Frequently Asked Questions (FAQs)
- What is the Energy Policy Act of 2005?
- What are the critical dates associated with the Energy Policy Act of 2005?
- What Advance solutions may help my facility qualify for an EPAct 2005 tax deduction?
- What is the best way to determine if a facility will benefit from a lighting upgrade and/or receive a tax deduction?
- According to the available information, additional specifications of the Energy Policy Act of 2005 are to be "promulgated", when will this happen?
- Are there mandatory upgrade requirements in the law related to lighting?
- How significant is the tax deduction that I can receive for making my lighting more energy efficient according to the new law?
- Why does the law offer two methods of calculating a tax deduction?
- Will the size of my tax deduction vary depending on the area being lighted?
- Is it possible to get a tax deduction by simply reducing the light output of my lighting system, thereby reducing the energy consumption of the system?
- What is ASHRAE?
- What are some important exclusions I should know about, regarding my eligibility for a tax deduction under the new law?
- Why is the choice of ballast important to a tax-deductible lighting decision?
- What lighting performance criteria are affected by the choice of ballast?
1. What is the Energy Policy Act of 2005?
The Energy Policy Act of 2005 is the official title of the energy bill. It was passed into law by Congress in July 2005, and signed by President George Bush on August 8, 2005. The full energy bill is over 1,200 pages of text and encompasses thousands of provisions related to energy production, distribution, and cost for a variety of fuels. This is the first comprehensive
Federal energy policy legislation passed by Congress since 1992. A full text pdf version is available at EPAct 2005 download.
2. What are the critical dates associated with the Energy Policy Act of 2005?
For commercial enterprise, the most timeline pertain to implementing energy saving upgrades and qualifying for tax deductions — any new system that exceeds ASHRAE standards by the required amount must be placed into service between January 1, 2006 and December 31, 2007. For businesses, this upgrade is voluntary. Government buildings, however, are expected to continually increase energy efficiency levels. Starting in 2006, all existing Federal buildings must reduce their annual energy consumption by 2%. By 2015, total energy usage for individual Federal buildings must be 20% or less versus 2003 levels.
3. What Advance solutions may help my facility qualify for an EPAct 2005 tax deduction?
Advance solutions for a variety fluorescent, HID and LED lighting systems may enable your facility to qualify for a tax deduction. Keep in mind that any products must support an updated lighting system must exceeding ASHRAE 90.1-2001 standards by 25-40% for buildings and 50% for warehouses in order to qualify for a tax deduction. For a comprehensive listing of Advance energy saving solutions click here.
4. What is the best way to determine if a facility will benefit from a lighting upgrade and receive a tax deduction?
You can begin to judge your potential for reduced lighting costs and a related tax deduction by using our online calculators. From there, you may want to pursue your lighting options under the new law by contacting your local Advance representative; or contact an ESCO or lighting contractor for a site visit.
5. According to the available information, additional specifications of the Energy Policy Act of 2005 are to be "promulgated", when will this happen?
Soon. Further details were to be published by the end of 2005 and throughout 2006.
6. Are there mandatory upgrade requirements in the law related to lighting?
If you are a government facility, you are mandated to meet ASHRAE 90.1-2001 standards by December 31, 2007. Non-governmental facilities are not mandated to comply, but are incented to upgrade inefficient lighting systems now, to receive significant tax deductions.
7. How significant is the tax deduction that I can receive for making my lighting more energy efficient according to the new law?
You can earn a one-time tax deduction that amounts to thousands of dollars, based on the square footage of space affected and the degree of improved lighting efficiency. To qualify for the tax deduction, your upgrade must outperform the ASHRAE 90.1 standard by 25% to 40%. The more you exceed the standard, the greater your tax deduction opportunity. For example, a 25% improvement would merit a $.30 per square foot deduction, and a 40% improvement would merit a $.60 per square foot reduction.
8. Why does the law offer two methods of calculating a tax deduction?
The law authorizes tax deductions for either a whole or partial building energy efficiency upgrade. A whole building deduction of up to $1.80 per square foot encompasses lighting, HVAC / hot water systems, and the building envelope. However, the law also recognizes that a facility may not be in a position to upgrade across all three systems, and offers a partial deduction for the upgrade of one of the three systems, with a deduction incentive of up to $.60 per square foot.
9. Will the size of my tax deduction vary depending on the area being lighted?
Yes. The ASHRAE 90.1-2001 standard provides watts-per-square foot, "lighting power density" measures for a full range of lighting applications. For example, the specified "lighting power density" for an office area is 1.5 watts per square foot, using the "space-by-space" deduction calculation method. And if you were to use the whole facility deduction method, the lighting power density for the same office area would be 1.3 watts per square foot. Also note that if you wish to include a warehouse in your deduction, this space cannot be counted as tax deduction eligible unless the increase in energy efficiency is 50% or better.
10. Is it possible to get a tax deduction by simply reducing the light output of my lighting system, thereby reducing the energy consumption of the system?
Probably not. The law requires that to be eligible for a tax deduction, your lighting system must maintain lumens-per-square foot at or above a level prescribed by the Illuminating Engineering Society of North America (IESNA), while exceeding the lighting power density measure set by the ASHRAE 90.1-2001 standard for the area in question.
11. What is ASHRAE?
ASHRAE (American Society of Heating, Refrigeration and Air Conditioning Engineers) is an industry association that has long been an advocate of energy monitoring and management. The organization’s 90.1-2001 standard guides the measurement of the watts per square foot used by various building electrical systems.
12. What are some important exclusions I should know about, regarding my eligibility for a tax deduction under the new law?
The amount of a tax deduction cannot exceed the cost of your upgrade. This includes your expenses for design, materials and labor to make the upgrade.
13. Why is the choice of ballast important to a tax-deductible lighting decision?
All lighting systems are powered by way of ballasts, which vary in design and performance capacity, and therefore impact the potential energy efficiency of a lighting system. Lighting designers, contractors, and facility managers can better prescribe the most efficient and functional lighting systems, when they know the performance capacities offered by today’s range of electronic ballast solutions.
14. What lighting performance criteria are affected by the choice of ballast?
In addition to its contribution to system-wide energy efficiency, the right ballast choice enables specific application/performance needs such as controllable dimming of fluorescent lighting; the provision of better and whiter light through pulse-start metal halide lighting; safety and security features; and the need for broad ballast-system compatibility to allow the right choice of lamps, controls, and lighting system configurations. Contact Advance for help selecting the best ballast solution for your lighting application.
