Are you taking full advantage of EPAct 2005 for all your sustainable projects?

By Doug Lacy, PE, LEED AP BD+C
Senior Associate Electrical Engineer

Does your building Owner want to pursue LEED Certification or Energy Star but the budget isn’t supporting the expenditures? Maybe your project has the funds for energy efficiency improvements, but are you aware that your owner could be entitled to a federal tax deduction to recuperate some or all of the capital costs associated with high efficiency strategies?

Many design professionals and their clients may not be aware that the U.S. Federal government has extended the Energy Efficient Commercial Building Tax Deduction (CBTD) to encourage building owners to make capital investments in energy efficient technologies.

First adopted under the Energy Policy Act of 2005, this tax deduction was extended by the Energy Independence Act of 2007 (EISA). With this extension, the CBTD can be claimed for qualifying projects completed before January 1, 2014.

 
“The CBTD allows building owners (or tenants) to write off the complete cost of upgrading a building’s indoor lighting, HVAC/hot water and building envelope in the year the new equipment is placed in service. The full building upgrade of all three systems is capped at $1.80/sq.ft. Alternately, the owner (or tenant) could upgrade one of these three systems to earn the CBTD capped at $0.60/sq.ft” or could upgrade just the lighting systems with controls and earn a pro-rated tax deduction between $0.30 and $0.60/sq.ft.

All three of these compliance methods require various levels of documentation, certification, and field inspection/commissioning in order to demonstrate compliance to the IRS. All of these documentation and commissioning tasks are part of the requirements for LEED or Energy Star certification. Therefore, if a project is seeking LEED or Energy Star certification, there is minimal effort required on the part of the builder or design professional to assist the Owner in qualifying for the CBTD tax benefits.

Documentation of compliance must be calculated according to Appendix G of ASHRAE Standard 90.1-2004. This is the same ASHRAE standard used by most engineers and architects to demonstrate compliance with national energy codes and to meet the Energy and Atmosphere prerequisites in the USGBC’s LEED program.

The EPAct 2005 rules state that in order to qualify, a buildings combined energy efficiency must be 50% better than the reference building (or 20% better for HVAC, 20% better for lighting or 10% better for envelope when filling for single systems). This may seem unachievable, however it should be noted that EPAct 2005 is benchmarked against the on the 2001 edition of ASHRAE 90.1 Energy Standard. However, many local energy codes and the 2009 version of LEED for New Construction have adopted the more stringent 2007 edition of ASHRAE 90.1. This means that projects complying with ASHRAE Standard 90.1-2007 have already surpassed the requirements in both the 2001 and the 2004 editions of 90.1 and thus may already qualify for CBTD based on energy efficiency strategies that are already included in the projects program. Energy modeling services offered by ccrd partners can produce the summary report, that in conjunction with commissioning documents, are used by the Owner’s tax preparer to qualify for the CBTD tax benefits.

Typically, all that stands between the building owner and this tax deduction is lack of awareness. Many building owners who are committed to energy efficiency and sustainable buildings may be missing out on this monetary benefit that they are eligible for under this extended government program. As design professionals and builders, we need to make sure that our Owner’s representatives are aware of the credit and that the final closeout materials needed for IRS filing is provided to the Owner so they may be used by their accounting professionals during tax preparation.

You can learn more at the websites listed below or by contacting one our associates at ccrd partners.

http://www.lightingtaxdeduction.org/tax_deduction.html

http://www.efficientbuildings.org/about_the_provision.html

http://www.efficientbuildings.org/PDFs/internal-rev-bulletin06-26.pdf