EPAct Tax Deductions for Lighting Projects Grow More Popular
Part 1: EPAct Tax Deductions for Lighting Projects Gain Wider Use
Part 2: Warehouses, Retailers Use EPAct to Earn Lighting Savings
Part 3: How EPAct Works in LEED and Government Projects
Part 4: Lighting Products
How EPAct Works in LEED and Government Projects
By Charles Goulding, Jacob Goldman and Nicole DiMarino - July 2008
EPAct contains a tax provision intended specifically to help the government sector save energy. The law provides an incentive to designers to incorporate today’s energy efficient products into their designs for government buildings. In the beginning, the architecture and engineering community had a hard time grasping this incentive because it is the first building-design tax incentive ever offered in the Internal Revenue Code. As designers have learned about the incentive in continuing education programs, they have become eager to use it. “Government” includes federal, state and local governments, including K-12 public schools. Although virtually all government-building categories have benefited from this incentive, the most frequent uses are for K-12 public schools, state universities and colleges, and parking garages. Other common categories include post offices, military bases, libraries, courthouses and hospitals.
LEED buildings are also increasingly taking advantage of EPAct tax benefits. LEED certification, the standard for best-of-breed sustainable buildings, requires compliance with ASHRAE 90.1-2004 building code standards, which are more rigorous than the 2001 version of the standard. This means that achieving LEED status should put the building well on the way to obtaining EPAct tax benefits.
The key with LEED projects is to use an IRS-approved modeling software for both the LEED and EPAct processes. The LEED model will use ASHRAE 2004 as a reference building and the EPAct model will use ASHRAE 2001 tax reference building criteria.
Some building owners have made the decision not to proceed with LEED certification based on incomplete economic payback information. It is important to have finance professionals familiar with utility rebates and EPAct tax deduction opportunities on the LEED evaluation committee. To the extent that the LEED project incorporates a high percentage of energy-efficient measures, the combined energy savings, rebate payments and tax savings can materially influence payback. Many jurisdictions are providing extra rebates, some at the six-figure level, for buildings that achieve LEED status.
Charles Goulding, an attorney and certified public accountant, is president of Energy Tax Savers, Inc. Jacob Goldman is an engineer and tax consultant and Nicole DiMarino is an analyst with the firm. Energy Tax Savers Inc. is an interdisciplinary tax and engineering firm that specializes in the energy efficient aspects of buildings.
