While 2005 is not all that long ago, there are many businesses and business owners today that are not taking advantage of tax deductions that were created in that year. The EPACT 2005 tax deduction was established to provide a way to recognized businesses and commercial buildings that had reduced their energy consumption in three specific areas by a set of required standards.
The Reason for the EPACT 2005 Tax Deduction
The Energy Policy Act of 2005 was signed into law by President George W. Bush as a result of the growing awareness of the increasing and escalating use of energy in the commercial sector of the United States.
The goals of the Act included both reducing domestic energy consumption by commercial buildings through increasing energy efficiency as well as providing specific types of loans for companies and industry that was involved in specific types of energy production. In essence these loans were for energy production termed “alternative” in that they did not produce greenhouse gasses.
Tax Incentives Not Penalties
The EPACT 2005 tax deduction were set up to encourage commercial property owners, architects, contractors and engineers to incorporate specific levels of energy savings into the new and existing projects. In addition it allowed for the tax deduction for retrofit or renovations of older, energy inefficient buildings provided they were brought up to the standards required by the Act.
The EPACT 2005 tax deduction allows for both a full deduction, capped at $1.80 per square foot, as well as partial deductions. To calculate the deduction possible the building was divided into three subsystems, envelope, heating and cooling, and internal lighting. Each subsystem qualifies for a maximum deduction of $0.60 per square foot with full compliance.
Independent Review
For any commercial building to qualify for an EPACT 2005 tax deduction a company must complete a very strict and uniform analysis and report. Specific software that is approved by the IRS must be used to demonstrate the energy use reductions in each of the three subsystems in the building to qualify for the EPACT 2005 tax deduction.
The EPACT 2005 tax deduction has been very success in achieving its goals. The policy has been extended twice and now and continues to be an option for commercial businesses.
