Tax Incentives for Retail Store LED Lighting Solar Supercharging

Numerous leading retailers including Walmart, Costco, Kohl's, Ikea, Staples, and Walgreens have already installed large volumes of solar rooftop P.V. on their stores.

These same stores now have the opportunity to super charge their excess electricity production by installing low wattage LED lighting. In addition to greatly increasing available electricity generation, these stores can typically obtain EPAct tax deductions at the $1.20 to $1.80 per square foot level for the LED lighting installation if completed by December 31st 2013.

EPAct – Code Section 179D

Under Code Sec. 179D, as enacted by the Energy Policy Act of 2005 (EPAct) , building owners who make qualifying energy-reducing investments can obtain immediate tax deductions of up to $1.80 per square foot.
If the building project doesn’t qualify for the maximum of $1.80 per square foot immediate tax deduction, there are tax deductions of up to $0.60 per square foot for each of the three major building subsystems: Lighting, HVAC, and the Building Envelope. The building envelope covers every part of the building’s exterior perimeter that touches the outside world including roof, walls, insulation, doors, windows and foundation.

LED Lighting

Long life LED lighting provides substantial energy cost reduction and reduced maintenance costs. Many utilities offer rebates for energy efficiency LED Lighting especially if the lighting technology has been approved by the Design Lights Consultation(DLC).
LED lighting technology has now developed so that it is suitable for retail and warehouse club applications. Most solar P.V. is installed on large, flat roof buildings. When approved, existing solar P.V. installations were economically justified based on the amount of electricity generated by the P.V. system, and in particular, the excess electricity generation above current building needs.
After a retail or warehouse club LED lighting installation, the new wattage is typically less than 1.0 watt per square foot, which is 50% lower than typical retail locations. This means that the LED lighting supercharges the excess electricity production which often can be sold into the electric grid. The large EPAct tax savings level will range from $1.20 per square foot to $1.80 per square foot, depending on the final watts per square foot achieved by the lighting system.

Energy Efficient HVAC for Retail Distribution Centers

The HVAC technologies that will typically produce favorable EPAct tax deduction results for these types of facilities are:

1.Chillers in facilities less than 150,000 sq ft
2.VAV in facilities less than 75,000 sq ft
3.Very high energy efficient chillers
4.Energy Recovery Ventilation (ERV)
5.For facilities 150,000 square foot or greater combinations of very efficient chillers and ERV
6.Evaporative Coolers like Coolerado in dry climates

Retail Stores in Mandatory Bench Marking Jurisdictions

Many of the retail store footprints presented above exceed 50,000 sq ft. Seven major jurisdictions now mandate building Benchmarking at the 50,000 sq ft level or greater. Those seven jurisdictions are: 1) California, 2) Austin, 3) Washington DC, 4) New York City, 5) Seattle, 6) Philadelphia and 7) Minneapolis.

Enhancing a Previous Asset Economic Return

It is a rare opportunity to greatly enhance the economic return from a previous capital investment while getting large tax incentive for doing so. When helping the building owner evaluate the LED lighting upgrade decision, the tax adviser should combine the EPAct tax savings, the added payments from the added electricity sales to the grid (if available), and utility rebates which are often available for LED installations.

Tax Planning for New Rooftop Solar Installations

Retail and warehouse club building owners considering a new rooftop solar P.V. investment should complete the LED lighting installation before EPAct expires on December 31, 2013. The solar installation will have to be completed on or before December 31, 2016 to qualify for the 30 percent tax credit and the 5 year accelerated depreciation. Solar roof top P.V. utility interconnect approvals are required in many jurisdictions can take up to two years so it may be necessary to obtain investment approvals by the end of 2013 and early 2014 to obtain desired tax incentives.


Multiple LED lighting manufacturers now have LED lighting technologies suitable for retail and warehouse club buildings. All property owners interested in obtaining tax incentives for LED lighting upgrades should act by December 31, 2013.
Warehouse and industrial buildings with existing solar P.V. generation systems may be able to obtain large additional economic benefits for the material increase in electricity generation.

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