14A — November 23 - December 6, 2012 — Green Buildings — Mid Atlantic Real Estate Journal
www.marejournal.com
R enewable & A lternative E nergy
uilding energy technol- ogy is advancing and new opportunities ex- By Lee J. Peterson, Esq. and Anita Anand, Esq. of CohnReznick, LLP Federal investment tax credits: New opportunities exist for those interested in energy efficiency B nation of both energy efficiency and renewables are standing out as a smart solution. The
renewable energy generating equipment, federal and state tax incentives may help offset the cost. This article provides a brief overview of some of the tax incentives available for energy projects and certain tax considerations. As it relates to renewable energy, on the federal level, commercial solar energy and certain other renewable energy investments can qualify for a federal investment tax credit (ITC) which covers up to 30 percent of qualified equipment costs. With proper advice and good financial structuring, the federal tax benefits can often
cover up to 59.7 percent of the equipment costs. This includes an accelerated federal tax de- preciation benefit that owners can claim. But before you invest in re- newable energy generation, i.e., make your electricity on site, the smart play is to make your building more energy efficient first. So it’s important to know that energy efficiency projects focused solely on energy ef- ficiency may qualify for their own accelerated federal tax deductions where your build- ing efficiency meets certain standards. These federal tax deductions focus largely on
building lighting, heating, cool- ing, ventilation, hot water, and building envelope improve- ments, but can include things like solar panels as well. You may qualify for a federal tax deduction of up to $1.80 per square foot. However, this de- duction requires a reduction in the building’s depreciable basis, reducing depreciation deduc- tions and other basis dependent tax credits, such as the ITC. So be sure to consult your CPA before you act. In some cases, utility subsi- dies may also be available to offset the cost of your energy conservation measures. How- ever, though utility-sourced incentives may reduce operat- ing and construction costs for energy efficiency or renewable energy, they can also trigger mandatory tax basis reduc- tions leading to a reduction in tax credits and depreciation of your energy investment, so be sure you pay attention to how you are financing your ef- ficiency and renewable energy project. Similarly, federal or state grants can also raise tax implications. Many energy grants can be taxable. Thus, it is imperative to incorporate advance tax planning to avoid potential reductions to eligible basis and credits. State level tax benefits can also prove valuable. Of course, incentives vary from state to state, so it is imperative to check what state and local tax incentives are available to your project based on its precise loca- tion. A good resource for state and local energy tax benefits is www.dsireusa.org. Today, there is a wealth of energy tax incentives frommul- tiple sources that can help you cover the cost of modernizing your buildings. With careful tax planning and the advice of an experienced tax advisor, renewable energy can work well for your commercial building. Just be sure to do your research, look before you leap, and make sure you analyze not only what the renewable energy equip- ment will do for your building and your pocketbook, but what it will do to your tax return as well. Lee J.Petersonisalicensed attorney and senior tax manager for CohnReznick’s National Tax Practice (for- merly ReznickGroup).Anita Anand is a licensed attorney and a senior associate with CohnReznick. n
key is know- ing how to finance it. Mo s t en - ergy invest- ments have an up f ront cost, though leasing and p owe r - pu r -
ist for those i n t e r e s t e d in exploring energy effi- ciency (such as energy effi- cient lighting, heating, or cooling) and renewable en-
Lee J. Peterson Anita Anand
chase agreements are also becoming an established way to obtain the benefits of renew- able energy without a capital outlay. However, if you decide to make the capital outlay for
ergy – for example solar, fuel cells, combined heat and power, and geothermal. Because these investments can help lower your operating costs while increasing your energy security, the combi-
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