Energy Saving from Greengate - Villa Lighting
Energy Saving from Greengate Supporting the Requirements of EPAct 2005 Tax Deductions
Energy Policy Act of 2005
N
ever before has the need for energy efficiency been so important, nor the benefits of energy-saving technologies greater. The U.S. government is increasing legislation to encourage the use of energy-saving technologies that conserve natural resources, have a positive impact on our environment, and ultimately save you money. History was made on Aug. 8, 2005 when the Energy Policy Act of 2005 (EPAct 2005) representing enticing tax incentives and the potential to save tens - or even hundreds - of thousands of dollars on commercial energy costs was signed into law. As a result, there has never been a better time to upgrade your commercial lighting systems with new technologies that allow you to realize the tremendous savings and tax incentive opportunities that EPAct 2005 offers. Rescue Package Extends EPAct 2005 EPAct 2005 was set to expire before Jan. 1, 2009. But the Emergency Economic Stabilization Act of 2008 (commonly called the Rescue Package) signed by President Bush on Oct. 3 extended those deductions. The Section 179D commercial building deduction taxincentive was extended for five years, through Dec. 31, 2013. Under the extension, buildings will continue to be eligible for tax deductions of 60 cents per square foot each for lighting, HVAC and the building envelope for energy reductions as compared to a building that meets ASHRAE 90.1 2001. Over the past three years, most tax deductions under EPAct have been for lighting. As thelighting industry rolls out highly energy efficient but more expensive LED (light emitting diode) lighting, the five-year extension is very timely.
The Energy Policy Act of 2005 (EPAct 2005) EPAct 2005 provides a significant tax deduction to encourage the use of energy-efficient products. This government initiative will have an impact on almost all commercial buildings, both those that were built before today’s energy-efficient products were available, and those planned for construction over the next few years. The Commercial Buildings Deduction of EPAct 2005 offers a special financial incentive for building owners and/or leaseholders to adopt the most energy-efficient lighting strategies. Through EPAct 2005, the owner of a commercial building can now offset the costs of new lighting systems and controls in the taxable year they are placed in service. Through 2013, energy efficient lighting systems and controls may pay for themselves immediately, as well as over time, with significant tax deductions. So building owners can not only reduce operating costs, but can also increase profitability and
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competitiveness by investing in the highest levels of energy efficient lighting solutions — and have the added benefit of deducting up to the entire expense of new interior lighting solutions in the tax year that they are placed in service. With EPAct 2005’s attractive tax incentives to address energy inefficiencies in current lighting solutions, the use of energysaving lighting technologies will pay for itself faster than ever before.
Maximizing the deduction for a commercial building EPAct 2005 offers two types of tax deductions. All Systems provides a one-time whole building tax deduction of up to $1.80/square foot if you upgrade a building’s 1) interior lighting system, 2) HVAC/hot water system, and 3) building envelope to obtain certification that the property surpasses the ASHRAE 90.1-2001 standard by 50% or more. A building with 100,000 square feet of applicable energy-efficient improvements, for example, would benefit from a $180,000 tax deduction under All Systems. The required 50% reduction must be accomplished solely through energy and power cost reductions for heating, cooling, ventilation, hot water and interior lighting systems.
% of Lighting Power Density Reduction / Eligible Tax Deduction 25% 26% 27% 28% 29% 30% 31% 32% 33% 34%
35%
36%
$0.30 $0.32
$0.50
$0.52 $0.54 $0.56 $0.58 $0.60 $0.60
$0.34
$0.36 $0.38
$0.40 $0.42 $0.44 $0.46 $0.48
Individual Systems or Energy Saving Equipment provides a significant partial tax deduction of up to $0.60/square foot by upgrading any one of your systems to surpass the ASHRAE 90.1-2001 standard by 25-40%. Lighting is perhaps the easiest path to take advantage of the tax incentives offered by EPAct 2005. When it comes to reducing your total energy costs, no single system can have a greater impact than your lighting which can comprise up to 40% of your electricity bill (DOE/EIA). The chart shown above is a sliding scale for energy savings and corresponding tax deduction for lighting based on total LPD reduction surpassing ASHRAE 90.1-2001 standards. LPD refers to the Lighting Power Density (calculated in watts per square foot) requirements established by ASHRAE 90.12001. A minimum savings in lighting energy of 25% would result in a 30 cents per square foot tax deduction increasing to 60 cents for 40% or more energy savings in excess of ASHRAE 90.1-2001. In addition to lowering LPD below ASHRAE 90.1-2001 standards, EPACT 2005 also mandates additional Lighting Controls Provisions in order to qualify for the tax benefits. Estimate of Wasted Lighting in Individual Offices Daily Lighting Period
37%
38%
39%
40%
>40%
These include automatic shut off, space controls, exterior lighting controls, additional controls for specialized lighting applications, and bi-level switching.
When it comes to reducing your total energy costs, no single system can have a greater impact than your lighting which can comprise up to 40% of your electricity bill (DOE/EIA). The opportunity to introduce new energy-saving lighting technologies at substantial cost savings through EPAct 2005 is tremendous. According to the Department of Energy, only 20% of existing U.S. commercial buildings feature some degree of upgraded lighting technology, while 80% continue to operate lighting systems installed before 1986.
Reduction in Electricity Expense When Lights are Turned Off in Unoccupied Areas
Hours of Lighting
Hours Wasted
8 AM – 12 Noon
4.0
1.0
Location
Savings
12 Noon – 2 PM
2.0
1.0
Individual Offices
40-50%
2 PM – 6 PM
4.0
1.0
Open / Partitioned Spaces
30-35%
6 PM – 12 Midnight
3.0
2.8
Conference Rooms
45-60%
Daily Hours
13.0
5.8
Computer Rooms
55-60%
% of Total Daily Hours
100%
45%
Classrooms
30-40%
Restrooms
45-65%
Corridors
35-50%
Parking Structures
40-50%
Warehouse
60-80%
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Lighting Controls
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ighting Controls represents a key technology for achieving EPACT 2005 requirements. While not contributing to the Lighting Power Density (LPD) savings nee ded to qualify for the Commercial Buildings Deduction, Lighting Controls such as occupancy sensors and bilevel switching are required for achieving the tax deductions of EPACT 2005. The principal lighting control provisions of ASHRAE 90.1 that must be achieved in order to qualify for the tax deductions of EPACT 2005 include automatic shut off, space controls, exterior lighting controls, and additional controls for specialized lighting. In addition, the Lighting Controls Provisions of EPACT 2005 also requires bi-level switching. Here’s a review of the Lighting Controls Provisions of EPACT 2005.
