Energy Tax Savers EPAct and Tax Incentives Presentation
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Energy Tax Savers’ EPAct and Tax Incentives Presentation Geothermal Alliance of Illinois Energy Tax Savers, Inc. Charles Goulding Charles. Goulding@Energy. Tax. Savers. com
Presentation Index 2 l EPAct l Bonus Depreciation l Geothermal Heat Pump Tax Credit/Grant for Business l Geothermal Heat Pump Tax Credit for Residential
Energy Policy Act of 2005 (EPAct) l l l Extended through 12/31/13 Benefits available from 1/1/06 thru 12/31/13 Incentivized areas: – – – l l l 3 Lighting HVAC Building envelope Available for New Construction and Existing Buildings Also available for tenant owned lease-hold improvements Benefit available for Primary Designers on Government Projects
Important IRS Notice Rev. Proc. 2011 -14 l Taxpayers can now use 3115 process to catch up on all missed EPAct deductions – – l 4 Great for 2006/2007 new construction and retrofits Excellent for investor groups to avoid amended individual returns Many property owners are combining prior and current projects for the $1. 80
Who’s using EPAct? First Movers Retailers Reasons l l Distribution Centers l l Hotels Major growth market High economic return l Meet ASHRAE 2004 = Full EPAct Bi-level not required in guest rooms Parking Garages l Large facilities drive large EPAct benefits Industrial Facilities l Large facilities drive large EPAct benefits Existing lighting is being phased out by law l l 5 Energy is a major operating cost Centralized facilities’ management Office Buildings l More states enact ASHRAE 2004 or higher building energy codes Car Dealerships l Large deductions for lighting and service bay heaters
What’s it Worth? Lighting Building HVAC Envelope Sample Minimum Maximum Square Footage Deduction Total 50, 000 $ 15, 000 $ 30, 000 $ 90, 000 100, 000 $ 30, 000 $ 60, 000 $ 180, 000 250, 000 $ 75, 000 $ 150, 000 $ 450, 000 500, 000 $ 150, 000 $ 300, 000 $ 900, 000 750, 000 $ 225, 000 $ 450, 000 $ 1, 350, 000 1, 000 $ 300, 000 $ 600, 000 $ 1, 800, 000 *Note – with government buildings, the benefit goes to the primary designer 6
Commercial Building Immediate Deductions l l Stimulus Package emphasizes Energy Efficiency in Government Buildings Architects/Engineers/Lighting Designers – DOE goal to incentivize green design in government building sector l Benefits passed through to the primary designer of: – Federal l offices, military bases, court houses, post office, labs etc. – State offices, transportation facilities, state universities, court houses etc. – County, city, town, village etc l l 7 offices, schools, town halls, police, fire, libraries etc.
What’s in it for Architects/Engineers/Lighting Designers? l l 8 Growth in this EPAct area for government building designers is exploding Successful Design Niches: – K-12 Public Schools – State Universities and Colleges – Military Bases – Parking Garages – Airports
Allocation of $120, 000 Tax Deduction Government Buildings Only 4 Party 2 Party Allocation Geothermal Engineer Design & Build Contractor Architect Specifier $30, 000 Specifier 9 $40, 000 Specifier $60, 000 Allocation Engineer Design & Build Contractor No 3 Party Geothermal Design & Build Contractor $40, 000 Geothermal Specifier $120, 000
How do you Qualify? l Mechanics – – Deductions based on improvements over ASHRAE 90. 1 2001 Energy efficient improvements must be depreciable assets l – Available for installations completed between 1/1/06 & 12/31/13 l – Converts 39 year depreciation to current deduction Can begin in prior years Deduction amounts: l Lesser of total cost or: – – 10 $1. 80/sq. ft. Whole Building $0. 60/sq. ft. Individual Systems a. Lighting b. HVAC c. Building Envelope ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) HVAC (Heating, Ventilation & Air Conditioning)
