When the CARES act was passed on March 27th of this year, it opened up the possibility for lighting install upgrades to be 100% written off if claimed during the install year, meaning that the federal government would be subsidizing any improvement by the amount of the companies federal tax rate.
- QIP (Qualified Improvement Property) has been fixed by the CARES Act to now allow customers to write off 100% of an improvement like lighting (100% bonus depreciation). This is something that can be done even if the customer is leasing their building.
- Under the CARES Act Section 2203: If a business is expecting a loss in 2020 they can carry losses back 5 years and apply to years where they were profitable. If a customer is projecting a loss in 2020 this may be another way to get a 100% tax write-off on improvement projects like lighting.
- You may be allowed to take a 1 time tax deduction for lighting of $0.60 per sq. ft. based upon Section 179D/EPAct based upon lighting energy reductions.
Here is a common lighting project example:
- Imagine a lighting project for 50 high bay fixtures at $250/fixture for $12,500 total
- The Duke rebate is $250/high bay fixture right now up to 75% of cost, so the cost would be reduced by $187.50/fixture for $9,375 leaving $3125
- CBT contracts the installation labor at $9,000
- Bringing the total to $12,125 for the project
- At a 21% tax rate, you would be receiving $2,546 back in taxes utilizing the QIP 100% Bonus Depreciation
- Under EPAct you may qualify for the one-time tax credit of $0.60 per sq. ft. Our example is for a 20,000 sq. ft. building so $12,000 is credited.
- You could have over 100% of the project paid for (before considering energy and maintenance savings)!
CBT will help guide you through the process of claiming rebates and incentives, but consultation with a tax professional is recommended when taking advantage of incentives available through the CARES Act or EPAct.