EPACT 2005 Mandatory Lighting Controls Provisions ASHRAE 90.1-2001 Automatic Shut-Off
Space Controls
Exterior Lighting Controls
Bi-Level Switching Additional Controls for Specialized Lighting Applications
Dual Level Switching
ASHRAE 90.1-2001
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Automatic Shut-Off • Buildings that are larger than 5,000 square feet must use an automatic control device to turn off lighting in all spaces. The automatic control device must be either: • A programmable time scheduling device, where an independent program schedule shall be provided for areas less than or equal to 25,000 square feet, but not more than one program schedule per floor, or • An occupancy sensor that turns lighting off within 30 minutes after the space is vacated, or • An unoccupied control signal from another control or alarm system
• Each control device shall be capable of overriding the automatic lighting shut-off for no more than four hours • Each control device shall be readily accessible and located so that the occupant can see lights from the controlling switch
Space Controls • Each space that’s enclosed by ceiling-height partitions must have at least one control device that independently controls the general lighting in the space. Each control device shall be activated either by an automatic motion sensor, or manually by an occupant. • For spaces equal to or less than 10,000 square feet, each control device shall control a maximum of 2,500 square feet • For spaces greater than 10,000 square feet, each control device shall control zones no larger than 10,000 square feet
Additional Controls for Specialized Lighting Applications A separate control device is required for the following specialized applications: • Display/accent lighting • Case lighting (lighting in cases used for display purposes) • Hotel guest room lighting • Task lighting (including permanently installed undershelf or undercabinet lighting) • Nonvisual lighting (i.e., plant growth or food warming) • Demonstration lighting (lighting equipment that is for sale or for demonstrations in lighting education)
Exterior Lighting Controls • Lighting for all exterior applications must be controlled by photosensor or astronomical time switch (10-hr memory retention in the event of power loss) capable of automatically turning off the exterior lighting when adequate daylight is available.
ASHRAE 90.1-2001 Lighting Controls Requirements of EPAct 2005
Is the interior lighting in a building larger than 5,000 sq. feet?
NO
Building is exempted from mandatory automatic shut-off requirements
yes
Will lighting be used for continuous operation?
yes
Bi-Level Switching Bi-level switching must be provided for all occupancies except hotel and motel guest rooms, storage areas, restrooms, corridors and public lobbies. Lighting within a space must be switched so the occupant can reduce the connected lighting load by at least 50% in a reasonably uniform illumination pattern. Bi-level switching requirements may be met by: • Switching alternate luminaires in a row or alternate rows of luminaires • Separately switching half of the lamps in each luminaire or two lamps in three-lamp luminaires • Using dimming controls on all lamps or luminaires
Lighting exempted from automatic shutoff requirements
NO Interior lighting in all spaces must have automatic shut-off control – select one of these methods
Time schedule: Independent schedule for each 25,000 sq. ft. area or each floor (such as control panel)
Occupancy sensor: 30-minute maximum time delay
Other system signal: Alarm system or other signal that indicates area unoccupied
Provide space Control Devices • For each ceiling height partitioned space • Maximum controlled area is: • 2,500 sq ft if space is < = 10,000 sq ft • 10,000 sq ft if space is > = 10,000 sq ft • Must be able to override automatic shut-off control, but not for more than four hours (not applicable to occupancy sensors) • Must be accessible and located so controlled lighting is visible to the occupant
There are many Lighting Control solutions available to help you meet EPACT 2005 guidelines along with ASHRAE 90.12001 while still achieving substantial cost savings. Wall box controls and ceiling mounted occupancy sensors are convenient, cost effective solutions to meeting these provisions while providing energy savings and quick payback to the end users. Depending upon the characteristics of the space to be controlled, energy savings as high as 90% can be realized through use of occupancy sensors alone (U.S. EPA). Bi-level switching is a way of controlling dual level lighting and can be achieved by using devices such as a dual level wall switch. Dual level wall switching uses isolated relays to allow for the separate control of two loads powered by one or two circuits.
Comply with all other provisions of ASHRAE 90.1-2001 • Exterior Lighting Controls • Additional Controls for Specialized Lighting Applications
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Greengate Solutions
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reengate offers energy savings solutions that are readily available today. We offer a complete line of Lighting Control solutions that not only save energy, but also help you quickly and easily meet requirements of the Commercial Buildings Deduction of EPAct 2005, and maximize the tax deduction benefit.
Greengate Solutions for EPACT 2005 ASHRAE 90.1-2001 Automatic Shut-Off
Space Controls
• Ceiling Mounted Occupancy Sensors • Microset Ultrasonic Designer Ceiling Sensors • Designer Ceiling Sensors • Warehouse Sensors
• Ceiling Mounted Occupancy Sensors • Microset Ultrasonic Designer Ceiling Sensors • Designer Ceiling Sensors • Super Dual Tech Sensors
Bi-Level Switching Exterior Lighting Controls • Time-clock or with a Photocell
• Dual Level Wall Switching
Greengate Ceiling Sensors
ODC-U-1001
OMC-DT-0701-R
OEF-P-2MHO-MV-S
Greengate offers a complete line of Ceiling Sensors that can be used individually or in combination to provide lighting and HVAC control throughout an entire building. Greengate Ceiling Sensors utilize Ultrasonic and/or Passive Infrared (PIR) Sensing technology – both engineered to provide superior performance and help maintain the proper lighting when and where it is needed. These Ceiling Sensors are ideal for reducing energy usage and costs in a variety of commercial applications such as conference rooms, public areas, corridors, restrooms, storage areas, partitioned work areas and large open spaces.
Standard Ultrasonic Designer Series. These ultrasonic Sensors can be used individually or in combination to provide complete, no-gap coverage that effectively detects minor motion throughout an area. Featuring time delay adjustable from 15 seconds to 30 minutes, these designer Sensors have multiple frequencies that enable separate control of adjacent areas.
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Standard Designer Series Model No.
Recommended Room Size
Power Requirements
ODC-U-1001
500 up to 1,000 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack
ODC-U-1001-R
500 up to 1,000 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack or BAS connection
ODC-U-2000
1,000 up to 2,000 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack
ODC-U-2000-R
1,000 up to 2,000 sq. ft.
10-30 VDC. 25mA from Greengate Switchpack or BAS connection
ODC-U-0501
250 up to 500 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack
ODC-U-0501-R
100 up to 500 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack or BAS connection
ODC-U-0051-H
50 lin. ft.10-30
VDC, 25mA from Greengate Switchpack
ODC-U-0051-H-R
50 lin. ft.10-30
VDC, 25mA from Greengate Switchpack or BAS connection
ODC-U-0100-H
100 lin. ft.
