notes the stacking rule refers to the first group of criteria; check Annex Y section Y4.1 for the exact evidence each exemption needs.
Deadline: exemption applications must reach Commerce no later than six months before the compliance date, which for 1 July 2027 is about 1 January 2027. You can apply up to two years early. An exemption lasts only for the current five-year cycle.
Extensions
An extension gives you two more years to comply. Apply between six months before and six months after the compliance date, so from 1 January 2027 to 1 July 2027 and up to about 1 January 2028. You need at least one of these grounds:
- Circumstances beyond your control that substantially interfere with compliance
- A recent change of ownership (the 2026 rule specifies an arm's-length transaction)
- Financial restrictions
- New construction, additions or major remodels
- Benchmarking is complete, but you need more time for the Energy Management Plan and O&M Program
The last ground was added in August 2026, replacing the old "conditional compliance" route. It is useful, but it requires benchmarking to be finished, so start Portfolio Manager now even if you expect to need more time. Portfolio Manager setup guide.
Which one fits
| Your situation | Likely route |
|---|---|
| Building mostly vacant, unconditioned or industrial | Exemption, apply by about 1 Jan 2027 |
| Being demolished or not yet occupied | Exemption, with evidence |
| Bought recently, or mid-renovation | Extension |
| Data done, documents not ready in time | Extension (benchmarking ground) |
| None of the above | File by 1 July 2027 and claim the incentive |
An extension or exemption does not earn the incentive; filing does. For most occupied buildings, the $0.30/sq ft incentive makes filing on time the better outcome. Deadline, penalties and cost.