Twenty

1
Twenty Questions
?
?
This set of questions and answers has been
prepared by GE to present the current
understanding (May 2006) of provisions contained
in the 2005 Energy Policy Act. Further details
are awaited from the federal government. CONTACT
A QUALIFIED TAX PROFESSIONAL FOR FULL DETAILS OF
ELIGIBILITY REQUIREMENTS. Neither GE nor Rexel
accept, in any way, any liability for decisions
made based on the contents of this preliminary
explanation.
NAVIGATION Display in Slide Show mode. Click
anywhere on the screen or use the Next control
to display the answer and then to proceed to the
next question.
2
QUESTION 1 The tax deduction permitted by the
Energy Policy Act is on a sliding scale based on
the kilowatt-hours saved per year in the building.
Answer False The deduction is calculated based
on watts per square foot (lighting power density)
and is not based on the actual hours of energy
use.
3
QUESTION 2 If a space has multiple lighting
systems, the Energy Policy Act requires you to
count only the system that is on most of the time.
Answer False The watts per square foot
(lighting power density) is calculated as the
total of all the lighting systems present in that
space. EXCEPTION In retail spaces, track
lighting and display case lighting are not
counted in the watts per sq. ft. number. Also,
portable lighting is generally not counted, only
installed lighting.
4
QUESTION 3 The tax deduction can be taken for a
project started in 2005 as long as it is
completed in 2006 or 2007.
Answer True
5
QUESTION 4 No matter how low in energy you go,
the maximum deduction available for a lighting
system upgrade is 60 cents per square foot.
Answer True
6
QUESTION 5 The mandatory automatic shut-off
requirements for new building construction
spelled out in ASHRAE/IESNA 90.1 must be met in
order to qualify for the tax deduction.
Answer True New buildings greater than 5000 sq.
ft. must include automatic lighting shutoff.
7
QUESTION 6 If an upgrade is made that does not
result in energy savings, then no accelerated tax
deduction is possible.
Answer False The deduction depends on watts per
square foot (lighting power density) of the final
system and there is no condition on where you
started from. For example, it is possible to
replace old fixtures with identical new fixtures
and qualify for a tax deduction, even though no
energy savings are realized.
8
QUESTION 7 Automatic shut off is required for
all lighting systems.
Answer False The ASHRAE/IESNA document does not
require automatic shut-off for existing building
retrofits. However, a new requirement of
bi-level switching has been added to qualify for
the tax incentive.
9
QUESTION 8 It is necessary for the cost of the
upgrade to be treated by the accounting
department as a capital expenditure for the tax
deduction to be available.
Answer True The tax deduction is, essentially,
accelerated depreciation. The asset must be
shown on the books for the increased depreciation
to be taken in the first year.
10
QUESTION 9 Replacing incandescent lamps with
screw-in CFL lamps, and replacing std. F32T8 with
F28T8 are examples of ways to qualify for a tax
deduction by the Energy Policy Act because of the
energy savings involved.
Answer False The simple reason is that lamp
replacements are accounted for as maintenance
expense and not as investment. However, because
they are accounted for as expense, they reduce
income that year, and decrease the taxes to be
paid. In effect, the customer is getting 100 tax
deduction on the money spent on lamps, even
without bringing in EPACT!
11
QUESTION 10 An outdoor parking lot may be a
prime candidate for a lighting upgrade that
qualifies for a tax deduction.
Answer False The tax deduction is only for the
interior of buildings, not for outdoor lighting.
An indoor parking garage may qualify.
12
QUESTION 11 For a warehouse, as a tax deduction,
you either get 60 cents per square foot or you
get nothing.
Answer True For a warehouse to qualify, it has
to be at or below half the watts per square foot
specified in the ASHRAE/IESNA 90.1 (2001)
document.
13
QUESTION 12 Use of daylight to save energy
wherever possible is rewarded by the Energy
Policy Act.
Answer False However, this is good practice
because the energy savings can still be
attractive.
14
QUESTION 13 It is possible to apply for a tax
deduction for a portion of the building.
Answer True For example, if a certain portion
of the building is clearly defined as a
manufacturing area, it should be possible to
apply the manufacturing lighting standards to
this area. Accounting for an entire building
which has multiple areas under different
categories (e.g. office and manufacturing)
becomes more complex.
15
QUESTION 14 You can take the allowed tax
deduction no matter how much you spent on the
lighting upgrade.
Answer False You can only take the permitted
tax deduction up to the value of the asset--in
this case the lighting equipment. You cannot
take a deduction for more than you have spent.
16
QUESTION 15 All lighting retrofit investments
end up being deducted from income over time the
benefit of EPACT is that it allows a larger
portion of the capital investment to be deducted
in the first year.
Answer True Generally, lighting retrofit
investments are amortized over the life of the
system the Energy Policy Act allows a larger
portion to be amortized or depreciated in the
first year.
17
QUESTION 16 Whoever pays the energy bill, and
therefore, benefits from the energy-saving
retrofit is always eligible for the tax deduction.
Answer False The tax deduction is available to
the entity that is carrying the fixtures as an
asset on their books, not necessarily the entity
that is paying the electric bill.
18
QUESTION 17 With a few exceptions, all spaces
must have bi-level switching to qualify for the
tax deduction.
Answer True The exemptions are lobbies,
motel/hotel guest rooms, rest rooms and store
rooms.
19
QUESTION 18 The watts-per-square foot numbers
used in the Energy Policy Act of 2005 come from
the 2001 version of the ASHRAE/IESNA 90.1
document, not the most recent version.
Answer True The current (most recent) document
is ASHRAE/IESNA 90.1 (2004). The Energy Policy
Act refers to the numbers in an earlier (2001)
version of the document.
20
QUESTION 19 Non-profit organizations can still
take a tax deduction if the lighting qualifies.
Answer False Non-profit organizations pay no
taxes, anyway. IRS is trying to figure out how a
non-profit facility owned by a federal, state or
local government, can transfer some of the
benefits or incentives to the designer or
installer of the lighting system, as suggested in
the Bill.
21
QUESTION 20 Labor for installing the new
fixtures is not included in the book value of
investment for retrofit, only the cost of
materials.
Answer False Labor to put up the new fixtures
is considered part of the asset value. The labor
to take down the old fixture (demolition) is
considered a simple expense and cannot be
capitalized.