Given the current focus on energy efficiencies and “green” technologies embraced by the Obama Administration and various states, businesses and individuals are taking advantage of assorted tax incentives.  Under the recently enacted American Recovery and Reinvestment Act of 2009, an even more robust package of tax incentives to encourage investments and consumer spending in renewable energy projects or more-efficient technologies has been made available. 

Energy Investment Tax Credit
Businesses investing in solar powered energy systems and facilities receive a substantial (30 %)  Federal energy investment tax credits in the year the facility is placed in service.  Solar panels and a solar heating system both qualify for this credit.

Through December 31, users installing energy-efficient equipment and defined improvements will also be eligible for a bonus depreciation of 50 % of the asset’s cost.  Along with that, commercial businesses that install systems that reduce power consumption can deduct between $.60 and $1.80 per square foot of the qualified space.

There is also a substantial increase for 2009 and 2010 for the alternative refueling property credit – offered to businesses which install pumps that dispense alternate fuels like E85 fuel, electricity, and natural gas – from 30 % to 50 %, and the cap, previously $30,000, is now $50,000.  While hydrogen refueling pumps remain at a 30 % credit, the cap has been raised to $200,000.

The new law also benefits users of propane and those in the industry, as Congress temporarily increased the amount businesses can expense from $125,000 to $250,000, and the phase out limitation for the credit was also temporarily raised from $500,000 to $800,000 for 2008.  These changes apply to property placed in service in 2009.

Individual Beneficiaries
Known as the Residential Energy Efficient Property (“REEP”) Credit, tax incentives are also available to individual taxpayers for expenditures for qualified: solar electric and heating property,  fuel cell and small wind energy property, and qualified geothermal heat pump property.  

The tax credit for improvements to energy-efficient existing homes is extended to 2010, with the credit increased from 10 % to 30 % of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements.  Government buildings are eligible for incentives as well.  In New Jersey, for example, the state picks up 75 % of the cost of an energy audit and covers the full cost if the recommended measures are implemented.

New Jersey Smart Start Buildings Program
Available through New Jersey’s electric and gas utilities, the Smart Start Buildings Program is designed to offer incentives for upgrading to high efficiency equipment, whether you are renovating existing space or starting new construction.  This program offers benefits no matter the size of the project, with design support for ones over 50,000 square feet, and technical assistance for those that are smaller.  Incentives are also available for custom projects if your specifications are not defined by the program.  While these services are free, pre-approval is required for almost all energy efficient incentives.

For more information on how your business can take advantage of tax credits for “Going Green,” email ManufacturingMatters@njmep.org, put Tax Credits in the subject line.