Energy Saving fromGreengateSupporting the Requirementsof EPAct 2005 Tax Deductions

Rescue Package Extends EPAct 2005EPAct 2005 was set to expire before Jan. 1, 2009. But theEmergency Economic Stabilization Act of 2008 (commonlycalled the Rescue Package) signed by President Bush on Oct. 3extended those deductions. The Section 179D commercialbuilding deduction taxincentive was extended for five years,through Dec. 31, 2013.

Under the extension, buildings will continue to be eligible for taxdeductions of 60 cents per square foot each for lighting, HVACand the building envelope for energy reductions as compared toa building that meets ASHRAE 90.1 2001.

Over the past three years, most tax deductions under EPActhave been for lighting. As thelighting industry rolls out highlyenergy efficient but more expensive LED (light emitting diode)lighting, the five-year extension is very timely.

The Energy Policy Act of 2005 (EPAct 2005)EPAct 2005 provides a significant tax deduction to encouragethe use of energy-efficient products. This government initiativewill have an impact on almost all commercial buildings, boththose that were built before today’s energy-efficient productswere available, and those planned for construction over the nextfew years. The Commercial Buildings Deduction of EPAct 2005offers a special financial incentive for building owners and/orleaseholders to adopt the most energy-efficient lightingstrategies. Through EPAct 2005, the owner of a commercialbuilding can now offset the costs of new lighting systems andcontrols in the taxable year they are placed in service.

Through 2013, energy efficient lighting systems and controlsmay pay for themselves immediately, as well as over time, withsignificant tax deductions. So building owners can not onlyreduce operating costs, but can also increase profitability and

competitiveness by investing in the highest levels of energyefficient lighting solutions — and have the added benefit ofdeducting up to the entire expense of new interior lightingsolutions in the tax year that they are placed in service.

With EPAct 2005’s attractive tax incentives to address energyinefficiencies in current lighting solutions, the use of energy-saving lighting technologies will pay for itself faster than everbefore.

Maximizing the deduction for a commercial buildingEPAct 2005 offers two types of tax deductions. All Systemsprovides a one-time whole building tax deduction of up to$1.80/square foot if you upgrade a building’s 1) interior lightingsystem, 2) HVAC/hot water system, and 3) building envelope toobtain certification that the property surpasses the ASHRAE90.1-2001 standard by 50% or more. A building with 100,000square feet of applicable energy-efficient improvements, forexample, would benefit from a $180,000 tax deduction under AllSystems. The required 50% reduction must be accomplishedsolely through energy and power cost reductions for heating,cooling, ventilation, hot water and interior lighting systems.

Never before has the need for energy efficiency been so important, nor the benefits ofenergy-saving technologies greater. The U.S. government is increasing legislation to

encourage the use of energy-saving technologies that conserve natural resources, have apositive impact on our environment, and ultimately save you money.

History was made on Aug. 8, 2005 when the Energy Policy Act of 2005 (EPAct 2005) representingenticing tax incentives and the potential to save tens - or even hundreds - of thousands of dollars oncommercial energy costs was signed into law. As a result, there has never been a better time toupgrade your commercial lighting systems with new technologies that allow you to realize thetremendous savings and tax incentive opportunities that EPAct 2005 offers.

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Energy Policy Act of 2005

% of Lighting Power Density Reduction / Eligible Tax Deduction25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 35% 36% 37% 38% 39% 40% >40%

$0.30 $0.32 $0.34 $0.36 $0.38 $0.40 $0.42 $0.44 $0.46 $0.48 $0.50 $0.52 $0.54 $0.56 $0.58 $0.60 $0.60

Individual Systems or Energy Saving Equipment provides asignificant partial tax deduction of up to $0.60/square foot byupgrading any one of your systems to surpass the ASHRAE90.1-2001 standard by 25-40%. Lighting is perhaps theeasiest path to take advantage of the tax incentives offered byEPAct 2005. When it comes to reducing your total energycosts, no single system can have a greater impact than yourlighting which can comprise up to 40% of your electricity bill(DOE/EIA).

