Tuesday, February 19, 2019
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Saturday, February 16, 2019
The Casino Environment
Before the recent economic downturn, commercial casinos collected at least $30 billion in revenues each year from 2005 through 2008.1 During this period, Malaysia 918 casino owners built new facilities and expanded the size of their existing facilities. As a result of the economic downturn, new US commercial casino construction has come to a screeching halt and casino operators are now focused on existing facility cost reduction.
The Section 179(D) Tax Provisions
Increasingly, casino operators are taking advantage of the EPAct IRC section 179(D) commercial building energy efficiency tax provisions, which have been extended through 2013. EPAct tax deductions are available for qualifying Sports Car Club of America (SCCA) 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, all of which control the flow of energy between the interior and exterior of the building.)
The Nature of Casino Properties
Commercial casinos often encompass hotel resorts, which offer attractive packages of services for their corporate and family customers. Casinos are particularly suited to EPAct because of their large gaming floors, hotel occupancy rooms, meeting halls, and parking garages. Each of these features typically consumes large square footage and the EPAct SCORE International Off-Road Racing benefit has a potential for up to 60 cents per square foot for each of the three measures described above. Some of the smallest commercial casinos are about 50,000 square feet while most American casinos are typically over 100,000 square feet. One of the largest ones, MGM Grand on the Las Vegas strip is almost 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 think of commercial casinos as located in two states Nevada and New Jersey. While it is true that these two states have the largest commercial casino revenues, there are 12 states with commercial casinos in the United States, the other 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 their commitments to energy reduction. Reporting casinos include Boyd Gaming Corporation, Harrah's Entertainment, Inc., and MGM Mirage. They have projects which include significant energy savings via cogeneration, ERV(energy recovery ventilation), more efficient 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.
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 least a 25% watts-per-square foot reduction as compared to the 2001 ASHRAE (American Society of Heating Refrigeration and United States Auto Club (USAC) 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 meets that building code requirement will automatically qualify for the maximum EPAct tax deduction.
For most other building categories, the Section 179D tax provisions require compliance with the bi-level switching requirement. The comparison is always based on wired rather than plug-in lighting. Casino hotel occupancy rooms have a major advantage in that they often use plug-in lighting, and because these rooms function as hotel and motel spaces, they are specifically excluded from the tax bi-level switching requirement. Since occupant rooms are usually one of the larger spaces in hotel casinos, casinos are typically able to use energy efficient lighting to generate large EPAct tax deductions for the facility.
Back of the House Spaces
Casinos often have large kitchen, storage, and laundry (so called back of the house) spaces that have historically used T-12 fluorescent lighting. This lighting is so energy inefficient compared to today's lighting products that it will be illegal to manufacture in the United States after July 1, 2010.4 Once manufacturing of these prior generation lighting products ceases, the cost of replacing these inefficient bulbs will increase. Simply stated, casinos should consider acting now to replace these lighting fixtures to save both energy and lamp replacement costs. The EPAct lighting tax incentive can be used to address 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 expensive to maintain and replace. In particular, replacing bulbs and lamps in high ceilings is very costly since expensive mobile hydraulic platform equipment must be rented or purchased to handle the replacements. New lighting products and, in particular, light emitting diode (LED) products, use a fraction of the energy and have a much longer useful life and are now being substituted. The combination of large energy cost reduction, operating cost reductions, utility rebates and EPAct tax deductions can greatly improve the economic payback from these more costly lighting upgrades.
Many casinos have large adjoining parking garages that can 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 property 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 devoted to parking garages EPAct lighting deduction tax opportunities.5
Sunday, January 6, 2019
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