Lighting Audit Services
EPAct 2005 Tax Deduction
"Commercial Buildings Tax Deduction"
The Energy Policy Act of 2005 commonly known as epact, created the "Commercial Buildings Tax Deduction", which allows building owners to deduct the entire cost of a lighting or building upgrade in the year the equipment is placed in service, subject to a cap.
The Emergency Economic Stabilization Act of 2008, signed into law by President George W. Bush on Oct. 3 includes a five-year extension of the "Commercial Buildings Tax Deduction".
The deduction is now scheduled to expire on Dec. 31st, 2013.
The EPAct tax incentive is a tax deduction, not an EPAct tax credit.
The "Commercial Buildings Tax Deduction" offers an accelerated tax deduction equal to the complete cost of installing “energy-efficient commercial property” in a commercial building, capped at $1.80/sq.ft.
To achieve the maximum tax deduction of $1.80/sq.ft the total annual energy and power costs must be reduced to at least 50% less than a building satisfying
ASHRAE Standard 90.1-2001as determined by DOE approved audit software. A list of
DOE approved energy audit software is provided on the DOE website.
The focus of this site is lighting which is capped at $0.60/sq.ft.
What This Means When The Building Is Privately Owned:
$0.30 to $0.60/sq.ft. can potentially be deducted by the building owner.
The cap is the total cost of the project.
Therefore the entire cost of the project can be deducted in the same year.
What This Means When The Building Is Publicly Owned:
The deduction can be applied to the
"designer of record" and can be
divided among several companies.
Method of Taxpayer or Designer of Record to Claim the EPAct Tax Deduction and receive EPAct Certification:
The IRS released interim guidance (
IRS Notice 2006-52) in June 2006 to establish a process to allow building owners and designers of record to obtain EPAct Certification and claim the EPAct tax deduction.
IRS Notice 2008-40 was issued in March of 2008 to further clarify the rules of EPAct compliance. NREL published a report (
NREL/TP-550-40228) in February 2007 which provides guidelines for the energy modeling and inspection of energy savings required by the statute.
According to the Interim Rules for Lighting Projects:
- The lighting system energy savings target is a LPD (Lighting Power Density), or watts per square foot, that is 25% to 40% lower than the minimum requirements of ASHRAE Standard 90.1–2001
- The potential amount of the tax deduction available is $0.30 to $0.60 per square foot depending upon the percentage that the LPD is reduced beyond ASHRAE Standard 90.1 – 2001
- For warehouses, the lighting power density (W/sq. ft.) must be 50% lower than the minimum requirements of ASHRAE Standard 90.1–2001 to be eligible for $0.60 per square foot.
- Lighting power density (W/sq. ft.) reductions of <25% are ineligible for any tax deduction
In addition to demonstrating a reduction in lighting power density lower than the requirements for ASHRAE Standard 90.1–2001:
- Control provisions (i.e. Automatic Lighting Shutoff) relating to lighting systems as set forth in the Standard must be met.
- Bi-level switching must be installed.
- The lighting system must also meet the minimum requirements for calculated light levels as set forth in the 9th Edition of the IESNA Lighting Handbook. Visit the Illuminating Engineering Society of North America for information on obtaining the lighting handbook.
What This Means To The Auditing Team:
The lighting audit must now contain 3 additional data points per space. - 1. Foot-Candle Measurements.
This is to verify the lighting system meets the minimum requirements set forth in the 9th Edition of the IESNA Lighting Handbook. - 2. Room Dimensions (Sq. Ft.)
This is to document existing as well as proposed watts per square foot. - 3. Existing Controls.
This is to document bi-level switching and "Automatic Lighting Shutoff" as required by ASHRAE Standard 90.1–2001
Lighting Audit Services Approach:
Completing an "epact lighting audit" can be a daunting task. However, the tax deductions make it very attractive to our clients.
Lighting Audit Services has conducted many "epact lighting audits."
Our auditors are armed with a hand held computer, digital camera, foot-candle meter, ballast frequency meter and laser distance meter.
We audit every space in the building taking applicable measurements in each.
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