lighting conservation tax incentives

8/2/2019 Lighting Conservation Tax Incentives

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Lighting Conservation Tax Incentives$.60 Federal Tax Deduction per Square Foot!

My Mission - Bring a 75% Energy Savings and a $.60 per sq. ft, Federal Tax deduction toAmerican businesses, conserving more & improving quality of our workplaces and NaturalEnvironment, with SMD LED Tube Lighting!Our LED Tubes save a combined total of 75% or more, with a savings for both the Tube and theBallast. An equivalent of 45% is saved, compared to standard Fluorescent lighting, with the SMD LEDTubes alone.The Energy Policy Act of 2005 included a new tax incentive, to improve the energy efficiency ofcommercial buildings. The "Commercial Building Tax Deduction" establishes a tax deduction forexpenses incurred for energy efficient building expenditures made by a building owner.* Buildings that save at least 50 percent of projected annual energy costs across all three systemcomponents are eligible for a tax deduction of $1.80 per square foot.** Buildings that save a specified percentage of projected annual energy costs for one of the threecomponents building envelope (10 percent whole building energy savings), lighting (20 percent), orheating and cooling (20 percent) are eligible for a $0.60 per square foot deduction.*** For lighting improvements that reduce lighting use by 25-40 percent and also employ dualswitching (ability to switch roughly half the lights off and still have fairly uniform light distribution), the$0.60 per square foot may be prorated, ranging from $0.30 per square foot for 25 percent lighting

energy savings to $0.60 per square foot for 40 percent savings.The Emergency Economic Stabilization Act of 2008 (HR-1424), approved and signed on October 3,2008, extends the benefits of the Energy Policy Act of 2005 through December 31, 2013. Improve Lighting Systems:Improving your lighting systems is one of the first steps EPA recommends to increase the efficiencyof your buildings whether you are retrofitting existing buildings or designing new buildings. This is notonly because lighting upgrades are so cost effective, but also because less heat is generated fromefficient lighting systems, affecting the proper sizing of more capital-intensive heating and coolingsystems. As outlined in the ENERGY STAR Building Upgrade Manual, a strategy that combinesefficient lighting technologies, controls, and appropriate light levels is the most effective approach tomeeting energy efficiency goals, including those required to qualify for the partial tax deduction. Read

the Lighting Section, helpful information for lighting, don't forget to jump ahead of the curve, be aforward leaning, lean and mean energy machine, update to our state-of-the-art SMD LED Tubes andsave 75% over standard Fluorescent Tubes.You may qualify for a deduction of $0.60 per square foot if the lighting system employs dual switching(ability to switch roughly half the lights off and still have fairly uniform light distribution) and reducesinstalled lighting power by at least 25% from values specified in specific cited tables in ASHRAEStandard 90.1-2001. As lighting power reductions climb from 25% to 40%, the deduction is increasedproportionally, up to $0.60 for a 40% power reduction (plus the dual switching).For a typical building, a lighting power reduction of 40% increases the buildings ENERGY STARrating by about 10 points.Lighting consumes close to 35 percent of the electricity used in commercial buildings in the United

States and affects other building systems through its electrical requirements and the waste heat that itproduces. Upgrading lighting systems with efficient light sources, fixtures, and controls can reducelighting energy use, improve the visual environment, and affect thesizing of HVAC and electrical systems.CONSULT A TAX PROFESSIONALConfirm with your Tax Professional and take a $.60 per square foot deduction for improved lightingefficiency of 40% (with at switch that can turn off one/half of the lighting on command).Only a tax attorney or other related professional can provide tax advice.Q. What if my project cost exceeds the cap of $0.60/sq. ft.? How is the remaining cost treated tax-wise?
http://www.energystar.gov/BldgManualhttp://www.energystar.gov/ia/business/EPA_BUM_CH6_Lighting.pdfhttp://led-4-light.com/T-8%20LED%20Fluorescent%20Light%20Replacement%20Tubes.htmhttp://led-4-light.com/T-8%20LED%20Fluorescent%20Light%20Replacement%20Tubes.htmhttp://www.energystar.gov/ia/business/EPA_BUM_CH6_Lighting.pdfhttp://www.energystar.gov/BldgManual


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A. The remaining costs can be depreciated and claimed normally. So a qualifying project in a100,000-sq.ft. building with a cost of $100,000 and 40% lighting power density savings could beeligible to deduct $60,000 in the taxable year the lighting is placed in service. The remaining $40,000could then be claimed normally (i.e., capitalized and depreciated).Q. What if a commercial building tenant performs a retrofit that would meet the energy savings, wouldthey get the deduction?

