The EPAct 179D tax incentive provides a special incentive that directly rewards architects, engineers and contractors for the design of energy efficient projects in government-owned buildings - Jay Corn and Steve Nanos of Claris Energy show you how to claim your incentives.

1. Basics of
EPAct - Section 179D
Architects, Engineers and Building Owners:
Creating Value from Untapped
Federal Incentives

2. Creating Value from Untapped Federal Incentives
EPAct - Section 179D
 Section 179D is a little-known tax
incentive designed to encourage energy
efficient commercial building
construction.
 Building Owners can significantly
improve the economics of new
construction projects and renovations of
existing buildings.
 Architects, Engineers and Designers
can gain an important competitive
advantage in the marketplace with this
incentive.
See Required IRS Circular 230 Disclosure 2

3. Presenters
Claris Energy Corporation
Based in New Jersey, Claris Energy is a team of energy finance, tax and
engineering professionals focused on helping our clients maximize federal and
state incentives on renewable and energy efficiency projects.
Jay Corn
 Twenty-five years of corporate finance and tax experience in the energy
industry; specific focus on negotiating and closing corporate credit
facilities, project financings and tax structuring for energy services
companies.
 BBA from Abilene Christian University; Certified Public Accountant in Texas.
Steven G. Nanos
 Thirty years of business development and technical sales in
environmental, HVAC and power generation industries with a specific focus on
assisting architects, engineers and building owners specify energy efficient
equipment and systems for schools, offices, warehouses and manufacturing
facilities.
 B.S. in Engineering from Rensselaer Polytechnic Institute in Troy, NY.
See Required IRS Circular 230 Disclosure 3

4. Creating Value from Untapped Federal Incentives
AGENDA
1. Learn the basics of EPAct (the Energy Policy Act of 2005)
also know as Section 179D incentive.
2. Learn how building owners can improve the economics
of their construction projects and energy investments.
3. Understand how the rules for government projects can
directly benefit architects, engineers and contractors.
4. Review case studies and learn how to identify projects
that may qualify for the incentive.
5. Turn your knowledge of the tax incentive into a
competitive advantage in the marketplace.
6. Develop an action plan to create value from the projects
you have already completed.
See Required IRS Circular 230 Disclosure 4

5. EPAct Section 179D – The Basics
5

6. 6
Section 179D - Policy Objective 6
 Buildings account for almost 50% of
total U.S. energy consumption;
 Buildings account for over 75% of
U.S. electric consumption. ft.
 U.S. building stock will have a relatively
high turnover rate over a 25 year
period:
Current U.S. building stock 275 billion sq. ft.
Annual demolitions 1.75 billion sq. ft.
Annual renovations 5 billion sq. ft.
Annual new construction 5 billion sq. ft.
Percentage of building stock that will be newly constructed or
75%
renovated by 2035
6

7. Section 179D - Policy Objective
An incentive
targeted at the
design and
construction of
energy efficient
buildings should
have a significant
impact on U.S.
energy
consumption.
See Required IRS Circular 230 Disclosure 7

8. Section 179D: The Reference Building
 General Rule: Section 179D provides for
the immediate expensing of up to $1.80 per
sq. ft. for qualifying energy efficiency
projects incorporated into commercial
buildings.
 In order to qualify, the (1) lighting, (2)
building envelope and (3) HVAC
systems must reduce a building’s
energy costs by 50% or more
compared to a hypothetical reference
building.
 New construction and energy
efficiency upgrades to existing
facilities qualify for the incentive.
Section 179D converts a 39-year
deduction into an immediate tax benefit.
See Required IRS Circular 230 Disclosure 8

9. Section 179D: : The Reference Building
State Commercial Energy Codes
 The hypothetical
building is based on July 1, 2011
ASHRAE Standard
90.1-2001
reference data
modeled using
90.1-2004 Appendix
G methodology.
 The state energy
codes of 36 states
exceed ASHRAE
Standard 90.1-
2001.
IMPORTANT NOTE:
The energy savings comparison is based on a
hypothetical 2001 “reference building” and not to the
actual equipment being replaced.
See Required IRS Circular 230 Disclosure 9

