Anyone contemplating a fluorescent lighting upgrade to earn tax deductions under Section 179D should attempt to do it before the end of 2013. That's because the lighting-only tax deduction will be harder to achieve with a baseline of the ASHRAE 90.1-2004 standard, which could become effective Jan. 1, 2014 if the Senate proposal becomes law.
With HVAC, ASHRAE 90.1-2004 does not vary that much from 90.1-2001, so if the law is extended, the same measures that tend to qualify now will qualify under the standard of 90.1-2004. The HVAC measures that often qualify (subject to modeling) are as follows:
In addition, industrial space greater than 75,000 square feet with constant volume package units can often qualify for either the $1.20 or $1.80 deduction by installing energy efficient lighting that meets the standards for those deductions.
What's more, under current law, many heated (non-conditioned) warehouse and industrial buildings can meet the threshold for the $1.80-per-square-foot deduction if they have installed energy efficient lighting and perform work on their heating systems and roof. Here's how it works. To qualify for the maximum 179D deduction of $1.80 per square foot, a building must beat ASHRAE 90.1-2001 standards by a specified amount. Efficient lighting by itself may be enough to enable a building to hit that target. An owner can get only a 60 cents-per-square-foot deduction for lighting alone. But if the owner upgrades the roof and heater, those improvements can be grouped with lighting upgrades and will likely qualify for the maximum deduction. There are certain other conditions that must be met, but those are generally not hurdles.
All warehouse or industrial property owners interested in a heater upgrade or roof measure should, if they haven't done so already, install energy efficient lighting at wattage levels low enough to trigger the $1.80-per-square-foot incentive before Dec. 31, 2013. It is particularly important for warehouse or industrial building owners who are preparing for a near term rooftop solar photovoltaic installation that requires roof work to act now. Many non-conditioned warehouse owners are upgrading to LED lighting using the $1.80-per-square-foot deduction for that project.
In addition, many refrigerated warehouse owners are getting tremendous lighting-related energy cost savings from LED lighting and typically qualify for a $1.20-per-square-foot deduction.
Many new building projects that are in the design stage won't complete their projects until after Jan. 1, 2014. Because lighting is usually one of the last items installed, it may make sense to remain flexible on the lighting design and consider a more efficient lighting design if the larger lighting EPAct tax incentive is enacted.
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