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Commercial
Energy Efficiency Incentives
Business owners are eligible for a
variety of federal tax incentives for improving building
energy efficiency,
implementing combined heat and power
(CHP) systems, purchasing hybrid gasoline-electric
vehicles, and
installing onsite renewable generation,
fuel cells, and microturbines.
Commercial Buildings
Businesses can take a tax deduction for
new or renovated buildings by
reducing the energy costs associated
with three components—lighting
system; building envelope; and heating,
cooling and water heating
equipment. Buildings must meet the
ASHRAE 90.1-2001 standard and be
placed in service between January 1,
2006 and December 31, 2013 in
order to be eligible. The deduction is
available in two levels:
Buildings
that save 50% or more of projected annual energy costs
across all three system components are
eligible for a tax deduction
of $1.80 per square foot.
Buildings
that save a percentage of projected annual energy costs
for one of the three
components—building envelope (10% energy
savings), lighting (20%), and heating
& cooling (20%)—are eligible
for a partial deduction of $0.60 per
square foot.
The organization that makes the
expenditures is generally the recipient of the
deduction, which can be taken in the year the building
is placed in service. In the case of a public building,
the
designer may take the deduction. The
building must be certified by a qualified individual (a
licensed engineer or contractor)
as meeting the energy cost savings goal.
Combined Heat and Power (CHP)
Owners of CHP systems smaller than 50 MW
may take advantage of a 10% investment tax credit for
CHP
property, applicable to only the first
15 MW of CHP property. Systems must be placed into
service between
October 3, 2008 and December 31, 2016.
Only the original constructor or user of the CHP
property may take the
tax credit, in the year that the system
becomes operational. To qualify, a CHP system must be
60% efficient (on a
lower heating value basis), and produce
at least 20% of its useful energy as electricity and at
least another 20% as
useful thermal energy. The efficiency
requirement does not apply to CHP systems that use
biomass for at least
90% of the system's energy source, but
the credit will be reduced for less-efficient systems.
The economic stimulus
legislation also provides the option for
businesses to take a grant from the U.S. Treasury
Department during 2009
and 2010 in lieu of the investment tax
credit.
Commercial Vehicles
Buyers of heavy-duty hybrid vehicles can
receive tax credits based on the weight class of the
vehicle, its fuel
economy relative to a comparable
conventional vehicle, and the incremental cost. The
vehicle must also meet a
threshold value of "maximum
available power," a measure of the percentage of
total vehicle power available from
the rechargeable energy storage system
of the vehicle. Credits are available for heavy-duty
vehicles placed in
service from January 1, 2006 through
December 31, 2009.
The maximum credit available is: $3,000
for a vehicle weighing 8,501 to 14,000 pounds; $6,000
for a vehicle from
14,001 to 26,000 pounds; and $12,000 for
a vehicle over 26,000 pounds.
hdhybtaxcred.htm for
details. As of March 2009, nine manufacturers had
certified tax credits for at least one truck
Eligibility will be decided by the
Internal Revenue Service, and so this
information is provided as a guideline only.
contact a tax professional with any
questions specific to your situation.
The Tax Incentives Awareness Project (TIAP),
sponsored by a coalition of public interest nonprofit
groups, government agencies, and other
organizations in the energy efficiency
field, is designed to give consumers and businesses
information they need to make use of the federal income
tax
incentives for energy-efficient products
and technologies passed by Congress as part of the
Energy Policy Act of 2005 and subsequently amended by
later legislation.
Onsite Renewables
Business owners can take advantage of
several onsite renewable generation incentives. The
incentives apply to
solar and wind systems placed in service
from January 1, 2006 until December 31, 2016 and to
geothermal heat
pump systems placed in service from
October 3, 2008 until December 31, 2016. The incentives
are worth 30% of
the installed cost of the system. The
economic stimulus legislation also provides the option
for businesses to take a
grant from the U.S. Treasury Department
during 2009 and 2010 in lieu of the investment tax
credit.
Solar Systems
Qualifying equipment will use solar
energy to (1) generate electricity, or heat/cool or
provide hot water to a
structure, or (2) illuminate the inside
of a building by means of fiber-optic distributed
sunlight (tube systems and
passive solar are not eligible).
Solar
Water Heating: Systems
must be certified for performance by the Solar Rating
Certification
Corporation (SRCC) or a comparable
entity endorsed by the state government in which the
system is
located. At least half of the energy
used by the system to heat the water must be solar
energy. Expenses
for heating swimming pools or hot tubs
are not eligible.
Photovoltaic
(PV) Systems: Systems
must provide electricity for the residence, and must
meet applicable
fire and electrical code requirements.
Small Wind Systems
Businesses that install wind turbines
with not more than 100 kilowatts of nameplate capacity
are eligible for the
30% investment tax credit.
Geothermal Heat Pumps
Qualified geothermal heat pump property
refers to any equipment that uses the ground or ground
water as a
thermal energy source to heat the
taxpayer's residence, or as a thermal energy sink to
cool the residence. The unit
must meet the requirements of the ENERGY
STAR program that were in effect when the heat pump was
purchased. Taxpayers who install
geothermal heat pump property for commercial use are
eligible for an incentive
covering 10% of the expenditures.
Fuel Cells and Microturbines
The investment tax credits for these two
systems are available for
systems "placed in service"
through December 31, 2016. Fuel cells
generate electricity through a chemical
process. They are somewhat
similar to batteries, except they must
be continuously fed with fuel.
Microturbines are small power generation
systems using a gas turbine
engine.
Fuel
Cells: Credits
are for 30% of the cost, up to $3,000 per
kW of power that can be produced. To
qualify, systems must
have an efficiency of at least 30% and
must have a capacity of
at least 0.5 kW.
Microturbines:
Credits are for
10% of the cost, up to $200 per
kW of power that can be produced. To
qualify, systems must have an efficiency of at least 26%
and must
have a capacity of 2,000 kW or less.
This is a basic overview of the
federal-level commercial tax incentives. For more
information on equipment
specifications, pertinent IRS forms, and
additional eligibility details, visit the IRS Web site
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