What is EPACT 2005?
A quick look
The Energy Policy Act of 2005 (EPACT 2005) offers large tax credits for buildings that comply with certain energy-efficiency standards. Does your building qualify for any EPACT 2005 tax deductions? We broke it down for you.
First, it's important to determine who is ELIGIBLE for the tax credit depending on the building. The types of
buildings that are ELIGIBLE for the EPACT 2005 tax credit are:
-Government buildings (public schools, post offices, libraries, etc)
-Commercial buildings (offices, warehouses, retail stores, etc)
-Private housing units and hotels (apartment buildings, condos, etc)
Churches, charitable organizations, and other Non-Profits are not eligible specifically for this particular tax credit, but talk to your tax professional about other deductions that might be available.
Privately owned commercial or residential buildings are eligible depending on who made the upgrades for energy-efficiency. If the upgrades were paid for by the owner, than he/she is eligible for the tax credits. If the tenant (condo, apartment, storefront, business, etc) made the upgrades, than he/she is eligible for a tax credit on his/her rented space. Government buildings, schools, universities, and hospitals that meet EPACT 2005 specifications will be credited to the architecture/design firm that built the building according to EPACT 2005 standards. EPACT 2005 tax credits are offered according to the following three criteria:
EPAct 2005 – Federal tax deduction for high efficiency building systems
In 2005 Congress enacted the EPact 2005 program. This legislation states that building owners can claim a tax deduction, if they design in, and install energy efficient structures and systems. The deductions are available for energy efficient lighting, HVAC, and building envelope (windows, roof, insulation, etc.). Any building that has been built or retrofitted between the dates of 1/1/2006 and 12/31/2017 with one or more of these systems may qualify for up to $1.80/sqft in federal tax deductions.
If the building in question is a “public building”, built with public funds (schools, municipal buildings, etc.) the tax deduction is available to the “designer” of the high efficiency system, such as an architect or engineer. “Private building” deductions automatically go to the owner of the building. The deductions are $0.60/sqft for each system. Therefore the deduction will either be $0, $0.60/sqft,$1.20/sqt, or $1.80/sqft. This depends solely on which systems qualify.
Example of deduction amounts and cost for a 150,000 sqft. Building:
1) Nothing (no systems qualified)/ No Cost
2) $0.60/sqft or $90,000 (one system qualified)/ Cost - $0.06/sqft
3) $1.20/sqft or $180,000 (two systems qualified)/ Cost - $0.10-$0.12/sqft
4) $1.80/sqft or $270,000 (either all three systems qualified, or the building is 50% more efficient than thebaseline model)/ Cost $0.10-$0.12/sqft
Our company, Engineered Cost Recovery (ECR), is a national engineering firm that utilizes IRS approved software and processes to certify buildings for the Epact federal tax deduction. ECR will look at your building system prints for free and determine if you qualify for this deduction. Once the amount of deduction is determined ECR will provide you with an engagement letter that states exactly how much of a tax deduction you qualify for and the cost to you to obtain the deduction.
The process is very simple and, because of our free feasibility study and audit protection guarantee, there is no risk or liability to the client.
What is EPAct 2005?
In the governments words...
Section 1331 of the Energy Policy Act of 2005, enacted § 179D of the Code, which provides a deduction with respect to energy efficient commercial buildings. Sections 179D(d)(1) and 179D(f) allow a deduction to a taxpayer for part or all of the cost of certain partially qualifying commercial building property that the taxpayer places in service after December 31, 2005, and before January 1, 2008 (The Emergency Economic Stabilization Act of 2008 (HR-1424), approved and signed on October 3, 2008, extends the benefits of the Energy Policy Act of 2005 through December 31, 2013). For purposes of the notice partially qualifying commercial Building property is property that would be energy efficient commercial building property except for the failure to achieve the 50-percent reduction in energy and power costs required under section 2.02(1)(c) of Internal Revenue Bulletin (IRB 2006-52).
Energy efficient commercial building property is defined to be depreciable property that satisfies each of the following conditions:
- The property is installed on or in any building that is located in the United States and is within the scope of American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE) Standard 90.1–2001, and
- The property is installed as part of
- the interior lighting systems,
- the heating, cooling, ventilation, and hot water systems, or
- the building envelope , and
- It is certified that the interior lighting systems, heating, cooling, ventilation, and hot water systems, and building envelope 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 50 percent or more as compared to a Reference Building that meets the minimum requirements of ASHRAE Standard 90.1–2001. The required 50-percent reduction must be accomplished solely through energy and power cost reductions for the heating, cooling, ventilation, hot water, and interior lighting 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 50-percent reduction is achieved.
In addition, the deduction for the cost of energy efficient commercial building property installed on or in a building shall not exceed the excess (if any) of:
- The product of $1.80 and the square footage of the building, over
- The aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.
In addition, the "Interim Lighting Rule" allows for 33% of the Tax Deduction to be achieved on lighting projects without modeling if specific requirements for lighting power densisty, controls systems, and light levels are met.