A. Unfortunately, as in many matters of tax law, the answer is not necessarily clear. The person who

gets the Commercial Buildings Deduction is the person who owns the property for tax purposes.

Although in many, if not most instances, a tenant improvement will revert to the landlord at the end ofa lease, the property is not necessarily owned by the landlord for tax purposes. It is a question of fact,and the determination depends on the arrangements between the parties. If the tenant pays for theinvestment, constructs it according to its own specifications, and there are no concessions in thelease or from the landlord, it is likely that the tenant will be the owner of the improvements for taxpurposes and eligible to claim the Commercial Buildings Deduction.

Fortunately, this is a question that arose under the tax law before the enactment of the CommercialBuildings Deduction provision. In the case of tenant improvements, the tenant and landlord would

have to determine who the tax owner is for purposes of claiming depreciation deductions in anyevent. The Commercial Buildings Deduction does not change that determination. The CommercialBuildings Deduction simply provides a more beneficial deduction that that normally provided bydepreciation. Perhaps a tenant should come to an agreement, in advance, with the landlord aboutwho get the deduction, or how it is to be shared, consult your tax professional. The analysis is the same regarding improvements in government buildings. If the contractor is theowner for tax purposes, it can claim the Commercial Buildings Deduction. Whether a private personcan be an owner of property with respect to a government building under the applicable local law is afactor that would have to be taken into account in determining who the owner is for tax purposes.Sources -Commercial Tax Incentives - http://www.energystar.gov/ia/business/comm_bldg_tax_incentives.pdf

Lighting and People - http://www.energystar.gov/ia/business/EPA_BUM_CH6_Lighting.pdfCommercial Lighting Tax Deductions - http://www.lightingtaxdeduction.org/IRS Deduction for Energy Efficient Commercial Buildings - http://www.efficientbuildings.org/PDFs/n-08-40.pdfQualified Software to Calc. Comm. Building Tax Deductionshttp://www1.eere.energy.gov/buildings/qualified_software.htmlTax Incentives for Commercial Buildings http://www1.eere.energy.gov/buildings/tax_commercial.htmlFederal Tax Incentives. Home and Businesshttp://www.mi.gov/documents/dleg/FAQs_Federal_Tax_Credits_256153_7.pdfBusiness Tax Incentives http://energytaxincentives.org/business/commercial_buildings.php

David asks: We are strongly considering changing out all our fluorescent bulbs

throughout our entire building (offices, warehouse, cafeteria, restrooms, etc.) with LED

lighting. Can you please explain all the benefits (reduction of energy, tax deductions,

etc) and what 'has to happen' in order to take advantage of the 179D? Also, if we decide

to bypass the ballast in our existing fixtures, opposed to changing out the fixtures, with

the lights still be UL approved, and can we take advantage of the 179D by doing so?
http://www.energystar.gov/ia/business/comm_bldg_tax_incentives.pdfhttp://www.energystar.gov/ia/business/EPA_BUM_CH6_Lighting.pdfhttp://www.energystar.gov/ia/business/EPA_BUM_CH6_Lighting.pdfhttp://www.lightingtaxdeduction.org/http://www.lightingtaxdeduction.org/http://www.efficientbuildings.org/PDFs/n-08-40.pdfhttp://www.efficientbuildings.org/PDFs/n-08-40.pdfhttp://www1.eere.energy.gov/buildings/qualified_software.htmlhttp://www1.eere.energy.gov/buildings/qualified_software.htmlhttp://www1.eere.energy.gov/buildings/tax_commercial.htmlhttp://www.mi.gov/documents/dleg/FAQs_Federal_Tax_Credits_256153_7.pdfhttp://energytaxincentives.org/business/commercial_buildings.phphttp://energytaxincentives.org/business/commercial_buildings.phphttp://www.mi.gov/documents/dleg/FAQs_Federal_Tax_Credits_256153_7.pdfhttp://www1.eere.energy.gov/buildings/tax_commercial.htmlhttp://www1.eere.energy.gov/buildings/qualified_software.htmlhttp://www.efficientbuildings.org/PDFs/n-08-40.pdfhttp://www.efficientbuildings.org/PDFs/n-08-40.pdfhttp://www.lightingtaxdeduction.org/http://www.energystar.gov/ia/business/EPA_BUM_CH6_Lighting.pdfhttp://www.energystar.gov/ia/business/comm_bldg_tax_incentives.pdf


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Lastly, Bi-level Switching is very confusing to us. What is the minimum we can do to get

away with this? We need the lights on all day, so bi-level won't be exercised -- in order

to get the tax deduction, what can we do?

