New Federal Tax Incentives for 2009!

Schools and government facilities throughout Wisconsin are turning to energy efficiency and renewable energy as a way to save energy, cut costs and improve their bottom lines. And now, purchasing and installing smart energy solutions is more affordable then ever when eligible facilities combine financial incentives from Focus on Energy with business tax credits and U.S. Department of Treasury Grants from the federal government.

New act extends business tax credits
The Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 extended the Energy Policy Act of 2005, which offered tax credits for qualifying energy efficiency improvements and renewable energy measures. These new acts extend and expand the Federal incentives available for energy efficiency and renewable energy improvements made in 2009 and beyond.

Focus on Energy encourages interested facilities to discuss these Federal incentives with a trusted tax professional and gather key information about the projects for tax purposes. Businesses will need to provide evidence regarding the cost of the project or system (including labor), when it was placed in service, the square footage of the building and whether the system meets the qualifying IRS criteria.

Energy tax deduction and credit watch: 2009
New Federal tax incentives are available in 2009 to facilities that pay federal taxes to help fund the following equipment and systems:

Commercial Buildings
Business can receive deductions of up to $1.80 per square foot on new or renovated buildings (that meet ASHRAE Standard 90.1-2001) that save 50 percent or more of the projected annual energy costs for heating, cooling, ventilation, water heating and lighting compared to model national standards.

Partial deductions of $0.60 per square foot can also be taken for efficiency improvements to the building envelope, lighting and HVAC systems that reduce total heating, cooling, ventilation, water heating and interior-lighting energy use by 16.66 percent.

These deductions are available for the period December 31, 2005 through December 31, 2013 and the deduction must be taken in the year the property was placed in service. For publicly owned buildings, the tax deduction can be assigned to the designer of the building. A designer may include, for example, an architect, engineer, contractor, or environmental consultant who creates technical specifications for installation of the energy efficient building property.

Although the public agency cannot receive the deduction, it could assign the credit to the building designer and negotiate a rebate or credit for design and engineering fees and realize the credit in that way. It is important to note that designers will likely incur costs for accounting services related to the tax deduction calculation and certification of the energy efficient building property per IRS requirements.

Solar Energy Systems
An investment tax credit or U.S. Treasury grant for 30 percent of eligible expenditures is available for qualified solar water heating, solar electric and solar lighting systems. Qualifying equipment must use solar energy to generate electricity, heat, provide hot water, or illuminate a building by fiber-optic distributed sunlight. The investment tax credit is available for systems placed in service between 2009 and 2016 whereas the renewable energy grant is available for systems placed in service between 2009 and 2010, or before the credit termination date if the project construction is begun in 2009 to 2010. Solar energy systems that qualify for the 30 percent investment tax credit / grant may also qualify for an accelerated five year depreciation schedule. Also systems placed in service in 2009 may be eligible for a 50 percent bonus which allows 50 percent of the adjusted basis of the property in 2009 to be depreciated in 2009 while the remaining 50 percent is depreciated using the accelerated five-year schedule.

Small Wind Systems
Businesses and farms that install wind turbines with a nameplate capacity of 100 kilowatts or less may be eligible to receive an investment tax credit or U.S. Treasury grant for 30 percent of the total installed cost of the system. Both the investment tax credit and U.S. Treasury grant are available for systems placed in service between 2009 and 2016. Wind electric systems that qualify for the 30 percent investment tax credit / grant may also qualify for an accelerated five year depreciation schedule. Also, systems placed in service in 2009 may be eligible for a 50 percent bonus which allows 50 percent of the adjusted basis of the property in 2009 to be depreciated in 2009 while the remaining 50 percent is depreciated using the accelerated five-year schedule. 

Biogas Electric Systems
Businesses and farms that install biogas digesters with a nameplate capacity rating not less than 150 kilowatts may be eligible to receive an investment tax credit or U.S. Treasury grant for 30 percent of eligible expenditures. The investment tax credit is available for systems placed in service between 2009 and 2016 whereas the renewable energy grant is available for systems placed in service between 2009 and 2010, or before the grant’s termination date if the project construction is begun in 2009 to 2010.

Ground-Source (Geothermal) Heat Pumps
Tax credits up to 10 percent of the cost are available for the year the property is placed in service. Qualified ENERGY STAR® systems must use ground or ground water as a thermal energy source to heat the business, or as a thermal energy sink to cool the business, and be installed between January 1, 2009 and December 31, 2016.

Additional funding from Focus on Energy
In addition to the federal tax credits, eligible Wisconsin facilities can receive Cash-Back Rewards from Focus on Energy on qualifying energy efficiency and renewable energy projects that save electricity and natural gas. Pre-approval may be required to receive financial incentives. Visit focusonenergy.com/incentives or call 800.762.7077 for up-to-date information on available incentives.