The chart shown above is a sliding scale for energy savingsand corresponding tax deduction for lighting based on totalLPD reduction surpassing ASHRAE 90.1-2001 standards.LPD refers to the Lighting Power Density (calculated in wattsper square foot) requirements established by ASHRAE 90.1-2001. A minimum savings in lighting energy of 25% wouldresult in a 30 cents per square foot tax deduction increasingto 60 cents for 40% or more energy savings in excess ofASHRAE 90.1-2001.

In addition to lowering LPD below ASHRAE 90.1-2001standards, EPACT 2005 also mandates additional LightingControls Provisions in order to qualify for the tax benefits.

These include automatic shut off, space controls, exteriorlighting controls, additional controls for specialized lightingapplications, and bi-level switching.

The opportunity to introduce new energy-saving lightingtechnologies at substantial cost savings through EPAct 2005is tremendous. According to the Department of Energy, only20% of existing U.S. commercial buildings feature somedegree of upgraded lighting technology, while 80% continueto operate lighting systems installed before 1986.

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Estimate of Wasted Lighting in Individual Offices

Daily Lighting Period Hours of Lighting Hours Wasted

8 AM – 12 Noon 4.0 1.0

12 Noon – 2 PM 2.0 1.0

2 PM – 6 PM 4.0 1.0

6 PM – 12 Midnight 3.0 2.8

Daily Hours 13.0 5.8

% of Total Daily Hours 100% 45%

Reduction in Electricity Expense When Lights are Turned Off inUnoccupied Areas

Location Savings

Individual Offices 40-50%

Open / Partitioned Spaces 30-35%

Conference Rooms 45-60%

Computer Rooms 55-60%

Classrooms 30-40%

Restrooms 45-65%

Corridors 35-50%

Parking Structures 40-50%

Warehouse 60-80%

When it comes to reducing your totalenergy costs, no single system canhave a greater impact than yourlighting which can comprise up to40% of your electricity bill (DOE/EIA).

Lighting Controls

4

Lighting Controls represents a key technology for achieving EPACT 2005 requirements.While not contributing to the Lighting Power Density (LPD) savings nee ded to qualify for

the Commercial Buildings Deduction, Lighting Controls such as occupancy sensors and bi-level switching are required for achieving the tax deductions of EPACT 2005. The principallighting control provisions of ASHRAE 90.1 that must be achieved in order to qualify for thetax deductions of EPACT 2005 include automatic shut off, space controls, exterior lightingcontrols, and additional controls for specialized lighting. In addition, the Lighting ControlsProvisions of EPACT 2005 also requires bi-level switching. Here’s a review of the LightingControls Provisions of EPACT 2005.

EPACT 2005 Mandatory Lighting Controls ProvisionsASHRAE 90.1-2001 Bi-Level Switching

Automatic Shut-Off Space Controls Exterior Lighting Additional Controls for Dual Level SwitchingControls Specialized Lighting

Applications

Automatic Shut-Off• Buildings that are larger than 5,000 square feet must use

an automatic control device to turn off lighting in all spaces. The automatic control device must be either:• A programmable time scheduling device, where an

independent program schedule shall be provided forareas less than or equal to 25,000 square feet, but not more than one program schedule per floor, or

• An occupancy sensor that turns lighting off within 30 minutes after the space is vacated, or

• An unoccupied control signal from another control or alarm system

Space Controls• Each space that’s enclosed by ceiling-height partitions

must have at least one control device that independently controls the general lighting in the space. Each control device shall be activated either by an automatic motion sensor, or manually by an occupant.• For spaces equal to or less than 10,000 square feet,

each control device shall control a maximum of 2,500 square feet

• For spaces greater than 10,000 square feet, each control device shall control zones no larger than 10,000 square feet

• Each control device shall be capable of overriding the automatic lighting shut-off for no more than four hours

• Each control device shall be readily accessible and located so that the occupant can see lights from the controlling switch

Exterior Lighting Controls• Lighting for all exterior applications must be controlled

by photosensor or astronomical time switch (10-hr memory retention in the event of power loss) capable of automatically turning off the exterior lighting when adequate daylight is available.

