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 to American businesses, conserving more & improving quality of our workplaces and Natural Environment, with SMD LED Tube Lighting! Our LED Tubes save a combined total of 75% or more, with a savings for both the Tube and the Ballast. An equivalent of 45% is saved, compared to standard Fluorescent lighting, with the SMD LED Tubes alone. The Energy Policy Act of 2005 included a new tax incentive, to improve the energy efficiency of commercial buildings. The "Commercial Building Tax Deduction" establishes a tax deduction for expenses 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 system components 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 three components building envelope (10 percent whole building energy savings), lighting (20 percent), or heating 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 dual switching (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 efficiency of your buildings whether you are retrofitting existing buildings or designing new buildings. This is not only because lighting upgrades are so cost effective, but also because less heat is generated from efficient lighting systems, affecting the proper sizing of more capital-intensive heating and cooling systems. As outlined in the ENERGY STAR Building Upgrade Manual, a strategy that combines efficient lighting technologies, controls, and appropriate light levels is the most effective approach to meeting 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 a forward leaning, lean and mean energy machine, update to our state-of-the-art SMD LED Tubes and save 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 reduces installed lighting power by at least 25% from values specified in specific cited tables in ASHRAE Standard 90.1-2001. As lighting power reductions climb from 25% to 40%, the deduction is increased proportionally, 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 STAR rating 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 it produces. Upgrading lighting systems with efficient light sources, fixtures, and controls can reduce lighting energy use, improve the visual environment, and affect the sizing of HVAC and electrical systems. CONSULT A TAX PROFESSIONAL Confirm with your Tax Professional and take a $.60 per square foot deduction for improved lighting efficiency 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 taxwise?

A. The remaining costs can be depreciated and claimed normally. So a qualifying project in a 100,000-sq.ft. building with a cost of $100,000 and 40% lighting power density savings could be eligible to deduct $60,000 in the taxable year the lighting is placed in service. The remaining $40,000 could 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, would they 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 of a 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 the investment, constructs it according to its own specifications, and there are no concessions in the lease or from the landlord, it is likely that the tenant will be the owner of the improvements for tax purposes and eligible to claim the Commercial Buildings Deduction. Fortunately, this is a question that arose under the tax law before the enactment of the Commercial Buildings 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 any event. The Commercial Buildings Deduction does not change that determination. The Commercial Buildings Deduction simply provides a more beneficial deduction that that normally provided by depreciation. Perhaps a tenant should come to an agreement, in advance, with the landlord about who 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 the owner for tax purposes, it can claim the Commercial Buildings Deduction. Whether a private person can be an owner of property with respect to a government building under the applicable local law is a factor 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.pdf Commercial Lighting Tax Deductions - http://www.lightingtaxdeduction.org/ IRS Deduction for Energy Efficient Commercial Buildings - http://www.efficientbuildings.org/PDFs/n08-40.pdf Qualified Software to Calc. Comm. Building Tax Deductions http://www1.eere.energy.gov/buildings/qualified_software.html Tax Incentives for Commercial Buildings http://www1.eere.energy.gov/buildings/tax_commercial.html Federal Tax Incentives. Home and Business http://www.mi.gov/documents/dleg/FAQs_Federal_Tax_Credits_256153_7.pdf Business 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?

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-efficient improvements 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 in service 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%)]

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 with a 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

 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/