10-30 VDC, 25mA from Greengate Switchpack
MicroSet™ Full-Automatic Ultrasonic Designer Series. Groundbreaking MicroSet™ ultrasonic technology from Greengate simplifies installation. At installation, the Sensor will automatically set the time delay to 10 minutes when left at the installer test setting. The Sensor will monitor the coverage area to determine the optimum sensitivity setting and continually adjust sensitivity and time delay in response to variations in occupant behavior and environment. There is no need for the Sensor to “learn” behavior patterns over time. Each Sensor provides complete, no-gap coverage that effectively detects minor motion throughout the area.
Warehouse Sensor. Featuring the groundbreaking MicroSet™ PIR technology, the Greengate Warehouse Sensor attaches and wires directly to a fluorescent fixture and controls lamps mounted up to 40 feet in a warehouse or other high bay application. No manual adjustment is necessary to sensitivity and time delay, the Sensor automatically monitors the coverage area to determine the optimum sensitivity setting and continues to self-adjust automatically and immediately in response to occupant behavior and environmental conditions.
Warehouse Sensor Maximum
MicroSet Full-Automatic Designer Series Model No. OMC-U-1001
Recommended Room Size 500 up to 1,000 sq. ft.
Maximum Load
Power Requirements
Model No.
Coverage
Voltage
Per Relay
10-30 VDC 25mA from Greengate Switchpack
OEF-P-2MHO-MV-S
50 lin. ft. or 2,000 sq. ft.
120 VAC: Incandescent/Tungsten
6.7 amps, 800 VA
OMC-U1001-R
500 up to 1,000 sq. ft.
10-30 VDC 25mA from Greengate Switchpack or BAS connection
OMC-U-2000
1,000 up to 2,000 sq. ft.
10-30 VDC 25mA from Greengate Switchpack
OMC-U-2000-R
1,000 up to 2,000 sq. ft.
10-30 VDC 25mA from Greengate Switchpack or BAS connection
OMC-U-0501
Up to 500 sq. ft.
10-30 VDC 25mA from Greengate Switchpack
OMC-U-0501-R
Up to 500 sq. ft.
10-30 VDC 25mA from Greengate Switchpack or BAS connection
Super Dual Tech Sensor. The Super Dual Tech Sensor effectively combines passive infrared (PIR) and ultrasonic technologies for superior performance in lighting and HVAC control. This pairing of technologies virtually eliminates false activation in vacant rooms with heavy airflow. Ideal for classrooms and computer rooms, the Greengate Super Dual Tech Sensors feature self-adjusting sensitivity and time delay in real time for complete no-gap coverage.
Fluorescent/Ballast 240/277 VAC: Fluorescent/Ballast
6.7 amps, 800 VA 4.3 amps, 1200 VA
Greengate Wall Switches SuperSwitch® 2. The Greengate SuperSwitch® 2 automatically turns lights off when a room is vacated, and is so smart it adjusts itself to make sure lights stay on when someone is in the room. No adjustments are necessary to sensitivity and time delay. SuperSwitch 2 can cut lighting OSW-P-0451-MV energy usage by as much as 30% during peak hours, and can save more than 90% of lighting energy used after 6 pm. The SuperSwitch 2 dual-level feature allows occupants to select a reduced level of lighting when it is more comfortable for them which can increase savings during daylight hours of up to 60%.
Super Dual Tech Sensor Model No.
Recommended Room Size
OMC-DT-0701-R 700 up to 2,000 sq. ft.
OMC-DT-2000-R
300 up to 700 sq. ft.
Power Requirements
SuperSwitch 2
10-30 VDC 25mA from Greengate Switchpack or BAS connection
Recommended Model No.
Room Size
Interface/ Max Voltage
10-30 VDC 25mA from Greengate Switchpack or BAS connection
OSW-P-0451-MV
Up to 300 sq. ft.
120/277 VAC
Load per Relay 6.7 amps, 800 VA; 4.3 amps, 1200
OSW-P-0451-DMV*
Up to 300 sq. ft.
120/277 VAC
6.7 amps, 800 VA; 4.3 amps, 1200 VA
*Meets bi-level switching requirement.
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Cost Savings Analysis
Commercial Application – Investment Analysis Calculation Warehouse Retrofit Comparison
Fixture Mounting Height Initial Lamp Lumens Number of Lamps Initial Fixture Lumens Ballast Factor
400W High-Bay Standard Metal Halide
Meets EPACT 2005 (Controls and Lighting) Fluorescent High-Bay with Novitas 01-36X Sensor
31'
31'
36,000
3,100
1
6
36,000
18,600
1
1.18
36,000
21,948
Lamp Lumen Depreciation
0.75
0.95
Luminaire Dirt Depreciation
0.88
0.88
Fixture Efficiency
0.792
0.937
Maintained Fixture Lumens
Initial Fixture Lumens (Ballast Corrected)
18,818
17,193
Fixture Watts
460
222
Fixture Lumens/Watt
41
77
CRI
65
82
FC Averaged Maintained
38
34
Number of Fixtures
496
496
Number of Greengate Occupancy Sensors
496
% Savings Using Greengate Occupancy Sensors
60%
Cost per KWH
$0.085
$0.085
Total Wattage
22,8160
110,112
Square Footage
245,000
245,000
Total Installed Price
Existing
$151,366
0.93
0.45
Watts per Sq. Ft. Total Hrs/Year
8,760
3,504
$169,888
$32,796
Energy Savings per Year
N/A
$137,092
Building Size: 245,000 sq. ft. (350' x 700') Total Tax Deduction (245,000 x $0.60)
N/A
Annual Energy Usage (Costs)
ASHRAE 90.1-2001 Requirement: 1.3W/sq. ft. (Warehouse Space) (Warehouse must exceeded ASHRAE 90.1-2001 by 50% for full .60 sq. ft. tax credit)
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$147,000 Deduction-$147,000
Final Cost for Installed Job After Deduction
$4,366.08
Simple Payback
0.03 Years
Office Interior New Installation Comparison 24,000 sq. ft. (25 offices ~ 4,400 sq. ft.; 4 open common areas ~ 19,600 sq. ft.) 3 Lamp T8 Parabolic Fixture Mounting Height
Meets EPACT 2005 (Controls and Lighting) 2 Lamp T5 Accord with Greengate OSW-P-0451-DMV and OMC-U-2000
10'
10'
2,800
2,800
3
2
Initial Fixture Lumens
8,400
5,600
Ballast Factor
0.90
1.15
Initial Fixture Lumens (Ballast Corrected)
7,560
6,440
Initial Lamp Lumens Number of Lamps
Lamp Lumen Depreciation
0.90
0.95
Luminaire Dirt Depreciation
0.88
0.88
Fixture Efficiency
69.4
88.9
Maintained Fixture Lumens
4,722
5,439
Fixture Watts
87
66
Fixture Lumens/Watt
54
82
CRI
72
82
FC Averaged Maintained
41
40
Number of Fixtures
228
198
Number of Greengate 01-DL401 Bi-Level Switches (for private offices ~ 4,400 sq. ft.)