Answer:David, Im assuming that your building will be pursuing the partial deduction of

$0.60/sf for lighting improvements only, since you made no mention of HVAC or

envelope improvements over baseline. The extent of improvements you pursue will have

an impact on the maximum deduction you can claim through 179D since to qualify for

the full deduction, the cost reduction plan must target all the systems specifically

identified in Sec. 179D(c)(1)(D).

As you know, the Energy Policy Act of 2005 (EPAct), added new Sec. 179D to the United

States Code Title 26, Internal Revenue Code. Sec. 179D, the Commercial Building Tax

Deduction provides an immediate tax deduction for the cost of energy-efficientimprovements to commercial property designed to save energy through envelope, HVAC

and lighting system improvements. The Emergency Economic Stabilization Act of 2008

(HR-1424), approved and signed on October 3, 2008, extends the benefits of the Energy

Policy Act of 2005 through December 31, 2013. These tax deductions are available for

systems placed inservice from January 1, 2006 through December 31, 2013.

Sec. 179D(d)(1) provides a partial allowance if a taxpayer replaces one of the systems

allowed under Sec. 179D(c) (1)(c), and the replacement meets the target for that

system. However requirements for demonstrating improvement over ASHRAE Standard

90.1 remain the same as for the full deduction, as far as Im aware.

Interim rules for Lighting systems state that the lighting system target minimum shall

be a reduction of lighting power density of 25% (50% for warehouse spaces) of the

minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 of ASHRAE/IESNA Standard

90.1-2001.

If, with respect to the lighting system, reduction of lighting power density doesnt meet

the minimum, only the applicable percentage of the amount of deduction is allowed. To

determine the tax deduction /ft2 based on lighting power density reduction, the formula

below can be used (http://www.lightingtaxdeduction.com/f5.html):

Applicable percentage = 50% + [50% x ((% reduction of LPD - 25%) / 15%)]
http://www.lightingtaxdeduction.com/f5.htmlhttp://www.lightingtaxdeduction.com/f5.html


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The result is multiplied against the maximum cap, which is $0.60, to determine the

actual maximum deduction per square foot.

Subsection (f) does not apply to systems in which the controls and circuiting do not

comply fully with the mandatory and prescriptive requirements of Standard 90.1-2001

and which do not include provision for bi-level switching in all occupancies except hotel

and motel guest rooms, store rooms, restrooms, and public lobbies, or systems that do

not meet the minimum requirements for calculated lighting levels as determined by

IESNA Lighting Handbook, Performance and Application, Ninth Edition, 2000.

Most importantly, to take advantage of this deduction, the project must be certified by a

professional recognized as qualified to do so.

In addition to the obvious benefit of the tax deduction, installing LED lighting will also

result in reduced energy consumption (the reason behind the tax credit), and come witha plethora of benefits. They typically last longer than fluorescents, are very durable,

operate cool, are mercury free, and end up being quire cost-effective for a number of

applications.

Unfortunately I cant comment on the UL listing, since Im not really an expert in lighting

systems and the UL listing system is somewhat complicated, but from what Ive read I

dont see any reason you couldnt take advantage of 179D by bypassing the ballast (Id

check 90.1 for any mention of UL listing to be sure), but as long as youre achieving the

desired energy reduction I think youd be okay.

The definition of bi-level switching can vary from state to state. Typically bi-level

switching is either an automatic or manual (sometimes both) method of controlling

lighting systems to provide two levels of lighting power for a space to save energy

(typically estimated to be 10-15% annually). This obviously doesnt include off as one

of the levels, and can be satisfied by dimming and also must meet the requirements of

the jurisdictional codes which may also require bi-level switching.

The International Energy Conservation Code (IECC) requires at if the space meets any of

the criteria below, then it must have bi-level switching.

Has more than one light fixture

Is not controlled by an occupancy sensor

Is not a corridor, storeroom, restroom or public lobby


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Has a lighting power density (lighting W/sq.ft.) >0.6W/sq.ft.

Is not a guestroom/sleeping unit

IECC defines bi-level switching as providing occupants the ability to reduce lighting load

in a reasonably uniform pattern by at least 50%, and recognizes four methods

1. Controlling all lamps or fixtures (e.g., dimming or light level switching)

2. Dual switching alternate rows, fixtures or lamps

3. Switching middle lamp independent of outer lamps (3-lamp fixtures)

4. Switching each fixture or each lamp

Hope this helps!

Sarah Gudeman, LEED AP

http://www.ledlightbulbsbyblv.com/page/tax-deductions.html

http://www.lightingtaxdeduction.org/tax_deduction.html#P8

http://www.efficientbuildings.org/
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