The Energy Policy Act of 2005 was passed on July 29, 2005 and signed into law by President George W. Bush on August 8, 2005. The bill was an attempt to oppose the increasing energy problems and inefficiencies. The bill had a relatively slow starts but has come of age in the recent years. Below are common questions and concerns regarding the EPAct. Here’s what you need to know.
What is the EPAct?
The Energy Policy Act of 2005 is a bill passed to create tax deductions for energy efficient buildings in Section 179D. These buildings include:
- Used primarily for commercial purposes.
- Used for industrial purposes
- Multi-family residential building with four or more floors.
What are some requirements of the EPAct?
You must obtain certification of the requirements from a qualified individual. This certification must include:
- The qualified individual’s name, address, and phone number.
- Address of the building
- One of the following statements from Section 4 of the IRS Notice 2006-52.
What does the EPAct do?
The EPAct encourages energy efficient buildings and renovations. The more energy efficient the building, the higher the tax deduction. The deduction caps out at $1.80 per square foot and cannot exceed the amount of the equipment and installation cost.
How to calculate EPAct?
The EPAct tax deduction is based on the energy efficiency of commercial buildings. The efficiency can be measured in three ways.
- Whole building qualification
- Partial qualification
- Partial qualification through interim lighting rule. (The Interim Lighting Rule covers properties that have reduced lighting power at least 25% below Standard 90. 1-2001. The deductions vary from $0.30/sf (25%) to $0.60/sf (40%). Warehouses muse be 50% below the standard. )
|Whole Building Qualifitation||Partial Qualifiying Property (Lighting)||Interim Lighting Rule|
|Savings Requirements||50%||16.7%||25%-40% lower Lighting Power Density (50% for warehouses)|
|Tax Deductiions||$1.80/sf||$0.60/sf||$0.60/sf multiplied by applicable percentage|
Who qualifies for EPAct?
To qualify for the EPAct tax deduction you must either be an owner of a commercial property that is energy efficient or be an architect, designer, Energy Service Company (ESCO), or engineer of municipal buildings.
Who can certify EPAct?
To certify EPAct you have to be a qualified individual in the district of the building. The IRS says a qualified individual is all of the following:
- Not related to taxpayer.
- A property licensed engineer or contractor professional.
- Has represented in writing to the taxpayer that he has the essential requirements.
The Energy Policy Act of 2005 is a great way to further benefit from becoming energy efficient. Don’t miss out on the opportunity to capitalize on these deductions. Shop LED lighting for all your energy efficient lighting needs. For more assistance, contact us.