Article #1570 - COMcheck and the Commercial Building Tax Deduction for Energy-Efficient Lighting

The Energy Policy Act of 2005 provides a tax deduction for lighting and other energy systems that reduce energy use below prescribed levels. The primary tax provision is based on certified whole building energy reduction, but there is an interim rule designed specifically for lighting installations that is based on a simpler prescriptive calculation basis. This article provides answers to frequently asked questions about the interim lighting rule including how COMcheck™ can be applied as part of the process in receiving this deduction.

What are the requirements for applying the interim lighting rule?

The interim tax deduction applies to lighting property placed in service between December 31, 2005, and January 1, 2008, that meets the following requirements:

1. Achieve a reduction in lighting power density of at least 25 percent (50 percent in the case of a warehouse) of the minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 (not including additional interior lighting power allowances of Standard 90.1-2001).
2. Have controls and circuiting (wiring) that comply fully with the mandatory and prescriptive requirements of ASHRAE/IESNA 90.1-2001 (Lighting Section 9).
3. Include provision for bi-level switching in all occupancies except hotel and motel guest rooms, store rooms, restrooms, and public lobbies.
4. Meet the minimum requirements for calculating lighting levels as set forth in the IESNA Lighting Handbook, Performance and Application, Ninth Edition, 2000.

Is whole building energy modeling necessary to get the interim lighting deduction?

No. The interim lighting rule is based on a percentage reduction in lighting power densities (LPD) below specified levels. Whole building energy modeling is not applicable to the interim rule.

Can the tax deduction be applied to lighting retrofits?

Yes. However, only the cost of any newly installed lighting will be eligible for tax deduction.

COMcheck loading screen.

How can COMcheck help determine the potential tax deduction for my project?

The U.S. Department of Energy’s (DOE’s) COMcheck software can be used to calculate the percentage reduction in your project’s Lighting Power Density (LPD) compared to Standard 90.1-2001 that forms the basis for the dollar value of the tax deduction. COMcheck can also be used to document compliance with the controls and wiring requirements of 90.1-2001.

What version of COMcheck do I need to perform the calculations?

Any version of COMcheck that includes compliance with ASHRAE/IESNA 90.1-2001 (version 2.5 and above) will provide the necessary calculations. You can download the latest version of the software from www.energycodes.gov

How do I use COMcheck to calculate the project's LPD reduction for a potential lighting tax deduction?

Project tab in the COMcheck energy code compliance software.

1. After starting the software, go to the Code menu on the taskbar and select "90.1 (2001) Standard".
2. Select the Project tab.
1. Select the type of project from the options under Project Type.
2. For new construction, select "New Construction"
3. For an addition, select "Addition"
3. Select "Whole Building" or "Area Category (Space-by-space)" under Building Use. Either path can be used for the tax deduction.
4. Select type of building or space categories from the pop-up list and enter the applicable square footage(s).
5. Select the Lighting tab and define all the components of the final lighting system as it will be after project completion.
1. Press the button for the appropriate type of lighting: Linear Fluorescent, Compact Fluorescent, HID, or Incandescent.
2. Enter the lighting system details. Note: additional lighting power allowances cannot be used.
3. Repeat steps 5.1 and 5.2 until the entire lighting system is entered. This may include existing lighting if the project is a retrofit or remodel, but only the cost of the newly installed lighting will be eligible for tax deduction.
6. Check the Lighting Percentage value in the lower right hand corner of the screen. If the lighting design passes by more than 25% (better than "+25%" shown in green), you are eligible for a tax deduction. If your project will not achieve better than a 25% reduction do not proceed further as you will not be eligible for any deduction with the interim rule.
7. From the File menu, select View/Print Report.
8. Select Lighting Compliance Certificate and select OK to generate a PDF of the certificate.
9. Print the Lighting Compliance Certificate.

The Lighting Compliance Certificate will note that Standard 90.1-2001 was used for compliance comparison and will show the percentage that your design is better than the Standard in the shaded box at the bottom. This is your self-documentation of your eligibility for the tax deduction based on reduction of LPD over 90.1-2001¹. The certificate will also provide a checklist of the controls and wiring requirements of the 90.1-2001 standard that must be met.

Can I apply any of the "exemptions" or "allowances" in COMcheck for purposes of the tax deduction?

You can use any of the exemptions that apply. However, the tax provision specifically prohibits the use of any of the additional lighting power allowances.

Can I use COMcheck to document the bi-level switching and IESNA light level calculation requirements?

The 90.1-2001 Standard does not require bi-level switching so documentation of this will not be available on this application of COMcheck. You can find some information on compliance with typical bi-level switching requirements at www.energycodes.gov/training/commercial_training.stm in the IECC 2000/2001/2003 training presentation for Lighting. IESNA light level recommendations are not included in the COMcheck software. They can be found in the IESNA Lighting handbook.

Can COMcheck be used to calculate any non-lighting tax deduction values?

No. Non-lighting tax deductions require the use of whole building energy modeling which is not a capability of COMcheck.

How is the actual lighting deduction calculated?

The maximum possible deduction is calculated on a sliding scale based on the percentage reduction in lighting power your project achieves compared to the Lighting Power Density (LPD) level limits in the ASHRAE/IESNA 90.1-2001 Standard. The portion of the $0.60 per square foot your lighting project is eligible for will range from $0.30 at only 25% LPD reduction to the full $0.60 at 40% LPD reduction according to the following formula:

Maximum available deduction ($) = $0.60*(100 - (3⅓*(40 - % LPD reduction))).

A sampling of typical deduction amounts are shown in the following table:

What other resources are available?

For guidance on the commercial building tax deduction, see the Internal Revenue Service website: www.irs.gov/newsroom/article/0,,id=158395,00.html.

For condensed information on the tax credits, visit the following websites:

• U.S. DOE Tax Incentives for Energy-Efficient Buildings and Products
• NEMA Commercial Building Tax Deduction Coalition
• American Council for an Energy-Efficient Economy News Release

¹While COMcheck is not an officially recognized IRS software tool for the permanent tax rule, it is applicable in providing the LPD reduction percentage needed for the interim tax deduction calculation. PNNL-SA-50842