Additional Controls for Specialized Lighting ApplicationsA separate control device is required for the followingspecialized applications:• Display/accent lighting• Case lighting (lighting in cases used for display purposes)• Hotel guest room lighting• Task lighting (including permanently installed

undershelf or undercabinet lighting)• Nonvisual lighting (i.e., plant growth or food warming)• Demonstration lighting (lighting equipment that is for

sale or for demonstrations in lighting education)

ASHRAE 90.1-2001

Bi-Level Switching Bi-level switching must be provided for all occupancies excepthotel and motel guest rooms, storage areas, restrooms,corridors and public lobbies. Lighting within a space must beswitched so the occupant can reduce the connected lightingload by at least 50% in a reasonably uniform illuminationpattern. Bi-level switching requirements may be met by:• Switching alternate luminaires in a row or alternate

rows of luminaires• Separately switching half of the lamps in each

luminaire or two lamps in three-lamp luminaires• Using dimming controls on all lamps or luminaires

There are many Lighting Control solutions available to helpyou meet EPACT 2005 guidelines along with ASHRAE 90.1-2001 while still achieving substantial cost savings. Wall boxcontrols and ceiling mounted occupancy sensors areconvenient, cost effective solutions to meeting theseprovisions while providing energy savings and quick paybackto the end users. Depending upon the characteristics of thespace to be controlled, energy savings as high as 90% canbe realized through use of occupancy sensors alone (U.S.EPA). Bi-level switching is a way of controlling dual levellighting and can be achieved by using devices such as a duallevel wall switch. Dual level wall switching uses isolated relaysto allow for the separate control of two loads powered by oneor two circuits.

5

ASHRAE 90.1-2001 Lighting Controls Requirementsof EPAct 2005

Is the interior lighting

in a building larger than

5,000 sq. feet?

Building is exempted

from mandatory

automatic shut-off

requirements

Lighting exempted

from automatic shut-

off requirements

Will lighting be used for

continuous operation?

Interior lighting in all spaces must have automatic shut-off

control – select one of these methods

Time schedule:

Independent

schedule for each

25,000

sq. ft. area or

each floor (such

as control panel)

Other system signal:

Alarm system or

other signal that

indicates area

unoccupied

Provide space Control Devices

• For each ceiling height partitioned space

• Maximum controlled area is:

• 2,500 sq ft if space is < = 10,000 sq ft

• 10,000 sq ft if space is > = 10,000 sq ft

• Must be able to override automatic shut-off control, but

not for more than four hours (not applicable to occupancy

sensors)

• Must be accessible and located so controlled lighting is

visible to the occupant

Comply with all other provisions of ASHRAE 90.1-2001

• Exterior Lighting Controls

• Additional Controls for Specialized Lighting Applications

Occupancy sensor:

30-minute

maximum

time delay

NO

yes

yes

NO

Greengate Ceiling Sensors

Greengate offers a complete line ofCeiling Sensors that can be usedindividually or in combination toprovide lighting and HVAC controlthroughout an entire building.Greengate Ceiling Sensors utilizeUltrasonic and/or Passive Infrared(PIR) Sensing technology – bothengineered to provide superiorperformance and help maintain theproper lighting when and where it isneeded. These Ceiling Sensors areideal for reducing energy usage andcosts in a variety of commercialapplications such as conferencerooms, public areas, corridors,restrooms, storage areas, partitionedwork areas and large open spaces.

Standard Ultrasonic Designer Series. These ultrasonicSensors can be used individually or in combination to providecomplete, no-gap coverage that effectively detects minormotion throughout an area. Featuring time delay adjustablefrom 15 seconds to 30 minutes, these designer Sensors havemultiple frequencies that enable separate control of adjacentareas.

