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Furniture Stores Benefit from Energy Tax Deduction

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Furniture stores and other commercial buildings are eligible for a tax deduction under the Energy Policy Act of 2005. The deduction applies to new construction as well as remodeling projects placed into service after January 1, 2006. There are no limits on size of the project, small or large, but the deduction is capped at $1.80 per square foot.

The Energy Policy Act of 2005 (EPAct 2005) offers building owners the maximum deduction if the entire building achieves a 50% reduction in annual energy cost when compared to the industry standard ASHRAE/IESNA 90.1-2001. Energy costs defined in EPAct 2005 refer to heating, cooling, water heating and lighting.

Monte Lee, regional manager for New Jersey based Service Lamp Corporation, has notified customers that their lighting designs should qualify for the maximum deduction under EPAct 2005. “The great thing for our customers is that even if the entire building doesn’t qualify they can still take a deduction for the cost of efficient lighting. Based on the percent of energy below the standard allowances, deductions are awarded on a sliding scale to a maximum of 60 cents per square foot,” says Lee from his High Point office.

A deduction cannot exceed the capitalized cost of energy-efficient property installed during construction. A partial deduction of 60 cents per square foot is provided for building subsystems, such as lighting, in the event the entire building does not qualify. ASHRAE/IESNA 90.1-2001 allows 2.1 watts per square foot for retail plus an additional allowance of 1.6 watts for “lighting equipment installed in retail spaces that is specifically designed and directed to highlight merchandise.” The total allowance (3.7 watts) is more generous than many current, state building codes but is the basis for computing the tax deduction.

EPAct 2005 intentionally rewards storeowners for using energy efficient products. In some cases these products carry a higher initial cost but offer long-term energy savings to stores. Energy efficient light sources used in Lee’s lighting designs include ceramic metal halide track heads; electronic ballasts used with T5/T8 lamps, infrared halogen lamps, and compact fluorescent lamps.

Lee is a contributing editor for Furniture World magazine and his article “Better Lighting - Lower Cost“ appears in the October 2005 publication. The article is available on line at www.furninfo.com/absolutenm/templates/Article_Retailing.asp?articleid=5522&zoneid=3

Lee said that one of the best on line references to EPAct 2005 is by Sylvania and is found at http://content.sylvania.com/app/display.aspx?id=003687078.

Methods for claiming the tax deduction, which may include third party verification of savings claimed, have not been defined. “I expect the store will need a report run by COMcheck or another certified program to show how installed lighting compares to the standard,” adds Lee “but documentation for a lighting design is readily available to show compliance.

States are required by Federal Law to have energy saving requirements in building codes either by reference to ASHRAE/IESNA standards or by developing their own codes. California’s Title 24 energy code is among the strictest in terms of limiting watts on the retail sales floor. Achieving a quality presentation that complies with building code is sometimes difficult for furniture stores.

Monte Lee will discuss EPAct 2005 along with lighting design, code compliance and the benefits of efficient lighting at the NHFA Retailer Resource Center ® (IHFC-M1210) during the April 2006, International Home Furnishings Market in High Point. Service Lamp Corporation, headquartered in Voorhees, NJ, is a distributor of lighting products specializing in the furniture industry. Through a regional office in High Point, North Carolina.

 Service Lamp is supplier to National Home Furnishings Association, has national accounts with furniture manufacturers, and supplies Top 100 retailers and independent furniture stores. Philips Lighting Company, the U.S. - based lighting company affiliated with Royal Philips Electronics, announced a distribution partnership with Service Lamp on June 6, 2005 to focus on the furniture industry. This announcement is intended to increase public awareness of EPAct 2005 benefits but is not offered as tax advice.

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