Tax Deductions for Commercial Buildings

According to a post in the Environmental Leader yesterday, Energy Star-qualified commercial building designs have increased by 60%, as 75 new commercial building design projects became Energy Star qualified.

One of the projects, the Lenox Hotel in Boston implemented multiple measures to achieve qualification, including:

  • 610+ low energy windows
  • Super-efficient boilers and heat pumps
  • ENERGY STAR office equipment, and televisions
  • Motion sensors for lighting in intermittent or low-traffic areas
  • An ozone laundry system, avoiding the use of hot water and cleaning chemicals
  • Thousands of Compact and Fluorescent bulbs (saves 58,000 kilowatts each year)
  • Motion sensors on vending machines (saves an additional 21,000 kilowatts per year).

    Note: the last two initiatives alone remove 52 tons of CO2 from of the atmosphere each year!

Saunders Hotel Group is now evaluating solar hot water technology for their Comfort Inn & Suites property – if it is feasible and effective.

How the ROI of the Upgrades

Motion sensors in storage areas/closets, Approx. $500, Payback 1 year, In Engineering budget
Compact Fluorescent Chandelier Bulbs, $5,000, Payback 8 months, In Engineering budget
Separate meter for cooling tower, N/A, Payback 1-3 years, Financed in combination of water utility and Engineering budget

A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. These tax deductions are available for systems “placed in service” from January 1, 2006 through December 31, 2013.
Take the
ENERGY STAR Challenge to find the best opportunities for energy savings, set goals for improvement, and achieve superior energy efficiency.

IRS Notice 2006-52 (6/2/2006) provides guidance on deduction for energy efficient commercial buildings.
IRS Notice 2008-40 (4/7/2008) – Amplification of Notice 2006-52
Qualified Software for Calculating Energy Savings
Commercial Building Tax Deduction Coalition
For More Information:
Tax Incentives Assistance Project (TIAP)
Energy Policy Act of 2005
IRS Guidance on the Energy Policy Act of 2005 (June 2006)
Emergency Economic Stabilization Act of 2008 (“the Bailout Bill”)
Signed October 3, 2008 by President Bush
Relevant sections are in DIVISION B, Sections 106 (25D) and 302 (25C)
American Recovery and Reinvestment Act of 2009 (the “Stimulus Bill”)
Signed February 17, 2009 by President Obama
Relevant Sections are: DIVISION B, Sections 1103, 1121 (25C) and 1122 (25D)
Department of Energy Web site on Tax Incentives

Commercial Building Design Goals

Developing a Green Building Policy

Tax Deductions for Commercial Buildings

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