10. Section 179D: Partial Deductions
 Partial deductions are allowed for the installation of
individual subsystems (or any combination of two)
that meet a lower standard of efficiency
improvement:
 Interior lighting – $.30-$.60/sq. ft. deduction for
lighting projects based on a sliding scale of energy
savings.
 Building envelope –$.60/sq. ft. deduction.
 HVAC and hot water systems –$.60/sq. ft. deduction.
See Required IRS Circular 230 Disclosure 10

11. Required Energy Savings (Partial Measures)
Energy Savings Percentage Guidance Summary
Partially Qualifying Property - Permitted Percentage Thresholds
January 2006 January 2006 March 2012
through through through
December 2008 December 2013 December 2013
Interior lighting systems 16.67% 20.00% 25.00%
HVAC and hot water systems 16.67% 20.00% 15.00%
Building envelope 16.67% 10.00% 10.00%
See Required IRS Circular 230 Disclosure 11

12. Securing the Section 179D Tax Incentive
 The tax incentive can be claimed by a building
owner, tenant or ESCO, depending on who pays
for and owns the equipment.
 “Designers” of government-owned
buildings also qualify for the incentive.
 The incentive is deductible in the year that the
property is placed in service and applies to all
projects completed and placed in service from
January 1, 2006 to December 31, 2013.
 The incentive can be claimed retroactively.
 Amended returns can be filed for open tax
years (generally 3 years from the date of
filing).
 For private owners, the IRS has provided for
special procedures to claim the incentive
for previous tax years on as a change of
accounting method on current tax returns.
See Required IRS Circular 230 Disclosure 12

13. Securing the Section 179D Tax Incentive
 To claim the deduction, a Section 179D
compliance study must be performed by a
qualified firm or individual:
 The energy savings projected for the
measure installed must be confirmed
through energy modeling based on specific
standards outlined by the IRS in its
published guidelines.
 The energy savings must be certified by an
engineer or contractor independent to the
project.
 The project cost, estimated energy savings
and the associated tax deduction must be
documented in the manner prescribed by
the IRS.
 IRS-approved software must be used for
modeling process.
See Required IRS Circular 230 Disclosure 13

14. Special Situations
 Property Location – The building must be
located in the U.S. to be eligible for the
179D incentive
 Nonprofit Organizations – Buildings
owned by nonprofit organizations are not
eligible for the incentive.
 REITS – Although REITs are eligible for
the incentive, the benefit of the incentive
is limited because of their tax structure
and the way they distribute taxable
income.
 S Corporations – S Corporations and
other pass-through entities (e.g., LLCs )
are eligible for the incentive but it may
be limited in any given tax year by the
shareholder’s basis in the S Corporation.
See Required IRS Circular 230 Disclosure 14

15. How Does the Incentive Work?
Office Building - HVAC Upgrade
 Few companies know about this
incentive. Fewer still are claiming the
Total square feet of air conditioned space 150,000
benefit to which they are entitled.
Installation of new McQuay WME chiller $250,000
Energy savings achieved vs. ASHRAE 90.1-2001 21%
 Incorporating this incentive into your
payback analysis could greatly
Project qualifies for $0.60 per sq. ft. tax deduction improve the economics of your next
since energy savings exceeds 20%. project.
Tax incentive
Total square feet 150,000
 A question :
Qualifying tax deduction $0.60
Total tax deduction $90,000 Could you deliver more effective
Tax rate 40% solutions if you could reduce the
Cash benefit $36,000 first-cost of a project by 16% and
improve your customer’s payback
Estimated annual energy savings from chiller upgrade $44,000 by almost a full year?
Section 179D cash incentive as a percentage of the project 15.0%
Improvement in payback due to 179D incentive (in years) 0.9
See Required IRS Circular 230 Disclosure 15

16. EPAct Section 179D – Government Buildings
16

17. Special Rules for Government Facilities
 Since public entities do not pay
taxes, the tax incentive attributable to
the project is passed through to the
“Designer” of the energy efficiency
upgrades for any “Government Facility.”
 A “Government Facility” includes any
building owned by a Federal, State or
local public entity including:
schools, post offices, airports, military
bases, court houses, public
universities, town halls, libraries, police
departments, fire houses, etc.
If you have designed (or helped to
design) energy upgrades to a
government facility, the special tax
incentive belongs to YOU.
See Required IRS Circular 230 Disclosure 17

