Energy Efficiency Incentives for Florida Businesses

Currently, the federal government offers several tax incentives for improving the energy efficiency of commercial offices. First, businesses can take advantage of a 30% investment tax credit (ITC) for the purchase price (not including installation costs) of solar panels, wind turbines, or fuel cells. However, the fuel cells credit is capped at $1,500 per half kilowatt of capacity. An additional 10% tax credit is available for the purchase of combined heating and power systems or geothermal heat pumps. An itemized invoice showing the purchases utilized for the tax credit is required in order to claim the tax benefit, along with the filing of IRS Form 3468 with the applicable tax return. Depending on their situations, businesses should also consider whether it is more advantageous to claim the 30% purchase tax credit or to write off the entire purchase as a business expense.

In addition to the tax benefit, the federal government also provides for accelerated depreciation, usually on a five-year schedule, for all of the technologies that qualify for the ITC, allowing for faster recovery of energy investments. IRS Form 4562 must be filed along with the applicable years’ tax returns in order to take advantage of the accelerated depreciation schedule. The IRS also provides a more general guide for taking advantage of property depreciation.

Beyond specific purchases, the federal Energy Policy Act of 2005 provides a tax deduction for efforts to make commercial buildings more energy efficient. Businesses in qualifying buildings that are able to certify a 50% reduction in its heating/cooling energy usage may also qualify for an additional $1.80 per square foot tax deduction. Qualifying buildings are those within the scope of ASHRAE standard 90.1-2001, which basically requires that the building’s heating system have an output capacity of greater than or equal to 3.4 Btu/h-ft2 or has a cooling system output capacity of greater than or equal to 5 Btu/h-ft2. The building also must not be residential and must be connected to electric power. This $1.80 per square foot deduction can also be divided and broken down into three categories of partial tax deductions of $.60 per square foot, which is available for certified energy savings of 1) 10% in the building envelope, 2) 20% from lighting improvements, and 3) 20% from heating and cooling improvements. An additional credit of $.30 per square foot is available for “dual switch” lighting systems (which can switch off half the lights and still have uniform lighting) that reduce lighting power by at least 25% from values cited in ASHRAE standard 90.1-2001. This “lighting system” credit increases proportionally to $.60 per square foot as reductions exceed the 25% baseline and approach 40%.

Qualifying for the tax credit only requires certification by a qualified individual (usually licensed engineers or contractors who are unrelated (as defined by the IRS) to the person or organization receiving the tax benefit) that the various energy savings requirements have been met. Certification is completed using computer software, but does require an on-site field inspection of the building after it is placed into service following the upgrades in order to verify the efficiency savings. Although the certification does not have to be filed along with the tax return in which the deduction is claimed, the certification should be kept by the taxpayer as part of the supporting documents and records. No special form is required to claim the deduction after certification is obtained. Rather, the taxpayer should include the amount of the deduction in the “Other deductions” line of the applicable tax return, along with a statement listing the types and amounts of these deductions. For more information on the requirements for meeting this tax credit, see IRS Notice 2008-40.

The State of Florida has a standing exemption for sales and use taxes on all solar system purchases. The state has in the past also provided rebates for solar panel installation, but funding for the program is currently exhausted pending possible new appropriations for the program in 2011. When operative, the rebate program provided a $4 per watt rebate up to $20,000 for residences and $100,000 for businesses. To qualify, the system must be installed by a state-licensed contractor, comply with all building codes, and the application for the rebate must be made within 120 days of purchase. Rebate applications can be filled out and submitted online at the Florida Energy and Climate Commission’s website.

Unfortunately, Beach Power, the local utility, does not offer rebates to businesses or new residences. Rather, their rebate program is targeted entirely at existing residences, which can qualify for a small rebate for such things as HVAC upgrades, water heaters, and solar filming for windows. However, local area power customers, both residential and commercial, who fall under the jurisdiction of Jacksonville Electric Authority (JEA) may also qualify for a rebate on the costs of installing a solar water heating system in their homes or businesses. Commercial customers who make the installation could recoup 15% (non-local installers) to 30% (local installers) of their investment, up to a maximum of $5,000 per installation ($2,500 for non-local installers). More information about solar water heaters and JEA’s the rebate can be found on the JEA’s website.

For a listing of all various energy efficiency incentives that may be applicable in your area to your home or office, visit the Database of State Incentives for Renewables & Efficiency at http://www.dsireusa.org.

Jeremey Dobbins, Legal Intern