The most significant incentive for lighting system upgrades was written into the National Energy Policy Act of 2005. Known as the Commercial Building Tax Deduction, the program offers a tax deduction for building owners to help offset the cost of energy-efficient building upgrades, including lighting system improvements. The amount of the deduction the facility qualifies for depends on the scope and cost of the retrofit. Under the program, organizations can claim the cost of a lighting system upgrade or other energy-efficiency projects in one tax year instead of having to gradually claimed over several years.
The total deduction is limited to $1.80 per square foot of the portion of the property the retrofit affects. The deduction allows for for upgrading systems within the building, such as lighting, and depends on the level of reduction achieved. To qualify for the tax deduction, projects must meet certain requirements. For lighting systems, the retrofit must reduce energy by at least 20 percent. Although primarily building owners take advantage of the deductions, they are available to managers of rented or leased facilities who make comparable changes to their spaces.
Timing is important if managers are to take advantage of the Commercial Building Tax Deduction incentive because the program ends January 1, 2014. The program already has been extended several times, but there is little chance of that happening again.
Even without the financial incentives offered by the Commercial Building Tax Deduction, lighting retrofits make good economic sense for most facilities. Energy savings alone typically recovers the cost of the retrofit program in two-three years. Retrofits also give managers the opportunity to redesign the lighting system to better meet the needs of building occupants. The new fixtures and lighting controls also will reduce maintenance requirements.