Tax Opportunities for LED Lighting in Car Dealers

Preface

Following the restructuring of the US automotive industry, the US automotive market is currently dominated by seven major integrated automotive companies: General Motors, Ford, Chrysler / Fiat, Toyota, Lexus, Hyundai and Honda. In particular, as the US brand recovers, we are reimagining ourselves as energy efficient by reducing fuel consumption and consolidating the number of dealers for all vehicle models. These dealers are investing in facilities that match their brand’s fuel economy efforts to reduce operating costs.

Consider Ford’s new EcoBoost engine to find out what kind of fuel efficiency efforts US car brands are making. According to Ford, the EcoBoost engine combines advanced direct injection technology and a turbocharger with a gasoline engine. The end result is an engine that can offer up to 20% better fuel economy, 15% lower CO2 emissions, and improved driving performance compared to larger displacement engines.

Car dealers are interested in both energy-efficient indoor lighting and energy-efficient outdoor lot lighting. They are becoming more and more comfortable as they see LED lighting technology becoming mainstream in automotive headlight and taillight applications. LEDs are now mainstream in dealer showrooms and outdoor parcels.

Section 179 DEPAct Tax Opportunity

According to Energy Policy Act (EPAct) Section 179D, car dealers making eligible energy savings investments in new or existing locations are eligible for an immediate tax credit of up to $ 1.80 per square foot.

Up to $ 0.60 / sq ft for each of the three major building subsystems (lighting, HVAC (heating, ventilation, and air)) if the construction project is not eligible for an immediate tax deduction of up to EPAct $ 1.80 / sq ft There is a tax deduction. Conditioning), and the exodermis of the building. Building skins are all items on the outside of a building that touch the outside world, such as roofs, walls, insulation, doors, windows, and foundations.

Unique Opportunity for 2011: Strengthening Bonus Tax Depreciation

Outdoor parcel lighting is typically subject to MACRS depreciation, but owners of buildings with LED lighting systems installed between September 8, 2010 and December 31, 2011 will receive a 100% depreciation tax bonus. Can be received immediately. If the building owner misses this 2011 period, they will still receive a 50% depreciation bonus on the equipment used from January 1, 2011 to December 31, 2012.

Outdoor lot lighting

Outdoor parcel lighting is lighting that illuminates only the landscaping or exterior of the building (excluding parking lots and walkways) and plant growth lights, but is not relevant to the operation or maintenance of the building. Outdoor compartment lighting systems are usually pole-mounted or self-contained and help illuminate sidewalks, parking lots, or recreational areas.

For the first time in US tax history, 100% of the cost of an outdoor lighting project can be spent for tax purposes based on the bonus depreciation above.

Ford, General Motors, Chrysler Dealer Facility Reorganization

As the total number of US retailers declines from over 30,000 to about 18,000 and volume recovery, each retailer, by definition, must be a much larger facility that can support more sales and service volumes. Over the last decade, US car sales have declined overall, and the number of car dealerships has declined since 1970.

When the energy-efficient tax incentives were first enacted in 2005, foreign car dealers focused on dominating the financially strong, small and efficient car market. Take advantage of EPAct tax savings. For example, Emich Volkswagen in Denver has installed LED lighting throughout new and used car dealerships. The LED Remodeling Project Reduces Emich VW’s Lighting Energy Consumption by Nearly 80%, and Dealers Invest in Approximately 18 Months Based on Energy Savings from Xcel Energy and Denver City and County’s LED Lighting and Savings Rebate You can get the reward of. ..

Since 2008, American car brands have followed the leadership of foreign car brands due to market demand for restructuring and more efficient cars.

Federal lighting ban

Dealers who haven’t upgraded their lights for more than five years often use inefficient T-12 or metal halide lights, and their manufacture or import is currently banned by the federal government. Therefore, sooner or later, these dealers will be forced to upgrade to more efficient lighting, such as T-5 and T-8 fluorescent lights, or new, more efficient LED lighting.

LEDs are up to four times more energy efficient than traditional incandescent bulbs, so their ability to reduce energy operating costs is twice the energy savings and associated tax savings.

Ford

Ford has closed its longtime Mercury brand. Therefore, it chose to integrate certain Ford and Lincoln dealers across the country. Some exclusively combined Lincoln-Mercurn dealers had lower total sales than Ford-only or combined Ford-Lincoln dealers. There are many factors that have influenced Ford’s decision to reduce the Mercury brand, but what is important is the impact of the decline in brand numbers on Ford’s future dealer strategy.

Fewer brands in the portfolio and improved financial conditions will allow automakers to focus not only on product quality, but also on overall cost savings. Ford’s projected annual operating profit is about $ 8 billion, the highest since 2000’s $ 10.2 billion profit, a 33% increase in US industry car sales. Since the arrival of CEO Alan Mulally in October 2006, lower sales volumes and higher profits have been one of the keys to the company’s strategy. Some of the required building upgrades have been shown to range from $ 300,000 to $ 1,500,000 per dealer. Some dealers disagree with these numbers, which could lead to more closures unless they accept the energy and tax savings associated with more efficient luminaires. Upgrading to long-life energy LED lighting is a way to reduce ongoing operation and maintenance costs.

General Motors

The biggest reduction in dealerships was at General Motors, which dumped Oldsmobile, Pontiac, Saab, Saturn and Hummer and then slimmed down to four brands: Cadillac, Chevy, Buick and GM. GM has launched the largest and most popular reimaging program for domestic car dealers. They dispatched inspectors to analyze all the dealer’s facility attributes, such as appearance, location, and overall quality. Many retailers who were fortunately not fired are now obliged to upgrade their major facilities.

Chrysler

Chrysler merged with Fiat, giving Fiat a major US distribution network for its more fuel-efficient product line. Recently reported dealer data showed that Chrysler dealers’ average pre-tax profit fell to $ 150,000 during the recession. This means that reducing the facility’s energy operating costs by $ 15,000 will increase pre-tax profits by 10%.

Dealers can get an EPAct tax credit of $ 1.20 per square foot in combination with energy-efficient LED lighting and energy-efficient HVAC in both the air-conditioned and non-air-conditioned parts of the facility. ..

Conclusion

The newly constructed US automotive industry is increasingly fuel-efficient, both in vehicles and in dealerships. By upgrading indoor and outdoor lot lighting to LEDs, dealers have the opportunity to significantly reduce energy costs while achieving significant tax savings.