Manufacturers and businesses don’t often get good news during tax season, so savor this tidbit: Recent tax credit extensions are creating opportunities for increased production of energy-efficient equipment and machinery.
That’s great news for both the manufacturers of such equipment and for the businesses that use them — and the planet, for that matter.
Here’s everything you need to know about these tax policies and how they can affect your bottom line.
Information from the IRS
When the government wants businesses to do something, one of the ways it influences business owners is by manipulating the tax code. While that might sound ominous on the surface, it often means providing businesses a helping hand via tax breaks. In the case of Form 3468, it means offering a credit for investing in energy-saving properties.
If you’ve never heard of Form 3468, be sure to ask your accountant or tax professional if you’re eligible. You can start gathering paperwork related to any of the following expenses you may have encountered over the course of the past year, including:
- Renovations to Your Commercial Building to Provide Greater Energy Efficiency. These include adding energy-efficient lighting, heating and envelope sealing and insulation.
- Adding a Combined Heat and Power System (CHP). These systems take heat energy that’s a byproduct of producing electricity and put it to good use, resulting in significant energy savings.
- Adding Hybrid or All-Electric Vehicles to Your Commercial Fleet. The tax break could double the savings you’re already enjoying by not spending as much on fuel.
- On-site Renewable Energy Generation. These include investments in solar panels and wind turbines to power your business which can reduce your facility’s utility costs.
You can also search Energy.gov’s website to see what other incentives you might be eligible for.
How Tax Breaks Help Manufacturers
On the surface, a tax break is an obvious boon: You get to keep more of your profits instead of handing them over. Those savings allow you to make bigger investments to expand your business.
These tax breaks might also increase your customer base if you begin to offer your customers energy-efficient equipment. Building better products with increased efficiency might seem like a bridge too far in the past — would anyone buy them if they were too expensive? These tax breaks are a huge selling point for your clients if they’re having trouble deciding between an old less-efficient model and a new, highly efficient one.
For example, companies that produce large-scale equipment, such as forklifts, are now focusing on a variety of benefits for its clientele including energy savings, space utilization and productivity optimization. It gets to offer the premium goods and services it’s always been capable of because clients are now demanding more efficient equipment — and they have more money to spend on it, thanks to the tax savings they’re expecting to take advantage of. Manufacturers are expecting great sales in the coming year, and it’s easy to see why.
Boosting Your Business Credit
Even if you’re not in the business of building energy-efficient equipment, the tax break is cause for celebration. You’ll be rewarded for doing your part to increase energy savings in your commercial buildings, and you can leverage your new eco-friendly credentials to boost customer confidence. The lure of eco-friendly products and service is strong, and 53 percent of people now prefer to do business with companies that are environmentally friendly.
Go ahead and write that press release about your investments in going green, and don’t forget to turn your environmental efforts into a few great advertising points — you can make your money back on these investments in more ways than one.
After you’ve reaped the tax savings, you can reinvest that money into even more efficiencies. This might be the thing that allows you to expand using new equipment to take advantage of even greater fuel savings in the future. Think of it as a snowball — when you reinvest the savings, you can continue to do even more for the environment.
About The Author: Megan Wild specializes in energy-efficiency in manufacturing. When she’s not writing about the commercial side of construction, she also offers advice and tips about residential construction on her blog, Your Wild Home.