25 55%
% Savings Using Greengate 01-DL401 Bi-Level Switches Number of Greengate 01-111 Microset Ultrasonic Ceiling Sensors (for open office areas ~ 19,600 sq. ft.)
16 35%
% Savings Using 01-111 Microset Ceiling Sensors Cost per KWH
$0.085
$0.085
Total Wattage
19,836
13,068
Square Footage 124,000 sq. ft. (25 offices ~ 4,400 sq. ft.; 4 open common areas ~ 19,600 sq. ft.)
24,000
24,000
Total Installed Price
$18,012
$35,353
0.83
0.54
Watts per Sq Ft Total Hrs/Year for private offices
4,380
1,971
Total Hrs/Year for open office areas
4,380
2,847
Annual Energy Usage (Costs)
$7,385
$2,984
N/A
$4,401
Annual Energy Savings per Year Building Size: 24,000 sq. ft. (120' x 200') Total Tax Deduction (24,000 x $0.60)
$14,400
ASHRAE 90.1-2001 Requirement: 1.3W/sq. ft. (Office Space) Final Cost for Installed Job After Deduction
Deduction: -$14,000 $18,012
$20,953
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Additional Information
Frequently Asked Questions What commercial projects are eligible for EPAct 2005 deductions? Projects eligible under the energy-efficient commercial building tax deduction of EPAct 2005 are those: 1. Located within the United States 2. Within the scope of ASHRAE 90.1-2001 (includes public buildings, schools and rental housing four stories or higher) 3. Utilize energy efficient commercial building property installed as part of the interior lighting system, HVAC/hot water system, or building envelope 4. Placed in service between Jan. 1, 2006 and Dec. 31, 2013 Lighting system projects may qualify for the partial deduction if they satisfy the following requirements: 1. Reduce lighting power density (LPD) by 2540% beyond ASHRAE 90.1-2001 minimum requirements (warehouse spaces must reduce LPD by 50%) 2. Comply with all ASHRAE 90.1-2001 lighting controls requirements 3. Provide bi-level switching for all occupancies (except hotel/motel guest rooms, store rooms, restrooms and public lobbies) 4. Minimum requirements for calculated lighting levels according to IESNA Lighting Handbook, 9th Ed. EPAct 2005 is very confusing to read. How complicated is this? What’s important to understand is that the lighting portion of the Commercial Buildings Deduction can be achieved by using commercially available lighting technologies, good lighting design, and familiar lighting practices aimed at exceeding the minimum requirements of ASHRAE 90.1-2001, the national standard energy code.
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Even if I meet the LPD deduction requirement of EPACT 2005, do I still have to meet the Lighting Controls and BiLevel Switching Provisions of ASHRAE 90.1-2001 in order to receive any tax deduction? Yes. Regardless of how much energy-savings you are able to obtain in your lighting system through reduced LPD, you must also meet the Lighting Controls Provisions of ASHRAE 90.12001 and Bi-Level Switching Requirements. Does the accelerated tax deduction cover the complete cost of the lighting and controls, including installation labor, or does it only include the cost of purchasing the equipment? What are thecomponents of the “cost” that can be written off? It includes anything that can be capitalized, including the cost of labor. Are recycling costs deductible? Any cost that may be capitalized may be considered for the deduction. What is the difference between a tax deduction and a tax credit? The difference between a deduction and a credit is that a credit reduces the tax, while a deduction reduces the amount of income that is taxed. A “tax deduction” is subtracted from your adjusted gross income before you calculate your federal income taxes. A "tax credit" entitles the taxpayer to subtract the amount of the credit (dollar-for-dollar) from the total federal income tax bill.
Who gets the deduction? The tax deduction for privately-owned buildings goes to the owner or the person or entity who paid to have the building constructed or renovated. For government buildings, the primary designer of the lighting system typically can claim the deduction in the owner’s place. Can one benefit from the tax credit if improvements are only made to part of a building instead of the entire building? Yes, EPAct 2005 encourages tenants or occupants of a building to utilize energy-efficient equipment, as well as building owners. Tax deductions can be claimed by an owner or tenant for energy-efficiency equipping a portion of a building, as long as the improvements meet all of the ASHRAE 90.1 requirements. In fact, two or more tenants in the same building can claim a tax deduction as long as the total of the deductions does not exceed the amount allowed for the building as a whole. How do I claim the Energy Efficiency tax deduction for Commercial Property Owners? The IRS has unveiled guidelines on how commercial building owners or leaseholders can qualify for the tax deduction for making their building energy efficient, as well as the official process to certify the required energy savings in order to claim the Energy Efficiency Deduction. While the amount deductible may be as much as $1.80 per square foot of building floor area for buildings that achieve a 50% energy savings target, buildings below the 50% threshold may qualify for a deduction of up to 60 cents per square foot if they meet a 16.7% energy savings target. EPAct 2005 instructs the Secretary of the Treasury to modify its tax forms so that the Commercial Buildings Deduction can be implemented. Building owners and managers, and electrical and lighting professionals are encouraged to see the consultation of a tax expert.
Does compliance have to be verified? Yes, before claiming the deduction with respect to equipment installed on or in a commercial building, the taxpayer must obtain a certification with respect to the property. This certification must be provided by a qualified individual and satisfy the requirements of 179D of the Internal Revenue Code. Third-party inspectors who review the plans and actual construction/renovation will determine whether or not compliance has been met. Procedures for the inspection and testing of buildings will be determined by the Secretary of the Treasury. Details of the certification requirements can be found in IRS Notice 2006-52 “Deduction for Energy Efficient Commercial Buildings”. What is the effective date for taking advantage of this tax deduction? The provision is effective for energy-efficient commercial building property placed in service after December 31, 2005 and prior to January 1, 2014 and the deduction will only be allowed in the year that the energy-saving solutions are placed in service.
EPACT 2005 Resources • • • • • • •
www.lightingtaxdeduction.org www.energybillinfo.com www.nema.org/gov/energy/Energy-Legislation.cfm www.aboutlightingcontrols.org www.efficientbuildings.org www.energytaxincentives.org Advanced Energy Design Guide for Small Office Buildings available at www.ashrae.org
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Greengate • Complete Energy Management Offering • One Company, One Phone Number to Call • World Class Engineering/Manufacturing/Quality
Cooper Controls, Greengate, Novitas, PCI Lighting Controls, MicroSet, Digita, ControlKeeper, LiteKeeper, DMX Keeper, AnalogKeeper, IntelliRelay are valuable trademarks of Cooper Industries in the U.S and other countries. You are not permitted to use Cooper Trademarks without the prior written consent of Cooper Industries.
