EPAct 2005 was signed into law in August 2005. It offers incentives to commercial and industrial property owners to reduce energy consumption by providing a one-time tax deduction through greater efficiency in the building envelope, HVAC equipment and lighting. DOE set as its objectives to make tax incentives performance based, that is, the more energy you save, the more taxes you save. The goal is to maximize efficiency of conventional equipment and processes and to encourage alternative energy equipment and design. A more efficient operation reduces peak demand for energy and defers the need for additional power plants.
Deductions are based on improvements over ASHRAE 90.1 2001, and energy-efficient improvements must be depreciable asset. It simply converts the present 39 year depreciation to a current deduction. The tax deduction is available for installations completed in 2006, 2007 and 2008, even if they begin in prior years. Deduction amounts for lighting systems are the lesser of total cost or $0.60/sq.ft.
Lighting is one of the easiest methods to cash-in on the tax deductions that begin at 25% improvement over ASHRAE with an additional $0.02/sq.ft added for each 1% over 25% up to $0.60/sq.ft. The tax benefits from EPAct 2005 along with the savings through lower energy consumption can repay the lighting investment in as little as one year!