There is a growing focus on the national obesity epidemic. Studies show that on a global level, 500 million people are obese. The U.S. Institute of Medicine reported that the annual cost of obesity-related illnesses in the U.S. is over $190 billion.

One of the financial industry’s recent products is the development of an obesity stock investment portfolio. This portfolio includes companies that are expected to benefit from multifaceted solutions to addressing the obesity problem.

Companies expected to flourish in the near future from tackling obesity are categorized into pharmaceuticals and healthcare, food, commercial weight loss, diet management and nutrition, and sports apparel and equipment. These categories span across a large sector of business, each category standing to obtain large EPAct tax incentives.

Tax Opportunities

Pursuant to Energy Policy Act (EPAct) Section 179D, buildings making qualifying energy-reducing investments in their new or existing locations 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 foundation.

Presented below are the EPAct tax incentives for the kinds of companies that might be included in the obesity stock portfolio categories.

The Potential EPAct Tax Deductions Available for Energy Efficient Building Improvements for a

Hypothetical Obesity Fund

*Total square footage is an estimate based on internet data of the average square footage of each location.

Note: This is a hypothetical portfolio created by the authors and does not represent any particular obesity fund.

LED Lighting/LEED Certification EPAct Tax Deductions

LEED stands for Leadership in Energy and Environmental Design and is the renowned standard for sustainable buildings in the United States . In conditioned (cooled) LEED buildings, air conditioning is the largest building energy user. Conditioned LEED buildings will qualify for a LED lighting tax deduction of $1.80 per square foot when the buildings HVAC system is very energy efficient.

To qualify for the $1.80 LED lighting tax deduction the building must be modeled in IRS approved software. Building owners should utilize tax engineers who are intimately familiar with the EPAct building modeling process. An experienced tax engineer will be able to confirm before the LED LEED building lighting installation whether it is likely to qualify for the $1.80 LED lighting tax deduction.

Retail Energy Efficiency

Many of the obesity stock companies properties are moving towards energy efficiency in their facilities. GNC has installed low wattage long life LED lighting in their company headquarters and in over 1,500 company stores. Dick’s Sporting Goods’ 675,000 square foot headquarters is LEED certified.

Nike retail stores are achieving energy efficiency by means of energy management system (EMS) installation in their retail outlet locations. Of Nike’s 200 retail locations, 170 of them are equipped with EMS. Territory facility manager, Shawn Browning, says the goal of EMS installation is to “Maximize savings but minimize the impact on operations and the customer experience”. Nike’s savings goal is an average of 12% energy savings quarterly.

The building types involved with these companies vary and include warehouses, manufacturing facilities, distribution centers, office buildings, fitness centers, health clubs, laboratories and retail stores. Below are the EPAct wattage targets for each building type.

EPAct Wattage Targets

Conclusion

The obesity problem requires multiple solutions. As we trim the fat from the global obesity epidemic, we can simultaneously trim energy costs and obtain EPAct benefits.

References

“Efforts To Tackle Global Obesity Shaping A New Investment Megatrend, Says New BofA Merrill Lynth Report” Business Wire, July 16, 2012. Accessed at http://www.thestreet.com/story/11618602/1/efforts-to-tackle-global-obesity-shaping-a-new-investment-megatrend-says-new-bofa-merrill-lynch-report.html?cm_ven=emailfriend

Charles Goulding, Jacob Goldman, & Amelia Aboff. “How LEED 2009 Expands EPAct Tax Savings Opportunities” Corporate Business Taxation Monthly, September 2009, Pg. 11-13.

Laura Peters. “GNC stores upgraded with Lighting Science Group’s LED lamps” LEDs Magazine, August 2011. Accessed at http://ledsmagazine.com/news/8/8/13

“Top 7: Largest Pittsburgh-area LEED-certified projects” Pittsburgh Business Times, July 1, 2011. Accessed at http://www.bizjournals.com/pittsburgh/news/2011/07/01/largest-pgh-area-leed-certified-projects.html

Greg Zimmerman. “Efficiency and The Bottom Line” Building Operating Management, July 2012, Pg. 30-35.

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