Posts Tagged ‘2005 Energy Policy Act’

Are You Ready to Take Advantage of New Green Tax Incentives?

Monday, September 12th, 2011

Are You Ready to Take Advantage of New Green Tax Incentives?

Learn more about deductions for energy efficient construction or improvement projects.

Tuesday, August 30, 2011

Capital Review Group

The Energy Policy Act of 2005 includes a tax deduction for investments in “energy-efficient commercial building property” designed to significantly reduce the heating, cooling, water heating, and interior lighting energy cost of new or existing commercial buildings. This energy-efficient commercial building property must be placed into service between January 1, 2006, and December 31, 2013.

If you own your hotel or are a tenant/lessee who has paid for energy efficient construction or improvement projects, you may be eligible for a tax deduction of up to $1.80 per square foot for improving the energy efficiency of your existing commercial buildings or designing high efficiency into new buildings.

To qualify for the full deduction, a building owner or tenant must make investments designed to reduce energy costs by 50 percent or more. A partial deduction of $0.60 per square foot is available for investments in one of three subsystems – lighting, heating and cooling; or building envelope – designed to reduce energy costs by 16.67 percent (one third of the 50 percent requirement).

It is important to remember that tax deductions reduce your overall taxable income with the value of the deduction dependent upon your tax bracket. Tax credits, such as the ones provided for consumers in the 2005 Energy Policy Act, reduce the amount of tax you owe dollar for dollar.

The first step in many effective energy savings programs is to establish the energy use of your building and determine a reasonable energy savings goal. The EPA’s national energy performance rating system (www.energystar.gov/benchmark) is a free online tool that provides many types of buildings with a score on a simple 1 to 100 scale (1 being the least efficient and 100 the most). Assess the current use of your building to establish a reference to assist in identifying the best opportunities to qualify for the tax deduction.

A third-party certificate is required in order to claim the deduction for energy efficient commercial buildings under §179D of the Internal Revenue Code for proposed or newly installed: lighting upgrades, HVAC, hot water and building envelope. Capital Review Group will provide an approved Certification and assure that the process is conducted in accordance to the Energy Policy Act of 2005.

The Energy Policy Act of 2005 provides for and allows a deduction for energy efficient commercial buildings that reduce annual energy and power consumption by 50 percent compared to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) standard. The deduction equals the cost of energy efficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building. Additionally, a partial deduction of $0.60 per square foot is provided for building subsystems such as lighting, HVAC, hot water and building envelope.

Owners of new and existing buildings may earn a partial deduction of $.60 per square foot per “system” for upgrading one or two major building subsystems. These deductions apply to new buildings placed in service between the date of enactment and December 31, 2008, or retrofits to existing buildings during the same time period.

The current rules established a deduction of $0.30 per square foot for buildings – or portion of buildings – that achieve at least 25 percent lighting savings relative to the ASHRAE lighting power density requirements (but excluding ASHRAE’s “additional lighting power allowances”) and that also use bi-level switching. This deduction increases progressively to $.60 per square foot for using bi-level switching and achieving 40 percent lighting savings.

Energy efficient heating, cooling, ventilation and hot water property is partially qualifying property, provided that satisfies both of the following conditions:

1. The property is installed as part of the heating, cooling, ventilation and hot water systems of a building; and

2. It is certified that the heating, cooling, ventilation and hot water systems that have been incorporated into the building, or that the taxpayer plans to incorporate into the building subsequent to the installation of such property, will reduce the total annual energy and power costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water and interior lighting systems by 16.67 percent or more – meeting the minimum requirements. The 16.67 percent reduction must be accomplished solely through energy and power cost reductions for the heating, cooling, ventilation and hot water systems. Reductions in any other energy uses, such as receptacles, process loads, refrigeration, cooking, and elevators, are not taken into account in determining the required deduction.

CRG can conduct a physical inspection and perform an Energy Efficiency Study to calculate, determine and certify the allowable deductions for part or all of the cost of the Energy Efficient Lighting, HVAC, hot water, and building envelope – or any one of these sub-systems that have been placed in service after December 31, 2005, and before January 1, 2014.

For more information, contact M.A. Moore at markym@capitalreviewgroup.com or at (602) 741-7776.



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