DAVID GOLDSTEIN NRDC JOE HOWLEY GE Lighting

At CEE’s Industry Partners meeting, a diverse panel of experts examined the first year of the Energy Policy Act (EPAct) 2005, analyzing the opportunity to take advantage of the tax incentives for commercial buildings.

Tax deductions, when combined with existing program incentives offered by CEE members, can make a more attractive package for local customers.

Thus far, however, the actual implementation of these tax incentives has been a challenge.

At the conclusion of the session, two things became abundantly clear: the commercial lighting industry is in the best position to take advantage of this opportunity and virtually everyone favors an extension.

On June 2, 2006 the IRS issued a notice explaining how commercial building owners or leaseholders can qualify for this tax deduction, which “allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings.”

According to the notice, “the amount deductible may be as much as $1.80 per square foot of building floor area for buildings that achieve a 50-percent energy savings target ... Buildings below the 50-percent threshold may, nevertheless, qualify for a deduction of up to 60 cents per square foot of building floor area if they meet a 162/3-percent energy savings target.”

The notice also stipulates the following: “Before claiming the deduction, the taxpayer must obtain a certification that the required energy savings will be achieved ... The Department of Energy will create and maintain a public list of software that must be used to calculate energy savings for purposes of providing the certification. It also provides a process that software developers must use if they desire to have their software included on that list.”

The panel at the Industry Partners Meeting included David Goldstein (NRDC), who discussed politics and policy; Kyle Pitsor (NEMA), who talked about the NEMA Coalition’s efforts; Joe Howley (GE Lighting), representing the commercial lighting industry; Jim Mullen (Lennox), representing the HVAC industry; and Jim Parks (SMUD), who discussed the efficiency program viewpoint.

“We need a national program that is consistent everywhere and a multi-year commitment,” said Goldstein. “Two years is not enough time to transform the market; we would need at least four. We’re trying to get an extension. It’s not likely we’ll hear anything this year but we’re hoping for news in 2007.”

About a year ago, the National Electrical Manufacturers Association (NEMA) put together a coalition of interested stakeholders to spread information about the EPAct tax incentives and how they could be applied to commercial buildings. Monthly meetings were held and a coalition Web site was launched (www.efficientbuildings.org).

The interim rules for commercial lighting, released well before the guidance for commercial buildings, set guidelines for achieving the tax incentives and also established rules for partial tax deductions.

“Lighting can be done more quickly and easily than changes to HVAC or building envelope,” said Howley.

The lighting industry was able to take advantage of EPAct 2005 more readily than other industries. The Web sites of the three major lighting manufacturers – GE, Philips and Sylvania – all devote sections explaining how to take advantage of the tax incentives.

Mullen noted that a 50 percent increase in efficiency above the ASHRAE standard is a “lofty goal and we have a pretty small window to do all the work.” He is hoping for an EPAct extension and “simpler qualifying criteria.”

At Sacramento Municipal Utility District, efforts have focused on educating customers about the opportunity. Parks agreed about the difficulty in meeting the 50 percent target and the limited time frame. “Only small commercial construction projects can take advantage of the incentives,” he said.

CEE will further explore the opportunity for using the tax incentives to promote high-efficiency lighting through its Commercial Lighting Committee. CEE will also inform members about any relevant changes.

Click here for a CEE Web page that contains links providing information about EPAct 2005.

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