Why it Pays to be Green:
The IRS’ Deduction for Energy Efficient Commercial Buildings
Now there is even more great news for those considering purchasing a steel building for commercial use, such as schools, storage buildings, community buildings and aircraft hangars. Not only are steel structures durable, and easy to maintain and keep up, but now they are even more affordable and financially rewarding, thanks to recent legislation passed by the Internal Revenue Service (IRS). In 2008 the IRS added an additional addendum to the Energy Policy Act of 2005, which allows for additional deductions for owners of energy-efficient commercial buildings. The idea is to continue to inspire commercial builders and building owners to seek high-level of energy efficiency. In America Commercial and industrial buildings contribute to over 45 percent of all emissions of greenhouse gasses and commercial buildings use over $200 billion worth of electricity and natural gas per year.
This new addition to the standing Energy Policy Act states that owners of a commercial building who improve their building’s cooling, heating, lighting and water systems to meet or exceed energy efficiency requirements, set forth by the Internal Revenue Code, with the effective use of steel will be eligible for additional deductions to their taxes. Based upon the level of energy efficiency the owner of a steel commercial building is eligible to write off the partial or entire cost of the steel building. Not only does an energy efficient steel building pay off immediately with tax deductions, but also makes a large impact on annual electricity and water utilities and commercial steel building owners use 30 percent less energy than counterparts in the industry saving on average $0.54 per square foot in operations costs when compared to the average building.
When establishing the new notice to the original Act the IRS also established a sliding scale to determine the amount of savings each owner can qualify for. The amount of savings you can accrue depends upon the level of improvement to traditional energy efficiency levels that your building achieves. The IRS defined a 50 percent threshold on savings of energy costs, related to water, electricity and heating and cooling costs, based upon the traditional cost of energy expenses.
If a building achieves or exceeds these 50 percent savings the owner is eligible for a tax deduction of up to $1.80 per square foot of the building. If your building does not meet the 50 percent threshold owners are still eligible for savings and can save an emerge of $0.60 per square foot in the building floor area if the structure meets or exceeds a 16⅔ percent savings on energy. The calculation of energy savings looks at the efficiency of a variety of building systems and accessories, including but not limited to building insulation, interior and exterior lighting, water heaters, timed and sensory lighting systems, water heaters, furnaces, and the caulking and energy efficiency of air ducts, windows, doors, building siding and roofs.
Now that you’re aware of the benefits owning an energy efficient building can reap you may be wondering how to get there. Choosing to own a steel building is a step in the right direction, as steel buildings are naturally almost 20 percent more efficient than any other type of building. However, a building’s structure and the right finishes and accessories can further amplify the level of energy efficiency. During the construction phase, you will already begin experiencing the green benefits of a green building as a metal building tends to move through construction 30 percent more quickly than other buildings. This initial speed will help cut down on on-site lighting, electricity and machinery costs incurred by the construction crew. Another green benefit of choosing lies in the fact that steel is 100 percent recyclable. All steel used in previous buildings and structures can be efficiently and quickly converted back into scrap metal.
To further capitalize on energy efficiency pay attention to the insulation of your building, as well as the placement of windows, doors, and ventilation ducts. Selecting the correct insulation depends upon the climate that your building exists in. There are nine primary types of insulation: insulated panels, reflective insulation, stayed foam insulation, rigid fiber insulation, loose-fill insulation, insulated foam boards, rigid board insulation, blanket roll insulation and concrete block insulation. Each insulation type differs greatly in its composition, thickness and its ability to both retain heat and cool air.
The term insulation can also refer to structural paint jobs and coatings, which do their own part to reflect and retain heat. Some metal roof finishes can contain special “cool” pigments that reflect the sun’s rays keeping unwanted heat and condensation out of your building. This reduces the energy emitted by air conditioning systems trying to regulate indoor temperatures.
Before claiming this energy deduction the owners of a commercial steel building must first measure the level of building efficiency. Measurements must be carried out by certified legal means. Along with the legal restrictions applying to the new addendum, the update to the Energy Policy Act also includes a list of approved software one can use to measure the energy efficiency of a structure.
This software looks at a variety of factors to measure energy consumption and measures these variables in two main buckets: power and demand. Power, measured in watts, keeps track of the rate at which energy is expended, or used. Demand, measured in volt-amperes (VA), measures the amount of energy that the owner of a commercial building places on the utility to deliver voltage and current. Once the energy levels of your commercial building have been measured by certified means one must submit the findings
Author: Conrad Mackie