Impacting Policy: LumenOptix Urges the Extension of Section 179D
Jay Goodman, founder of LumenOptix and part of a National Electrical Manufacturers Association (NEMA)-led industry delegation which is working to lobby for the extension of the recently-expired Commercial Building Tax Deduction, discusses the importance of this landmark tax provision to the industry, American business, and national economic growth and security
In late May, representatives from LumenOptix, a Montgomeryville, PA-based leader in innovative luminaire design for the built environment and a member of NEMA’s High-Performance Building Council, traveled to Washington, D.C. alongside representatives from fellow members Philips and Legrand to lobby for the extension of the federal Commercial Building Tax Deduction, also known as Section 179D, which officially expired on December 31st, 2013. Upon his return from Capitol Hill, Edison Report sat down with Jay Goodman, founder of LumenOptix and a vocal member of the NEMA-led industry delegation, to discuss his feelings on the landmark tax incentive and why he believes its reinstatement is critical to not only the electrical products industry but to America’s economic growth and job security as well.
ER: What was the nature of your recent visit to Capitol Hill?
Goodman: The Commercial Building Tax Deduction, or Section 179D, was an original provision of the Energy Policy Act of 2005 and represented the nation’s first performance-based federal tax incentive aimed at driving energy efficiency improvements in commercial buildings. It allowed for tax deductions of up to $1.80 per square foot for buildings that achieved a 50% reduction in energy and power costs relative to the ASHRAE 90.1-2001 standard and proved to be successful in promoting upgrade activity among the nation’s 5 million commercial buildings; though it was extended twice along the way, however, it officially expired on December 31st, 2013. As part of NEMA’s High-Performance Building Council, I participated in a NEMA-led delegation alongside colleagues from Philips and Legrand to lobby for the reinstatement/update of Section 179D with legislators who champion the extension of this landmark tax code.
ER: How important is the extension to our industry?
Goodman: Commercial buildings account for over a third of all of the electricity consumed in America and the financial incentives made available through Section 179D were a catalyst behind thousands of commercial upgrade projects nationwide in the past decade, helping to offset the total cost of these projects, boost their ROIs, and accelerate their payback periods. Historically, financial incentives offered by entities such as the federal government and utility companies have been very successful in shifting market behavior and encouraging the use of energy-efficient products and practices. And from personal experience, many of our customers have used the 179D tax deduction for payback and savings calculations and it’s proven to be a powerful tool in selling energy-saving retrofit projects because it incentivizes companies to undertake energy-efficient upgrades by allowing the total installed cost of the project to be expensed. In essence, if a $100,000 project is given an “expense” classification of deduction at a profitable company with a 33% tax rate, that $100,000 of tax deduction is equivalent to $33,000 in cash tax savings in Year 1, which is a powerful tool and incentive for savvy businesses looking to boost their bottom line.
ER: Who do you feel will benefit most from the reinstatement of Section 179D?
Goodman: Companies both big and small will benefit from tax incentives offered as part of an updated Section 179D, but this bill will be especially helpful to America’s small businesses, which make up a large percentage of the retrofit and upgrade market; the bill will also create job opportunities for players at every level of the value chain, from fixture manufacturers (such as the very start-up company I launched out of my garage over a decade ago) to ESCOs, rebate administrators, electrical contractors/installers, etc. It’s been estimated that the reinstatement of Section 179D will create 77,000 new American jobs within two years of enactment, which is a tremendous win-win for U.S. business from both an efficiency and a job creation standpoint.
ER: Would the extension still offer incentives of up to $1.80 per square foot?
Goodman: New legislation known as the “Energy Efficiency Tax Incentives Act” (S.2189), which was recently introduced by Senators Ben Cardin (D-MD), Dianne Feinstein (D-CA), and Brian Schatz (D-HI), proposes to extend and modernize the Section 179D deduction by creating scaled incentives of up to $3 per square foot to further encourage energy improvements in existing buildings. The legislation would also enable private and non-profit building owners to allocate deduction amounts to other parties who are associated with or benefit from retrofit projects, such as designers or building tenants.
ER: Where does this initiative currently stand?
Goodman: As we understand it, Section 179D is among a number of expired tax provisions that members of Congress are currently considering extending under newly-proposed bills and we’re monitoring this closely.
ER: Any final thoughts to share on your position on and the potential impact of a reinstated Section 179D?
Goodman: LumenOptix strongly encourages the inclusion of Section 179D in any tax extender legislation to ensure that this provision continues to spur energy efficiency throughout American industry in both new buildings and through the retrofit of existing ones. Businesses can collectively save billions of dollars in energy and operating costs as their buildings become more energy-efficient, enabling that capital to be invested in machinery, equipment or, even better, in people, to help continue to grow their businesses. I’m a huge proponent of energy independence and am thrilled to see an act like this attain critical mass because it incentivizes businesses to invest in efficiency and moves our country closer to true energy independence while also stimulating the employment of tens of thousands of Americans in the broad support of this beneficial activity.
As a company, we’re proud to stand alongside NEMA and a coalition of over 50 manufacturers and organizations in the broader construction, labor, environmental, finance, and business sectors in endorsing an extension of Section 179D. Through its clear impact on economic growth and job creation, we hope that Congress will see the incredible benefits and positive ripple effect that an investment in American business will have on the entire supply chain. On a personal note too, I feel proud to tell my daughters that I’m working to help get a bill passed which could have such a real and meaningful impact on the economy, the environment, and America’s future, even if my voice is just one of many.