Reducing Energy Cost Shrinks Operating Expenses

PRLog (Press Release) - Aug 06, 2011 - Most businesses and commercial building owners are doing everything they can to reduce operating budgets. Yet, there is one very big cost recovery opportunity that most are missing. That opportunity rests inside the power bill that they pay every month.

It's no secret that energy bills are high, and heading (much) higher. At the same time, the U.S. Department of Energy estimates that in 4.2 million commercial buildings across the United States, an average 30% of the energy bill is pure waste. During 2007 (latest figures available), energy wasted $60.7 billion of operating budgets.

As a result, the two pressing questions before most businesses and commercial building owners are "how can we identify wasted energy expense?" and "How can we do something about it?"

While these two questions are obvious, the answers to them are not. One recent answer (particularly from government agencies) has been "Cover the rooftop with solar." As almost any Chief Financial Officer or accountant can tell you, those "solar" numbers seldom work.

Another answer gaining rapidly in popularity is "Get your building an energy audit." On the face of it, that suggestion makes a lot of sense. But dig a little deeper and you will discover several pitfalls.

First, most commercial energy audits are offered by energy product sales people. They are not engineers and they have a strong bias (which is the need to sell their product).  While many of these product sales people offer "free" or "low cost" commercial energy audits, the audit quality they deliver is what "free" or "low cost" pays for.

Another common pitfall is the fact that even the best commercial energy audit processes do not adjust their calculations for necessary risk mitigation. A watt is not just a watt, and a dollar is not just a dollar when safety issues, the possibility of business interruptions and the certainty of continuing energy cost increases have to advise both engineering and financial calculations.

A third problem with many commercial energy audits (and auditors) is that they are attempting to adapt a home energy audit process for commercial purposes. A thin commercial veneer stretched over a home energy audit process simply cannot work.

So, what's a business or commercial building owner to do? How can he or she take a chunk out of the monthly energy bill, cost-effectively and reliably?

One good answer is by passing on traditional energy audits and, instead, going directly to Energy Due DiligenceTM. The Energy Due Diligence process (and supporting software) was developed by the energy engineers at Big Green Zero. Energy Due Diligence can identify the components of energy expense in almost any commercial or industrial environment. The process then considers a wide range of business risk mitigation. Finally, it calibrates strategic options for increasing operating income and real estate capitalized equity value in the most cost-effective manner possible..

For most businesses and commercial building owners, reducing energy cost is the best way to shrink an operating budget. And, the best way to reduce energy costs is through  Energy Due DiligenceTM.

For more information visit http://www.BigGreenZero.com, or contact Info@BigGreenZero.com.

Big Green Zero helps commercial real estate owners turn energy pennies into equity dollars. Big Green Zero Energy Due Diligence™ reduces risks, recovers cost and increase capitalized equity value in commercial and industrial properties.

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IRS Revenue Procedure 2011-14: Energy efficiency and claiming the §179D deduction

PRLog (Press Release) - Aug 08, 2011 - The §179D tax deduction came about as part of the Energy Policy Act of 2005 (EPAct). Congress wanted to incentivize the utilization of energy-efficiency components in a building to one of the following parties:

1.   The owner of the building
2.   The tenant
3.   The primary designer of an energy-efficient government building. (Architect, engineer, contractor etc.)

The deduction available is up to $.60 per sq./ft. for lighting, HVAC and building envelope, creating potential for $1.80 per sq./ft. if all three components qualify.  These deductions are applicable to buildings that were either built or retrofitted after 12/31/2005.

Since EPAct came into effect, the IRS has provided interim guidance on EPAct deductions through several additional notices. IRS Notice 2006-52 describes in detail the rules and how to ensure a building qualifies if it was a new build or a retrofit. It requires the taxpayer to obtain certification that the property satisfies the energy efficiency requirements of 179D and specifies the software that must be used to calculate energy and power consumption.  To further the cause, the IRS issued Notice 2008-40, which allowed a government building (non-taxpaying entity) to pass the deduction to the “primary designer” of the qualifying assets.

Until recently, taxpayers looking to claim the §179D deduction were limited by the three year statute of limitations for filing amended income tax returns for a particular tax year. That has changed with the issuance of Revenue Procedure 2011-14, which will allow some taxpayers to bypass this statute of limitations and claim this deduction all the way back to 1/1/2006 without filing one single amended income tax return. Taxpayers who wish to take the deduction without amending any returns will file a Form 3115 (Application for Change in Accounting Method) and will get to take the entire “catch up” deduction on the return that is being filed. This means that a taxpayer could potentially claim deductions from 2006-2010 (or 2011) all on one return and significantly reduce their tax burden, if not eliminate it altogether.