Standard Designer Series

Model No. Recommended Room Size Power RequirementsODC-U-1001 500 up to 1,000 sq. ft. 10-30 VDC, 25mA from

Greengate Switchpack

ODC-U-1001-R 500 up to 1,000 sq. ft. 10-30 VDC, 25mA from Greengate Switchpack or BAS connection

ODC-U-2000 1,000 up to 2,000 sq. ft. 10-30 VDC, 25mA from Greengate Switchpack

ODC-U-2000-R 1,000 up to 2,000 sq. ft. 10-30 VDC. 25mA from Greengate Switchpack or BAS connection

ODC-U-0501 250 up to 500 sq. ft. 10-30 VDC, 25mA from Greengate Switchpack

ODC-U-0501-R 100 up to 500 sq. ft. 10-30 VDC, 25mA from Greengate Switchpackor BAS connection

ODC-U-0051-H 50 lin. ft.10-30 VDC, 25mA fromGreengate Switchpack

ODC-U-0051-H-R 50 lin. ft.10-30 VDC, 25mA fromGreengate Switchpack orBAS connection

ODC-U-0100-H 100 lin. ft. 10-30 VDC, 25mA from Greengate Switchpack

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Greengate offers energy savings solutions that are readily available today. We offer acomplete line of Lighting Control solutions that not only save energy, but also help

you quickly and easily meet requirements of the Commercial Buildings Deduction ofEPAct 2005, and maximize the tax deduction benefit.

ODC-U-1001

OMC-DT-0701-R

OEF-P-2MHO-MV-S

Greengate Solutions

Greengate Solutions for EPACT 2005ASHRAE 90.1-2001 Bi-Level Switching

Automatic Shut-Off Space Controls Exterior Lighting Controls• Ceiling Mounted Occupancy • Ceiling Mounted Occupancy • Time-clock or with • Dual Level Wall Switching

Sensors Sensors a Photocell• Microset Ultrasonic • Microset Ultrasonic Designer

Designer Ceiling Sensors Ceiling Sensors• Designer Ceiling Sensors • Designer Ceiling Sensors• Warehouse Sensors • Super Dual Tech Sensors

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MicroSet™ Full-Automatic Ultrasonic Designer Series.Groundbreaking MicroSet™ ultrasonic technology from Greengate simplifies installation. At installation, the Sensor willautomatically set the time delay to 10 minutes when left at theinstaller test setting. The Sensor will monitor the coverage areato determine the optimum sensitivity setting and continuallyadjust sensitivity and time delay in response to variations inoccupant behavior and environment. There is no need for theSensor to “learn” behavior patterns over time. Each Sensorprovides complete, no-gap coverage that effectively detectsminor motion throughout the area.

MicroSet Full-Automatic Designer Series

Model No. Recommended Room Size Power RequirementsOMC-U-1001 500 up to 1,000 sq. ft. 10-30 VDC 25mA from

Greengate Switchpack

OMC-U1001-R 500 up to 1,000 sq. ft. 10-30 VDC 25mA from Greengate Switchpack or BAS connection

OMC-U-2000 1,000 up to 2,000 sq. ft. 10-30 VDC 25mA fromGreengate Switchpack

OMC-U-2000-R 1,000 up to 2,000 sq. ft. 10-30 VDC 25mA from Greengate Switchpack or BAS connection

OMC-U-0501 Up to 500 sq. ft. 10-30 VDC 25mA from Greengate Switchpack

OMC-U-0501-R Up to 500 sq. ft. 10-30 VDC 25mA from Greengate Switchpack or BAS connection

Super Dual Tech Sensor. The Super Dual Tech Sensoreffectively combines passive infrared (PIR) and ultrasonictechnologies for superior performance in lighting and HVACcontrol. This pairing of technologies virtually eliminates falseactivation in vacant rooms with heavy airflow. Ideal forclassrooms and computer rooms, the Greengate Super DualTech Sensors feature self-adjusting sensitivity and time delay in real time for complete no-gap coverage.

