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Commercial Building Energy Conservation Tax Credits

In 2005 congress passed into law the Energy Policy Act. Within this act, NEMA, the National Electrical Manufacturers Association, and NRDC, the Natural Resources Defense Council, backed a provision as part of the act to give tax credits to business owners who retrofitted or remodeled their business properties to be more energy efficient.

The Commercial Building Tax Deduction

This tax deduction was to offset costs incurred by business owners who spend monies on energy efficiency modifications to their buildings’ interior lighting, HVAC and hot water systems, and building envelope systems. Originally conceived to terminate few years later the benefits period of the tax deduction was extended in October 2008 to terminate December 31st, 2013.

Taking Advantage of the Energy Policy Act

In order to take advantage of this act there are several simple steps a business owner should take in order to qualify or the deduction. They are:

  1. Ensure your building qualifies according to Standard 90.1-2001, Energy Standard for Buildings Except Low-Rise Residential Buildings – This may take some research and a little bit of leg work but you must know if your building qualifies before work begins.
  2. Build a plan to reduce energy usage by 50% according to the 2005 California Nonresidential Alternative Calculation Method Approval Manual – If you only retrofit according to a plan to reduce 10% energy usage, then none of your costs will qualify. Therefore you must create a plan with your local utilities company to reduce to 50% or more. They can help you draw up the possible upgrades to your building that will achieve this.
  3. Record and track expenses, materials, services performed by certified installers – If you don’t keep track of every receipt of all the work done it will have been in vain. You must have a record that the IRS can look through to verify your claim.
  4. Have an inspection performed – The inspectors must be certified engineers or contractors and licensed in the jurisdiction where your building resides. Any inspection done by unlicensed or uncertified persons will not qualify for the deduction.
  5. Claim the deduction on your 2013 tax refund – When you file your refund there is no specific place to claim this deduction so the IRS has directed that it be claimed under business forms in the “Other deductions” line. All your receipts and records must be included with your refund when claiming this deduction.

After these steps you have already begun saving money on your utility bill each month and will simply need to wait for your refund check to be deposited in your bank account.