http://www.capitalreviewgroup.com - You may be eligible for a Stimulus Package Energy Efficiency Credits or tax deductions of up to $1.80 per square foot for improving the energy efficiency of your existing commercial buildings or designing high efficiency into new buildings. The Energy Policy Act of 2005 includes a tax deduction for investments in “energy-efficient commercial building property” designed to significantly reduce the heating, cooling, water heating, and interior lighting energy cost of new or existing commercial buildings.

1. ARE YOU READY TO TAKE ADVANTAGE OF THE NEW COMMERCIAL
TAX INCENTIVES?
INTRODUCTION
You may be eligible for a tax deduction of up to $1.80 per square foot for improving the energy
efficiency of your existing commercial buildings or designing high efficiency into new buildings.
The Energy Policy Act of 2005 includes a tax deduction for investments in “energy-efficient
commercial building property” designed to significantly reduce the heating, cooling, water
heating, and interior lighting energy cost of new or existing commercial buildings.
ELIGIBILITY
The energy-efficient commercial building property – such as state of the art lighting system –
must be placed into service between January 1, 2006 and December 31, 2013.
FULL DEDUCTION
To qualify for the full deduction, a building owner or tenant must make investments designed
to reduce energy costs by 50% or more.
PARTIAL DEDUCTION
A partial deduction of $.60 per square foot is available for investments in one of three
subsystems – lighting, heating and cooling; or building envelope – designed to reduce energy
costs by 16 2/3% (one third of the 50% requirement).
Tax deductions reduce your overall taxable income with the value of the deduction dependent
upon your tax bracket. Tax credits – such as the ones provided for consumers in the 2005
Energy Policy Act reduce the amount of tax you owe dollar for dollar.
WHO CAN BENEFIT FROM THE DEDUCTION?
The person or the organization that pays for construction is generally the recipient of the
deduction. This is usually the building owner, but for some HVAC or lighting efficiency projects
– it could be the tenant/lessee. For government owned buildings, the person primarily
responsible for designing the building or project may be able to claim the deduction.
WHAT CAN YOU DO TODAY TO BE READY?
Establish the energy use of your building(s) and set a savings. It is hard to manage what we do
not measure. With new easy to use energy tracking tools, you can establish the current energy
use of your building(s) and determine a reasonable energy savings goal. This is the first step in
many effective energy savings programs, and will help you identify the best opportunities to
qualify for the tax deduction.
Here’s How:
Assess the current use of your building(s) to establish a reference using the EPA’s national
energy performance rating system (www.energystar.gov/benchmark) – a free online tool that
provides many types of buildings with a score on a simple 1 to 100 scale (1 the least efficient
and 100 the most).
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2. ENERGY EFFICIENCY STUDY & ENERGY CERTIFICATION
In Accordance with the request for a Certificate relating to the deduction for energy efficient
commercial buildings under §179D of the Internal Revenue Code for the proposed or newly
installed: lighting upgrades, HVAC, hot water and building envelope, Capital Review Group will
provide an approved Certification Process and assures that the process is conducted in
accordance to Section 1331 of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Sta. 594
(2005) enacted §179D of the Internal Revenue Code.
1. OVERVIEW
Section 1331 of the ENERGY POLICY ACT OF 2005 provides for and allows a deduction for energy
efficient commercial buildings that reduce annual energy and power consumption by 50%
compared to the American Society of Heating, Refrigerating, and Air Conditioning Engineers
(ASHRAE) standard. The deduction equals the cost of energy efficient property installed during
construction, with a maximum deduction of $1.80 per square foot of the building.
Additionally, a partial deduction of $.60 per square foot is provided for building Sub-Systems.
SUB –SYSTEMS: Lighting, HVAC, Hot Water and Building Envelope
PARTIAL DEDUCTION: Owners of new and existing buildings (placed in service prior to the
date of enactment) may earn a partial deduction of $.60 per square foot per “system” for
upgrading one or two major building Sub-Systems. These deductions apply to new buildings
placed in service between the date of enactment and December 31, 2008 OR retrofits to
existing buildings during the same time period.
2. IRS GUIDELINES
CRG follows the IRS Guidelines relative to Partial Credits and the Interim Rule, Partial Credits
and the Permanent Rule Notice 2006-52, Calculation methods – Notice 2006 -52, and the
Certification – Notice 2005 -52.
