Cotocon EPAct Energy Tax Incentives Presentation

ENERGY TAX INCENTIVES

And How They Can Benefit You…

The Cotocon Group Tel: 888-98-COTOCON(26862)

[email protected]

www.thecotocongroup.com

The Learning Objectives

• Understand how Energy Policy Act (EPAct) 179D works to claim

substantial benefits for energy efficient design, construction and

renovation of commercial buildings placed in service between the years

2006 and 2013.

• Learn how Private Building benefit Owners and Tenants and why

management companies, architects, engineers energy consultants should

also be aware of this policy.

• Learn how Public Buildings benefit Architects, Engineers and

Contractors as the “Designer” of new construction, additions or

renovations.

• Turn your knowledge and application of EPAct 179D into a new

Competitive Advantage and niche Business Development Strategy.

• Additional tax savings and other strategies like Cost Segregation and

“DEIRA” Insurance Replacement Appraisals.

• How to find additional savings through State, Local, Municipal and Local

Utility Rebates.

About Cotocon’s Tax Services • The COTOCON Team is a licensed Engineering Firm with

niche Accounting and Tax expertise with offices on the East

Coast of the United States

• The COTOCON Team averages $10 million in monthly

refunds and tax benefits for real estate clients (50+ studies

per month!)

• The COTOCON Team averages $1 million in monthly

refunds and tax benefits for architects, engineering firms,

contractors and other firms involved in Public Building projects

• Clients include Google, Hilton, Marriott, Disney, Boeing, Ford,

BMW, Outback

• Partners with AIA, USGBC, Energy Star, DOE, ASHRAE,

ConEdison, NYSERDA

Energy Policy Act of 2005

• Congress passed legislation in August of 2005 to encourage property owners to build energy efficient properties to promote reduction in energy consumption. Service dates were from 1/1/06 through 12/31/08.

• The Economic Recovery and Stabilization Act of 2008 (HR-1424), approved and signed on October 3, 2008, extends the benefits of the Energy Policy Act of 2005 through 2013.

• The 179D ruling allows up to a $1.80 per sq. ft. tax deduction for commercial property owners and tenants … Incentives were also allowed for contractors, site home builders and residential home owners.

Note: You can go back 4 years and carry forward the unused 179D energy tax benefit for 15 years.

Important: CASH Refunds may be due to you!

Recap: EPAct 179D

For Commercial Buildings 2006-2013 (New Buildings & Renovations)

- Private Buildings (Benefits - Owner / Tenant)

- Public Buildings (Benefits - Architect/ Engineer / Contractor)

- Lighting | HVAC | Envelope (Roof / Windows / Insulation)

$.60 $.60 $.60 = $1.80 per SF

$100k SF = $180,000

- Model vs. ASHRAE 2001 90.1 (16 2/3% Improvement)

- Business Development Strategy (Value-Added Info)

Attention: Architects,

Engineers & Contractors

For energy-efficient commercial building

improvements (New Build or Renovations) made by

a Public or Government Entity ...

Examples: Schools K-12, Colleges, Universities, Civil,

Municipal, Government, Jails, Military Buildings, etc.

… the IRS now allows the deduction to be allocated

to the “person primarily” responsible for designing

the property and systems in lieu of the public entity.

Did you read your AIA Journals?

Did your Accountant tell you about this?

Goal: Reduce Energy Use

In the US alone … Buildings Account for:

• 72% of electricity consumption

• 39% of energy use

• 38% of all carbon dioxide (CO2) emissions

• 40% of raw materials

• 30% of waste output (136 million tons annually)

• 14% of potable water consumption

Who Benefits?

• Owners or Tenants who pay for new or

improved energy-efficient commercial

buildings since 2006 through 2013

• Designers of energy-efficient properties

installed in publicly-owned buildings.

• Homeowners

• Building and Real Estate Communities

all indirectly benefit.

Why Is the Energy Tax Benefit

Not Used?

• Less than 1% of eligible taxpayers have

filed for their energy tax benefits with the

IRS.

• Millions of taxpayers are due significant

benefits and possible refunds since 2006.

• Why are taxpayers missing significant

energy tax benefits and incentives?

Low Awareness – No one was interested in the “good” times.

Requires Qualified Engineer with Qualified DOE Software

Requires Tax Paperwork – 179D Deduction

Ideal Candidates for 179D

• New Construction: Schools, Office, Retail, Hospitality, Industrial, Multi-Family

• Renovations & Retrofits: Improvements to Lighting, HVAC, Envelope (roof , insulation, windows), Energy Performance Contracting, CRA Redevelopment

• Green & LEED Certified Buildings

Case Studies: 179D Energy Tax Benefits

Case Study: Nissan Dealership

• $35,000+ 179D Energy Tax Deduction

• $640,000+ Additional Cost Segregation Tax Benefit

$1,391,089 Energy Tax Deduction for IKEA

• IKEA Brooklyn, NY Project Area: 346,638 SF

Qualified for $.60 per SF 179D Tax Benefit $207,983

• Cost Segregation Study Five Year Cash Benefit: $16,975,757

$1,183,105.80 Energy Tax Credits CLAIMED for 5

additional IKEA Locations.

