Understanding renewable tax credits is crucial

June 3, 2010
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Tax credits for energy sources such as oil and gas were created shortly after dinosaurs became fossil fuels, but similar credits for renewable energies are relatively new.

Plante & Moran PLLC, a national accounting firm with offices in West Michigan, helps clients understand, from an accounting perspective, what is available to them and evaluate those options.

“With the law changes from Obama in 2009, it helped us see we needed to focus more time into the renewable energies area,” said Jim Manning, a Plante & Moran partner and tax leader of the firm’s real estate group.

Before Plante & Moran can help a company understand renewable energy incentives, Manning said it is important to understand what that company is currently doing and identify any incentives it may be missing. The next step would be to look at renewable energy incentives.

“Once we move through the facility and understand what they are doing — just knowing how intensive they are in using electricity, gas or whatever they’re using — then helping them understand ways where they can reduce that cost,” he said.

“Another place where we can help is the lighting companies will go out and give these companies a proposal saying, ‘Here’s why you should (update) your lighting and here’s how much it will save you. … Here are all the incentives out there.’

“Truthfully, it’s pretty confusing unless you’re an accountant. Our clients and others will come to us and say, ‘Is this right?’ We can work through that and say yes or no. … We can help them understand, long term, if this is a good investment.”

Manning also said the government requires that a CPA must certify incentive-eligible improvements, such as adding a wind turbine, if the project is over $5,000. If the project is legit, the IRS will send the company a rebate check for up to 30 percent of the cost within 60 days. To claim that 30 percent rebate check, at least 5 percent of the project’s cost must be incurred by Dec. 31 of this year. After that, the incentive is a tax credit.

Manning also mentioned the proposed amendment in the Michigan legislature that would offer tax credits of up to 50 percent on new or rehabbed building projects. The percentage of tax credits would be determined by the level of LEED certification achieved.

“As you move up, you would get a higher credit. It does make sense to do that, and I do hope that passes,” he said.

Manning also mentioned deductions that are available from the IRS for energy efficiency.

“If you did improvements to your heating and cooling, building envelope and your lighting, there is a 60-cent per component deduction you can take, and that’s 60 cents times the number of square feet you have,” said Manning.

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