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Energy Policy Act of 2005
N
ever before has the need for energy efficiency been so important, nor the benefits of energy-saving technologies greater. The U.S. government is increasing legislation to encourage the use of energy-saving technologies that conserve natural resources, have a positive impact on our environment, and ultimately save you money. History was made on Aug. 8, 2005 when the Energy Policy Act of 2005 (EPAct 2005) representing enticing tax incentives and the potential to save tens - or even hundreds - of thousands of dollars on commercial energy costs was signed into law. As a result, there has never been a better time to upgrade your commercial lighting systems with new technologies that allow you to realize the tremendous savings and tax incentive opportunities that EPAct 2005 offers. Rescue Package Extends EPAct 2005 EPAct 2005 was set to expire before Jan. 1, 2009. But the Emergency Economic Stabilization Act of 2008 (commonly called the Rescue Package) signed by President Bush on Oct. 3 extended those deductions. The Section 179D commercial building deduction taxincentive was extended for five years, through Dec. 31, 2013. Under the extension, buildings will continue to be eligible for tax deductions of 60 cents per square foot each for lighting, HVAC and the building envelope for energy reductions as compared to a building that meets ASHRAE 90.1 2001. Over the past three years, most tax deductions under EPAct have been for lighting. As thelighting industry rolls out highly energy efficient but more expensive LED (light emitting diode) lighting, the five-year extension is very timely.
The Energy Policy Act of 2005 (EPAct 2005) EPAct 2005 provides a significant tax deduction to encourage the use of energy-efficient products. This government initiative will have an impact on almost all commercial buildings, both those that were built before today’s energy-efficient products were available, and those planned for construction over the next few years. The Commercial Buildings Deduction of EPAct 2005 offers a special financial incentive for building owners and/or leaseholders to adopt the most energy-efficient lighting strategies. Through EPAct 2005, the owner of a commercial building can now offset the costs of new lighting systems and controls in the taxable year they are placed in service. Through 2013, energy efficient lighting systems and controls may pay for themselves immediately, as well as over time, with significant tax deductions. So building owners can not only reduce operating costs, but can also increase profitability and
2
competitiveness by investing in the highest levels of energy efficient lighting solutions — and have the added benefit of deducting up to the entire expense of new interior lighting solutions in the tax year that they are placed in service. With EPAct 2005’s attractive tax incentives to address energy inefficiencies in current lighting solutions, the use of energysaving lighting technologies will pay for itself faster than ever before.
Maximizing the deduction for a commercial building EPAct 2005 offers two types of tax deductions. All Systems provides a one-time whole building tax deduction of up to $1.80/square foot if you upgrade a building’s 1) interior lighting system, 2) HVAC/hot water system, and 3) building envelope to obtain certification that the property surpasses the ASHRAE 90.1-2001 standard by 50% or more. A building with 100,000 square feet of applicable energy-efficient improvements, for example, would benefit from a $180,000 tax deduction under All Systems. The required 50% reduction must be accomplished solely through energy and power cost reductions for heating, cooling, ventilation, hot water and interior lighting systems.
% of Lighting Power Density Reduction / Eligible Tax Deduction 25% 26% 27% 28% 29% 30% 31% 32% 33% 34%
35%
36%
$0.30 $0.32
$0.50
$0.52 $0.54 $0.56 $0.58 $0.60 $0.60
$0.34
$0.36 $0.38
$0.40 $0.42 $0.44 $0.46 $0.48
Individual Systems or Energy Saving Equipment provides a significant partial tax deduction of up to $0.60/square foot by upgrading any one of your systems to surpass the ASHRAE 90.1-2001 standard by 25-40%. Lighting is perhaps the easiest path to take advantage of the tax incentives offered by EPAct 2005. When it comes to reducing your total energy costs, no single system can have a greater impact than your lighting which can comprise up to 40% of your electricity bill (DOE/EIA). The chart shown above is a sliding scale for energy savings and corresponding tax deduction for lighting based on total LPD reduction surpassing ASHRAE 90.1-2001 standards. LPD refers to the Lighting Power Density (calculated in watts per square foot) requirements established by ASHRAE 90.12001. A minimum savings in lighting energy of 25% would result in a 30 cents per square foot tax deduction increasing to 60 cents for 40% or more energy savings in excess of ASHRAE 90.1-2001. In addition to lowering LPD below ASHRAE 90.1-2001 standards, EPACT 2005 also mandates additional Lighting Controls Provisions in order to qualify for the tax benefits. Estimate of Wasted Lighting in Individual Offices Daily Lighting Period
37%
38%
39%
40%
>40%
These include automatic shut off, space controls, exterior lighting controls, additional controls for specialized lighting applications, and bi-level switching.
When it comes to reducing your total energy costs, no single system can have a greater impact than your lighting which can comprise up to 40% of your electricity bill (DOE/EIA). The opportunity to introduce new energy-saving lighting technologies at substantial cost savings through EPAct 2005 is tremendous. According to the Department of Energy, only 20% of existing U.S. commercial buildings feature some degree of upgraded lighting technology, while 80% continue to operate lighting systems installed before 1986.
Reduction in Electricity Expense When Lights are Turned Off in Unoccupied Areas
Hours of Lighting
Hours Wasted
8 AM – 12 Noon
4.0
1.0
Location
Savings
12 Noon – 2 PM
2.0
1.0
Individual Offices
40-50%
2 PM – 6 PM
4.0
1.0
Open / Partitioned Spaces
30-35%
6 PM – 12 Midnight
3.0
2.8
Conference Rooms
45-60%
Daily Hours
13.0
5.8
Computer Rooms
55-60%
% of Total Daily Hours
100%
45%
Classrooms
30-40%
Restrooms
45-65%
Corridors
35-50%
Parking Structures
40-50%
Warehouse
60-80%
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Lighting Controls
L
ighting Controls represents a key technology for achieving EPACT 2005 requirements. While not contributing to the Lighting Power Density (LPD) savings nee ded to qualify for the Commercial Buildings Deduction, Lighting Controls such as occupancy sensors and bilevel switching are required for achieving the tax deductions of EPACT 2005. The principal lighting control provisions of ASHRAE 90.1 that must be achieved in order to qualify for the tax deductions of EPACT 2005 include automatic shut off, space controls, exterior lighting controls, and additional controls for specialized lighting. In addition, the Lighting Controls Provisions of EPACT 2005 also requires bi-level switching. Here’s a review of the Lighting Controls Provisions of EPACT 2005.
