Green Business Tax Incentives: How the Impact Your Environment and Your Bottom Line

Posted onAuthorStephanie

The concept of ‘going green’ has become more than a tagline. For businesses, there are some excellent advantages for choosing ‘eco-friendly’ as a method for cost reduction, while also reducing a company’s carbon footprint. The American Recovery and Reinvestment Act of 2009 was signed by President Obama and allows both residential and businesses to take specific energy tax benefits. Depending upon which choices you make, there can be long-term bottom line savings and escalation of the company reputation as a green business.

There is a distinct benefit to a tax credit as opposed to a deduction. A deduction reduces the total amount that is taxed while a tax credit is a direct dollar-for-dollar reduction on the tax bill itself. This is not to be confused with Section 179 deductions, which typically have a percentage amount allowed based on the type of business and includes a per-year cap. Section 179 deductions have benefited business, but the amount available for reduction has been reduced year after year.

As a company makes decisions on the types of changes they will be instituting to become a green business, the tax credit dollars are becoming one of the largest incentives and are an encouragement for companies to select eco-friendly options. Many states are offering tax incentives, as well, so as to escalate the value of the investment choice.

Businesses have a unique opportunity versus residential, because of higher budgets and renewable energy grants available for companies (Section 1104). Tax credit decisions can encompass a variety of possible changes and can include:

  • building structure;
  • renewable and sustainable energy sources;
  • replacing standard company vehicles with hybrid, electric-powered vehicles;
  • the use of alternative fuels.

There have been some changes in the requirements that now allow a 50% credit and an increase to $50,000 for the per-location limit.

Renewable energy selections can include a variety of solar, solar-thermal, biomass, wind, landfill gas, fuel cells, geothermal heat, solar-hybrid lighting, municipal solid waste, hydrokinetic power, tidal and wave energy, anaerobic digestion, ocean thermal, photovoltaics, micro turbines, fuel cells that use renewable energy, and geothermal direct use. When thinking about renewable and sustainable energy options, businesses will have the tax credit and savings in overall energy cost expenditures that will be carried year over year.

If you are considering changing your business structure to accommodate ‘green building,’ you will need to work with qualified and licensed contractors. The United States government has strict guidelines and requirements with which a contractor will be familiar. To qualify for a LEED certification, 75% of the square footage of the commercial building will need to be compliant. The laws governing ‘green construction’ may also be different from state-to-state, and this is where your contractor’s knowledge will be of best use.

Making a ‘green choice’ is an excellent way to receive tax credits, but there is another uptick that the marketing team will love. Representing your company as an ecologically conscious organization is an attractive position for the reputation of the organization. Potential customers are now reviewing the businesses that they want to invest in, and a green certification is a competitive advantage.

While tax credits for smart ecological choices in business have stayed, it is important for any company to confirm the up-to-date tax requirements with a tax professional before making green business decisions.

To get you started, we recommend you check out the following information: