1. Energy Tax Savers’ EPAct and Tax Incentives Presentation Energy Tax Savers Jacob Goldman jacob.goldman@energytaxsavers.com

2. 2 Energy Policy Act of 2005 (EPAct) Extended through 12/31/13 Benefits available from 1/1/06 thru 12/31/13 Incentivized areas: – Lighting – HVAC – Building envelope Available for New Construction and Existing Buildings Also available for tenant owned lease-hold improvements jacob.goldman@energytaxsavers.com

3. 3 Who’s using EPAct? First MoversReasons Retailers Energy is a major operating cost Centralized facilities’ management Distribution Centers Major growth market High economic return Hotels Meet ASHRAE 2004 = Full EPAct Bi-level not required in guest rooms Parking Garages Large facilities drive large EPAct benefits Industrial Facilities Large facilities drive large EPAct benefits Existing lighting is being phased out by law Office Buildings More states enact ASHRAE 2004 or higher building energy codes

4. 4 What’s it Worth? Building LightingHVACEnvelopeTotal Sample Minimum Maximum Square Footage Deduction 50,000 $ 15,000 $ 30,000 $ 90,000 100,000 $ 30,000 $ 60,000 $ 180,000 250,000 $ 75,000 $ 150,000 $ 450,000 500,000 $ 150,000 $ 300,000 $ 900,000 750,000 $ 225,000 $ 450,000 $ 1,350,000 1,000,000 $ 300,000 $ 600,000 $ 1,800,000 jacob.goldman@energytaxsavers.com *Note – With Government Buildings, the benefit goes to the Primary Designer

5. Commercial Building Immediate Deductions Stimulus Package emphasizes Energy Efficiency in Government Buildings Architects/Engineers/Lighting Designers – DOE goal to incentivize green design in government building sector Benefits passed through to the primary designer of: – Federal offices, military bases, court houses, post office, labs etc. – State offices, transportation facilities, state universities, court houses etc. – County, city, town, village etc offices, schools, town halls, police, fire, libraries etc. jacob.goldman@energytaxsavers.com 5

6. What’s in it for Architects/Engineers/Lighting Designers ? Growth in this EPAct area for government building designers is exploding Successful Design Niches: – K-12 Public Schools – State Universities and Colleges – Military Bases – Parking Garages – Airports jacob.goldman@energytaxsavers.com 6

7. Allocation of $120,000 Tax Deduction Government Buildings Only 7 4 Party Allocation Lighting Specifier $30,000 Engineer $30,000 Architect $30,000 Design & Build Contractor $30,000 3 Party Allocation Lighting Specifier $40,000 Engineer $40,000 Architect $40,000 2 Party Allocation Engineer $60,000 Architect $60,000 No Allocation Engineer $120,000

8. 8 How do you Qualify? Mechanics – Deductions based on improvements over ASHRAE 90.1 2001 – Energy efficient improvements must be depreciable assets Converts 39 year depreciation to current deduction – Available for installations completed between 1/1/06 & 12/31/13 Can begin in prior years – Deduction amounts: Lesser of total cost or: – $1.80/sq.ft. Whole Building – $0.60/sq.ft. Individual Systems a. Lighting b. HVAC c. Building Envelope ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) HVAC (Heating, Ventilation & Air Conditioning) jacob.goldman@energytaxsavers.com

9. 99 8 Ways to Capture Tax Deduction (1) Whole Building ($1.80/ft 2 ) – 50% Energy Cost Reduction below standard Permanent Rules partial deduction ($0.60/ft 2 ) (8) Interim Lighting Rules ($0.30/ft 2 -$0.60/ft 2 ) – 25% to 40% prescribed Light Power Density (LPD) reduction below standard Building Envelope LightingHVAC Alternative 1 (2) 16 2/3 % (3) 16 2/3 % (4) 16 2/3 % Alternative 2 (5) 10% (6) 20% (7) 20% jacob.goldman@energytaxsavers.com

10. Where are the Benefits Lighting, Lighting, Lighting Lighting Controls Specific Types of HVAC – Geothermal – Thermal Storage – Central Chiller plants with small buildings(<150,000sq.ft.) in Campus LEED Buildings 10 jacob.goldman@energytaxsavers.com

11. 11 Interim Lighting Rules Meet W/ft 2 targets Add’l Requirements – Bilevel Switching – Meet ASHRAE 90.1 Requirements – Meet IESNA minimum light levels LPD (Light Power Density) % Improvement25%26%27%28%29%30%31%32%33%34%35%36%37%38%39%40% Tax Deduction $/sq.ft.0.300.320.340.360.380.400.420.440.460.480.500.520.540.560.580.60 2001 Standard LPD, W/ft 2 25% Improvement 40% Improvement Office1.30.9750.78 Manufacturing2.21.651.32 School/Library1.51.1250.90 Retail1.91.4251.14 Warehouse1.250% required, 0.60 jacob.goldman@energytaxsavers.com

