The EPAct Aspects of Hotel LED Lighting

The EPAct Aspects of Hotel LED Lighting

The U.S. hotel industry is beginning to rebound from one of the most adverse hotel industry economic environments it has ever experienced. As a result, many properties are in need of modernization at a time when substantial energy cost savings, maintenance cost savings and tax incentives are available, particularly for upgrading to energy efficient long life LED (Light Emitting Diode) lighting and very efficient HVAC. The available tax incentives can be utilized to fund projects that reduce energy costs for hotel owners and tenants, providing savings for years to come.

Also, in many cities, particularly New York City, there is a wave of new boutique hotel construction where the same EPAct Section 179D tax incentives are also available for new construction.

The EPAct Tax Opportunity

Pursuant to Energy Policy Act (EPAct) Section 179D, multinationals making qualifying energy-reducing investments in their new or existing manufacturing facilities can obtain immediate tax deductions of up to $1.80 per square foot.

If the building project doesn't qualify for the maximum $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 (heating, ventilating, and air conditioning), and the building envelope. The building envelope is every item on the building’s exterior perimeter that touches the outside world including roof, walls, insulation, doors, windows and foundation1. In a previous article, the authors explained that hotels and motels are the most favored EPAct category, due to guest rooms being exempt from the bi-level switching requirement of Code Sec. 179D.2

The Hotel Legal Lighting Environment

Hotels are particularly impacted by a wide range of Federal lighting bans impacting incandescent lighting in guest rooms and other Federal lighting bans impacting support spaces. Often the large hotel support spaces including kitchens, and laundry area's have prior generation now Federally banned T-12 and metal halide lighting that needs to be retrofitted. The list of federally banned lighting can be found in Table 1.

Table 1: Federal Lighting Bans


The majority of states’ building energy codes are at the ASHRAE 2004 building code level or better. ASHRAE 2004 mandates hotel energy efficiency at levels better than the full lighting EPAct Section 179D tax deduction level. Simply stated, if hotel property owners direct their lighting retrofitters to upgrade to current state/city building energy code or better, they will obtain the full EPAct Section 179D tax deduction.

Guest Rooms

In guest rooms, the key to optimizing energy costs and tax savings is to utilize LEDs for both the building lighting and the interior package, meaning bed and desk lamps.

LEDs also have the advantage of highlighting aspects of a room. Designers can strategically use the LEDs to make the rooms more attractive, leading to higher customer satisfaction. In hotel chains, where uniformity is priority in multiple building design, this strategy can be applied to creating consistent rooms and spaces.

Hallways and Common Areas

Hallways, lobbies, and stairwells usually run their lights for 24 hours a day and seven days a week. Keeping lights on continuously means reaching the end life of a product quicker, and changing bulbs. The long life rating of LEDs should be of particular interest to hotels since it not only reduces energy operating costs, the long product life cycle greatly reduces ongoing lamp replacement maintenance costs.

Hallways are particularly optimal for LED retrofitting because of the ease of installation and design. LED strips can be bought whole and installed throughout entire corridors with minimal work.

Parking Garages

Many hotels include their own parking garage within or adjacent to the building. Parking garages were one of the first building types to adapt to LED lighting, and the large open spaces make them specifically advantaged under Code Sec. 179D, enabling them for large EPAct tax deductions. In Notice 2008-40, the IRS announced that parking garages are a property class specifically entitled to use the EPAct tax deductions3. Also, parking garages are excluded from the bi-level switching requirement4.

Hotel Restaurants

LED lighting is particularly popular for restaurant lighting and many national restaurant franchises are already upgrading all their facilities, including hotel locations, to LED's. The versatility of LEDs makes them desirable for both their energy savings and their interior design capabilities. Previous articles have stated how, LEDs can highlight both food and architecture, making the restaurant appear more desirable.5 6

Understanding Hotel LED High Energy Efficiency HVAC Combination's

Boutique hotels are platformed for larger LED tax deductions any time they combine LED's with facilities that have centralized HVAC systems like a chiller plant.


Converting lighting to LEDs can also cut HVAC energy usage. The low heat output of LEDs may be beneficial to hotel operators. The heat output of incandescent and fluorescent bulbs is significantly higher than LEDs and can create additional heat that must be offset by air conditioning. Hotels spend lots of their energy use on air conditioning in guest rooms. Installing LEDs should reduce overall energy costs.

LED Hotel Trailblazers

Hotels are already taking advantage of the massive energy savings provided by LEDs. The Hyatt Regency Grand Cypress Resort in Orlando, FL converted all of their hallways and lobbies to LEDs. They were enticed by the energy and maintenance savings, as well as the higher quality lighting. Their investment resulted in an average energy savings of 80%-90%.7 This is very significant considering that lighting comprises 25-30% of a hotel’s energy bill.8

The Agua Caliente hotel in Rancho Mirage, CA installed new LED lighting in its 14 floors. The owners made the decision to retrofit their lighting not only because of the long life and maintenance savings, but for the wide range of colors available. LEDs provided the hotel with the exact color temperature to help create the atmosphere they envisioned.9


Hotels are rapidly embracing LED lighting to save energy and maintenance costs. Informed owners will use the EPAct Section 179D tax incentives and make sure they consider upgrading all of their properties by December 31, 2013.


1. Goulding, Charles, Goldman, Jacob, & DiMarino, Nicole. “EPAct Tax Deductions for Lighting Gain Wider Use.” Building Operating Management. July 2008. Pg 68-74.

2. Goulding, Charles, Jacob Goldman, & Taylor, Goulding. “Hotels and Motels Most Favored Energy Policy Act Tax Properties.” Corporate Business Taxation Monthly. March 2009. Pg 17-18.

3. Notice 2008-40, IRB 2008-14, 725.

4. Goulding, Charles, Jacob Goldman & D. Malcolm Thomas. “Multiple Lighting Technologies Drive Large EPAct Tax Deductions for Parking Garages.” International Parking Institute. August 2010. Pg 22-24

5. Goulding, Charles, Jacob Goldman, and Daniel Audette. "The LED Lighting Tax Aspects of Restaurants" Corporate Business Taxation Monthly. Print.

6. Goulding, Charles, Raymond Kumar, and Daniel Audette. "LED Building Lighting Drives Supermarket EPAct Tax Deductions." Corporate Business Taxation Monthly. Print.

7. "Resort hotel lit by Cree LED Lighting ." Semiconductor Today 26 Feb. 2010: Web. 24 Nov 2010.

8. Simon, Dave. "Factors to Consider When Exploring LED Lighting." Green Lodging News 15 Apr. 2009 : Web. 24 Nov 2010.

9. "Agua Caliente hotel goes green with Albeo LED lighting." LEDs Magazine 07 Aug 2008: Web. 24 Nov 2010.

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