the 2005 energy policy act monetization of energy efficient commercial building property deduction...
DESCRIPTION
Special Rule for Government - Owned Buildings Assignable by Governmental Entity to Designer of Qualified Project Architect, Engineer, Contractor, Environmental Consultant or Energy Services Company (ESCO) 3 rd Party Validation & Valuation RequiredTRANSCRIPT
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The 2005 Energy Policy ActMonetization of Energy Efficient Commercial Building Property Deduction (179D) for Government EntitiesWilliam VolkerPartnerEfficiency Energy
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Energy Efficient Commercial Building Tax Deduction (CBTD) One-time deduction during year placed in service Applicable to both retrofit & new construction Includes :
Interior Lighting System HVAC & Hot Water System Building Envelope
100% of Project Cost UP TO $1.80/sq.ft. $.60/sq.ft. Per Lighting, HVAC, Envelope System
Certified by Independent ‘Qualified Individual’ 3rd Party Contractor/Engineer Licensed in locale of Project DOE-Approved Software
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Special Rule for Government - Owned Buildings
Assignable by Governmental Entity to Designer of Qualified Project
Architect, Engineer, Contractor, Environmental Consultant or Energy Services Company (ESCO)
3rd Party Validation & Valuation Required
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179D Requirements
IRS NOTICES: 2006-52, 2008-40, 2012-17
Projects Completed January 1, 2006 thru December 31, 2014 Three year IRS retroactive opportunity
Combined 50% Savings vs. ASHRAE 90.1-2001
25% Lighting, 15% HVAC, 10% Envelope
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179D Legislation Retroactive opportunity for 2011-2014 projects Most recent extension thru 2014 was included in
HR 5771 signed by the President 12/19/14. Extension thru 2016 passed Senate Finance
Committee 7/21/15 Future improvements:
Expansion (Nonprofits, ‘Designer’ designation) Increase ($3/sqft or credit conversion) Update benchmark or same building savings
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What is it worth?
Building Size: 1,000,000 sq ftOne Bldg. System Three Bldg. Systems
$0.60/sq ft $1.80/sq ft179D Allocation 600,000$ 1,800,000$ Benefit Value @ 35% Tax rate 210,000$ 630,000$ Benefit Value @ 45% Tax Rate 270,000$ 810,000$
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179D Transfer Monetization GOVT ENTITY
IRS
Designer
Discount/Rebate on Designer Fees §179D Deduction
File Return or Amended Return
Refund Deferred Taxes
Valuation/Negotiation/
Documentation
Efficiency Energy EP Act Consultant
Incentive Management
EP ACT Certification 3rd Party Engineering
Certification
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Case Study: School District Lighting and HVAC upgrades798,100 sqft affected in 9 SchoolsX $1.20/sqft = $957,720 DeductionX Designer Tax Rate 35%=$335,202 Tax BenefitLess: Certification Fee $54,400Less: Legal/Accounting Fees: $17,000Net Tax Benefit = $263,80350/50 split = $131,901 savings on current project via invoice credit in lieu of cash
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Case Study: New School Construction356,000 sqft replacement HS completed in 2012X $1.80/sqft = $640,800 DeductionX Designer Tax Rate 35%=$224,280 Tax BenefitLess: Certification Fee $35,600Less: Legal/Accounting Fees: $7,000Net Tax Benefit = $181,68075/25 split = $136,260 rebate
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Risk Management… Compliance, Disallowance Risks
Multiple Designers Certification and Insurance Public Oversight Record-Keeping Quality Control
Funding ‘Blind’ Potential Savings Forms: Cash/Rebate, Additional
ECM Scope via No Cost Change Order, Donated Equipment, Invoice Credit etc
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Document Chain & TimelinesDraft Allocation Agreement and Estimate
d Term Sheet 4-8 weeks
Certification Package 6-8 weeks
Final Term SheetAllocation Form
IRS Response 3-12 Months
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179D Contract Language Account for value conferred, associated costs Provide net savings to government owner at
predetermined/negotiable % of net savings Value becomes ascertainable post
certification after assets placed in service Savings provided upon Designer receipt Form: rebate, additional scope, invoice credit
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Issues… Education, Certification, Valuation Tax Status: c-corp, s-corp, partnership Tax Rate: NOL vs. 0-49% tax payers Two Way Street
Participation is not 100% either way
Negotiation Relative Tax Benefit Value/Appetite of Designer Certification, Legal, Accounting, Admin Fees
Omission or Undervaluation
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EFFICIENCY ENERGY LLCEnergy Policy Act Advisor Clients
Texas A&M University System
University of T exas System
Denver International Airport
NC State University
North Carolina Global Transpark
District of Columbia School District
City of Orlando
Orange County, FL
Los Angeles Unified School DistrictsFlorida State College System
Miami-Dade County
Miami-Dade County Public Schools
Palm Beach County Public Schools
City of Sarasota, FL
Palm Beach County, FL
Florida State University
University of South Florida
University of Central Florida
Florida Atlantic University
University of Florida
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Efficiency Energy: PioneeringEnergy Policy Act Consulting
1. Efficiency Energy LLC – www.wesavegreen.com
- Developers of EP Act Benefit Monetization Model
- EPACT Qualifying Project Management Experience
- Former SEC Forensic Auditor
- Public Finance / Investment Banking Backgrounds
2. Kutak Rock LP – www.kutakrock.com
- Federal tax law and public finance law experts
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Bottom Line
Underutilized Tax Benefits to be Managed Rebates & Reduced Upfront Cost on Energy
Efficiency Lighting, HVAC and Envelope Projects