The federal government is starting a full-court press to encourage corporate sustainability, with a wave of tax credits, exemptions, rebates, or grants meant to foster such efforts.
Companies with sustainability efforts already in place would do well to take advantage of all the offerings, experts say. And for those companies still debating how they could be better corporate citizens—now might be the time to start executing.
Incentives are changing so rapidly that even companies already using some should take a fresh look at what’s available, says Howard Wagner, an executive in the national tax office of Crowe Horwath. “Chances are there are additional new incentives available or modifications to existing ones.”
Federal incentives include energy credits and grants, deductions for energy-efficient commercial buildings, work and training credits, and accelerated depreciation for some equipment. The Energy Department has set aside $3.1 billion for its State Energy Program for energy efficiency and renewable energy programs, for example, and the American Recovery and Reinvestment Act provides $3.2 billion for the Energy Efficiency and Conservation Block Grant to help states develop programs to encourage energy efficiency. Other state-level incentives include corporate tax deductions, property tax exemptions, sales tax rebates, and utility incentives.
Gimigliano
John Gimigliano, principal in charge of KPMG’s energy sustainability tax practice, describes a new grant program created under the Recovery Act for producers of renewable electricity as “a real game changer.”
Companies already receive a 30 percent tax credit for purchases of equipment used to produce renewable energy. The Recovery Act provides a separate incentive worth 30 percent of the cost of qualifying equipment, but in the form of a direct grant—which will lure companies that can’t take advantage of a tax credit, Gimigliano says. Also new under the Recovery Act is a tax credit for companies that manufacture equipment or products used to produce renewable energy.
Bravo
At the state level, energy efficiency incentives vary dramatically. Jenny Bravo, tax leader of the enterprise sustainability practice at Deloitte, notes that New York and Oregon offer incentives for green building construction, including items like efficient heating, ventilating, and air conditioning systems and other energy efficiency upgrades. Other states offer sales tax rebates, reduced property taxes and non-traditional items such as preferred permitting.
“Incentives can help offset some of the cost to a point where the project is both socially and economically attractive.”
—Thomas Alberte,
National Leader for Business Incentives,
BDO Seidman
Investments into on-site renewable energy such as solar power “are becoming increasingly feasible through tax incentives,” says Bravo. The retail sector has been active on that front, she says, installing solar panels on stores and warehouses to power their facilities.
Of course, many of the incentives do carry eligibility requirements. The federal energy-efficient commercial buildings deduction, which provides a tax deduction of up to $1.80 per square foot, requires external certification. And Kentucky provides a 50-cent income tax credit for every dollar spent on equipment used for recycling, but companies must submit a report and have an inspection done by the state at the end of the year to claim the credit, Wagner says.
Moving From Idea to Program
Despite the sluggish economy, Wagner and others says there’s “definitely a business case” for corporate sustainability initiatives. “With long-term trends in the cost of energy, it’s a fundamental economic decision, not just a matter of social conscious,” he says.
Bravo says much the same. Companies want to reduce energy consumption and carbon footprints anyway to reduce costs, and sustainability helps achieve that. She describes such programs as “a business imperative, not a nice-to-have.” And Wagner also notes that some large companies are pushing their carbon footprint standards down through their supply chains.
Alberte
The incentives can help offset the cost of sustainability projects. For example, for a company that wants to install pricey energy-efficient equipment at its facilities, “Incentives can help offset some of the cost to a point where the project is both socially and economically attractive,” says Thomas Alberte, national leader for business incentives and credits at BDO Seidman.
Likewise, Wagner says, “If companies are not considering tax benefits of their sustainability efforts, they’re potentially understating the benefits or overstating the costs.”
Bravo says power purchase agreements (that is, contracts between electricity generators and purchasers) for alternative energy have also become popular in recent months. Given the recent incentives for alternative energy, she says companies should take another look at whether PPAs still make more sense than purchasing renewable energy equipment outright.
ENERGY EFFICIENCY
Below is more information on the “Energy Efficiency and Conservation Block Grant Program” :
Over $2.7 billion in formula grants are now available to U.S. states, territories, local governments, and Indian tribes under the Energy Efficiency and Conservation Block Grant (EECBG) Program, funded for the first time under the American Recovery and Reinvestment Act of 2009. This Program, authorized in Title V, Subtitle E of the Energy Independence and Security Act of 2007 (EISA) and signed into Public Law (PL 110-140) on December 19, 2007, provides funds to units of local and state government, Indian tribes, and territories to develop and implement projects to improve energy efficiency and reduce energy use and fossil fuel emissions in their communities. The Program is administered by the Office of Weatherization and Intergovernmental Programs (WIP) in the Office of Energy Efficiency and Renewable Energy (EERE) of the U.S. Department of Energy (DOE).
Program Application Deadline—NEW
As of May 11, 2009, the program application deadline for ALL applicants, including local, tribal, and state governments, is June 25, 2009, 8:00:00 PM, Eastern Time.
How to Apply
Due to the increase in Federal funding activities, the EECBG Funding Opportunity Announcement (FOA) and application package are located on two different websites. The FOA and its attachments are located at FedConnect, the federal online site for government funded programs. The application package is located at Grants.gov. For detailed instructions on locating these essential documents needed to apply for the EECBG Program, please read Special Application Instructions.
Source
Energy Efficiency and Conservation Block Grant Program
Gimigliano offers another reason companies ought to pay attention to sustainability programs: the Obama Administration’s push for a system to manage carbon dioxide emissions. As currently contemplated, a “cap and trade” system would force producers of carbon dioxide to bear the cost of their carbon emissions directly.
That would make everything, not just energy, more expensive, Gimigliano says. “If cap-and-trade happens, all companies would have to incorporate the price of carbon into the economy,” he says.
Securing sustainability credits does take effort. First, companies must actually know what’s out there—and companies outside the energy sector often don’t, Alberte says. And even companies that do know about the incentives may fail to secure them because they don’t have the time or in-house expertise to pursue them, he adds.
For instance, companies that use energy-efficient products such as light fixtures and bulbs may miss incentives because they haven’t met the necessary administrative requirements. Georgia has a certification process for companies to obtain income tax credits for the use of energy efficient products, Alberte notes.
Wagner says a lack of internal communication is often the culprit. “More likely than not, companies are already doing activities that qualify for incentives, but may not be getting them because of a lack of communication between their finance and operations people,” he says.
In other words, while the company’s engineers and plant managers may have numerous energy-efficiency programs to help reduce costs, the company can’t get credit for them if the tax department doesn’t know they exist and the compliance department isn’t following up on necessary paperwork.
The earlier the tax department is involved, Bravo says, “the greater the chances of qualifying for and retaining the full incentive projected, with the least amount of effort.”
Alberte recommends companies establish a formal process to assure that all incentive opportunities are evaluated early in the process. “The most successful companies accomplish this by having a ‘project champion’ from senior management take responsibility for implementing and monitoring this process so that opportunities are not missed,” he says.
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