EPACT 2005 Mandatory Lighting Controls Provisions ASHRAE 90.1-2001 Automatic Shut-Off
Space Controls
Exterior Lighting Controls
Bi-Level Switching Additional Controls for Specialized Lighting Applications
Dual Level Switching
ASHRAE 90.1-2001
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Automatic Shut-Off • Buildings that are larger than 5,000 square feet must use an automatic control device to turn off lighting in all spaces. The automatic control device must be either: • A programmable time scheduling device, where an independent program schedule shall be provided for areas less than or equal to 25,000 square feet, but not more than one program schedule per floor, or • An occupancy sensor that turns lighting off within 30 minutes after the space is vacated, or • An unoccupied control signal from another control or alarm system
• Each control device shall be capable of overriding the automatic lighting shut-off for no more than four hours • Each control device shall be readily accessible and located so that the occupant can see lights from the controlling switch
Space Controls • Each space that’s enclosed by ceiling-height partitions must have at least one control device that independently controls the general lighting in the space. Each control device shall be activated either by an automatic motion sensor, or manually by an occupant. • For spaces equal to or less than 10,000 square feet, each control device shall control a maximum of 2,500 square feet • For spaces greater than 10,000 square feet, each control device shall control zones no larger than 10,000 square feet
Additional Controls for Specialized Lighting Applications A separate control device is required for the following specialized applications: • Display/accent lighting • Case lighting (lighting in cases used for display purposes) • Hotel guest room lighting • Task lighting (including permanently installed undershelf or undercabinet lighting) • Nonvisual lighting (i.e., plant growth or food warming) • Demonstration lighting (lighting equipment that is for sale or for demonstrations in lighting education)
Exterior Lighting Controls • Lighting for all exterior applications must be controlled by photosensor or astronomical time switch (10-hr memory retention in the event of power loss) capable of automatically turning off the exterior lighting when adequate daylight is available.
ASHRAE 90.1-2001 Lighting Controls Requirements of EPAct 2005
Is the interior lighting in a building larger than 5,000 sq. feet?
NO
Building is exempted from mandatory automatic shut-off requirements
yes
Will lighting be used for continuous operation?
yes
Bi-Level Switching Bi-level switching must be provided for all occupancies except hotel and motel guest rooms, storage areas, restrooms, corridors and public lobbies. Lighting within a space must be switched so the occupant can reduce the connected lighting load by at least 50% in a reasonably uniform illumination pattern. Bi-level switching requirements may be met by: • Switching alternate luminaires in a row or alternate rows of luminaires • Separately switching half of the lamps in each luminaire or two lamps in three-lamp luminaires • Using dimming controls on all lamps or luminaires
Lighting exempted from automatic shutoff requirements
NO Interior lighting in all spaces must have automatic shut-off control – select one of these methods
Time schedule: Independent schedule for each 25,000 sq. ft. area or each floor (such as control panel)
Occupancy sensor: 30-minute maximum time delay
Other system signal: Alarm system or other signal that indicates area unoccupied
Provide space Control Devices • For each ceiling height partitioned space • Maximum controlled area is: • 2,500 sq ft if space is < = 10,000 sq ft • 10,000 sq ft if space is > = 10,000 sq ft • Must be able to override automatic shut-off control, but not for more than four hours (not applicable to occupancy sensors) • Must be accessible and located so controlled lighting is visible to the occupant
There are many Lighting Control solutions available to help you meet EPACT 2005 guidelines along with ASHRAE 90.12001 while still achieving substantial cost savings. Wall box controls and ceiling mounted occupancy sensors are convenient, cost effective solutions to meeting these provisions while providing energy savings and quick payback to the end users. Depending upon the characteristics of the space to be controlled, energy savings as high as 90% can be realized through use of occupancy sensors alone (U.S. EPA). Bi-level switching is a way of controlling dual level lighting and can be achieved by using devices such as a dual level wall switch. Dual level wall switching uses isolated relays to allow for the separate control of two loads powered by one or two circuits.
Comply with all other provisions of ASHRAE 90.1-2001 • Exterior Lighting Controls • Additional Controls for Specialized Lighting Applications
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Greengate Solutions
G
reengate offers energy savings solutions that are readily available today. We offer a complete line of Lighting Control solutions that not only save energy, but also help you quickly and easily meet requirements of the Commercial Buildings Deduction of EPAct 2005, and maximize the tax deduction benefit.
Greengate Solutions for EPACT 2005 ASHRAE 90.1-2001 Automatic Shut-Off
Space Controls
• Ceiling Mounted Occupancy Sensors • Microset Ultrasonic Designer Ceiling Sensors • Designer Ceiling Sensors • Warehouse Sensors
• Ceiling Mounted Occupancy Sensors • Microset Ultrasonic Designer Ceiling Sensors • Designer Ceiling Sensors • Super Dual Tech Sensors
Bi-Level Switching Exterior Lighting Controls • Time-clock or with a Photocell
• Dual Level Wall Switching
Greengate Ceiling Sensors
ODC-U-1001
OMC-DT-0701-R
OEF-P-2MHO-MV-S
Greengate offers a complete line of Ceiling Sensors that can be used individually or in combination to provide lighting and HVAC control throughout an entire building. Greengate Ceiling Sensors utilize Ultrasonic and/or Passive Infrared (PIR) Sensing technology – both engineered to provide superior performance and help maintain the proper lighting when and where it is needed. These Ceiling Sensors are ideal for reducing energy usage and costs in a variety of commercial applications such as conference rooms, public areas, corridors, restrooms, storage areas, partitioned work areas and large open spaces.
Standard Ultrasonic Designer Series. These ultrasonic Sensors can be used individually or in combination to provide complete, no-gap coverage that effectively detects minor motion throughout an area. Featuring time delay adjustable from 15 seconds to 30 minutes, these designer Sensors have multiple frequencies that enable separate control of adjacent areas.
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Standard Designer Series Model No.
Recommended Room Size
Power Requirements
ODC-U-1001
500 up to 1,000 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack
ODC-U-1001-R
500 up to 1,000 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack or BAS connection
ODC-U-2000
1,000 up to 2,000 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack
ODC-U-2000-R
1,000 up to 2,000 sq. ft.
10-30 VDC. 25mA from Greengate Switchpack or BAS connection
ODC-U-0501
250 up to 500 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack
ODC-U-0501-R
100 up to 500 sq. ft.
10-30 VDC, 25mA from Greengate Switchpack or BAS connection
ODC-U-0051-H
50 lin. ft.10-30
VDC, 25mA from Greengate Switchpack
ODC-U-0051-H-R
50 lin. ft.10-30
VDC, 25mA from Greengate Switchpack or BAS connection
ODC-U-0100-H
100 lin. ft.