3. SCOPE OF SERVICES
CRG will conduct a physical inspection and perform an Energy Efficiency Study (EES) to
calculate, determine and certify the allowable deductions for part or all of the cost of the
Energy Efficient Lighting, HVAC, hot water, and building envelope – or any one of these Sub-
Systems that have been placed in service after December 31, 2005 and before January 1,
2013.
4. INTERIM RULES – LIGHTING
Interim rules (existing while the Secretary of the Treasury develops long-term rules) establishes
a deduction of $.30 per square foot for buildings – or portion of buildings - that achieve at least
25% lighting savings relative to the ASHRAE 90.1-2001 lighting power density (Watts per sq. ft)
requirements (but excluding ASHRAE’s “additional lighting power allowances”) AND that also
use bi-level switching. This deduction increases progressively to $.60 per square foot for using
bi-level switching and achieving 40% lighting savings.
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3. 5. HVAC, HEAT PUMPS, FURNACES AND WATER HEATERS
Energy efficient heating, cooling, ventilation and hot water property is partially qualifying
property, within the meaning of Section 2.01 of Notice – 160920-05 (Notice 2006-52) that
satisfies both of the following conditions:
1) The property is installed as part of the heating, cooling, ventilation and hot water
systems of a building; and
2) It is certified that the heating, cooling, ventilation and hot water systems that have
been incorporated into the building, or that the taxpayer plans to incorporate into the building
subsequent to the installation of such property, will reduce the total annual energy and power
costs with respect to combined usage of the building’s heating, cooling, ventilation, hot water
and interior lighting systems by 16 2/3% or more – meeting the minimum requirements of
Standard 90.1-2001. The required 16 2/3% reduction must be accomplished solely through
energy and power cost reductions for the heating, cooling, ventilation and hot water systems.
Reductions in any other energy uses, such as receptacles, process loads, refrigeration, cooking,
and elevators, are not taken into account in determining whether the 16 2/3% reduction
achieved.
6. METHOD OF COMPUTATION
The Performance Rating Method (PRM) must be used to compute the percentage reduction in
the total annual energy and power costs with respect to combined usage of a building’s
heating, cooling, ventilation, hot water and interior lighting systems as compared to the
minimum requirements of Standard 90.1-2001.
7. CERTIFICATION
Before a taxpayer may claim a Section 179D deduction with respect to property installed on or
in a commercial building, the taxpayer must obtain a Certification with respect to the
property. The Certification must be provided by a qualified individual and satisfy the
requirements of Section 179D(1).
Statements of Certification must meet the minimum requirements of Standard 90.1-2001 for
interior lighting systems, heating, cooling, and ventilation and hot water systems and illustrate
the energy reduction by 50% or more.
Statements for Energy Efficient Lighting Systems meeting the requirements of the permanent
rule Section 2.03(1)(a) – will be made satisfying a reduction by 16 2/3% or more.
Statements for Energy Efficient Lighting Systems meeting the requirements of the interim rule
of Section 2.03(1)(b) – must satisfy the requirements stated in Section 2.03(1)(a) of Notice
2006-52.
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4. 8. METHODOLOGY
CRG will analyze, calculate, make recommendation and/or Certify subject property(ies) that
reduce annual energy and power consumption (combined power consumption) by 50% or
qualifying appropriate Sub-System qualifying percentages. The deduction equals the cost of
energy-efficient property installed or planned during construction or rehabilitation – with a
maximum of $1.80 per square foot of the building. A partial deduction of $.60 per square foot
may be realized and provided for Sub-Systems of the building.
1. Initial data is gathered to evaluate the potential tax savings for implementation of
an Energy Efficiency Study and Certification.
2. Once a Letter of Engagement is authorized engineering staff will visit the subject
site/building(s).
3. A physical inspection of the installed equipment must occur. Should the assets be
proposed a review of the plans and the specifications will occur. Once the assets/equipment
is installed a site visit must occur.
4. Prescribed calculations will be made on the energy usage and proposed usage.
5. The calculations, the Certification of approved and qualifying
assets/equipment will be completed and the Study reflecting the allowable deductions
will be delivered to taxpayer/property owner.
For more information please contact M.A.Moore at markym@capitalreviewgroup.com or
directly at 602.741.7776
CAPITAL REVIEW GROUP does not advise on any personal income tax requirements or issues. Use of any
information from this document or web site referred to is for general information only and does not
represent personal tax advice either express or implied. You are encouraged to seek professional tax
advice for personal income tax questions and assistance.
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