Stimulus Package Energy Efficiency Credits White Paper

718 views
633 views

Published on

http://www.capitalreviewgroup.com - You may be eligible for a Stimulus Package Energy Efficiency Credits or tax deductions 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.
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.

Published in: Real Estate, Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
718
On SlideShare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Stimulus Package Energy Efficiency Credits White Paper

  1. 1. ARE YOU READY TO TAKE ADVANTAGE OF THE NEW COMMERCIAL TAX INCENTIVES? INTRODUCTION 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. 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. ELIGIBILITY The energy-efficient commercial building property – such as state of the art lighting system – must be placed into service between January 1, 2006 and December 31, 2013. FULL DEDUCTION To qualify for the full deduction, a building owner or tenant must make investments designed to reduce energy costs by 50% or more. PARTIAL DEDUCTION A partial deduction of $.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 2/3% (one third of the 50% requirement). 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. WHO CAN BENEFIT FROM THE DEDUCTION? The person or the organization that pays for construction is generally the recipient of the deduction. This is usually the building owner, but for some HVAC or lighting efficiency projects – it could be the tenant/lessee. For government owned buildings, the person primarily responsible for designing the building or project may be able to claim the deduction. WHAT CAN YOU DO TODAY TO BE READY? Establish the energy use of your building(s) and set a savings. It is hard to manage what we do not measure. With new easy to use energy tracking tools, you can establish the current energy use of your building(s) and determine a reasonable energy savings goal. This is the first step in many effective energy savings programs, and will help you identify the best opportunities to qualify for the tax deduction. Here’s How: Assess the current use of your building(s) to establish a reference using the EPA’s national energy performance rating system (www.energystar.gov/benchmark) – a free online tool that provides many types of buildings with a score on a simple 1 to 100 scale (1 the least efficient and 100 the most). CAPITAL REVIEW GROUP Copyright 2007-2009 www.capitalreviewgroup.com 1
  2. 2. ENERGY EFFICIENCY STUDY & ENERGY CERTIFICATION In Accordance with the request for a Certificate relating to the deduction for energy efficient commercial buildings under §179D of the Internal Revenue Code for the proposed or newly installed: lighting upgrades, HVAC, hot water and building envelope, Capital Review Group will provide an approved Certification Process and assures that the process is conducted in accordance to Section 1331 of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Sta. 594 (2005) enacted §179D of the Internal Revenue Code. 1. OVERVIEW Section 1331 of 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% 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 $.60 per square foot is provided for building Sub-Systems. SUB –SYSTEMS: Lighting, HVAC, Hot Water and Building Envelope PARTIAL DEDUCTION: Owners of new and existing buildings (placed in service prior to the date of enactment) may earn a partial deduction of $.60 per square foot per “system” for upgrading one or two major building Sub-Systems. 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. 2. IRS GUIDELINES CRG follows the IRS Guidelines relative to Partial Credits and the Interim Rule, Partial Credits and the Permanent Rule Notice 2006-52, Calculation methods – Notice 2006 -52, and the Certification – Notice 2005 -52. 3. SCOPE OF SERVICES CRG will conduct a physical inspection and perform an Energy Efficiency Study (EES) 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, 2013. 4. INTERIM RULES – LIGHTING Interim rules (existing while the Secretary of the Treasury develops long-term rules) establishes a deduction of $.30 per square foot for buildings – or portion of buildings - that achieve at least 25% lighting savings relative to the ASHRAE 90.1-2001 lighting power density (Watts per sq. ft) 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% lighting savings. CAPITAL REVIEW GROUP Copyright 2007-2009 www.capitalreviewgroup.com 2
  3. 3. 5. HVAC, HEAT PUMPS, FURNACES AND WATER HEATERS Energy efficient heating, cooling, ventilation and hot water property is partially qualifying property, within the meaning of Section 2.01 of Notice – 160920-05 (Notice 2006-52) 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 2/3% or more – meeting the minimum requirements of Standard 90.1-2001. The required 16 2/3% 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 whether the 16 2/3% reduction achieved. 6. METHOD OF COMPUTATION The Performance Rating Method (PRM) must be used to compute the percentage reduction in the total annual energy and power costs with respect to combined usage of a building’s heating, cooling, ventilation, hot water and interior lighting systems as compared to the minimum requirements of Standard 90.1-2001. 7. CERTIFICATION Before a taxpayer may claim a Section 179D deduction with respect to property installed on or in a commercial building, the taxpayer must obtain a Certification with respect to the property. The Certification must be provided by a qualified individual and satisfy the requirements of Section 179D(1). Statements of Certification must meet the minimum requirements of Standard 90.1-2001 for interior lighting systems, heating, cooling, and ventilation and hot water systems and illustrate the energy reduction by 50% or more. Statements for Energy Efficient Lighting Systems meeting the requirements of the permanent rule Section 2.03(1)(a) – will be made satisfying a reduction by 16 2/3% or more. Statements for Energy Efficient Lighting Systems meeting the requirements of the interim rule of Section 2.03(1)(b) – must satisfy the requirements stated in Section 2.03(1)(a) of Notice 2006-52. CAPITAL REVIEW GROUP Copyright 2007-2009 www.capitalreviewgroup.com 3
  4. 4. 8. METHODOLOGY CRG will analyze, calculate, make recommendation and/or Certify subject property(ies) that reduce annual energy and power consumption (combined power consumption) by 50% or qualifying appropriate Sub-System qualifying percentages. The deduction equals the cost of energy-efficient property installed or planned during construction or rehabilitation – with a maximum of $1.80 per square foot of the building. A partial deduction of $.60 per square foot may be realized and provided for Sub-Systems of the building. 1. Initial data is gathered to evaluate the potential tax savings for implementation of an Energy Efficiency Study and Certification. 2. Once a Letter of Engagement is authorized engineering staff will visit the subject site/building(s). 3. A physical inspection of the installed equipment must occur. Should the assets be proposed a review of the plans and the specifications will occur. Once the assets/equipment is installed a site visit must occur. 4. Prescribed calculations will be made on the energy usage and proposed usage. 5. The calculations, the Certification of approved and qualifying assets/equipment will be completed and the Study reflecting the allowable deductions will be delivered to taxpayer/property owner. For more information please contact M.A.Moore at markym@capitalreviewgroup.com or directly at 602.741.7776 CAPITAL REVIEW GROUP does not advise on any personal income tax requirements or issues. Use of any information from this document or web site referred to is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance. CAPITAL REVIEW GROUP Copyright 2007-2009 www.capitalreviewgroup.com 4

×