10-30 VDC, 25mA from Greengate Switchpack
MicroSet™ Full-Automatic Ultrasonic Designer Series. Groundbreaking MicroSet™ ultrasonic technology from Greengate simplifies installation. At installation, the Sensor will automatically set the time delay to 10 minutes when left at the installer test setting. The Sensor will monitor the coverage area to determine the optimum sensitivity setting and continually adjust sensitivity and time delay in response to variations in occupant behavior and environment. There is no need for the Sensor to “learn” behavior patterns over time. Each Sensor provides complete, no-gap coverage that effectively detects minor motion throughout the area.
Warehouse Sensor. Featuring the groundbreaking MicroSet™ PIR technology, the Greengate Warehouse Sensor attaches and wires directly to a fluorescent fixture and controls lamps mounted up to 40 feet in a warehouse or other high bay application. No manual adjustment is necessary to sensitivity and time delay, the Sensor automatically monitors the coverage area to determine the optimum sensitivity setting and continues to self-adjust automatically and immediately in response to occupant behavior and environmental conditions.
Warehouse Sensor Maximum
MicroSet Full-Automatic Designer Series Model No. OMC-U-1001
Recommended Room Size 500 up to 1,000 sq. ft.
Maximum Load
Power Requirements
Model No.
Coverage
Voltage
Per Relay
10-30 VDC 25mA from Greengate Switchpack
OEF-P-2MHO-MV-S
50 lin. ft. or 2,000 sq. ft.
120 VAC: Incandescent/Tungsten
6.7 amps, 800 VA
OMC-U1001-R
500 up to 1,000 sq. ft.
10-30 VDC 25mA from Greengate Switchpack or BAS connection
OMC-U-2000
1,000 up to 2,000 sq. ft.
10-30 VDC 25mA from Greengate Switchpack
OMC-U-2000-R
1,000 up to 2,000 sq. ft.
10-30 VDC 25mA from Greengate Switchpack or BAS connection
OMC-U-0501
Up to 500 sq. ft.
10-30 VDC 25mA from Greengate Switchpack
OMC-U-0501-R
Up to 500 sq. ft.
10-30 VDC 25mA from Greengate Switchpack or BAS connection
Super Dual Tech Sensor. The Super Dual Tech Sensor effectively combines passive infrared (PIR) and ultrasonic technologies for superior performance in lighting and HVAC control. This pairing of technologies virtually eliminates false activation in vacant rooms with heavy airflow. Ideal for classrooms and computer rooms, the Greengate Super Dual Tech Sensors feature self-adjusting sensitivity and time delay in real time for complete no-gap coverage.
Fluorescent/Ballast 240/277 VAC: Fluorescent/Ballast
6.7 amps, 800 VA 4.3 amps, 1200 VA
Greengate Wall Switches SuperSwitch® 2. The Greengate SuperSwitch® 2 automatically turns lights off when a room is vacated, and is so smart it adjusts itself to make sure lights stay on when someone is in the room. No adjustments are necessary to sensitivity and time delay. SuperSwitch 2 can cut lighting OSW-P-0451-MV energy usage by as much as 30% during peak hours, and can save more than 90% of lighting energy used after 6 pm. The SuperSwitch 2 dual-level feature allows occupants to select a reduced level of lighting when it is more comfortable for them which can increase savings during daylight hours of up to 60%.
Super Dual Tech Sensor Model No.
Recommended Room Size
OMC-DT-0701-R 700 up to 2,000 sq. ft.
OMC-DT-2000-R
300 up to 700 sq. ft.
Power Requirements
SuperSwitch 2
10-30 VDC 25mA from Greengate Switchpack or BAS connection
Recommended Model No.
Room Size
Interface/ Max Voltage
10-30 VDC 25mA from Greengate Switchpack or BAS connection
OSW-P-0451-MV
Up to 300 sq. ft.
120/277 VAC
Load per Relay 6.7 amps, 800 VA; 4.3 amps, 1200
OSW-P-0451-DMV*
Up to 300 sq. ft.
120/277 VAC
6.7 amps, 800 VA; 4.3 amps, 1200 VA
*Meets bi-level switching requirement.
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Cost Savings Analysis
Commercial Application – Investment Analysis Calculation Warehouse Retrofit Comparison
Fixture Mounting Height Initial Lamp Lumens Number of Lamps Initial Fixture Lumens Ballast Factor
400W High-Bay Standard Metal Halide
Meets EPACT 2005 (Controls and Lighting) Fluorescent High-Bay with Novitas 01-36X Sensor
31'
31'
36,000
3,100
1
6
36,000
18,600
1
1.18
36,000
21,948
Lamp Lumen Depreciation
0.75
0.95
Luminaire Dirt Depreciation
0.88
0.88
Fixture Efficiency
0.792
0.937
Maintained Fixture Lumens
Initial Fixture Lumens (Ballast Corrected)
18,818
17,193
Fixture Watts
460
222
Fixture Lumens/Watt
41
77
CRI
65
82
FC Averaged Maintained
38
34
Number of Fixtures
496
496
Number of Greengate Occupancy Sensors
496
% Savings Using Greengate Occupancy Sensors
60%
Cost per KWH
$0.085
$0.085
Total Wattage
22,8160
110,112
Square Footage
245,000
245,000
Total Installed Price
Existing
$151,366
0.93
0.45
Watts per Sq. Ft. Total Hrs/Year
8,760
3,504
$169,888
$32,796
Energy Savings per Year
N/A
$137,092
Building Size: 245,000 sq. ft. (350' x 700') Total Tax Deduction (245,000 x $0.60)
N/A
Annual Energy Usage (Costs)
ASHRAE 90.1-2001 Requirement: 1.3W/sq. ft. (Warehouse Space) (Warehouse must exceeded ASHRAE 90.1-2001 by 50% for full .60 sq. ft. tax credit)
8
$147,000 Deduction-$147,000
Final Cost for Installed Job After Deduction
$4,366.08
Simple Payback
0.03 Years
Office Interior New Installation Comparison 24,000 sq. ft. (25 offices ~ 4,400 sq. ft.; 4 open common areas ~ 19,600 sq. ft.) 3 Lamp T8 Parabolic Fixture Mounting Height
Meets EPACT 2005 (Controls and Lighting) 2 Lamp T5 Accord with Greengate OSW-P-0451-DMV and OMC-U-2000
10'
10'
2,800
2,800
3
2
Initial Fixture Lumens
8,400
5,600
Ballast Factor
0.90
1.15
Initial Fixture Lumens (Ballast Corrected)
7,560
6,440
Initial Lamp Lumens Number of Lamps
Lamp Lumen Depreciation
0.90
0.95
Luminaire Dirt Depreciation
0.88
0.88
Fixture Efficiency
69.4
88.9
Maintained Fixture Lumens
4,722
5,439
Fixture Watts
87
66
Fixture Lumens/Watt
54
82
CRI
72
82
FC Averaged Maintained
41
40
Number of Fixtures
228
198
Number of Greengate 01-DL401 Bi-Level Switches (for private offices ~ 4,400 sq. ft.)