Deciding whether or not to amend returns or file for a Change in Accounting Method (Form 3115) is entirely dependent upon each taxpayer’s situation. If taxable income was higher in open years and therefore the taxpayer was in a higher tax bracket, it still may make sense to amend those returns. The impact of Revenue Procedure 2011-14 will also depend on whether or not any deductions have already been claimed or returns have been amended. A thorough analysis of each taxpayer’s scenario by an advisor experienced in §179D is advantageous to determining the best approach and claiming the maximum deduction allowed under the law.

At CRG, our only business is discovering, studying and applying the rules of play that can be applied with advantage to reduce costs and add profits. We are a national company with a presence in most states, where we work with professionals and their clients or directly with business owners/taxpayers.
CRG does not replace your current tax advisors -- we work with them, adding depth to their value to you. Our experts have a long record of successful dialog with the Treasury Department and IRS that stems from our expertise in the area of energy efficiency, and from our extensive support to tax advisors and CPA's in the cost segregation arena. We complement the expertise of your financial advisors with the necessary engineering, architectural, and legal professionals to take advantage of the intent of applicable legislation. We provide realistic approaches to tax reduction, tax credits and tax incentives.

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Big Green Zero Publishes Energy Audit Score Card

PRLog (Press Release) - Aug 06, 2011 - Two or three years ago, it was difficult to find a commercial energy auditor. Since then, a "perfect storm" of 1) rising energy costs, 2) conflicting stories from energy product sales people, and 3) a recession-plagued economy has commercial and industrial property owners struggling to recover every penny of energy cost that they can.

The potential to recover energy energy cost is tremendous. According to the U.S. Department of energy, in 4.2 million commercial buildings nationwide, 30% of energy bills are pure waste. During 2007 (latest figures available), that waste cost property owners and their tenants $60.7 billion.

Given this environment, it is not surprising that interest in commercial energy audits is rising. And, it is also not surprising that thousands of "energy auditors" are coming forth to provide that service. The situation is kind of a gold rush. And, as in any gold rush, it is difficult to seperate the good energy auditors from the bad energy audits and from the ugly.

To bring some clarity to this increasingly confusing situation, the energy engineers at Big Green Zero polled property owners and their facilities managers, financial people and accountants. They asked them what they wanted and also what they have experienced with respect to conducting an energy audit. Based on these conversations, Big Green Zero suggests that commercial energy auditors be selected based on the following score card:

1.  Will be audit be conducted by a degreed engineer who understands both the energy-
related structural issues and the energy systems typically found in your type of  
buidling?

2.  Will your energy audit be analyzed through the use of specialized software designed
specifically for that purpose?

3.  Will your energy auditor weigh energy-related business risks as inputs to his or her
findings and recommendations?

4. Can the prospective energy auditor provide a list of commercial customers who are
raving fans?

5. Does the energy auditor have any "axes" to grind. Does he or she sell any products
that the audit may just happen to recommend? Or, does the auditor happen to be a
contractor (who will sell their services to fix your energy-related problems?).

6. Does the energy audit cost being proposed make sense?

Questions 1 through 4 are pass/fail. If the answer is "yes" a prospective auditor may be a good candidate. If the answer to any one of these four questions is "no" the prospective auditor is not a good candidate.

Questions 5 and 6 are more subjective.

For Question 5, product sales people simply cannot be unbiased. They are not good candidates. On the other hand, some contractors are degreed engineers and they may be able to be objective and unbiased despite their self-interest. The decision to retain them as an auditor really comes  down to making a judgement about their honesty, objectivity and transparency.

Finally, Question 6 can really separate the good energy auditors from the bad and the ugly. Any would-be auditor who offers a "free" audit or an audit for a few hundred dollars is going to be a very poor choice. As previously discussed, commercial energy auditing requires an engineering or extensive contracting background.  It also requires the use of special purpose software and a great deal of financial savvy and insight. All of that comes at a price (which typically ranges from a few thousand to perhaps ten thousand dollars).

A commercial energy audit can be very worthwhile. Typically, it will provide due diligence guidance for reducing energy bills form 20% or 30% to as much as a Big Green Zero. But, commercial energy auditing is a gold rush. So, caveat emptor (let the buyer beware). As commercial energy auditors  proliferate, property owners would be well advised to select them with a score card.

Big Green Zero helps commercial real estate owners turn energy pennies into equity dollars. Big Green Zero Energy Due Diligence™ reduces risks, recovers cost and increase capitalized equity value in commercial and industrial properties.

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