Going Green Yields Immediate Tax Savings

Energy efficiency yields numerous business benefits. For example, purchasing equipment that is more energy efficient provides long-term savings and other financial benefits to companies practicing good environmental stewardship.

Specifically, Laura L. Roman, partner-in-charge of tax and strategic business services in Midland at Weaver, notes in an AICPA Tax Adviser article that the benefits also extend to tax incentives. A number of tax incentives are available at the federal, state and local levels to defray the costs of purchasing and installing energy-efficient equipment.

Roman notes the classification for incentives fall into five general categories:

  • Gross income exclusions: A company can exclude from its gross income part or all of the incentive payments or grant funds it receives for qualified energy conservation projects.
  • Tax credits: Each dollar offered for a tax credit reduces the total amount of business income subject to tax.
  • Deduction in lieu of depreciation: The energy-efficient commercial building deduction of the tax code allows taxpayers to deduct the cost of new energy-efficient equipment, rather than depreciate it.
  • Ancillary funding and allowances: Job-creation incentives exist for companies in what are considered “green industries,” and, depending on the circumstances, may be available for companies operating in other industries as well.
  • Multiple opportunities: Organizations can utilize multiple incentives for each project, including loans, performance-based incentives, deductions, tax exemptions and grants, along with property and sales tax rebates.

The article elaborates even further on each of these classifications, as well as walks readers through factors to consider for energy conservation plans and the immediate and long-term benefits of energy conservation credits.