The Energy Policy Act of 2005, known as EPACT, transformed America’s energy landscape through the use of loan guarantees, subsidies and tax incentives. Originally scheduled to sunset in 2013, the legislation has been extended, with modifications, through 2015 and looks likely to receive another extension for 2016 though no action has yet been taken by Congress.

EPACT tax deductions in Section 179d of the Internal Revenue Code provide significant tax savings for qualifying commercial buildings in three energy-efficient categories one of which is lighting. And these days installing energy-efficient, environmentally friendly lighting means installing LED’s.

Simply put, LED’s are greener than grass. Their incredibly long life means less replacement costs and less landfill waste. They use less energy, create no UV or Infrared emissions and contain no mercury.

The disincentive for using LED’s invariably centers around one factor — their high price. But that has far more impact on residential customers who have neither the area nor the usage to justify savings which, in their case, might well take decades to realize.

For commercial buildings, it’s a different story. The fact that businesses tend to use more LED’s over a greater area for a longer time each day serves to recoup their initial cost in far less time. Add Section 179d to the package with a potential tax write-off of 30 to 60 cents per square foot, and there’s no reason not to install or retrofit a building with LED’s.

Qualifying for a 179d can be somewhat onerous. The IRS mandates that an independent third party perform an on-site visit and prepare a tax report to certify the deduction. Beyond that, your company’s tax professional needs to be well versed in the provisions of the code.

In 2005 Congress passed the Energy Policy Act, which created the EPAct tax deductions. Since then, the act has been renewed twice, making it possible for companies to take advantage of the tax deduction through 2015. But many companies are not aware of this tax deduction, or how to take advantage of it. Since the deduction is set to expire at the end of 2015, it would be beneficial for a company to look into the act and see if they qualify for the deductions.
The Energy Policy Act provides a tax deduction of up to $1.80 per square foot. It was intended that companies would perform upgrades to their facilities to meet the energy efficiency standards outlined by the act in order to qualify for the deductions. The deductions are divided into three areas for $0.60 per square foot. To qualify for the lighting deduction, a company must be 50% below the ASHRAE standard for energy efficiency metrics. A certified electrician must verify that the upgrades meet the standards for the act, but after that it is only a matter of filling out the paperwork and submitting it along with the tax filing for 2015. It is recommended that a tax professional verify that the filing for the deductions is correct.
While the intention of the act is to help companies cover the cost of making upgrades to their lighting, HVAC, and building envelope, lighting is probably the easiest and least costly upgrade that can be made. A simple change to LED lighting throughout the company is generally enough to meet the standards, which, again, must be verified by a certified electrician.
Time is running out in 2015 to make lighting upgrades, but Relumination may be able to help a business meet the lighting standards to get the $0.60 per square foot tax deduction.

Last December, Congress approved the Tax Increase Prevention Act of 2014 which retroactively extended the 179D lighting deduction through the end of 2014.  Since the Section 179d tax deductions save taxpayer money with energy-efficient public facilities, encourage sustainability and offer substantial tax savings to building designers and owners, it garners widespread support.

The president and congress show a history of extending the Energy Policy Act of 2005 but waiting until the last-minute to act and having the policy apply retroactively.  Since LED lighting has inherent savings even before tax considerations, upgrading to LEDs is worthwhile while the 179D incentive carrot hangs out there for 2015.

Furthermore, any LED retrofits and installations performed in 2014 can still qualify for the 2014 tax return deduction.  So if your project accomplished a 40% reduction in lighting power density or 50% for warehouses, determined by the minimum requirements in the ASHRAE/ESNA 90.1-2001 standard, it should qualify for the $0.60 per square foot deduction.

For light system installations that achieve a 25% lighting power density reduction, there is a $0.30 per square foot reduction available if you meet other lighting controls and levels prerequisites.

LED lighting system improvement to commercial buildings, apartments of at least four stories and public buildings qualify for the 179D provision.  It is available for tenant-owned leasehold upgrades, building renovations and new construction.  In most cases, the building owner takes the deduction at the time of the installation although non-taxable government facility owners not needing the deduction may allocate it to the engineer or architect of the retrofit.  A qualified third-party must certify that the project meets the ASHRAE standards and the government entity must provide a letter allotting the deduction.  The assigned deduction is available retroactively if the filer submits an amended tax return within three years.

Although the 179D deduction expired at the end of 2014, the fact that it belongs to the group of tax extender provisions which have bipartisan support and typically see renewal, provides a good reason to upgrade to LED lighting in 2015.  LED lighting is versatile which is why owners and designers use it for enhancing the design of commercial spaces while saving energy and money.

To encourage energy efficiency among commercial property owners, the IRS started offering Section 179d tax deductions in 2005. The credit has recently been extended through 2015. You may claim a one-time credit of up to $1.80 per square foot for certain upgrades in your building to conform to the government’s standard for energy efficiency. You must receive certification from an independent third-party energy organization indicating that your property meets the standards.

Commercial buildings constructed or retrofitted prior to December 31, 2005 do not qualify for the credit. Additionally, the building you own must be at least 20,000 square feet to apply for the credit. The IRS provides a credit of up to .60 per square foot for lighting, HVAC, and building envelope improvements. Our company, Relumination, can help your building meet energy efficiency standards and qualify for the lighting portion of the 179d tax deduction.

Our Approach Helps You Realize Tax and Energy Savings

We complete a comprehensive needs analysis the first time you meet with a representative from Relumination. This involves an on-site audit of your building to determine issues with your current lighting system. When we present you with the findings, we seek your input on changes you would like to make to improve worker safety, secure your building, or save on energy costs. If you are interested in sustainability, we work with you to create a plan that meets the requirements of the 179d tax credit.

Next, we provide you with projected energy savings so you can actually see your return on investment. This step helps most business owners get past their hesitancy about making the initial investment in lighting upgrades. In addition to providing you with cost and savings estimates, we research local and federal rebates or credits you may be entitled to besides the 179d tax credit.