Incentive Programs
Various incentive programs exist to encourage the use of energy efficient equipment in lighting projects.  These include tax incentives by various jurisdictions and rebates from states and utility companies.
The Commercial Buildings Tax Deduction in Section 179D expired December 31, 2014.  However The Tax Extenders Act, HR 2029, was signed into law on December 18, 2015.  The Tax Extenders Act reinstated Section 179D for qualified energy-efficient commercial buildings, but only until December 31, 2016. The energy baseline for projects installed in calendar year 2016 has been updated to ASHRAE 90.1-2007. Qualified projects installed prior to 1/1/2016 can apply for the deduction based on the ASHRAE 90.1-2001 energy standard.

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 90.1-2007. 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” through December 31, 2016.

This deduction applies to new construction or renovations for property located within the United States.

Disclaimer

The information contained on this site about The Energy Policy Act of 2005 is not offered as tax advice and should not be taken as such.  Any information here or any other document referred to is meant for general informational purposes only.  Please consult with your tax advisor to determine the specific tax treatment appropriate for your company.

Allocation of Deduction 

The deduction may be allocated to design firms for commercial building property expenditures made by a public entity, such as public schools, hospitals or government offices.

A 'designer' is a person that creates the technical specifications for installation of energy efficient commercial building property. A designer may include, for example, an architect, engineer, contractor, environmental consultant or energy services provider who creates the technical specifications for a new building or an addition to an existing building that incorporates energy efficient commercial building property.  A person that merely installs, repairs, or maintains the property is not a designer. 

If more than one designer is responsible for creating the technical specifications for installation of energy efficient commercial building property on or in a government-owned building, the owner of the building shall: 
1. determine which designer is primarily responsible and allocate the full deduction to that designer, or 
2. at the owner’s discretion, allocate the deduction among several designers.

The Process

1. Design and install the compliant lighting system
2. Have a ‘qualified’ person certify the project
3. Claim deduction on tax form
4. Attach a copy of the compliance certificate to the file copy of the tax returns to be brought out if audited

Tax Deduction for Lighting Systems: Lighting systems are recognized as one of three building subsystems qualifying for the commercial buildings tax deduction.

Lighting is estimated by the Department of Energy to be about one-fifth of the national electrical consumption

Lighting represents about one-third of commercial building energy use

Lighting renovations can be implemented relatively quickly

Interim rules provide a lighting system-specific deduction

Must meet specific power density limits

   - Outperform the ASHRAE/IESNA Standard 90.1-2001 lighting requirements by 25% ($0.30/sf) to 40% ($0.60/sf) using a sliding sale between 25 and 40%.

   - Warehouses must outperform ASHRAE/IESNA Standard 90.1-2001 lighting requirements by 50% and may only qualify for the full $0.60/sf deduction.

   - May NOT include the ‘Additional Interior Power Allowances’ referenced in Table 9.3.1.2.

Must meet certain light level requirements (IESNA)

Must meet lighting control requirements