8 Ways to Capture Tax Deduction • (1)Whole Building ($1. 80/ft 2) – • • 11 50% Energy Cost Reduction below standard Permanent Rules partial deduction ($0. 60/ft 2) Building Envelope Lighting HVAC Alternative 1 (2)162/3 % (3)162/3 % (4)162/3 % Alternative 2 (2)10% (3)20% (4)20% Alternative 3 (5)10% (6)25% (7)15% (8)Interim Lighting Rules ($0. 30/ft 2 -$0. 60/ft 2) – 25% to 40% prescribed Light Power Density (LPD) reduction below standard
Biggest EPAct Growth Area LED’s
What Tends to Qualify on the HVAC side? 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13 Geothermal (Ground Source Heat Pumps) Thermal Storage High Efficiency VRF units in Rental Apartments/Dorms/Hotels Centralized HVAC in Rental Apartments/Dorms/Hotels Energy Recovery Ventilation Demand Control Ventilation Chillers in buildings < 150, 000 sq ft Direct fired heaters in no AC Industrial Spaces VAV (variable air volume devices) in buildings <75, 000 sq ft Chilled Beam Magnetic Bearing Chillers Gas fired chillers combined with electric chillers to peak shave
Warehouse Heater & Efficient Lighting Location Jacksonville, FL Irving, TX S. Brunswick, NJ Franklin, NJ Middleton, PA Bristol, PA Edison, NJ Oxford, MA Hauppauge, NY Memphis, TN Houston, TX St. Tammany Parish, LA Edison, NJ Atlanta, GA Edison, NJ Eagan, MN Whippany, NJ Joplin, MO Indianapolis, IN Norwood, MA Buffalo, NY Minneapolis, MN Totals Sq. Ft. W/sq. ft. 642, 219 0. 69 701, 250 0. 40 200, 000 0. 75 140, 000 0. 45 61, 067 0. 61 273, 080 0. 37 60, 000 0. 76 43, 192 0. 54 68, 800 0. 76 80, 324 0. 63 231, 345 0. 39 895, 000 0. 45 852, 000 0. 44 95, 654 0. 28 600, 814 0. 44 105, 403 0. 33 570, 567 0. 44 292, 458 0. 39 146, 901 0. 31 533, 520 0. 78 100, 000 0. 50 851, 548 0. 39 731, 115 0. 36 8, 276, 257 Heaters 3(1, 850 MBH ea) 20(400 MBH ea) 4(1, 200 MBH ea) 1(1, 850 MBH) & 1(1, 600 MBH) 2(1, 200 MBH ea) 2(2, 200 MBH) & 4(1, 600 MBH) 1(1, 600 MBH) & 1(1, 200 MBH) 1(950 MBH) & 1(800 MBH) 1(3, 200 MBH) 4(1, 600 MBH ea) 1(1, 200 MBH) 5(200 MBH ea) & 2(100 MBH) 1(400 MBH) 15(2 MBH ea) 11 (200 MBH ea) 1(1, 600 MBH) 2(600 MBH) & 2(400 MBH) Special System 1 (1, 000 MBH) & 2 (200 MBH) 4(1, 600 MBH ea) Special System $/sq. ft. $1. 20/sq. ft. $1. 80/sq. ft. $1. 20/sq. ft $1. 80/sq. ft. Tax Deduction $770, 663 $1, 262, 250 $240, 000 $252, 000 $73, 280 $491, 544 $72, 000 $51, 830 $82, 560 $96, 389 $416, 421 $1, 611, 000 $1, 533, 600 $172, 177 $1, 081, 465 $189, 725 $1, 027, 020 $526, 424 $264, 422 $960, 336 $180, 000 $1, 532, 786 $1, 316, 007 $14, 203, 899
Geothermal Free Riding l Your database of completed geothermal projects is a goldmine – – Free ride new HVAC tax deductions Free ride LED lighting installations ACT NOW! 15
LED REPAct 16 l This is our proprietary tax service for LED installations in refrigerated warehouses l Developed in conjunction with the leading manufacturers of LED’s for cold storage.
Energy “Modeling” required for HVAC & Envelope l HVAC and Building Envelope – Modeling required (IRS Approved) – No partial deductions – Almost exclusively new construction and l l l – – 17 Geothermal Thermal Storage Lighting/heater combinations LED REPAct LEED (Leadership in Energy & Environmental Design) certified
LEED Buildings 18 l LEED buildings present excellent EPAct opportunities l LEED buildings are already modeled l If the LEED EA-1 credit template is sent to us we will review it on a complimentary basis to determine if the building is already “in the money”
Understanding Energy Models l IRS has approved thirteen types of modeling software – – l l l 19 e. QUEST, Trane Trace 700, Energy Plus, Carrier HAP, Visual. DOE, Energy. Gauge, DOE 2. 2, DOE 2. 1 E & 2. 1 E-JJH, Owens Corning Commercial Energy Calculator, Green Building Studio, Ener. Sim, IES <Virtual Environments> other submissions are in process Important modern Energy management tool. Currently required for all HVAC and building envelope deductions and for whole building lighting alternative. In many jurisdictions, rebates are provided for all or substantial portions of modeling costs.
