Commercial Lighting Tax Deduction



Commercial Buildings Deduction

  • What is the Energy Efficient Commercial Buildings Deduction?
  • How can the maximum cap of $1.80/sq.ft. be earned for the tax deduction?
  • How do I get a copy of the law to read the section describing the Commercial Buildings Deduction for myself?
  • This website focuses almost entirely on the lighting aspects of the Commercial Buildings Deduction. Is there a similar site or resource providing guidance on all aspects, including HVAC/hot water and building envelope?

Commercial Buildings Deduction's Lighting Rules

  • Are partial allowances available for individual systems?
  • What are the Interim Lighting Rules?
  • What is the formula for the sliding scale to determine the tax deduction cap/sq.ft. based on lighting power density savings between 25% and 40%?
  • I’ve taken a look at EPAct 2005 and it’s very confusing to read. How complicated is this?
  • What is the difference between a tax deduction and a tax credit?
  • The Commercial Buildings Deduction allows the owner to write off the cost of a lighting upgrade, capped at $0.60/sq.ft., in the taxable year that the lighting is placed in service. What does “placed in service” mean?
  • What is the timeframe for the Commercial Buildings Deduction?
  • How is the deduction claimed by the owner?
  • Are there project certification requirements and if so, what are they?
  • Will there be inspections of buildings to determine compliance? Who will do them?
  • Some regulations have not been issued. What is missing, and when will they be issued?
  • In a retrofit situation, does the existing system matter in terms of relating lighting energy savings to lighting power density savings?
  • Is this like many utility rebate programs, where there is a limited amount of funding that can run out as it is tapped?
  • What is my project cost exceeds the cap of $0.60/sq.ft.? How is the remaining cost treated tax-wise?
  • The math involved in calculating the tax deduction may result in a value between $0.30 and $0.60 that is a fraction with multiple decimal places, such as $0.4287/sq.ft. Will there be a regulation regarding rounding, or will the exact numbers be applied (e.g., $0.4287 x 1000 sq.ft. is $428.70, while $0.43 x 1000 sq.ft. is $430.00)? 
  • What if a commercial building tenant performs a retrofit that would meet the energy savings, would they get the deduction? Is the deduction for privately owned buildings restricted to the owner, or can a management company or a tenant in a leased space take advantage of the deduction? Here’s another question. The tax deduction is to be given to the owner of the lighting system. Do you believe this enables ESCOs, if they own the lighting system until the end of their performance contracts, to claim the tax deduction for themselves as the legal owner of the lighting system? Could the building owner even do it legally if the ESCO is the owner under the performance contract?  

Commercial Buildings Deduction's Coverage

  • How should a taxpayer claim the section 179D deduction relating to energy efficient commercial buildings?
  • What is the timeframe for the Commercial Buildings Deduction?
  • What types of buildings qualify?
  • Do public buildings qualify for this tax deduction?
  • Do churches qualify for this tax deduction?
  • Can projects in foreign countries for buildings owned by U.S. businesses qualify for the Commercial Buildings Deduction?
  • What types of lighting expenditures qualify?
  • Does this mean lighting cost components such as installation labor or lamp recycling can be deducted on the owner’s taxes?
  • Do lighting retrofits qualify for the Commercial Buildings Deduction, or must it be a new construction or renovation project?
  • Can portions of buildings be retrofitted and still qualify for a deduction—for example, the common area versus tenant spaces, or a portion of the common area?

Lighting and Controls

  • Are exit signs included in the program; and if so; can they be retrofits versus new signs?
  • Are screw-in compact fluorescent lamps included, and if so, is there any requirement for permanence?
  • Can task lighting be included in a retrofit that contributes to earning the Commercial Buildings Deduction?
  • If a building already has bi-level switching, can its cost be claimed for the purposes of the tax deduction?
  • The warehouse requirement of 50% savings appears strict. What technology candidates can be used to achieve the deduction? What was the thinking behind setting a 50% goal instead of a 25-40% goal? 
  • Is there a criterion for what type of lighting systems would qualify for the partial tax deduction? For example, in a manufacturing facility, would task lighting upgrades qualify if the lighting power density is reduced by enough to obtain the deduction? Or is the deduction for ceiling lighting system upgrades?
  • Do lighting controls like occupancy sensors contribute to the lighting power density savings needed to qualify for the Commercial Buildings Deduction?
  • The requirement for bi-level switching is not in ASHRAE/IES 90.1. What was the thinking behind including it in most building space types? What typical savings can be achieved through bi-level switching? Or was the thinking more of requiring a basic infrastructure so that advanced controls are more attractive for installation and can be used to generate higher savings? 
  • Where is bi-level switching required?
  • I have seen several different definitions of bi-level switching, for example in California and New York rules. What is the definition?
  • Dimming is not listed in the mandatory controls provisions of ASHRAE/IES Standard 90.1-2001. Can dimming contribute to the lighting power density savings needed to qualify for the Commercial Buildings Deduction?

ASHRAE/IES Standard 90.1-2001

  • What is Standard 90.1?
  • Is it the case that per ASHRAE/IES 90.1 the maximum possible wattage for the fixture will be applied?
  • ASHRAE/IES Standard 90.1-2001 allows tradeoffs between building types and space types depending on method, and it also allows additional interior lighting power allowances if using the Space-by-Space Method. Are these still the case when applying Standard 90.1-2001 to the Commercial Buildings Deduction?
  • If a building is used as both a warehouse and manufacturing facility, ASHRAE/IES 90.1 appears to allow the building area method to be used separately for the warehouse portion and the manufacturing facility portion. Is it then the case that the tax deduction would be calculated separately for both areas of the building if the building area method is used—50% savings and $0.60/sq.ft. for the warehouse, and 25-40% savings and $0.30-$0.60/sq.ft. for the manufacturing facility? 
  • I have heard that Standard 90.1-2001 was amended to adopt the lighting power densities in Standard 90.1-2004, which are stricter. How is this addressed by the Commercial Buildings Deduction?
  • If a building were designed to a newer building standard, wouldn’t it already satisfy the conditions for the tax deduction?
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