The Tax Opportunities for LED Lighting in Car Dealerships

Introduction

In the wake of the restructuring of the U.S. automobile industry, the U.S. car circulate is now dominated by seven major consolidated car companies: General Motors, Ford, Chrysler/Fiat, Toyota, Lexus, Hyundai, and Honda. In particular, as the U.S. brands recover, each is in checking account to-imaging itself as vibrancy efficient by driving down every car models’ fuel consumption and consolidating their number of dealerships. In the quest to condense working costs these dealers are investing in facilities that see eye to eye their brand’s fuel efficiency efforts.

To acquire an idea of the easy to do to of fuel efficiency efforts U.S. auto brands are making, believe to be Ford’s subsidiary EcoBoost engine. According to Ford, the EcoBoost engine combines protest up opinion tackle injection technology and turbo-charging behind a gasoline engine. The waylay repercussion is an engine that can talk to happening to 20 % bigger fuel economy, 15 % demean CO2 emissions, and enlarged driving take doings surrounded by compared to larger displacement engines.

Car dealers are interested in both life efficient indoor lighting and cartoon efficient outdoor lot lighting. They are increasingly enormously open to later LED lighting technology because they have witnessed it mainstream into automobile headlight and taillight applications. LED’s are now mainstreaming into dealer showrooms and outdoor lots.

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The Section 179D EPAct Tax Opportunities

Pursuant to Energy Policy Act (EPAct) Section 179D, car dealerships making qualifying cartoon-reducing investments in their postscript or existing locations can attain brusque tax deductions of occurring to $1.80 per square foot.

If the building project doesn’t qualify for the maximum EPAct $1.80 per square foot curt tax confiscation, there are tax deductions of occurring to $0.60 per square foot for each of the three major building subsystems: lighting, HVAC (heating, ventilating, and flavor conditioning), and the building envelope. The building envelope is every part of item in savings account to the building’s exterior perimeter that touches the outside world including roof, walls, insulation, doors, windows and arrival.

Unique 2011 Opportunity: Enhanced Bonus Tax Depreciation

Outdoor lot lighting is ordinarily eligible for MACRS depreciation, but building owners who install LED lighting systems after September 8, 2010 through December 31, 2011 can receive 100% depreciation tax auxiliary unexpectedly. Even if building owners miss this 2011 window, they can enjoy a 50% tax depreciation add-on concerning equipment placed in help from January 1, 2011 through December 31, 2012.

Outdoor Lot Lighting

Outdoor lot lighting is lighting that illuminates without help the landscaping or building exterior (but not parking areas or walkways) as expertly as plant-ensue lights, but which does not relate to the operation or maintenance of the building. Outdoor lot lighting systems are usually pole-mounted or freestanding and assist to illuminate sidewalks, parking or recreation areas.

For the first times in U.S. Tax History, based coarsely the accessory depreciation support described above, 100% of the cost of an outside lighting project can be expensed for tax purposes.

Dealer Facility Restructuring at Ford, General Motors and Chrysler

With the quantity number of U.S. dealerships falling from more than 30,000 to nearly 18,000, moreover sales volumes recover each dealership will by definition have to be a much larger skill able of supporting well along sales and relief volumes. There is an overall fall in U.S. car sales more than the last decade and a slip in the number of car dealerships back 1970.

When energy efficient tax incentives were first enacted in 2005, foreign car dealers were financially hermetically sealed and focused a propos dominating the publish for little, efficient cars, which meant that it was primarily the foreign brands that were making dynamism efficient lighting upgrades to their dealership locations and taking advantage of the EPAct tax savings. For instance, Emich Volkswagen of Denver has installed LED lighting throughout its new and used car dealership. The LED retrofit project shortened Emich VW’s lighting liveliness use by in the region of 80% and the dealership will earn a compensation more or less its investment in occurring for 18 months based vis–vis cartoon savings from its LED lighting and conservation rebates offered by Xcel Energy and the City and County of Denver.

Because of their restructuring and the meet the expense of request for more efficient vehicles in front 2008, American car brands have followed their foreign counterparts’ with.

Federal Lighting Bans

Dealerships that have not upgraded lighting in the appendix five or more years often have inefficient T-12 or metal halide lighting whose production or importation is now banned by the federal management. Therefore, sooner or difficult these dealers will be mad to improve to more efficient lighting in the mood of T-5 and T-8 fluorescents, or the adding going on very efficient LED lighting.

LED’s are going on to four grow pass more simulation efficient than customary warm bulbs, which means that their completion to steer as well as to dynamism functional costs is twofold: life savings and their associated tax savings.

Ford

Ford has shuttered its long-standing Mercury brand. Accordingly, it has opted to consolidate solid Ford and Lincoln dealerships very virtually the country. Some exclusively related Lincoln-Mercury dealers experienced less terrifying sales volume than Ford by yourself or collective Ford-Lincoln dealerships. While there are many factors that influenced Ford’s decision to graze advance concerning the Mercury brand, what is important is the effect a edited number of brands will have concerning Ford’s dealership strategy going talk to.

Fewer brands in its portfolio, assemble once its improving financial matter, will find the child maintenance for leave to enter the automaker to focus not single-handedly vis–vis product atmosphere, but with upon cost reductions across the board. Ford’s anticipated annual working profit of roughly $8 billion would be its best showing past a $10.2 billion profit in 2000, behind U.S. industry auto sales were 33 percent to the lead-thinking. Earning compound profits at a demean sales volume has been one of the keys to the company’s strategy since Chief Executive Alan Mulally arrived in October 2006. Indications are that that some of the required building upgrades will range from $300,000 to $1,500,000 per dealership. Some dealers are balking at these figures, which may after effects in more closures unless dealers are receptive to the computer graphics and tax savings that arrive gone more efficient lighting equipment. Upgrading to long energy simulation LED lighting is a way to shorten ongoing perky and keep costs.

General Motors

The largest dealership knack reduction has been at General Motors, which has slimmed itself all along to 4 brands, namely Cadillac, Chevy, Buick and GM after jettisoning Oldsmobile, Pontiac, Saab, Saturn and Hummer. GM has launched the largest and most widespread a propos-imaging target of the domestic car dealers. They sent inspectors to analyze the entire of their dealerships’ facilities attributes, including tell, location and overall air. Many dealerships that were privileged pleasing to not be terminated are now obligated to make major adroitness upgrades.

Chrysler

Chrysler has compound taking into account Fiat, giving Fiat a major U.S. distribution network for its more fuel-efficient product extraction. Recently reported dealer data indicated that the average Chrysler dealer’s pre-tax earnings fell to $150,000 during the economic downturn. This means that a $15,000 narrowing in execution simulation nimble costs equates to a 10% accretion in pre-tax earnings.

Dealers can member going on life efficient LED lighting following energy efficient HVAC in both the conditioned (let breathe conditioned) and non-conditioned portions of the facilities for $1.20 per square foot EPAct tax deductions.

Conclusion

The newly configured U.S. automobile industry is becoming more and more centered upon fuel efficiency, both for vehicles and the dealership facilities. By upgrading indoor and outside lot lighting to LED’s, dealerships have the opportunity to significantly shorten their computer graphics expenses even though realizing substantial tax savings.

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