Firm Sees Green Credits As Golden Opportunity

ANDOVER — In the world of commercial real estate, engineering and tax services—especially when combined in one discussion—usually aren’t hot topics at CRE gatherings. But mention energy efficiency and cost savings, and ears will perk up, particularly among those on the development side.

Engineered Tax Services (ETS) is attempting to educate the development community in Greater Boston to the fiscal windfalls that can be found when installing energy efficient systems in commercial buildings, either in new construction or during energy upgrades of existing commercial product. The Florida-based service entered New England in the spring of 2011, opening an office in Andover. “We’re expanding our presence into (Greater Boston) because we are finding that the 179D tax deduction is underutilized in the Northeast,” explains Kate Dewolf, director of business development at ETS.

A creation of the US 2005 Energy Policy Act, Section 179D allows a significant federal tax deduction for the costs of installing certain energy efficient systems in commercial buildings, for improving the energy efficiency of existing commercial buildings or designing high efficiency into new buildings. The deduction applies specifically to (non-REIT) commercial properties designed to significantly reduce heating, cooling, water heating, and interior lighting energy costs. The deduction also can apply to architects or engineers who design buildings.

Buildings must meet IRS-mandated energy efficiency standards to qualify for deductions of up to $.60/psf in three separate categories (building envelope, HVAC and lighting) for a total deduction of up to $1.80/psf for new construction or gut rehab. Projects completed between Dec. 31st, 2005 and Dec. 31st, 2013 are eligible, and benefits may be carried forward for 15 years.

Utilizing a staff of LEED certified engineers, CPAs and a former senior IRS executive, ETS provides third party certification for projects, as required by the IRS. “We work with the tax departments of our clients at no cost, to have them make sure that they can maximize the deduction benefits,” says DeWolf. ETS also provides documentation to building owners so that they can write off replaced assets, (the less-efficient lighting they are removing), and cost segregation services to maximize depreciation benefits.

DeWolf’s firm is targeting private building owners, real estate developers (but not REITs due to their tax structure), architects, energy engineers and turnkey lighting companies. Also, she says, “LED specialty lighting and data cooling centers are ideal candidates for this service.” ETS is currently working with a developer in Quincy upgrading the HVAC system for an eight-building, 600,000-sf apartment complex. The anticipated savings to the developer using the ETS service will be $360,000 in 179D tax benefits, plus $235,000 in utility rebates from a total construction cost of $995,000, according to DeWolf.

But despite the cost savings and the increased interest in sustainable upgrades and design by major Boston developers, DeWolf says entry into the Boston market has not been easy. “Not many Boston real estate developers are aware of this 179D tax deduction, and we try to talk to them, but it’s hard to get their attention sometimes,” she says. “New York developers take advantage of this deduction, but we’re just starting to work with Boston real estate developers.”