12. 12 Definition of Bi-Level Switching A room, as defined by floor to ceiling walls, must have at least two light levels other than off. This can be met in a number of different ways: – Dimming ballasts create an infinite number of light levels – 50% of lights in a room on one switch, 50% on another or 60/40, 70/30… – Occupancy controls on separate lighting circuits – Even lights on at least 2 separate circuit breakers would technically qualify Exceptions – Storerooms, Restrooms, Lobbies, Hotel & Motel Guestrooms, and Garages jacob.goldman@energytaxsavers.com

13. 13 Benefiting from ASHRAE 2004 & 2003 IECC 2001 Std. (W/ft 2 ) 25% Over 2001 40% Over 2001 2004 Std. (W/ft 2 ) 2004 % over 2001 Automotive Facility1.51.1250.9 40%X Convention Center1.41.050.841.214% Court House1.41.050.841.214% Bar Lounge/Leisure1.51.1250.91.313% Cafeteria/Fast Food1.81.351.081.422% Family Dining1.91.4251.141.616% Exercise Center1.41.050.84129%X Gymnasium1.71.2751.021.135%X Health Care Clinic1.61.20.96138%X Hospital1.61.20.961.225%X Hotel1.71.2751.02141%X Library1.51.1250.91.313% Manufacturing2.21.651.321.341%X Motel21.51.2150%X 2001 Std. (W/ft 2 ) 25% Over 2001 40% Over 2001 2004 Std. (W/ft 2 ) 2004 % over 2001 Movie Theater1.61.20.961.225%X Museum1.61.20.961.131%X Office1.30.9750.78123% Parking Garage0.30.2250.180.30% Theater1.51.1250.91.6-7% Police/Fire Station1.30.9750.78123% Post Office1.61.20.961.131%X Retail1.91.4251.141.521% School/University1.51.1250.91.220% Sports Arena1.51.1250.91.127%X Town Hall1.41.050.841.121% Transportation1.20.90.72117% Warehouse1.20.8 Workshop1.71.2751.021.418% jacob.goldman@energytaxsavers.com

14. 14 Energy Codes & Code Compliance 35 states are now at codes stricter than ASHRAE 2001 Title 20 appliance standards and equivalent are eliminating the use of probe start metal halides (CA, OR, WA) others pending We see many designs that miss EPAct and miss Building Codes Download COMcheck at: http://www.energycodes.gov/comcheck/ez_download.stm jacob.goldman@energytaxsavers.com

15. 15 States with Stricter Lighting Standards than ASHRAE 90.1 2001 2003 IECC ArkansasNew York ColoradoMontana ConnecticutNebraska West Virginia 2004/2006 IECC IllinoisNew Hampshire Rhode IslandPennsylvania MarylandKentucky South CarolinaGeorgia WisconsinKansas OklahomaNew Mexico UtahIdaho Iowa ASHRAE 04 VirginiaLouisiana MaineNew Jersey OhioNevada State Specific CaliforniaOregon FloridaVermont North CarolinaWashington Massachusetts jacob.goldman@energytaxsavers.com

16. 16 Lighting Retrofit Economics Energy Savings is usually the main driver In some states, Utilities offer Rebates for energy efficient lighting Installations Tax Savings is the newest opportunity Demand Response is another potential income stream Capitalizing on all the incentives can bring payback for projects to below 2 years and in some cases less than 1 year jacob.goldman@energytaxsavers.com

17. 17 Major Lighting Bans Lighting TypeDate Effective Most Probe Start Metal HalidesJanuary 1, 2009Manufacturing banned T-12s¹July 1, 2010 Manufacturing banned Distribution now limited to ten per pack Incandescents²Beginning 2012-2014Ban on current efficiency levels beginning 2012 ¹ Residential is excluded from the ban, provided power factor is less than 0.90. ² Permissible replacements for incandescents include: 1)High efficiency incandescents 2)CFLs 3)LEDs jacob.goldman@energytaxsavers.com

18. 18 Common Lighting Retrofits Industrial/Manufacturing/Warehouse Metal Halide 458 Watts T5 HiBay Fluorescent 234 Watts Or Office & Retail 4 Lamp 4’ T12 Mag. Ballast 144→164 Watts 2 Lamp 4’ Super T-8 Elec. Ballast 67 Watts 3 Lamp 4’ Super T-8 Elec. Ballast 72 Watts jacob.goldman@energytaxsavers.com

19. 19 Commercial Building Immediate Deduction Permanent Rules – 16 ⅔% overall cost improvement below standard generated by each system (Lighting, HVAC, Building Envelope) – Energy models confirm savings – Daylighting systems particularly well suited – HVAC may qualify with as little as a 25% improvement over standard jacob.goldman@energytaxsavers.com

