Commercial Casinos Energy Policy Act Tax Opportunity


Before the recent economic downturn, commercial casinos collected at least $30 billion in revenues each year from 2005 through 08. 1 During this period, US 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 kiss 918 cease and casino operators are now focused on existing facility cost reduction.

The Section 179(D) Tax Specifications

Increasingly, casino operators are taking advantage of the EPAct IRC section 179(D) commercial building energy efficiency tax specifications, which have been extended through 2013. EPAct tax discount are available for passing energy deals in lighting, HVAC(heating, setting up, 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 character of Casino Properties

Commercial casinos often encircle hotel resorts, which provide attractive packages of services for their corporate and family customers. Casinos are particularly fitted to EPAct for their large gaming floors, hotel occupancy rooms, meeting halls, and parking garages. Each of these features typically consumes large pillow foot and the EPAct benefit has a potential for approximately one 60 cents per pillow foot for each of the three measures described above. Some of the smallest commercial casinos are about 50, 000 pillow feet while most American casinos are typically over 100, 000 pillow feet. One of the largest ones, MGM Grand on the Las vegas strip is virtually 2 million pillow feet. Hotels themselves are the most favored of Section 179 building category. (See “Hotels and Motels Most Favored Energy Policy Act Tax Properties”)

Really to consider commercial casinos as located in two states Nevada and Nj. While it well spoken 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, The state of illinois, Indiana, Iowa, Louisiana, The state of michigan, Mississippi, Missouri, Pennsylvania, and South Dakota. Members of the American Gaming Association have publicized some of their commitments to energy reduction. Revealing casinos include Boyd Gaming Corporation, Harrah’s Entertainment, Inc., and MGM Mirage. They have projects together with significant energy savings via cogeneration, ERV(energy recovery ventilation), more sound HVAC units, replacing incandescent lights with energy efficient lightings, windows with energy efficient day lighting systems, solar arctic 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 compensation. 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 Hvac Engineers) building energy code standard. Full tax deduction is achieved with a 40% watts-per-square foot reduction in comparison 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 highest level EPAct tax deduction.

Occupancy Rooms

For most other building categories, the Section 179D tax specifications 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 work as hotel and motel spaces, they are specifically omitted 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 discount for the facility.

Back entrance Spaces

Casinos often have large kitchen, storage, and wash (so called back of the house) spaces that have historically used T-12 fluorescent lighting. This lighting is so energy dysfunctional compared to today’s lighting products that it will be illegal to manufacture in the united states after June 1, 2010. 4 Once manufacturing of these previously generation lighting products ceases, the cost of replacing these dysfunctional designs will increase. Simply stated, casinos should evaluate acting now to these lighting fixtures to save both energy and area rug replacement costs. The EPAct lighting tax compensation 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 dysfunctional and often very expensive to maintain and replace. In particular, replacing designs and lamps in high ceilings is very costly since expensive mobile hydraulic platform equipment must be rented or purchased to handle the substitutes. 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 deals, utility rebates and EPAct tax discount can greatly improve the economic payback from these more costly lighting upgrades.

Parking Garages

Many casinos have large next to parking garages that can save substantial energy costs and generate large tax discount by upgrading to energy efficient furnishings. In Notice 2008-40 issued Strut seventh, 08, the IRS announced that parking garages are a property class that is specifically entitled to use the EPAct tax discount. Also, parking garages are omitted from the tax bi-level switching requirement. Please see the September, 08 International Parking Institute article devoted to parking garages EPAct lighting deduction tax opportunities. 5

Slot machines and Gaming Floors

One of the biggest energy users on hotel gaming floors is slot machines. Although these were early adapters of fluorescent technology, even these energy efficient designs normally have to be changed 3 times a year because of 24/7 operating hours. Due to the high labor maintenance costs, casino owners are now transitioning to LED technology in their slot machines. LED’s, while they have higher up front costs, have high energy efficiency and much longer life cycle, offering significant savings in labor and maintenance costs.


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