Green Development

The 2008 collapse of the U.S. housing market were built with a particularly damaging effect on the domestic furniture industry. An online freeze on new and existing home purchases resulted in an extreme decline in sales for furniture chains who, before the collapse, dominated the industry primarily by selling foreign-made furniture. The furnishings industry has largely become an import model where huge warehouses store the furniture that’s then sold in retail show rooms. Some major brands use large, warehouse-like structures his or her retail facilities. As the economy continues to improve, these businesses can realize significant energy cost savings and very large EPAct tax deductions by installing LED lighting in their showrooms together with energy-efficient lighting and heaters within their distribution centers.

Large store showrooms seeking to showcase their furniture can use LED’s for focused lighting, while huge warehouses that contain the furniture before it reaches retail storefronts can realize tremendous operating cost reductions by installing LED’s or other energy-efficient lighting. While all these building types involves a distinct planning process with various tax implications, LED lighting can drive large tax deductions for those furniture chain facilities.

The Section 179D EPAct Tax Opportunities

Pursuant to Energy Policy Act (EPAct) Section 179D, furniture chains making qualifying energy-reducing investments in their new or existing locations can get immediate tax deductions as high as $1.80 per square foot.

If the building project doesn’t qualify for the largest EPAct $1.80 per square foot immediate tax break, there are tax deductions of up to $0.60 per square foot for that three major building subsystems: lighting, HVAC (heating, ventilating, and ac), and the building envelope. Your building envelope is every item on the building’s exterior perimeter that touches the outside including roof, walls, insulation, doors, windows and foundation.

Renewable power Tax Credits and Grants

Pursuant to the American Recovery and Reinvestment Act of 2009, you will find multiple 30% or 10% tax credits available for a number of alternative energy measures with varying credit termination dates. For instance, the 30% solar tax credit and also the 10% geothermal electric tax credit expire January 1, 2017.

All alternative measures which are entitled to the 30% and 10% tax credits are also entitled to equal cash grants for that 3 years staring January 1, 2009 and ending December 31, 2011.

Unique 2011 Opportunity: Enhanced Bonus Tax Depreciation

Solar P.V. and geothermal systems are ordinarily eligible for 5-year MACRS depreciation, but building owners who install these systems after September 8, 2010 through December 31, 2011 can take 100% depreciation tax bonus immediately. Even when building owners miss this 2011 window, they can have a 50% tax depreciation bonus on equipment placed in service from January 1, 2012 through December 31, 2012.

The Tax Planning Implications for Furniture Chains

Showrooms and EPAct 179D

LED lights are good for presenting furniture because it provides a high-powered, focused beam ideally suited to showroom floors. The shopper is of course drawn to the furnishings due to the LED’s spotlighting effect. For this reason, the Ashley Furniture showroom in Boca Raton, Florida has opened among the first furniture stores seeking LEED certification for its inclusion of, among other things, LED lighting. Because this store is almost 100,000 sq. ft. large, it will be entitled to as much as $60,000 in tax deductions for lighting alone, and potentially greater EPAct deductions for qualifying HVAC equipment and building envelope measures. Indeed, as part of its plan to seek LEED certification, Ashley installed high-performing, low-emitting glass with automatic shades that conserve energy and rooftop solar tubes at its Boca site. A qualified professional can convert Ashley’s required LEED energy model into an EPAct tax model.

Warehouse Lighting and EPAct 179D

Building lighting comprises most of furniture warehouse energy use. Most warehouses that have not were built with a lighting upgrade to energy-efficient lighting within the last 7 or 8 years use earlier generation metal halide or T-12 fluorescent lighting. You should understand that effective January 1, 2009, most probe-start metal halide lighting might no longer be generated or imported in to the Usa and, effective July 1, 2010, most T-12 lighting might no longer be generated or imported in to the United States. Which means that warehouses that still have older lighting technology will quickly be, or already are, susceptible to large price increases for replacement lamps and bulbs.

This earlier generation T-12 and metal halide lights are energy-inefficient compared to today’s T-8 and T-5 lighting, along with a lighting retrofit can easily cut lighting discovered another means by 40 to 60 percent. Along with large energy cost reductions from upgrading basic building lighting, most warehouses undergoing lighting retrofits install sensors that completely turn off lighting in portions of the warehouse that aren’t being used. Previously, many warehouse owners and lighting specialists were not wanting to install sensors because they reduced fluorescent lamp useful life. Today, with improved technology, sensors can be found with warranties that force away reduction in lamp useful life. Within the furniture warehouse business, sensors will prove particularly useful because warehouses only need intermittent illumination. Combined with flourescent, induction or, increasingly, LED lighting, sensors are a vital consideration to any furniture warehouse operator.

