Dec. 31, 2013: Facility managers planning energy efficiency projects should circle that date on the calendar. Under current law, that's the last day that a project can be put in service and qualify for tax deductions under EPAct — the Energy Policy Act of 2005.
EPAct tax deductions — also known as Section 179D deductions — can be as high as $1.80 per square foot for projects that meet IRS requirements. If a project doesn't qualify for the full deduction, partial deductions of 60 cents per square foot are available for lighting, HVAC and the building envelope.
Savings may be significant. Green Leaf Paper installed T-8 lamps and occupancy sensors in an 80,000 square foot warehouse, says Marky Moore, CEO, Capital Review Group, at a cost of about $45,000. The project earned a utility rebate of $23,131. The EPAct tax deduction was $24,869, based on 60 cents per square foot minus the rebate. "The deduction is applicable to the 'net' cost," says Moore in an email. "The 'net' cost is the cost less any rebates, credits or other incentives. In other words, anything that reduces the asset basis."
A growing number of facilities are taking advantage of EPAct deductions, says Charles G. Goulding of Energy Tax Savers. He cites the Raritan Center Business Park as an example. Many facilities in the park are owned and managed by Federal Business Centers. A concerted energy efficiency upgrade effort was launched in 2009 to further modernize buildings and increase building efficiency. Federal Business Centers used a combination of energy cost reduction, New Jersey Smart Start Utility Rebates and EPAct Federal tax savings to support retrofits. More than 3 million square feet of space has been upgraded with T8, T5, induction, and LED technology, and approximately 2 million square feet of space has been upgraded with energy-efficient natural gas heating units. Federal Business Centers has received more than $800,000 in EPAct deductions, according to Ray Willer, president of RFW Clean Energy Consulting.
It's possible that Congress will decide to extend the deductions into 2014 and beyond. But given the concern over deficits in Washington, facility managers who can get a project into service by the end of 2013 might be wise to do so.
— Edward Sullivan, editor
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Section 179D Rules Mean Clock Is Ticking On EPAct Deductions