18. Special Rules for Government Facilities
 A “Designer” includes any architect, engineer, ESCO
contractor, etc. that helps create the technical
specifications of the project.
 If multiple parties contribute to the design of the
facility, the incentive can be allocated in any way
that is representative of their contribution.
Don’t Forget:
The Designer’s tax incentive can be claimed
retroactively for all open tax years.
See Required IRS Circular 230 Disclosure 18

19. Special Rules for Government Facilities
 The Section 179D incentive for government facilities provides designers with a unique
opportunity to create value:
 Profitability – The incentive provides additional margin for your business.
 Competitiveness – Access to the incentive leads to increased success on highly
competitive projects.
 Business Development – Work with the full design team to secure incentives for all.
 The special rule for government facilities can be a tool to help you build strong
relationships with the architects, engineers and contractors you work with.
Consultant Architects Engineers Design/Build
Contractors
Design Team
See Required IRS Circular 230 Disclosure 19

20. Obtaining the Government Incentive
 The government entity must give the
Designer an “Allocation Letter” – a
written declaration of the amount
and allocation of the deduction.
 The government entity has the
discretion to allocate the
deduction among multiple
Designers.
 Any authorized party of the
government entity can sign the
allocation letter – this is often
the government employee that
is responsible for managing the
project and approving its
completion.
See Required IRS Circular 230 Disclosure 20

21. EPAct Section 179D – Implementation
21

22. Project Certification – The Modeling Process
 The energy modeling process is prescribed by
IRS and is based on ASHRAE 90.1-2001 reference
data modeled using 90.1-2004 Appendix G
methodology:
 Step 1 – Model the energy use of the
subject building after all energy upgrades
have been incorporated.
 Step 2 – Model the total energy use of
reference building designed to ASHRAE
90.1-2001 standards following the
methods for baseline building
performance in Appendix G of 90.1-2004
(and certain requirements from the 2005
California Title 24 Nonresidential
Alternative Calculation Method Approval
Manual).
 Step 3 – Determine the percentage of
energy savings from the difference
between Step 1 and Step 2.
See Required IRS Circular 230 Disclosure 22

23. Project Certification – The Modeling Process
 IRS approved software must be used to perform the
energy modeling.
 The list of IRS-approved software includes:
1. DOE-2.2 6. eQUEST
2. EnergyGauge 7. Green Building Studio
3. EnergyPlus 8. Carrier HAP
4. EnergyPro 9. IES <Virtual Environment>
5. EnerSim 10. Trane Trace 700
 A physical inspection of the building must be
performed by a qualified independent firm to
determine that the energy efficient measures used in
the modeling were installed to specification.
 A written certification must be provided by the
independent third-party certifying that the energy
measures are projected to meet the energy savings
requirements of Section 179D.
See Required IRS Circular 230 Disclosure 23

24. Optional Rules for Lighting
 Interim lighting rules were adopted to encourage building owners to focus on lighting projects
which are easily measured and perceived to have a high impact on building energy efficiency:
 Lighting systems (except warehouses) that reduce lighting power density (LPD) by 40%
qualify for the full $0.60 incentive.
 Lighting systems (except warehouses) that reduce LPD by 25% qualify for a $0.30
incentive. LPD improvements between 25% and 40% are prorated in accordance with
IRS Notice 2006-52.
 Warehouse lighting systems must reduce LPD by 50% to qualify for the $0.60 deduction
(with no proration below 50%).
Interim Lighting Rules Minimum Maximum
Improvement
Most 25% 40%
In LPD
commercial
buildings Deduction $0.30 $0.60
Improvement
n/a 50%
Warehouses In LPD
Deduction n/a $0.60
See Required IRS Circular 230 Disclosure 24

25. Optional Rules for Lighting
 Specific interim lighting rule requirements:
 Reductions in LPD are based on the minimum
requirements in ASHRAE Standard 90.1-
2001’s Table 9.3.1.1 (building area method)
or Table 9.3.1.2 (space-by-space method), not
including additional interior lighting power
allowances.
 Bi-level switching must be installed in all
occupancies except hotel and motel guest
rooms, store rooms, restrooms and public
lobbies.
 Controls and circuiting (i.e. automatic lighting
shutoff) must comply fully with the
mandatory and prescriptive requirements of
ASHRAE Standard 90.1-2001.
 The system must meet the minimum
requirements for calculated light levels as
established in the 9th Edition of the IES
Lighting Handbook.
See Required IRS Circular 230 Disclosure 25