• Five year cash benefit from 3 Additional CSS = $8,301,688

• Total Five Year Cash Benefit for 4 buildings = $25,277,445

$117,666 Tax Benefit Claimed by

the Private Building Owner • Republic Services

• LEED Silver

• 65,370 square feet

• Completed Fall 2008

Two Ways To Qualify Under 179D

1st - Using the “Whole Building Approach”

Get the full $1.80 per square foot if the

building reduces total annual combined

energy use by at least 50% compared to

similar building based on ASHRAE 90.1 2001

energy guidelines

2nd - Qualifying Partial Building Systems

• Interior Lighting systems up to $.60 per sf

• HVAC (Heating, Cooling, Ventilation & Hot Water systems) up to $.60 per sf

• Building Envelope (Roof, Insulation, Windows) up to $.60 per sf

• Lighting accounts for almost 40% of commercial electrical consumption

• 100 Billion square feet of commercial space nationwide. (Nearly all requires lighting … Parking Garages!)

• Less than 3% of eligible facilities have claimed EPAct 179D Deductions

• New energy-efficient lighting can save building owners as much as 50% on their electric bills and payback in two years or less

• Any building with a lighting system 10 years or older is using old technology

• In addition to reduction in operating expense, new lighting improves lighting quality, increases the asset value and marketability of the building

The Lighting Opportunity

Relamp Case Study

Industry: Packaging Manufacturer

Building Size: 115,000 SF.

Actions: Replace (148) 400W MH

and (44) 190W T12 with (180)

220W T5 HO Fixtures

Project Cost: $35,000

Energy Savings: $11,000 per year

Rebates and Incentive: $20,000

Environmental Savings:

Prevents emission of 147 tons

of greenhouse gases

BUILDING ENVELOPE

• Roofs, Walls & Insulation

• Climate Considerations

• Doors, Windows & Openings

• Thermal Efficiency

• Reflectivity

• Moisture Buildup

1st Step … Feasibility Analysis • Review basic building info including location, SF,

year completed, scope of work, what systems

(Lighting / HVAC / Building Envelope)

• Prepare (complementary) Cost Benefit Analysis for each

building or portfolio of buildings for client to review

• Average COTOCON fee is $.05 - $.15 per sf

• Average client benefit is $1.20 per sf

• Agree on Engagement strategy, COTOCON collects

building plans and specs from client

• Cotocon completes review, energy modeling and

benefit calculation

• Cotocon schedules site visit as required by IRS

• Complete process takes 30-45 days

CERTIFICATION MUST INCLUDE:

• Statement regarding the energy efficiency of the building

(Lighting, HVAC and/or hot water system, Envelope)

• Statement that the reduction has been determined under the Rules of

Notice 2006-52

• Statement that field inspections have been performed verifying the

energy-saving assets

• Statement that approved software has used for calculations

• A list of qualifying assets and projected annual energy costs

• Completed by a Qualified, Independent 3rd Party

- Properly licensed engineer with accounting and IRS experience

- Not a related Individual or Entity

- Written statement of qualification to taxpayer

- The qualified firm’s (TCG) name, address and phone number

IRS GUIDELINES FOR 179D

Additional Federal Incentives

• Fuel Cells = 30% Credit

• Stationary Micro Turbines

• Power Plants = 10% Credit

• Solar Equipment = 30% Credit

State Incentives Can Be Equal or

Greater Than Federal Incentives

Federal Benefits Not Exclusive

• Important to know that new energy incentives

are coming online everyday.

• In addition to Federal incentives, many States

also have matching credits as well.

• Also, utility companies have incentives related to

energy assets.

• Important to look at ALL incentives: State,

Federal, Local Government and Utility

Companies

Additional Incentives & Programs

• Public Utility

Rebates

• Insurance

Savings

• State and Local

Rebates

Visit www.dsireusa.org for clickable map

and a listing of all Federal, State and Local

incentives for energy improvements

Recap: EPAct 179D

For Commercial Buildings 2006-2013 (New Buildings & Renovations)

- Private Buildings (Benefits - Owner / Tenant)

- Public Buildings (Benefits - Architect/ Engineer / Contractor)

- Lighting | HVAC | Envelope (Roof / Windows / Insulation)

$.60 $.60 $.60 = $1.80 per SF

$100k SF = $180,000

- Model vs. ASHRAE 2001 90.1 (16 2/3% Improvement)

- Business Development Strategy (Value-Added Info)

About Cotocon’s Tax Services

TCG marries the science of engineering with the

principles of tax and accounting utilizing innovative

financial strategies resulting in increased cash flow,

minimized tax payments and increased ROI. These

IRS approved services include Cost Segregation

Studies, Energy Tax Credits, 179D Deductions and

Historical and Brownfield Development Credits.

The Cotocon Team

Tel: 888-98-COTOCON(26862)

[email protected]

www.thecotocongroup.com