Regardless of your personal beliefs, environmental issues have become more prominent in global political conversations. Considering this, one of the most powerful tools in governments’ toolkits are tax incentives to promote green initiatives. The thinking is that by incentivizing certain green behavior, businesses and organizations will enact green policies and initiatives. This will ultimately play a large part in safeguarding the earth.
So, what are some of those key tax incentives that you can leverage? Ultimately, there are several. By taking advantage of some of these tax abatements and credits, you and your business can increase your bottom line.
Before we proceed, however, we would like to mention one key caveat. What follows is not tax advice. It is provided for informational purposes only. If you are seeking tax advice, we recommend that we speak with your organization’s attorneys and accountants. This is especially true if you are unclear whether a particular tax abatement or tax program applies to your organization.
The ITC is a program that incentivizes businesses and organizations to invest in renewable energy. What happens is that you and your business receives a defined tax credit for investment into different renewable technologies. They may include solar technologies, fuel cells, microturbines, and geothermal systems. According to the U.S. Department of Energy, businesses or organizations taking advantage of the ITC can receive a 30 percent rebate for investments in solar, fuel cells and wind. You can receive a 10 percent rebate for investments in geothermal, microturbines, and combined heat and power (“CHP”).
That said, there is a key caveat here. The ITC has been amended several times—most recently in February 2018. The rebates for certain investments are expected to decline in future years, and rebates are based on when construction begins. For instance, the rebate for solar water heating and solar space heating or cooling is expected to fall. It may go from 30 percent in 2019 to 10 percent in 2022. To review the entire schedule of rebates, please click here. The ultimate conclusion is that businesses and organizations are incentivized to invest in these renewable technologies sooner rather than later. While you can take advantage of this program at a later date, you won’t be getting as much bang for your buck.
The ITC is the most significant tax incentive program that you and your organization can leverage. But having said that, there are other incentives that you may want to consider. For instance, there are incentives available if your business owns a commercial building.
The 179D commercial buildings energy efficiency tax deduction allows building owners to claim a tax deduction for installing a system that reduces energy power and costs in the building. Specifically, the building owner must install systems like interior lighting, building envelope, or heating, cooling, ventilation, or hot water systems that reduce a building’s power and energy cost by half compared to other buildings meeting minimum requirements. The deductions vary, but could equal up to $1.80 per square foot.
There is another tax credit that your business can leverage if it is making a substantial change.
The rehabilitation, energy, and reforestation investments credit applies in several use cases. If your business spent capital rehabilitating or renovating a historic, old building, you could be eligible for this tax credit.
If you work for a timber producer, you may also be eligible for a tax credit for the costs associated with reforestation. While the exact amount received will vary depending on you and your business, this credit typically covers 10 percent of your expenditures and has a cap of $10,000 per year.
Georgia has enacted two clean vehicle tax credits.
The first is the low emission “alternative fuel” vehicle tax credit (“LEV/ZEV”). The LEV/ZEV program has was discontinued on July 1, 2015; however, your organization can claim the credit if the vehicle was purchased or leased before July 1, 2015. In addition to that qualification, the vehicle must be registered in Georgia, must meet the low or zero emission standard, and must be solely powered by an alternative fuel. To learn more about these requirements, click here. If eligible, you could receive different incentives for a low-emission or zero-emission vehicle. For a low-emission vehicle, you may receive 10 percent of the vehicle’s cost or $2,500 (whichever is less). And for a zero-emission vehicle, you may receive 20 percent of the vehicle cost or $5,000 (whichever is less).
Along with the LEV/ZEV program, there are the alternative fuel/medium-duty vehicle (“MDV”) / heavy duty vehicle (“HDV”) tax credits. Unlike the LEV/ZEV program, the MDV/HDV program applies to vehicle purchases made after July 1, 2015. There are some strict provisions governing your eligibility for this program. Some of those restrictions include a certain gross vehicle weight ratio, 75 percent of vehicle mileage accumulated in Georgia for each year over a five year period, and that the vehicle is a new commercial vehicle manufactured by the Original Equipment Manufacturer and third-party equipment manufacturer. Upon meeting all of these requirements, however, your organization can receive some major tax benefits (up to tens of thousands of dollars per vehicle).
If your business owns vehicles that rely on alternative fuel, you will want to investigate whether you can take advantage of any of these programs.
This is just a sampling of the potential tax abatements and credits that may be available to you. As always, you will want to do your own research and run your ideas past a tax professional. But having said that, regardless of the size of your organization, you likely will be able to take advantage of some of these green tax incentives, whether they are administered by the state of Georgia or the federal government.
Ultimately, we encourage you to get started today. Not only can you help protect our earth, but you can keep some hard-earned dollars within your organization. What’s not to like?