Super Dual Tech Sensor

Model No. Recommended Room Size Power RequirementsOMC-DT-0701-R 700 up to 2,000 sq. ft. 10-30 VDC 25mA from Greengate

Switchpack or BAS connection

OMC-DT-2000-R 300 up to 700 sq. ft. 10-30 VDC 25mA from Greengate Switchpack or BAS connection

Warehouse Sensor. Featuring the groundbreaking MicroSet™PIR technology, the Greengate Warehouse Sensor attaches andwires directly to a fluorescent fixture and controls lampsmounted up to 40 feet in a warehouse or other high bayapplication. No manual adjustment is necessary to sensitivityand time delay, the Sensor automatically monitors the coveragearea to determine the optimum sensitivity setting and continuesto self-adjust automatically and immediately in response tooccupant behavior and environmental conditions.

Warehouse Sensor

Maximum Maximum LoadModel No. Coverage Voltage Per RelayOEF-P-2MHO-MV-S 50 lin. ft. or 120 VAC:

2,000 sq. ft. Incandescent/Tungsten 6.7 amps, 800 VA

Fluorescent/Ballast 6.7 amps, 800 VA240/277 VAC:Fluorescent/Ballast 4.3 amps, 1200 VA

Greengate Wall Switches

SuperSwitch® 2. The GreengateSuperSwitch® 2 automatically turns lights offwhen a room is vacated, and is so smart itadjusts itself to make sure lights stay on whensomeone is in the room. Noadjustments are necessary to sensitivity andtime delay. SuperSwitch 2 can cut lightingenergy usage by as much as 30% during

peak hours, and can save more than 90% of lighting energyused after 6 pm. The SuperSwitch 2 dual-level feature allowsoccupants to select a reduced level of lighting when it is morecomfortable for them which can increase savings during daylighthours of up to 60%.

SuperSwitch 2

Recommended Interface/ MaxModel No. Room Size Voltage Load per Relay

OSW-P-0451-MV Up to 300 sq. ft. 120/277 VAC 6.7 amps, 800 VA;

4.3 amps, 1200

OSW-P-0451-DMV* Up to 300 sq. ft. 120/277 VAC 6.7 amps, 800 VA;

4.3 amps, 1200 VA

*Meets bi-level switching requirement.

OSW-P-0451-MV

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Cost Savings Analysis

Commercial Application – Investment Analysis CalculationWarehouse Retrofit Comparison

Meets EPACT 2005 (Controls and Lighting)400W High-Bay Standard Fluorescent High-Bay with

Metal Halide Novitas 01-36X SensorFixture Mounting Height 31' 31'

Initial Lamp Lumens 36,000 3,100

Number of Lamps 1 6

Initial Fixture Lumens 36,000 18,600

Ballast Factor 1 1.18

Initial Fixture Lumens (Ballast Corrected) 36,000 21,948

Lamp Lumen Depreciation 0.75 0.95

Luminaire Dirt Depreciation 0.88 0.88

Fixture Efficiency 0.792 0.937

Maintained Fixture Lumens 18,818 17,193

Fixture Watts 460 222

Fixture Lumens/Watt 41 77

CRI 65 82

FC Averaged Maintained 38 34

Number of Fixtures 496 496

Number of Greengate Occupancy Sensors 496

% Savings Using Greengate Occupancy Sensors 60%

Cost per KWH $0.085 $0.085

Total Wattage 22,8160 110,112

Square Footage 245,000 245,000

Total Installed Price Existing $151,366

Watts per Sq. Ft. 0.93 0.45

Total Hrs/Year 8,760 3,504

Annual Energy Usage (Costs) $169,888 $32,796

Energy Savings per Year N/A $137,092

Building Size: 245,000 sq. ft. (350' x 700')Total Tax Deduction (245,000 x $0.60) N/A $147,000

