Epact Tax Benefit

The Energy Policy Act of 2005 (EPAct 2005)

Tax incentives available under EPAct 2005 are a proven way to reduce the cost of energy efficiency improvements for a building.

EPAct 2005 provides an accelerated tax deduction of up to $1.80 per square foot for building investments that achieve specified energy cost reductions beyond ASHRAE 90.1-2001 (www.ashrae.org/technology/page/63 ) building energy code standards. The maximum combined $1.80 per square foot tax deduction is comprised of deductions of up to 60 cents per square foot for three types of building systems: lighting, including lighting controls, HVAC, and the building envelope, which includes roof, walls, windows, doors and floor/foundation.

EPACT 2005 RULES ON LIGHTING DEDUCTIONS

A tax deduction of 30 cents up to a maximum 60 cents per square foot for lighting is available with the wattage reductions between 25% to 40% from ASHRAE 90.1-2001 levels. To document the lighting electricity reduction and meet the EPAct requirements, the lighting project must be accompanied by detailed financial worksheets to demonstrate that the project meets the EPAct watts-per-square-foot thresholds and meets seven other procedural requirements.

EPAct 2005 was set to expire before Jan. 1, 2009. The Emergency Economic Stabilization Act of 2008 (commonly called the Rescue Package) signed by President Bush on Oct. 3 extended the deductions through Dec. 31, 2013. Over the past three years, most tax deductions under EPAct have been for lighting projects and when combined with utility rebates have contributed to enhanced financial return metrics.

  • Outperform the ASHRAE/IESNA Standard 90.1-2001 lighting requirements by 25-40% . Eligible tax deduction per sq.ft will be between $0.30-$0.60.
  • Warehouses must outperform the ASHRAE/IESNA Standard 90.1-2001 lighting requirements by 50% to qualify for the full $0.60/sq.ft deduction.
  • All control requirements in the Standard 90.1-2001 must be met, automatic shutoff for buildings greater than 5,000 sq.ft and bi-level switching must be installed
  • All existing building codes and product regulations must be met
  • IESNA Lighting Handbook, 9th Edition minimum requirements for calculated lighting levels must be me
  • This tax deduction is generally given to the individual/organization that makes the investment (typically the owner). However, for government buildings, the tax deduction may be taken by the designer

This summary of EPAct 2005 provides a general overview of the Energy Policy Act of 2005. Please consult your tax advisor to determine how this tax deduction impacts you.  Or, Visit Department of Energy Website or www.lightingtaxdeduction.org. Or Click on EPAct White Paper below.

EPAct White Paper PDF, click here for download