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commercial building deduction appears at new section 179D, which was
enacted in the Energy Policy Act of 2005. The provision allows a
deduction to a taxpayer who owns, or is a lessee of, a commercial
building and installs property as part of the commercial building’s
interior lighting systems, heating, cooling, ventilation, and hot water
systems, or building envelope. Certification must be obtained to verify
that the property installed satisfies the energy efficiency requirements
of section 179D.
Notice 2006-52 sets
forth interim guidance pending the issuance of regulations that explains
how commercial building owners or leaseholders can qualify for a tax
deduction. The Notice establishes a process to certify the required
energy savings in order to claim the deduction.
The amount
deductible under section 179D may be as much as $1.80 per square foot of
building floor area for buildings that achieve a 50-percent reduction in
energy and power costs. Notice 2006-52 provides that buildings that
achieve a reduction in energy and power costs of less than 50-percent
may, nevertheless, qualify for a deduction of 60 cents per square foot
of building floor area if the building achieves a reduction in energy
and power costs of 16⅔-percent.
Before
claiming the deduction, the taxpayer must obtain a certification that
the required energy savings will be achieved. Refer to the attached
notice which prescribes the content of that certification and the
qualifications that must be met by the person providing the
certification.
The Department
of Energy will create and maintain a public list of software that must
be used to calculate energy savings for purposes of providing the
certification. The notice provides a process that software developers
must use if they desire to have their software included on that list.
From the
business aspect it does pay itself off rather quickly to use Solar.
It would require an audit to determine the amount of electricity your
business uses, the amount of sun exposure and so forth. With that
we can design a system specific for your needs. However, I have
prepared this example just to demonstrate the over all savings:
Monthly usage: 3000 kWh at $0.08/kWh totaling a monthly electric
bill of $240.00, let's assume you install a 1500 kWh system at
$35,000.00 (just a rough estimate). You receive a credit of $1.00
per square foot and your business is 8,000.00 square foot, that would be
a credit of $8,000.00. Now you have a remaining balance of
$27,000.00 that can be depreciated over a 5 year period of time, since
it is business equipment, but I would check with a Certified Tax
Accountant to verify that. Each year you would also have an
estimated savings of $1440.00, but also you would be receiving PURPA
benefits, which Columbia, Missouri is working very hard to create a
legal and fair system with which to work from. However, if you
produced an extra 1000kWh/month at a cost of $0.08/kWh which would be an
estimated credit of $80.00 per month. So in effect, your electric
bill went from $240.00 to $40.00 per month. On your 10th year you
would have no bill aside from the $40.00 per month. Solar is not
an instant pay off, it is an investment that is as safe as buying a CD
from your bank.
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