The Casino Environment
Before the recent economic downturn, commercial casinos collected at the least $30 billion in revenues every year from 2005 through 2008.1 In this period, US casino owners built new facilities and expanded how big their existing facilities. Consequently of the economic downturn, new US commercial casino construction has arrived at a screeching halt and casino operators are now centered on existing facility cost reduction.
The Section 179(D) Tax Provisions
Increasingly, casino operators are benefiting from the EPAct IRC section 179(D) commercial building energy efficiency tax provisions, which were extended through 2013. EPAct tax deductions are available for qualifying energy reductions in lighting, HVAC(heating, ventilation, and air conditioning), and building envelope. (Building envelope consists of the building’s foundation, walls, roof, windows, and doors, which control the flow of energy between the inside and exterior of the building.)
The Nature of Casino Properties
Commercial casinos often encompass hotel resorts, which offer attractive packages of services due to their corporate and family customers. Casinos are particularly worthy of EPAct because of their large gaming floors, hotel occupancy rooms, meeting halls, and parking garages. Each one of these features typically consumes large square footage and the EPAct benefit has a potential for up to 60 cents per square foot for each of the three measures described above. A number of the smallest commercial casinos are about 50,000 square feet while most American casinos are generally over 100,000 square feet. One of many largest ones, MGM Grand on the Las Vegas strip is nearly 2 million square feet. Hotels themselves are the most favored of Section 179 building category. (See “Hotels and Motels Most Favored Energy Policy Act Tax Properties”)
It is common to consider commercial casinos as positioned in two states Nevada and New Jersey. While it does work that these two states have the greatest commercial casino revenues, you will find 12 states with commercial casinos in the United States, another commercial casino states are: Colorado, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri, Pennsylvania, and South Dakota. Members of the American Gaming Association have publicized some of the commitments to energy reduction. Reporting casinos include Boyd Gaming Corporation, Harrah’s Entertainment, Inc., and MGM Mirage. They have projects including significant energy savings via cogeneration, ERV(energy recovery ventilation), better HVAC units, replacing incandescent lights with energy efficient lightings, windows with energy efficient day lighting systems, solar thermal storage and numerous other energy saving initiatives.kingcobratoto
The underlying rule set to qualify for the Section 179D lighting tax deduction makes casinos and particularly casino hotels the most favored property category for the tax incentive. The rule set requires at the least a 25% watts-per-square foot reduction as compared to the 2001 ASHRAE (American Society of Heating Refrigeration and Air Conditioning Engineers) building energy code standard. Full tax deduction is achieved with a 40% watts-per-square foot reduction compared to the ASHRAE 2001 standard. The ASHRAE 2004 hotel/motel building code standard requires 40% wattage reduction, which means that any hotel or motel lighting installation that fits that building code requirement will automatically qualify for the utmost EPAct tax deduction.
For almost every other building categories, the Section 179D tax provisions require compliance with the bi-level switching requirement. The comparison is definitely centered on wired rather than plug-in lighting. Casino hotel occupancy rooms have a major advantage in they often use plug-in lighting, and because these rooms work as hotel and motel spaces, they’re specifically excluded from the tax bi-level switching requirement. Since occupant rooms usually are one of many larger spaces in hotel casinos, casinos are generally able to utilize energy efficient lighting to generate large EPAct tax deductions for the facility.
Back of the House Spaces
Casinos frequently have large kitchen, storage, and laundry (so called back of the house) spaces that have historically used T-12 fluorescent lighting. This lighting is indeed energy inefficient in comparison to today’s lighting products that it will soon be illegal to manufacture in the United States after July 1, 2010.4 Once manufacturing of these prior generation lighting products ceases, the price of replacing these inefficient bulbs will increase. Simply stated, casinos should consider acting now to displace these lighting fixtures to save both energy and lamp replacement costs. The EPAct lighting tax incentive can be used to handle the opportunities related to these legally mandated product changes
Ball Rooms, Banquet Rooms and Restaurants
These areas of casinos have historically used designer type lighting that is energy inefficient and often very costly to steadfastly keep up and replace. Specifically, replacing bulbs and lamps in high ceilings is very costly since expensive mobile hydraulic platform equipment must certanly be rented or purchased to handle the replacements. New lighting products and, in particular, light emitting diode (LED) products, work with a fraction of the energy and have a considerably longer useful life and are now being substituted. The mix of large energy cost reduction, operating cost reductions, utility rebates and EPAct tax deductions can greatly increase the economic payback from these more pricey lighting upgrades.
Many casinos have large adjoining parking garages that could save substantial energy costs and generate large tax deductions by upgrading to energy efficient fixtures. In Notice 2008-40 issued March 7th, 2008, the IRS announced that parking garages are a house class that is specifically entitled to use the EPAct tax deductions. Also, parking garages are excluded from the tax bi-level switching requirement. Please see the September, 2008 International Parking Institute article specialized in parking garages EPAct lighting deduction tax opportunities.5
Slot Machines and Gaming Floors
One of many biggest energy users on hotel gaming floors is slot machines. Although they were early adapters of fluorescent technology, even these energy efficient bulbs normally need to be changed 3 times annually due to 24/7 operating hours. Due to the high labor maintenance costs, casino owners are now transitioning to LED technology within their slot machines. LED’s, while they have higher at the start costs, have high energy efficiency and a lot longer life cycle, offering significant savings in labor and maintenance costs.
Casinos because of their typical 24 hour occupancy can perform significant energy cost savings from energy efficient HVAC systems. Specifically, Nevada’s hot climate further makes energy efficient HVAC an extremely worthwhile investment. Fortunately. Nevada with the greatest revenues from casinos has America’s second highest capacity for energy efficiency through renewable geothermal energy.6 Certain types of very efficient HVAC investments will often qualify for the HVAC EPAct tax incentive including geothermal and thermal storage.
We expect you’ll see more casinos obtain LEED status. (See LEED Building Tax Opportunities Article7). In 2008, The Palazzo, Las Vegas Casino became the greatest LEED certified building and one of many first certified LEED casinos in the US.8 Casinos and hotels see that certain types of frequent travelers are very enthusiastic about staying in facilities that have clearly demonstrated they’re centered on the environmental surroundings and sustainable design. To become LEED certified, a casino must have a building energy simulation model produced by a qualified engineer. Modeling can be necessary for the EPAct, HVAC and Building Envelope tax deductions. Qualified tax experts that know steps to make the adjustments to convert LEED computer models to EPAct tax deduction models can evaluate LEED models and determine whether large tax deductions are probable. For instance, a 500,000 square foot LEED casino that qualifies for the utmost EPAct tax deduction will receive an instantaneous tax deduction of $900,000 =(500,000*$1.80). Casino owners who understand the magnitude of these benefits can use the tax savings to simply help justify the costs related to achieving LEED status.
Casinos because of their large subspaces are a favored building category beneath the EPAct commercial building tax deduction legislation. Property owners who understand these opportunities can act during the existing economic downturn to enhance their facilities, reduce operating costs and potentially become LEED certified facilities.
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