According to the NLB, owners can earn an accelerated depreciation benefit equal to the cost of the lighting system or lighting system improvement, or .60 cents per square foot, whichever is less. Lighting systems that do not meet the efficiency required to earn the maximum deduction may be eligible for a smaller deduction. The benefit applies to discrete systems within a building; i.e., not all lighting in a building must meet the efficiency criteria for some of the lighting to be eligible for favorable tax treatment.
Insofar as commercial buildings are concerned, the Energy Policy Act of 2005 applies to the heating/ventilating/air-conditioning/water heating system and building envelope in addition to lighting. Rules for lighting are expected to take effect almost immediately, however, while other rules will take more time to develop.
The Energy Policy Act of 2005 applies to property that is placed into service no earlier than Jan. 1, 2006 and no later than Dec. 31, 2007. According to NLB Communications Director John Bachner, “Extensions of the law are likely, especially given the significant benefits the law is expected to achieve, and its low net cost.”
According to the new NLB brochure, experts predict that “the new law will generate energy savings equivalent to the output of more than 60 conventional, coal-fired power plants.” The tax deduction involved is merely accelerated depreciation, however. As such, “were the owner to sell the building, the federal government would be able to recapture whatever depreciation was not earned” at the time of the sale.
The National Lighting Bureau urges caution in developing systems to comply with the law. It says, “While improved energy efficiency is something we all want, high-efficiency lighting has to be high-benefit lighting in order to be genuinely cost- and energy-effective.”
High-benefit lighting is “lighting that creates an illuminated environment designed specifically for the workers and tasks involved, so they can perform visual tasks faster and with fewer errors.” Examples include lighting that creates visual comfort free of glare, lighting that enhances the appearance of a space and lighting that uses the high-tech equipment and controls available to deliver the absolute maximum efficiency.
The brochure also cautions, “Many people believe that the less energy their lighting system uses, the better. But that may not be the case.” It goes on to explain that seeming paradox by citing a hypothetical example that is “based on actual case histories collected by the National Lighting Bureau over the past 30 years.”
The brochure can be downloaded at the National Lighting Bureau Web site.
