Epact 179d Tax Deduction for Lighting Retroffiters


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The Energy Policy Act of 2005 (EPAct 05) created an incentive for commercial property owners to implement energy efficient systems into new and existing buildings. The 179D Tax Deduction is an Accelerated Depreciation allowing for property owners to fully deduct the expense of energy efficient systems in year one, subject to a cap. As a result in the downturn of the economy, the American Recovery and Reinvestment Act of 2009 extended the 179D incentive.

Walker Reid Strategies specializes in providing commercial property owners with strategic tax advantages accelerating your ROI through this energy based tax deduction and accelerated depreciation method. All of our certification standards follow strict IRS guidelines and procedures, allowing you to fully take advantage of the federal tax incentives available.

The 179D Tax Deduction allows for:

Lighting: 30-60¢ per sq.ft.
HVAC: 60¢ per sq.ft.
Building Envelope: 60¢ per sq.ft.

With the phase out of T12 lamps and HVAC manufacturers increasing the production of high efficiency equipment, the retrofit market is quickly growing. The decision for property owners to retrofit entire systems becomes easier the quicker the investment returns. The combination of energy savings with tax incentives and rebates helps accelerate that return. Contact http://walkerreid.com for more information.

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Epact 179d Tax Deduction for Lighting Retroffiters

  1. 1. 2005 EPAct §179D Commercial Lighting Tax Deduction
  2. 2. Accelerated Depreciation <ul><li>Why Wait 39 Years? </li></ul><ul><li>When property owners purchase and install a new lighting system, under standard IRS depreciation tables, they will be paying taxes on the lights for the next 39 years . Through the use of the §179D Deduction, the property owners may fully depreciate the cost of the lighting improvements in Year One , subject to a cap. </li></ul><ul><li>As an example, a 4 story office building in Atlanta, GA spent $150,000 on new energy efficeint lights. Through the use of the §179D Deduction, they were able to reduce that years taxable income by $150,000, resulting in a $52,500 savings on their tax bill. The Investment's Payback Period resulted in 6 Months through the §179D deduction, utility rebates and monthly energy savings. </li></ul>
  3. 3. About §179D <ul><li>Energy Policy Act of 2005 </li></ul><ul><li>Under the Energy Policy Act of 2005, Section 179D was created allowing for an accelerated depreciation for energy efficient property in commercial buildings. It allows for the lesser of the entire cost of the energy efficient property or a per square foot amount. To benefit from the incentive, certain energy targets must be met. </li></ul><ul><li>A 50% reduction in energy or more results in a $1.80/sqft deduction. </li></ul><ul><li>Partial Deductions: </li></ul><ul><ul><li>HVAC: requires a 20% reduction* in energy for $60¢/sqft. </li></ul></ul><ul><ul><li>Lighting: requires a 20% reduction* in energy for $60¢/sqft. </li></ul></ul><ul><ul><li>Building Envelope: requires a 10% reduction* in energy for $60¢/sqft. </li></ul></ul><ul><li>*Energy Reductions are calculated vs. an ASHRAE 2001 Baseline Building </li></ul>
  4. 4. Lighting and EPAct <ul><li>Lighting Interim Rule </li></ul><ul><li>The IRS allows for an LPD reduction of 25%-40% to qualify for a 30¢-60¢/sqft deduction. Making lighting the simplest and most widely used form of the tax deduction. </li></ul><ul><li>Additional Requirements: </li></ul><ul><li>Additionally, the IRS requires for property qualifying under the Interim Rule to meet Bi-Level Requirements and IESNA Lighting Levels. </li></ul><ul><li>If these requirements are not met, a whole building energy cost analysis may be performed to determine if a 20% reduction in overall energy has been reduced, allowing for a full 60¢/sqft deduction. </li></ul>Manufacturing and Warehouse Facilities often reduce their Payback Period by 40% or more with the use of the Epact Deduction.
  5. 5. Common Qualifying Technologies <ul><li>LED </li></ul><ul><li>With Energy Savings as high as 75%, LED technology will certainly qualify for the 60¢ allowed for the lighting category. </li></ul><ul><li>Under the right conditions, LED lights may also qualify property owners for the full $1.80 allowed under §179D. </li></ul><ul><li>T5/T8 High Output </li></ul><ul><li>The competitive pricing, energy savings, and §179D deduction obtained through the use of T5 and T8 High Output fixtures, often leads to an easy deicision for property owners. </li></ul><ul><li>Induction </li></ul><ul><li>Induction Lighting is another great energy efficient option for High Bay applications. With high energy savings, and a low maintenece cost, the 179D deduction can add substantial value to an ROI for the property owners. </li></ul>
  6. 6. IRS Guidelines <ul><li>Certification: The IRS requires for taxpayers to obtain a certification prior to claiming the §179D Deduction. The certification must be performed by a qualified individual and satisfy all requirements outlined by §179D of the I.R.C. </li></ul><ul><li>Time Frame: The effective timeframe of this provision is January 1, 2006 through December 31, 2013. Any energy efficient property placed into service during this time frame may qualify for the deduction </li></ul><ul><li>Change of Accounting Method: In January of 2011 the IRS released a bulletin allowing for a change of accounting method, making it easier for owners to take the deduction for prior years without having to amend any prior tax returns. </li></ul>
  7. 7. Government Owned Buildings <ul><li>Architects, Engineers, and </li></ul><ul><li>Contractors: </li></ul><ul><li>The IRS allows for government owned buidlings to allocate the §179D tax deduction to the primary designers for energy efficeint projects. </li></ul><ul><li>Unlike property owners, the §179D deduction for designers of Public Buildings is a true one time deduction (not an accelerated depreciation). For companies that work heavily in the public sector, it often times results in little to no tax liability for several years. </li></ul>Federal, State, or Local Governements can allocate the §179D to the Primary Designer
  8. 8. About Walker Reid Strategies <ul><li>Walker Reid Strategies is a Licensed Engineering Firm that specializes in the 2005 EPAct §179D certification. Our team is composed of diverse members including Professional Engineers, LEED Accredited Professionals, Commercial Energy Raters, Energy Engineers and CPA's.  Our mission is to Accelerate ROI, Lower Tax Basis, and Improve Cash Flow by providing §179D certifications for our clients that exceed IRS requirements. </li></ul>
  9. 9. Contact Information <ul><li>Website </li></ul><ul><li>www.WalkerReid.com </li></ul><ul><li>E-Mail </li></ul><ul><li>[email_address] </li></ul><ul><li>Facebook </li></ul><ul><li>facebook.com/Walker_Reid </li></ul><ul><li>Twitter </li></ul><ul><li>twitter.com/WalkerReid </li></ul>Walker Reid Strategies 4617 10th Ave. N Lake Worth, FL 33463 Phone 800.662.179D