Green Tech Investments Yield Golden Tax Breaks

Going Green – Without Breaking the Bank

 

Despite the challenging economy and related capital market gyrations, business owners across the country are continuing to invest in a variety of eco-friendly technologies.  Businesses that choose to invest in green technologies do so for a variety of reasons including: 

-     Being socially responsible, 

-     Reducing long-term operating costs, 

-     Public relations/ employee relations benefits, 

-     Securing tax benefits 

-     Or most likely a combination of these factors. 

A sampling of the type of investments that business owners are making to reduce their energy costs, as well as their carbon footprint , include: 

-         Developing their own power sources, such as solar, cogeneration, geothermal, etc.,

-         Purchasing more energy efficient office and processing equipment,

-         Acquiring alternative powered vehicles,

-         Installing pollution control and energy control systems,

-         Adopting or improving their office and plant recycling programs,

-         Using more renewable raw materials and supplies,

While great strides are being made to reduce the carbon footprints of businesses and individuals, these new eco-friendly shoes can come at a very high price.   Many technologies are still being proven in the marketplace, and proven technologies such as solar, LNG powered vehicles, and LEEDS certified buildings require significant investment and long-term pay-back.

As positive as these eco investments are on the environment and the communities these businesses operates in, business owners will still naturally look to the lowest cost method for greening their business.  Unfortunately, sometimes this means deferring the planned upgrades until cash flow is sufficient to justify the significant up-front costs.

On the bright side, there are a large number of federal and state tax incentives, including eco-credits such as energy and pollution control tax incentives, hiring credit incentives research & development credits and accelerated depreciation benefits (through December 31, 2009) readily available to a large cross-section of industries.  The combination of state and federal credits, and bonus/ section 179 asset write-offs can dramatically reduce the after-tax cost of green infrastructure.

Energy Incentives (Just a Sampling)

-         Federal Solar Credit of 30% on Solar Panels and related equipment,

-         Federal Small Wind Energy Credit of 30% (Maximum Rating of 100 kilowatts),

-         Cogeneration energy production from alternative fuel sources – 30% federal credit

-         Alternative Fueling Stations, including electric recharging stations – federal credit equal to the lesser of: i) 50% of the eligible costs, or ii) $50,000 per station.  More pricey hydrogen station credit caps are increased to the lesser of: 30% or $200,000 per station.  See: www.carbondayautomotive.com  for more info on plug-in recharging stations.

-         Hybrid or Electric Vehicles – $2,500 to $15,000 per electric vehicle purchased or a 10% credit for conversion costs to convert a conventional or hybrid vehicle to a plug-in electric format.  The pay-back period can be relatively quick at $3 per gallon,

-         Federal bonus depreciation at 50% of asset costs and IRC Section 179 “expensing” of most tangible personal property for assets purchased by December 31, 2009 also offer significant up-front tax advantages,

-         Federal and state Research & Development costs for developing or refining new equipment or processes

For companies that design, manufacture, assemble or distribute green technology products, some of the largest tax incentives come in the form of Location Based Incentive Credits (LBICs) which are available to most companies operating in any of the over 8,000 federal, state and local tax incentive zones throughout the country.   Therefore, companies are very wise to carefully choose where they establish or expand their business in order to minimize their federal and state tax burdens.

A small sampling of the 40 state and numerous federal LBIC programs  include:

-         The California Enterprise Zone Program (www.caez.org) available in 42 Zones throughout the state, which offers:

  •  hiring credits up to $13,000 per year/ per qualified employee
  • equipment credits up to 10.75% on pollution control, energy control, technology, manufacturing and processing equipment used exclusively in a Zone,
  • lender tax exemption for loans to businesses operating exclusively in a Zone
  • Employee-Level credits up to $525
  • Favorable permitting, bidding, grants and loans

-         Florida Enterprise Zone Program available in numerous regions throughout the state provides benefits including: hiring credits, equipment tax breaks, sales tax benefits, and property tax reductions,

  -         Federal Empowerment Zone Program (up to $3,000 per qualified employee/ per year)

-         Federal Renewal Community Program (up to $1,500 per qualified employee/ per year)

-         Federal Rural Renewal County Program (up to $4,800 per qualified employee/ per year)

-         Federal Work Opportunity Tax Credit (WOTC) Program available to business operating in any location – from $2,400 to $4,800 per qualified employee and up to $8,500 for Welfare-to-Work employees.

Federal and state grants and more liberal loans are also available for these assets.

 Businesses that either purchase or sell energy and pollution control equipment and spend the time educating themselves on the very beneficial green/ eco credits, state enterprise zone programs, federal tax incentive programs, can enhance their cash flow and profits and will gain significant competitive advantages. 

Read additional green tech blog entries below or review the article library at: www.blakechristian.com.

For more information on identifying Location Based Incentive Credit Zones, please refer to: www.ntcgtax.com.

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