Capital Investment Services for Sustainable Design: Reducing Hotelier's Bottom-Line
By David Ely President, CEO, Energy Design Service Systems | May 12, 2013
So you've thought of installing LED in your building, or Solar Panels on your roof but you can't find room in the budget for these energy solutions. The biggest thing we, in the energy efficiency industry, hear is that 'green' hotels are great, and there LEED® (Leadership in Energy & Environmental Design) but they are too expensive to build. Looking for a return-on-investment within a few years, hotel executives often think that there are no easy solutions with cash back results.
What most companies, regardless of industry, don't realize is rather than hoping that the operational costs will offset the added cost to adhere to LEED® standards, there are layers upon layers of incentive programs designed to provide bottom-line benefits. Even further, executives aren't aware that there is a growing industry designed just to help find these hidden incentives.
What Are 'Hidden' Incentives?
Federal, state, county, and local agencies set aside funding every year to provide incentives including tax deductions, credits, rebates, property tax exemptions, grants, and low-interest financing.
EPAct 179D Tax Deduction - At the center of these incentives is the Energy Policy Act of 2005 (EPAct) Section 179D Tax Deduction (26 USC §179D) that offers up to $1.80/sq. ft. for energy efficient commercial buildings that exceed the ASHRAE 2001 Standards 90.1. This deduction reviews the interior lighting systems, heating, cooling, ventilation, hot water systems, and building envelope. The benefits of EPAct for hotel owners is that you can take the federal deduction on qualified energy improvements on buildings that have been completed or will be placed in service by the end of 2013, without filing an amended tax return. This allows you to recapture costs from previous years, going back to open tax years since 2006 (typically this is your last 3 years).
Cost Segregation - A Cost Segregation Study is one of the most significant and yet most overlooked opportunity to reduce income tax liability, offering the ability to reclassify components of a commercial building. Reclassifying real property to personal property allows assets to be depreciated on a new 5-, 7-, or 15- year class life instead of traditional 39- year class life. With a shorter recovery period on new construction, existing buildings, new purchases and renovations, building owners can achieve significant tax savings and improved cash flow. While commonly applied in manufacturing, only a fraction of commercial property owners take advantage of this cash-conserving technique.