Reduce Project Costs with Tax Deductions and Tax Credits

At Advanced Energy Innovations (AEI) we are experts in obtaining the highest deductions and incentives available to help clients offset project costs. By understanding the complex requirements of different programs, we help clients take best advantage of funds available through local, state, and federal programs.

Maximizing EPAct Tax Deductions

The Energy Policy Act of 2005, or EPAct, offers commercial enterprises a one-time tax incentive for energy- efficiency upgrades. Although the program was originally slated to expire in 2008, Congress approved extending it through 2013. Municipal entities, which don’t file Federal Income Tax returns, can pursue eligibility through their contractor, designer, or ESCO who can file for the deduction and credit all or part of it back to the project.

Projects that include improvements to the building envelope, HVAC, and lighting may qualify for the highest deduction of $1.80/sq.ft. Upgrades of lighting only, for example, may qualify for the lesser deduction of $.30/sq.ft. to $.60/sq.ft.

Often, deductions and incentives influence priorities and will lead our experts to recommend structuring upgrades as a single comprehensive project as opposed to several successive smaller projects. The result – the client gains greater energy efficiency, higher return on investment, and faster payback.
Below is an example demonstrating the value of implementing a comprehensive project instead of upgrading lighting only. By implementing upgrades in stages, this client would potentially lose $48,000 in tax deductions. And, depending on the local utility incentive program, could lose additional project funding there as well.

Comprehensive Project Lighting Only Project
Project Cost $200,000.00 $100,000.00
$180,000.00 $60,000.00
<per square foot> <$1.80> <$0.60>
Est. Value of Deduction $72,000.00 $24,000.00
Local Utility Incentives $100,000.00 $35,000.00
Client Out-of-Pocket $28,000.00 $41,000.00
Energy Savings $75,000.00 $45,000.00
kWh <750,000> <450,000>
Simple Payback (years) 0.37 0.91
Ten-Year Return $750,000.00 $450,000.00
Return on Investment 26x 10x

As the client advocate, we manage the entire process for obtaining EPAct Federal tax deductions and utility company incentives, from initial research to completing audit forms and completing final reports. This ensures deductions are properly applied and incentive checks are issued in a timely manner.