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EPAct Increases Return on Integrated Lighting Control Projects
The Energy Policy Act of 2005 (EPAct) got off to a slow start but is finally gaining significant steam. These delays were due primarily to delays in Internal Revenue Service regulations to implement the law and for the market (building owners and facility managers) to understand the complex legislation.
EPAct tax deductions for lighting start at 30 cents per square foot for a 25 percent reduction in light power density compared to ASHRAE 90.1-2001 requirements. The deduction can be as great as 60 cents per square foot for a 40 percent reduction.
To illustrate the economic benefit, a 100,000-square-foot building that qualifies for the maximum incentive will generate a $60,000 Federal income tax deduction and, in most states, a corresponding $60,000 state income tax deduction.
include bi-level switchingand minimum IESNA light levels. Bi-level switching means having at least two levels of light other than off in all spaces which is easily accomplished with an integrated lighting relay panel. Occupancy sensors do not, on their own, meet this bi-level requirement because they do not provide two levels of light.
To get a deduction for a lighting EPAct project, facility project managers need to know the square footage of the spaces subject to the project, the watts per square foot for all rooms, including new and retained wired lighting, and how the bi-level switching requirement has been met. Documentation for the lighting tax deduction includes a watts-per-square-foot spreadsheet for all wired lighting, a written energy plan, a certification and an inspection document.
Maximizing Benefits
Many lighting projects just miss qualifying for EPAct tax incentives because the lighting systems designer was not aware how close the design was to meeting EPAct requirements. There are cases where design needs will trump EPAct qualification but those occasions should represent conscious decisions. In many situations, merely changing one item in a design such as changing out a few more fixtures than originally anticipated makes the difference between no tax deduction and a large tax deduction.
On a national facility project for a large retirement organization, for example, a slight design change increased the EPAct tax deductions from $2,000 per facility to $40,000 per facility.
The first step to obtaining EPAct deductions is hiring a lighting designer who is familiar with EPAct requirements or is willing to learn them. If a facility executive hires an architect or lighting designer who has no familiarity with EPAct, it may well be worth allowing some additional time to learn the standards.
Good design incorporates many different considerations, however, it’s clear that energy-efficient design is now being given more weight than in the past. There has also been a paradigm shift in the energy efficiency of lighting products, which makes it possible to achieve both good lighting quality and energy efficiency. Building owners and facility managers should choose a designer who is familiar with today’s products and is not merely recycling outdated, inefficient design solutions.
It is also important to keep accurate records of which properties have qualified for EPAct tax deductions and for how much per square foot. For example, a building that in 2007 qualifies for deduction of 37 cents per square foot will have the opportunity to achieve a second deduction of 38 cents per square foot if a proposal to increase the deduction from the current 60 cents to 75 cents becomes law.
Applying EPAct requires interdisciplinary skills involving engineering, energy management and tax concepts that are not normally part of the basic skill set of any single professional. The mainstream tax profession community is often not conversant with lighting electrical wattage, HVAC energy efficiency and building envelope fenestration concepts. Likewise, the facilities community generally is not familiar with tax deductions and normally does not use income tax benefits as part of the project capital authorization process.
Companies are beginning to obtain substantial tax savings ranging from a few thousand dollars for small projects to tens of millions of dollars for large national property holders.
To date, the most common lighting EPAct projects involve distribution centers, industrial facilities and retail spaces, but EPAct deductions have also been gained for lighting projects in office buildings, supermarket chains, restaurants, assisted living facilities, hotels and other types of buildings.
There are similarities between EPAct and the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) green building rating system. LEED requires computer modeling to document target levels of energy efficiency; EPAct also requires computer modeling for HVAC, building envelope, whole-building and some lighting deductions. More importantly, LEED generally requires adherence to ASHRAE 90.1-2004 energy-efficiency requirements, meaning that LEED projects will generally either qualify for EPAct tax deduction or come very close. What’s more, 90.1-2004 is the basis for code in some states.
The modeling required to qualify for a whole-building deduction under EPAct is very similar to LEED modeling. However, for separate systems modeling relating to lighting, HVAC and the building envelope, EPAct building modeling requires taking a different approach, one that most engineers are not familiar with. Facility executives should be sure that their engineers understand, in-depth, the computer modeling requirements of EPAct.
Energy Policy Act Brings New Tax Incentives - Additional Tax Information on EPAct
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