50% Bonus Depreciation l Placed in Service between: – – l 9/9/2010 and 12/31/2011 100% bonus 1/1/2012 and 12/31/2012 50% bonus Tax Depreciation Schedules less than 20 yrs – Examples l l l Alternative Energy(Geothermal, Solar, Wind, etc. ) Outdoor Lighting not affixed to the building Qualified leasehold improvements – Non structural interior improvements to non residential real property pursuant to a lease. – Building must be at least 3 years old – Original use must commence with taxpayer 20 l Consult Your Tax Advisor for More Info
American Recovery and Reinvestment Act of 2009 Tax Credits & Grants in Lieu of Tax Credits 21 Specified Energy Property Credit Termination Date Applicable Percentage of Eligible Cost Basis Large Wind Closed-Loop Biomass Facility Open-loop Biomass Facility Geothermal under IRC sec. 45 Landfill Gas Facility Trash Facility Qualified Hydropower Facility Marine & Hydrokinetic Solar Geothermal under IRC sec. 48 Fuel Cells Microturbines Combined Heat & Power Small Wind Geothermal Heat Pumps Jan 1, 2013 Jan 1, 2014 Jan 1, 2014 Jan 1, 2017 Jan 1, 2017 30% 30% 30% 10%* 30%** 10%*** 10% 30% 10% *For the first time in U. S. Tax History 100% of the cost of an alternative energy project can be expensed for tax purposes for projects completed after September 8, 2010 and before December 31, 2011. *Also cash grants equivalent to the 30% and 10% credit amounts are available through December 31, 2011
Business – Geothermal Heat Pump l l l 10% Credit or Grant Available thru 12/31/16 Grant – Must be started by 12/31/2011 l – Projects >$500, 000 require: l – CPA Agreed Upon Procedure(AUP) Grant applications for >$1, 000 require: l 22 5% safe harbor CPA Attestation
Geothermal Heat Pump Property l Includes equipment that uses energy from geothermal source – At least 75% energy used by equipment must be from geothermal source l – – 23 If not, equipment does not qualify as Geothermal Heat Pump Property This may include downstream (after heat pump) items: l Pipes l Ductwork l Heat Exchangers l Diffusers Items that do not use geothermal source energy do not qualify l Downstream Pumps l Downstream Fans
Conditioned Geothermal Tax Planning Example 100, 000 Sq. ft. Geothermal Project Cost (after rebate) Tax Credit or Grant 10% 24 $1, 600, 000 1, 440, 000 144, 000 After 10% Tax Credit 1, 296, 000 Remaining Basis(100% - (½x 10%)) 1, 368, 000 Bonus Depreciation (50% for 2012) 684, 000 Value of above at 35% 239, 400 Total First Year Tax Benefit 383, 400 Net Investment Before EPAct $1, 056, 600 Excess EPAct Tax Deduction $180, 000
Residential – Geothermal Heat Pump l l 25 30% credit Available thru 12/31/16 Must Meet Energy Star Criteria Current Energy Star Criteria l Closed Loop l Direct Expansion – – – 14. 1 EER 3. 3 COP 15 EER 3. 5 COP l Open-Loop – 16. 2 EER 3. 6 COP – –
What does Energy Tax Savers Deliver? l l Pre-project EPAct Marketing Material Complimentary Design Analysis Complimentary Tax Benefit Assessment Comprehensive EPAct Tax Package -Energy Reduction Plan (ETSI Software) -Building Energy Model (ETSI Reviewed) -Tax Deduction Calculation (ETSI Software) 26 -Owners Manual, highlighting energy savings -Design Certification (ETSI Document Creation and Review) -Post-Implementation Inspection (ETSI Document Creation and Review) -Audit Assistance
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Energy Tax Savers Inc. http: //www. energytaxsavers. com/ Energy Tax Savers 144 A Jackson Avenue Syosset, NY 11791 Phone: 516. 364. 2630 Fax: 631. 240. 5165 Email: Charles. Goulding@Energy. Tax. Savers. com 28
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