20. What Tends to Qualify on the HVAC side? 1. Geothermal (Ground Source Heat Pumps) 2. Thermal Storage 3. High Efficiency PTAC units in Rental Apartments 4. Centralized HVAC in Rental Apartment Buildings 5. Energy Recovery Ventilation 6. Demand Control Ventilation 7. Chillers in buildings < 150,000 sq ft 8. Blow through heaters in no AC Industrial Spaces 9. VAV (variable air volume devices) in buildings <75,000 sq ft 10. Chilled Beam 11. Magnetic Bearing Chillers 12. Gas fired chillers combined with electric chillers to peak shave jacob.goldman@energytaxsavers.com

21. 21 Understanding Energy Models IRS has approved thirteen types of modeling software – eQUEST, Trane Trace 700, Energy Plus, Carrier HAP, VisualDOE, EnergyGauge, DOE2.2, DOE2.1E & 2.1E-JJH, Owens Corning Commercial Energy Calculator, Green Building Studio, EnerSim, IES – other submissions are in process Important modern Energy management tool. Currently required for all HVAC and building envelope deductions and for whole building lighting alternative. In many jurisdictions, rebates are provided for all or substantial portions of modeling costs. jacob.goldman@energytaxsavers.com

22. Differences between LEED & 179D Section 179DLEED v2.2 Overall GuidanceNREL/TP-550-40467 May 2007ASHRAE 90.1 2004 Appendix G TechniqueASHRAE 90.1 2004 Appendix G Reference DataASHRAE 90.1 2001ASHRAE 90.1 2004 Appendix G VentilationASHRAE 62 1999ASHRAE 62.1 2004(?) Load DataTitle 24 (In NREL document)Actual Loads Exceptions Ventilation RateASHRAE 62 1999 not Title 24No Exceptions Occupancy/sq.ft.Title 24 not ASHRAE 62 1999No Exceptions Lighting LoadASHRAE 90.1 2001 not Title 24No Exceptions 22 jacob.goldman@energytaxsavers.com

23. The Modeler’s role Analyze existing projects for EPAct potential – Communicate the potential to Management Most projects are on the margins (between 0&1 or 1&2 deductions) – Suggest design improvements to capture additional EPAct $’s Modeling is now a profit center for government projects More & more rebates are based on modeled results Additional EPAct $’s corresponds with added LEED pts. 23 jacob.goldman@energytaxsavers.com

24. Rewarding an Integrated Approach Increasingly U.S. companies are using an integrated design approach to achieve four things at once. 1. LEED Certification 2. Major Energy Savings 3. Large Utility Rebates 4. Substantial EPAct Tax Savings jacob.goldman@energytaxsavers.com

25. American Recovery and Reinvestment Act of 2009 Tax Credits & Grants in Lieu of Tax Credits 25 Specified Energy Property Credit Termination DateApplicable Percentage of Eligible Cost Basis Large WindJan 1, 201330% Closed-Loop Biomass FacilityJan 1, 201430% Open-loop Biomass FacilityJan 1, 201430% Geothermal under IRC sec. 45Jan 1, 201430% Landfill Gas FacilityJan 1, 201430% Trash FacilityJan 1, 201430% Qualified Hydropower FacilityJan 1, 201430% Marine & HydrokineticJan 1, 201430% SolarJan 1, 201730% Geothermal under IRC sec. 48Jan 1, 201710%* Fuel CellsJan 1, 201730%** MicroturbinesJan 1, 201710%*** Combined Heat & PowerJan 1, 201710% Small WindJan 1, 201730% Geothermal Heat PumpsJan 1, 201710% *Geothermal Property that meets the definitions of qualified property in both § 45 and § 48 is allowed either the 30% credit or the 10% credit but not both. ** For fuel cell property the maximum amount of the payment may not exceed an amount equal to $1,500 for each 0.5 kilowatt of capacity. *** For microturbine property the maximum amount of the payment may not exceed an amount equal to $200 for each kilowatt of capacity. jacob.goldman@energytaxsavers.com

26. Grant in Lieu of Tax Credit Great for companies who don’t pay taxes Forms have been released Applications accepted through 10/1/2011 – For projects placed in service after: 1/1/2009 – or projects started before: 12/31/2010 Marketing the Grant – Get the word out – Include Grant in Proposals 26 jacob.goldman@energytaxsavers.com

27. 27 Energy Tax Savers Inc. http://www.energytaxsavers.com/ Energy Tax Savers 12 Split Rock Rd. Syosset, NY 11791 Phone: 516.364.2630 Fax: 516.364.2646 Email: jacob.goldman@energytaxsavers.com