Commercial Casinos Energy Policy Act Tax Opportunity
Commercial Casinos Energy Policy Act Tax Opportunity
Casino Environment Before the recent economic downturn commercial casinos earned around $30 billion in annual revenues every year from 2005 to 2008.1 During this period, US casino owners constructed new facilities and expanded capacity of existing ones. Because of the economic slump, new US development of commercial casinos has come to an abrupt halt and casino operators are now focusing on cost reductions for existing facilities. The section 179(D) Tax Dispositions In a growing number of cases, casinos are taking advantage of casinos are taking advantage of EPAct IRC section 179(D) commercial tax incentives for energy efficiency in buildings, which have been extended through 2013. EPAct tax deductions are offered for qualifying energy reductions for lighting HVAC(heating (heating, cooling, or ventilation)) as well as the building envelope. (Building envelope is comprised of the building's foundation, windows, walls, roof, and doors, all of which control the flow of energy pusatgame between the interior and exterior part of the house.) The Nature of Casino Properties Commercial casinos typically include hotels and resorts that provide appealing packages of services to their family and corporate customers. Casinos are especially well-suited to EPAct due to their huge gaming floors and hotel occupancy rooms. They also have meetings halls, and parking garages. Each of these facilities typically consumes large square footage and the EPAct benefits have a potential for as much as 60 cents per square foot in each of the three factors discussed in the previous paragraphs. Some of the smallest commercial casinos are a little less than 10,000 square feet while the vast majority of American casinos are typically over 100,000 sq. feet. One of the biggest, MGM Grand on the Las Vegas strip is almost 2 million square feet. Hotels themselves are one of the most popular in the Section 179's building categories. (See "Hotels and Motels Most Beloved in the Energy Policy Act Tax Properties") It is normal to think of casinos being found in two states: Nevada and New Jersey. Although both states enjoy the largest commercial casino revenues however, there are 12 states that have casinos with commercial operations within the United States, the other commercial casinos states are: Colorado, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri, Pennsylvania, and South Dakota. Members of the American Gaming Association have publicized the commitments they have made towards energy efficiency. The casinos that report include Boyd Gaming Corporation, Harrah's Entertainment, Inc., and MGM Mirage. They are working on projects that include significant energy savings via cogeneration ERV(energy recuperation ventilation) and more efficient HVAC systems, replacing incandescent lighting with energy efficient lighting systems windows that are energy efficient day lighting systems Solar thermal storage, as well as various other energy-saving initiatives. The fundamental rule that is set to make a property eligible under the Section 179D lighting tax deduction makes casinos and particularly casinos the most sought-after property category to receive the tax incentive. The rule requires at least a minimum of 25% watts-per-square foot reduction as when compared to 2001 ASHRAE (American Society for Heating, Refrigeration, and Air Conditioning Engineers) standard for building energy codes. Tax deductions of 100% are achieved with a 40% watts per square foot reduction compared to the ASHRAE standard of. The ASHRAE 2004 hotel and motel building code standards require 40% reduction in watts meaning that every hotel and motel light installation that meets the standard will automatically be eligible for the maximum EPAct tax-deductible. Occupancy Rooms In all other categories of construction that fall under Section 179D, tax laws require conformity to the bi-level switch requirement. The calculation is always based on wired rather than plug-in lighting. Rooms in hotel casinos with occupancy offer a significant advantage in that they typically use plug-in lighting, and since these rooms are hotels and motels, they are specifically excluded from the tax bi-level switching requirement. Because occupant rooms are typically among the largest rooms in casinos and casinos, they are equipped to utilize energy efficient lighting to create large EPAct tax deductions for the facility. B ack of the House Spaces Casinos are often equipped with large kitchens laundry, storage, and (so they are also known as back of the house) spaces that have historically utilized T-12 fluorescent lighting. The lighting used is so efficient compared to the current lighting products that it will be unlawful for manufacture within the United States after July 1, 2010.4 Once manufacturing of these earlier generation lighting products is stopped, the cost of replacing these inefficient bulbs will increase. It is imperative that casinos look into replacing these lighting fixtures to save both cost of energy and lamp replacement. The EPAct lighting tax incentive could be utilized to take advantage of the possibilities associated with these legally mandated product changes Ball Rooms, Banquet Rooms and Restaurants These areas of casinos traditionally have used designer lighting that is energy inefficient and can be costly to maintain and replace. In particular, replacing bulbs and lamps with high ceilings can be very costly since expensive mobile hydraulic platforms must be purchased or rented to deal with the replacements. Modern lighting devices, and in particular those that use light emitting diodes (LED) products use only a small amount of energy used and have a longer useful life and are increasingly being replaced. The combination of huge energy cost reduction and operating cost savings along with utility rebates, and EPAct tax credits can significantly boost the financial return from these more costly lighting upgrades. Garages Garages A lot of casinos have huge adjacent parking garages that save substantial energy costs and provide tax deductions of significant amounts by making the switch to energy efficient fixtures. In Notice 2008-40, issued on the 7th of March, 2008, the IRS declared that parking garages constitute property classes that are specifically eligible for EPAct tax credits. Parking garages are also exempt from the tax bi-level switching obligation. Please see the September, 2008 International Parking Institute article devoted to parking garages' electric lighting deduction tax opportunities.5 Slot Machines and Gaming Floors One of the largest gamers on hotel gaming floors is slot machines. Although they were early adopters of fluorescent technology but even these energy efficient bulbs normally need to be replaced 3 times a year because of continuous operation. Because of the high labor maintenance costs, casino owners are currently converting to LED technology in their slot machines. LED's, despite having higher upfront costs, have high energy efficiency and much longer life cycle, offering substantial savings in both labor and maintenance costs.

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