Brand Your Retail “GREEN” By Taking Advantage of Tax Benefits
Retailers have gone beyond reusable shopping bags and are now looking to the IRS to help them “go green”.
Developers can make significant investments in their buildings to meet retailers’ demands through energy efficient equipment, such as solar panels, and offset a portion of the costs with tax benefits. Owners can receive a dollar-for-dollar tax credit equal to 30% of the cost of solar panels and other energy efficient technologies (10% for some technologies). Also, if such equipment is placed in service in 2012, the owner will be eligible to accelerate 50% of its depreciation in 2012 (with the remaining 50% taken straight line over the remaining four years of depreciable life).
Another tax incentive for real estate developers (for buildings placed in service before 2014) is bonus depreciation for overall building energy efficiency. Where energy efficiency of a building (with respect to interior lighting systems, heating, cooling ventilation and hot water systems) is improved by 16.33% or more than a comparable benchmark building, the owner may take bonus depreciation equal to $0.60/sq. ft. If the energy efficiency is improved by 50% or more, the bonus depreciation increases to $1.80/sq. ft.
While the tax rules can create obstacles for the average taxpayer seeking to take credits, there are numerous strategies available to monetize these incentives to get the most “bang for your buck”. For example, under a power purchase agreement, third party providers can design, install, operate and maintain on-site power generation facilities, with no capital investment by the owner, in return for a monthly payment that is often less than the cost of traditional energy sources.
Facilities with large thermal/cooling loads, such as supermarkets, or 24/7 operational needs, such as hospitals and hotels, are often excellent targets for green energy upgrades.
For a more detailed summary of available federal tax incentives, including a chart identifying the types of incentives available based upon technology, click here. In addition, many states offer tax and other cash incentives for green buildings that often complement and may exceed the federal incentives, which may be found by clicking here.