ASHRAE 90.1-2001 Requirement: 1.3W/sq. ft. (Warehouse Space) Deduction-$147,000(Warehouse must exceeded ASHRAE 90.1-2001 by 50% for full .60 sq. ft. tax credit)

Final Cost for Installed Job After Deduction $4,366.08

Simple Payback 0.03 Years

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Office Interior New Installation Comparison24,000 sq. ft. (25 offices ~ 4,400 sq. ft.; Meets EPACT 2005 4 open common areas ~ 19,600 sq. ft.) (Controls and Lighting)

3 Lamp T8 2 Lamp T5 Accord with GreengateParabolic OSW-P-0451-DMV and OMC-U-2000

Fixture Mounting Height 10' 10'

Initial Lamp Lumens 2,800 2,800

Number of Lamps 3 2

Initial Fixture Lumens 8,400 5,600

Ballast Factor 0.90 1.15

Initial Fixture Lumens (Ballast Corrected) 7,560 6,440

Lamp Lumen Depreciation 0.90 0.95

Luminaire Dirt Depreciation 0.88 0.88

Fixture Efficiency 69.4 88.9

Maintained Fixture Lumens 4,722 5,439

Fixture Watts 87 66

Fixture Lumens/Watt 54 82

CRI 72 82

FC Averaged Maintained 41 40

Number of Fixtures 228 198

Number of Greengate 01-DL401 Bi-Level Switches (for private offices ~ 4,400 sq. ft.) 25

% Savings Using Greengate 01-DL401 Bi-Level Switches 55%

Number of Greengate 01-111 Microset Ultrasonic Ceiling Sensors (for open office areas ~ 19,600 sq. ft.) 16

% Savings Using 01-111 Microset Ceiling Sensors 35%

Cost per KWH $0.085 $0.085

Total Wattage 19,836 13,068

Square Footage 124,000 sq. ft. (25 offices ~ 4,400 sq. ft.; 24,000 24,0004 open common areas ~ 19,600 sq. ft.)

Total Installed Price $18,012 $35,353

Watts per Sq Ft 0.83 0.54

Total Hrs/Year for private offices 4,380 1,971

Total Hrs/Year for open office areas 4,380 2,847

Annual Energy Usage (Costs) $7,385 $2,984

Annual Energy Savings per Year N/A $4,401

Building Size: 24,000 sq. ft. (120' x 200')Total Tax Deduction (24,000 x $0.60) $14,400

ASHRAE 90.1-2001 Requirement: 1.3W/sq. ft. (Office Space) Deduction: -$14,000

Final Cost for Installed Job After Deduction $18,012 $20,953

Additional Information

Frequently Asked QuestionsWhat commercial projects are eligible for EPAct 2005deductions?Projects eligible under the energy-efficientcommercial building tax deduction of EPAct 2005 are those:

1. Located within the United States2. Within the scope of ASHRAE 90.1-2001

(includes public buildings, schools and rentalhousing four stories or higher)

3. Utilize energy efficient commercial building property installed as part of the interior lighting system, HVAC/hot water system, or building envelope

4. Placed in service between Jan. 1, 2006 and Dec. 31, 2013

Lighting system projects may qualify for the partial deduction ifthey satisfy the following requirements:

1. Reduce lighting power density (LPD) by 25-40% beyond ASHRAE 90.1-2001 minimum requirements (warehouse spaces must reduce LPD by 50%)

2. Comply with all ASHRAE 90.1-2001 lighting controls requirements

3. Provide bi-level switching for all occupancies (except hotel/motel guest rooms, store rooms, restrooms and public lobbies)

4. Minimum requirements for calculated lighting levels according to IESNA Lighting Handbook, 9th Ed.

EPAct 2005 is very confusingto read. How complicated isthis?What’s important to understandis that the lighting portion of theCommercial Buildings Deductioncan be achieved by usingcommercially available lightingtechnologies, good lightingdesign, and familiar lightingpractices aimed at exceedingthe minimum requirements ofASHRAE 90.1-2001, thenational standard energy code.

