What Are The Energy Tax Credits Available to Business Owners?

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by: Marky Moore
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Date: Sun, 21 Mar 2010 Time: 7:52 PM
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The Energy Policy Act of 2005 provides new tax incentives for commercial buildings targeting energy efficiency. Existing "credit" incentives include: solar/photovoltaic's, micro turbine engines, fuel cells, geothermal and wind.

The new commercial building "deductions" (fall under Section 179D) and target specific assets: lighting, HVAC and water heaters and the building envelope. The building envelope includes: lighting, HVAC, water heaters, roofing materials, insulation, window glazing, building orientation and building ventilation.

These incentives are all deductions - but the qualification requirements may be approached in a variety of ways.

If lighting only is installed - it may fall under the "Interim Rules" - which requires a prescribed watts per square feet and multi-level controls. Multilevel controls are something more than on and off. They may be dual switches for every other row of lights or a dimming that modulates the lighting from bright through a graduated dimming process.

The deductions allowable are applied as follows:
 Lighting = $.60/square foot
 HVAC = $.60/square foot
 Building Envelope usually = $.60/per square foot

In order to claim these deductions a qualified third party engineering group must verify and certify the assets and provide specific information to the taxpayer/client. It is important to "Certify" these deductions - so that the taxpayer's/property owner's tax advisor may sign off on the completeness and the validity of the Certification.

ENERGY TAX CREDITS FOR BUSINESS OWNERS:
Energy Tax Credits are available from both State and Federal Programs. States vary widely in the programs, the technologies covered and the application process. The most accurate and up-to-date resource is www.dsireusa.org - where you can find not only information your state's tax credits but also the utility rebate opportunities in your locale.

A common error is to confuse tax "credits" with tax "deductions". Tax credits are a dollar for dollar reduction in taxes owed - seldom are there issued checks from an agency to a taxpayer for a credit. A "deduction" is a dollar amount applied against your tax bracket - then the tax liability is reduced by that amount.

The Federal Government offers tax "credits" for renewable/efficiency energy sources: Solar, Wind, Biomass, Geothermal, Fuel Cells, Combined Heat & Power and Micro-turbine Engines. The "credits" range from 30% without caps to 10% with a variety of caps.

States are completely independent and offer a very broad range of incentives - typically credits.

The Federal Government also offers tax "deductions" for specific efficiencies: Lighting, Heating/Ventilation/Air Conditioning (HVAC) and the building envelope (the barriers between conditioned and un-conditioned space…or the walls, roof, doors and windows). The deduction for these efficiencies range from $.30/sq ft to $1.80/square foot of the building area.
It is always best to seek advice when considering the application of any of these tax opportunities - first to maximize your investment dollars and more importantly to assure the correct allocation of any incentive.

If you want to learn more, contact Marky Moore is a LEED AP and SEO of Capital Review Group Capital Review Group

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