Epact 2005

EPACT Tax Deduction Overview:

EPAct 2005 provides a tax deduction, limited to an amount up to $1.80/sq.ft for exceeding ASHRAE/IESNA 90.1-2001 by up to 50%, to the property for which the energy efficient expenditures are made as part of new construction or renovations.

  • Deduction is limited to the capitalized energy efficiency investment for the year in which the energy efficient investment is made
  • The provision is effective for property placed in service after December 31, 2005 and prior to December 31, 2013.
  • Deduction can be allocated to design firms for energy-efficient commercial building property expenditures made by a public entity, such as public schools, hospitals or government offices
  • Alternate system-specific deductions are available for three building sub-systems – each up to $0.60/square feet: interior lighting; HVAC; building envelope

Commercial Building Tax Deduction
Interior Lighting Tax Deduction: Lighting energy consumption is estimated to represent approximately 1/3rd of commercial building energy use. As a result, lighting is recognized as a qualified energy savings system that is eligible for a partial tax deduction up to $0.60/sq.ft and not exceeding the costs incurred for the energy efficient interior lighting system.

Interim rules for a lighting specific deduction:

  • Outperform the ASHRAE/IESNA Standard 90.1-2001 lighting requirements by 25-40% . Eligible tax deduction per sq.ft will be between $0.30-$0.60.
  • Warehouses must outperform the ASHRAE/IESNA Standard 90.1-2001 lighting requirements by 50% to qualify for the full $0.60/sq.ft deduction.
  • All control requirements in the Standard 90.1-2001 must be met, automatic shutoff for buildings greater than 5000 sq.ft and bi-level switching must be installed
  • All existing building codes and product regulations must be met
  • IESNA Lighting Handbook, 9th Edition minimum requirements for calculated lighting levels must be met.
  • This tax deduction is generally given to the individual/organization that makes the investment (typically the owner). However, for government buildings, the tax deduction may be taken by the designer

This summary of EPAct 2005 provides a general overview of the tax provisions of the Energy Policy Act of 2005. Please consult your tax advisor to determine how this tax credit impacts you.  Or, Visit Department of Energy Website