Even if I meet the LPD deduction requirement of EPACT2005, do I still have to meet the Lighting Controls and Bi-Level Switching Provisions of ASHRAE 90.1-2001 in orderto receive any tax deduction?Yes. Regardless of how much energy-savings you are able toobtain in your lighting system through reduced LPD, you mustalso meet the Lighting Controls Provisions of ASHRAE 90.1-2001 and Bi-Level Switching Requirements.

Does the accelerated tax deduction cover the completecost of the lighting and controls, including installationlabor, or does it only include the cost of purchasing theequipment? What are thecomponents of the “cost” thatcan be written off?It includes anything that can be capitalized, including the cost oflabor.

Are recycling costs deductible?Any cost that may be capitalized may be considered for thededuction.

What is the difference between a tax deduction and a taxcredit?The difference between a deduction and a credit is that a creditreduces the tax, while a deduction reduces the amount ofincome that is taxed. A “tax deduction” is subtracted from youradjusted gross income before you calculate your federal incometaxes. A "tax credit" entitles the taxpayer to subtract the amountof the credit (dollar-for-dollar) from the total federal income taxbill.

10

Who gets the deduction?The tax deduction for privately-owned buildings goes tothe owner or the person or entity who paid to have thebuilding constructed or renovated. For governmentbuildings, the primary designer of the lighting systemtypically can claim the deduction in the owner’s place.

Can one benefit from the tax credit if improvementsare only made to part of a building instead of theentire building?Yes, EPAct 2005 encourages tenants or occupants of abuilding to utilize energy-efficient equipment, as well asbuilding owners. Tax deductions can be claimed by anowner or tenant for energy-efficiency equipping a portionof a building, as long as the improvements meet all of theASHRAE 90.1 requirements. In fact, two or more tenantsin the same building can claim a tax deduction as long as thetotal of the deductions does not exceed the amount allowed forthe building as a whole.

How do I claim the Energy Efficiency tax deduction forCommercial Property Owners?The IRS has unveiled guidelines on how commercial buildingowners or leaseholders can qualify for the tax deduction formaking their building energy efficient, as well as the officialprocess to certify the required energy savings in order to claimthe Energy Efficiency Deduction. While the amount deductiblemay be as much as $1.80 per square foot of building floor areafor buildings that achieve a 50% energy savings target, buildingsbelow the 50% threshold may qualify for a deduction of up to 60cents per square foot if they meet a 16.7% energy savingstarget.

EPAct 2005 instructs the Secretary of the Treasury to modify itstax forms so that the Commercial Buildings Deduction can beimplemented. Building owners and managers, and electrical andlighting professionals are encouraged to see the consultation of atax expert.

Does compliance have to be verified?Yes, before claiming the deduction with respect to equipmentinstalled on or in a commercial building, the taxpayer must obtaina certification with respect to the property. This certification mustbe provided by a qualified individual and satisfy the requirementsof 179D of the Internal Revenue Code. Third-party inspectorswho review the plans and actual construction/renovation willdetermine whether or not compliance has been met. Proceduresfor the inspection and testing of buildings will be determined bythe Secretary of the Treasury. Details of the certificationrequirements can be found in IRS Notice 2006-52 “Deduction forEnergy Efficient Commercial Buildings”.

What is the effective date for taking advantage of this taxdeduction?The provision is effective for energy-efficient commercial buildingproperty placed in service after December 31, 2005 and prior toJanuary 1, 2014 and the deduction will only be allowed in theyear that the energy-saving solutions are placed in service.

EPACT 2005 Resources• www.lightingtaxdeduction.org• www.energybillinfo.com • www.nema.org/gov/energy/Energy-Legislation.cfm • www.aboutlightingcontrols.org• www.efficientbuildings.org • www.energytaxincentives.org • Advanced Energy Design Guide for Small Office Buildings

available at www.ashrae.org

11

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