The Energy Policy Act of 2005 (epact) created the "Energy Efficient
Commercial Buildings Deduction", which allows building owners to deduct the
entire cost of a lighting or building upgrade in the year the equipment is
placed in service, subject to a cap.
The Emergency Economic Stabilization Act of 2008, signed into law by
President George W. Bush on Oct. 3 includes a five-year extension of the
"Energy Efficient Commercial Buildings Deduction".
The deduction is now scheduled to expire on December 31st, 2013.
The Commercial Buildings Deduction offers an accelerated tax deduction equal
to the complete cost of installing "energy-efficient commercial property" in
a commercial building, capped at $1.80/sq. ft.
To achieve the maximum deduction of $1.80/sq.ft the total annual energy and
power costs must be reduced to at least 50% less than a building satisfying
ASHRAE/IES Standard 90.1-2001 as determined by DOE approved software. A
list of DOE approved software is provided on the
The focus of this site is lighting which is capped at $0.60/sq. ft.
What This Means When The Building Is Privately Owned:
$0.30 to $0.60/sq. ft. can potentially be deducted by the building owner.
The cap is the total cost of the project.
Therefore the entire cost of the project can be deducted in the same year.
What This Means When The Building Is Publicly Owned:
The deduction can be applied to the "designer of record" and can be
divided among several companies.
Method of Taxpayer/Designer to Claim Deduction and Project Certification:
The IRS released interim guidance (IRS Notice 2006-52) in June 2006 to establish a
process to allow taxpayers to obtain a certification that the property satisfies the
energy efficiency requirements contained in the statute.
IRS Notice 2008-40 was issued
in March of 2008 to further clarify the rules. NREL published a report (NREL/TP-550-40228)
in February 2007 which provides guidelines for the modeling and inspection of energy
savings required by the statute.
According to the Interim Rules for Lighting Projects:
- The lighting system energy savings target is a LPD (Lighting Power Density),
or watts per square foot, that is 25% to 40% lower than the minimum
requirements of ASHRAE/IESNA Standard 90.1–2001
- The potential amount of the tax deduction available is $0.30 to $0.60 per
square foot depending upon the percentage that the LPD is reduced beyond the
ASHRAE Standard 90.1 – 2001
- For warehouses, the lighting power density (W/sq. ft.) must be 50% lower
than the minimum requirements of ASHRAE Standard 90.1–2001 to be eligible
for $0.60 per square foot.
- Lighting power density (W/sq. ft.) reductions of <25% are ineligible for any
In addition to demonstrating a reduction in lighting power density lower
than the requirements for Standard 90.1–2001:
- Control provisions (i.e. Automatic Lighting Shutoff) relating to lighting
systems as set forth in the Standard must be met.
- Bi-level switching must be installed.
- The lighting system must also meet the minimum requirements for calculated
light levels as set forth in the 9th Edition of the IESNA Lighting Handbook.
Visit the Illuminating Engineering Society of North America for information
on obtaining the lighting handbook.
What This Means To The Auditing Team:
The lighting survey must now contain 3 additional data points per space.
- Foot-Candle Measurements.
This is to verify the lighting system meets the minimum requirements set
forth in the 9th Edition of the IESNA Lighting Handbook.
- Room Dimensions (Sq. Ft.)
This is to document existing as well as proposed watts per square foot.
- Existing Controls.
This is to document bi-level switching and "Automatic Lighting Shutoff" as
required by ASHRAE Standard 90.1–2001
Lighting Audit Services Approach:
Completing an epact lighting survey can be a daunting task. However, the tax
deduction makes it very attractive to our clients.
Lighting Audit Services has conducted many epact compliant lighting
Our auditors are armed with a hand held computer, digital camera,
foot-candle meter, ballast frequency meter and laser distance meter.
We survey every space in the building taking applicable measurements in each.
Please feel free to Contact Lighting Audit Services regarding the requirements of an epact lighting survey.