25 55%
% Savings Using Greengate 01-DL401 Bi-Level Switches Number of Greengate 01-111 Microset Ultrasonic Ceiling Sensors (for open office areas ~ 19,600 sq. ft.)
16 35%
% Savings Using 01-111 Microset Ceiling Sensors Cost per KWH
$0.085
$0.085
Total Wattage
19,836
13,068
Square Footage 124,000 sq. ft. (25 offices ~ 4,400 sq. ft.; 4 open common areas ~ 19,600 sq. ft.)
24,000
24,000
Total Installed Price
$18,012
$35,353
0.83
0.54
Watts per Sq Ft Total Hrs/Year for private offices
4,380
1,971
Total Hrs/Year for open office areas
4,380
2,847
Annual Energy Usage (Costs)
$7,385
$2,984
N/A
$4,401
Annual Energy Savings per Year Building Size: 24,000 sq. ft. (120' x 200') Total Tax Deduction (24,000 x $0.60)
$14,400
ASHRAE 90.1-2001 Requirement: 1.3W/sq. ft. (Office Space) Final Cost for Installed Job After Deduction
Deduction: -$14,000 $18,012
$20,953
9
Additional Information
Frequently Asked Questions What commercial projects are eligible for EPAct 2005 deductions? Projects eligible under the energy-efficient commercial building tax deduction of EPAct 2005 are those: 1. Located within the United States 2. Within the scope of ASHRAE 90.1-2001 (includes public buildings, schools and rental housing four stories or higher) 3. Utilize energy efficient commercial building property installed as part of the interior lighting system, HVAC/hot water system, or building envelope 4. Placed in service between Jan. 1, 2006 and Dec. 31, 2013 Lighting system projects may qualify for the partial deduction if they satisfy the following requirements: 1. Reduce lighting power density (LPD) by 2540% beyond ASHRAE 90.1-2001 minimum requirements (warehouse spaces must reduce LPD by 50%) 2. Comply with all ASHRAE 90.1-2001 lighting controls requirements 3. Provide bi-level switching for all occupancies (except hotel/motel guest rooms, store rooms, restrooms and public lobbies) 4. Minimum requirements for calculated lighting levels according to IESNA Lighting Handbook, 9th Ed. EPAct 2005 is very confusing to read. How complicated is this? What’s important to understand is that the lighting portion of the Commercial Buildings Deduction can be achieved by using commercially available lighting technologies, good lighting design, and familiar lighting practices aimed at exceeding the minimum requirements of ASHRAE 90.1-2001, the national standard energy code.
10
Even if I meet the LPD deduction requirement of EPACT 2005, do I still have to meet the Lighting Controls and BiLevel Switching Provisions of ASHRAE 90.1-2001 in order to receive any tax deduction? Yes. Regardless of how much energy-savings you are able to obtain in your lighting system through reduced LPD, you must also meet the Lighting Controls Provisions of ASHRAE 90.12001 and Bi-Level Switching Requirements. Does the accelerated tax deduction cover the complete cost of the lighting and controls, including installation labor, or does it only include the cost of purchasing the equipment? What are thecomponents of the “cost” that can be written off? It includes anything that can be capitalized, including the cost of labor. Are recycling costs deductible? Any cost that may be capitalized may be considered for the deduction. What is the difference between a tax deduction and a tax credit? The difference between a deduction and a credit is that a credit reduces the tax, while a deduction reduces the amount of income that is taxed. A “tax deduction” is subtracted from your adjusted gross income before you calculate your federal income taxes. A "tax credit" entitles the taxpayer to subtract the amount of the credit (dollar-for-dollar) from the total federal income tax bill.
Who gets the deduction? The tax deduction for privately-owned buildings goes to the owner or the person or entity who paid to have the building constructed or renovated. For government buildings, the primary designer of the lighting system typically can claim the deduction in the owner’s place. Can one benefit from the tax credit if improvements are only made to part of a building instead of the entire building? Yes, EPAct 2005 encourages tenants or occupants of a building to utilize energy-efficient equipment, as well as building owners. Tax deductions can be claimed by an owner or tenant for energy-efficiency equipping a portion of a building, as long as the improvements meet all of the ASHRAE 90.1 requirements. In fact, two or more tenants in the same building can claim a tax deduction as long as the total of the deductions does not exceed the amount allowed for the building as a whole. How do I claim the Energy Efficiency tax deduction for Commercial Property Owners? The IRS has unveiled guidelines on how commercial building owners or leaseholders can qualify for the tax deduction for making their building energy efficient, as well as the official process to certify the required energy savings in order to claim the Energy Efficiency Deduction. While the amount deductible may be as much as $1.80 per square foot of building floor area for buildings that achieve a 50% energy savings target, buildings below the 50% threshold may qualify for a deduction of up to 60 cents per square foot if they meet a 16.7% energy savings target. EPAct 2005 instructs the Secretary of the Treasury to modify its tax forms so that the Commercial Buildings Deduction can be implemented. Building owners and managers, and electrical and lighting professionals are encouraged to see the consultation of a tax expert.
Does compliance have to be verified? Yes, before claiming the deduction with respect to equipment installed on or in a commercial building, the taxpayer must obtain a certification with respect to the property. This certification must be provided by a qualified individual and satisfy the requirements of 179D of the Internal Revenue Code. Third-party inspectors who review the plans and actual construction/renovation will determine whether or not compliance has been met. Procedures for the inspection and testing of buildings will be determined by the Secretary of the Treasury. Details of the certification requirements can be found in IRS Notice 2006-52 “Deduction for Energy Efficient Commercial Buildings”. What is the effective date for taking advantage of this tax deduction? The provision is effective for energy-efficient commercial building property placed in service after December 31, 2005 and prior to January 1, 2014 and the deduction will only be allowed in the year that the energy-saving solutions are placed in service.
EPACT 2005 Resources • • • • • • •
www.lightingtaxdeduction.org www.energybillinfo.com www.nema.org/gov/energy/Energy-Legislation.cfm www.aboutlightingcontrols.org www.efficientbuildings.org www.energytaxincentives.org Advanced Energy Design Guide for Small Office Buildings available at www.ashrae.org
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Cooper Industries, Ltd. 600 Travis, Ste. 5800 Houston, TX 77002-1001 P: 713-209-8400 www.cooperindustries.com
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