How to Pay for Energy Efficiencies through §179D Energy Tax Incentives and Capital Discovery®
Case in point:
Based on a qualifying square footage (88,000) of a warehouse and lighting project that was completed, a building owner was entitled to a §179D deduction of approximately $53,000. Additionally, the company received an abandonment deduction of an additional $92,000 for removing the old hi-bays. Ultimately, the Company increased efficiency by approximately 40% and received an immediate tax deduction nearing $145,000.
As a progressive facility manager or building owner in today’s economy, you understand that creating an energy efficient property/facility saves both long-term dollars and provides immediate impact by providing reliable performance, better working conditions, and lowering operating costs. However, the first cost and the logistics of efficiency implementation may prove cost prohibitive. Unfortunately, the dynamics of the evaluation and determination of efficiency systems coupled with the market difficulty in securing financing options presents a conundrum for the facility manger or property owner. Questions posed are: “What is the best approach to evaluating more efficient systems?” and “Must I/my company provide the required capital for efficiencies or continue to face increased operating costs?” Businesses are looking for innovative ways to leverage their energy needs and finance projects. Most facility managers and property owners will assume that funding for energy efficient upgrades has to come from dipping into equity in the facility or from an outside funding source such a bank loan.
To address the ever persistent “bottom-line” financial needs for installations, design-builds, and retrofits for energy efficiencies, project goals need to be assessed first. First considerations are to determine which systems need immediate attention and which systems need to be addressed for long-term needs. Pinpointing the need(s) and then creating a cohesive plan to ensure that maximum energy savings are met is just part of process. Attention to efficiency requirements based on standards needed to meet incentives and tax benefit baselines should also be worked in for goals. The process is, in effect, a 3-fold process that makes sense for building owner – assessing the scope of the project and then determining what efficiency measures need to be met in order to reach goals to lower operating costs and to meet financial incentives.
Capital Review Group in Phoenix, Arizona, has developed their Capital Discovery® process over years of successfully identifying tax effects that yield immediate and dramatic financial advantage for their clients and applying discovered capital to high-value energy projects. Marky Moore, CEO of Capital Review Group, explains, “There are several strategies that may be employed to pay for energy efficiency projects by significantly lowering tax liability, including reclassification of real property (also known as Cost Segregation), abandonment, and §179D tax deductions. Capital Discovery® is utilized by our team of experts to maximize clients’ savings and significantly enhance ROI on energy projects.” Capital Discovery® puts all of the financial strategies together for facility owners, customizing solutions that provide smart and innovative ways to fund energy efficiency projects. The process also encourages evaluation of needs and the assessment of efficiencies that provide lowered operating costs.