Warehouse Heating and EPAct 179D

New, improved commercial heating systems can provide energy cost savings of 8 percent or more within the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 2001 building code standards. You will find multiple heater technologies ideal for the furniture warehouse market, including Cambridge direct fired gas heaters, unit heaters, and infrared (e.g. radiant) heaters. If it can be achieved, the warehouse heater could mount with an exterior wall to optimize the rooftop top space for any solar P.V. roof top system.

Typical Large Furniture Warehouses Obtain Large Tax Deductions

Many large warehouses have made the investments essential to get the full $1.80 per square foot EPAct tax deduction. Since the EPAct tax deductions connect with square footage, a 500,000 sq . ft . furniture warehouse can secure a $900,000 EPAct tax deduction.

IKEA’s Pioneering Solar Projects

IKEA uses large integrated warehouse/retail facilities to directly sell furniture. The Swedish company has announced that it will install solar P.V. in some of their stores in Colorado, Massachusetts, and New Jersey. By taking advantage of its enormous, flat rooftops on its facilities, IKEA will be able to generate enough kilowatt-hours to power its own stores’ lighting and HVAC needs with energy remaining to sell to utilities. Further, they are making the ideal utilization of their solar investment by installing highly energy-efficient geothermal heating systems and LED lighting. Geothermal typically generates large EPAct 179D tax deductions, particularly when along with LED lighting. As noted above, the geothermal system may also be eligible for a 10% tax credit or grant and very favorable tax deprecation.

The New York Market

Nyc has experienced a quicker economic recovery compared to rest of the country, and furniture chains are acting now to try to take advantage of the city’s momentum. Cleveland-based Arhaus Furniture; Nadeau Corp., a West Coast-based seller of eclectic furnishings; and discounter Home Goods, a division within TJX, are newcomers to the NYC scene and each is looking to take advantage of the heightened demand than has often forced homeowners and renters in to the suburbs to shop for their furniture. Using the opening of 20,000 to 40,000 square foot retail centers, these businesses get the chance to make use of LED lighting, and, in some locations, solar P.V., in their building design to drive down their operating expenses while utilizing large tax incentives.

Furniture Warehouse Tax Incentivized Energy-Efficient Design Process Steps

1. Assemble team including warehouse experts for EPAct tax incentives, utility rebates, lighting, heater, building envelope and solar energy.

2. See if roof works with for solar and heater. Obtain proposals for installations of solar installations and any other needed roof/insulation projects and any other needed roof/insulation projects.

3. Obtain lighting design that replaces all inefficient lighting. Assess costs of fluorescent, induction and LED lighting alternatives.

4. Obtain Cambridge heater or alternative heater proposals, taking into account possible roof designs.

5. Determine utility rebate based on all proposed separate and joined energy-efficient measures. Efficient lighting will cut electric use. Roof, insulation and heater will cut “therms.”

6. Determine tax incentives including EPAct Section 179D tax break benefit and solar credit tax deductions. EPAct is based on total project square footage, including mezzanines and pick and pack modules. The 30-percent solar tax credit is based on the entire solar material and installation costs.

7. Prepare project proposal detailing project costs, energy savings, utility rebates and tax incentives.

8. Get project approved by building owner.

9. Hire contractors and execute project.

10. Have EPAct tax expert prepare model and tax documentation using IRS approved software.

11. Process utility rebates.

12. Reduce federal and state estimated tax payments to take into account expected large EPAct tax deductions and credits.

13. Celebrate tax-enhanced energy-efficient warehouse achievement

Conclusion

U.S. furniture industry supply chain structures are ideally situated for LED lighting particularly in showrooms and integrated warehouse show rooms. Since EPAct tax savings pertains to sq footage, the industry’s large facilities drive large tax deductions. The required warehouses are usually large, flat roof structures that are well suited for solar P.V. Achieving energy reduction enhanced with tax savings can help this very competitive industry accelerate its recovery concurrently with overall economic recovery.