26. How Do I Benefit From the 179D Incentive?
26

27. What Projects Should I Focus On?
High Value Buildings
1. Buildings over 50,000 sq.ft.
2. New construction – benefits from multiple efficiency measures.
3. Newly constructed buildings designed to be highly-efficient (e.g., LEED certified buildings).
4. Existing building upgrades - High efficiency HVAC measures and/or re-lighting projects.
4. Most ESCO retrofit projects – benefits from multiple efficiency measures.
5. Any type of housing facility utilizing central HVAC systems, including apartment buildings (4 stories or
more), hotels, nursing homes, dormitories, etc.
5. Large, simple structures (warehouses, distribution centers, parking garages, self storage facilities, etc.).
6. Any government facility – the incentive belongs to the design team!
See Required IRS Circular 230 Disclosure 27

28. What Projects Should I Focus On?
High Impact HVAC Projects
1. Geothermal (ground source heat pumps).
2. Magnetic bearing chillers (or conventional chillers with VFD’s), especially in buildings <150,000 sq. ft.
3. Thermal storage.
4. Any type of chiller or water source heat pump in housing facilities - apartment buildings (4 stories or more),
hotels, nursing homes, dormitories, etc.
5. VRV (variable refrigerant volume) systems, especially in buildings <75,000 sq. ft.
6. Heat recovery ventilation.
7. Demand control ventilation if in combination with another measure.
8. VAV (variable air volume) devices especially in buildings <75,000 sq. ft.
9. Hybrid chiller plant (electric chiller combined with gas chiller for improved thermal efficiency).
See Required IRS Circular 230 Disclosure 28

29. Don’t Be Left Behind
Be Proactive - Claim Your Energy Tax Incentive
 Since 2006, millions of dollars have
been received by building
owners, architects, engineers and
contractors from this incentive
program.
 Your knowledge of the program and
an ability to execute on that
knowledge can improve your
profitability and competitiveness in
the marketplace.
See Required IRS Circular 230 Disclosure 29

30. Claris Energy’s 179D Certification Process
Turnkey 179D Certification Process
Screening Cost Section 179D
Process Estimate Certification
 Complimentary  You provide Claris  Energy modeling by
project screening. with building plans qualified 179D
and project modelers.
specifications.
 Helps you narrow  Property inspection.
the projects that  Detailed feasibility
 Delivery of
may qualify. study and project
certification report
cost estimate
verifying savings.
provided before we
 Helps you design begin.  IRS required 179D
new projects to documentation.
maximize the benefit
of the incentive.  Assistance with
Allocation Letter on
government
projects.
See Required IRS Circular 230 Disclosure 30

31. Turnkey 179D Certification Solutions
 Claris Energy provides the resources and expertise to help our
clients secure the Section 179D tax incentive.
 Our team of energy finance, tax and engineering professionals
provide a turnkey service that includes the
modeling, inspections, independent certifications and tax
documentation required by the IRS. Claris Energy's turnkey
service shifts the administrative burden of these filings to our
179D professionals, allowing you to focus on your business.
 We perform a complete Section 179D study in accordance with
the IRS guidelines including:
 Calculate and document the deduction.
 Perform the energy modeling required to certify the
project.
 Provide the site inspection and delivery of the
certification report required by the IRS.
 Assist with obtaining the Allocation Letter from the
proper government or public entity official.
 Coordinate with your tax department or independent
accounting firm.
See Required IRS Circular 230 Disclosure 31

32. Contact Information
Claris Energy Corporation.
55 Madison Avenue, Suite 400
Morristown, New Jersey 07960
Jay Corn Steven G. Nanos
Office: 973.813.1224 Office:973.813.1224
Mobile: 862.266.1600 Mobile: 609.306.1326
Email: Jay@ClarisEnergy.com 32 Email: Steve.Nanos@ClarisEnergy.com

33. Thank You For Your Time
Required IRS Circular 230 Disclosure
To comply with requirements imposed by the Department of the Treasury, we inform
you that any U.S. tax advice contained in this communication (including any
attachments) is not intended or written to be used, and cannot be used, in connection
with the promotion, marketing or recommendation of any of the matters addressed
herein or for the purpose of avoiding U.S. tax related penalties.
33