As if significant savings on electricity bills weren't enough, IT managers have another reason to embrace environmentally friendly IT practices: a bevy of federal, state and local tax incentives that could tip the scales to make green IT projects financially attractive.
However, companies have been slow to take advantage of the available incentives, essentially leaving money on the table. One reason is that many tax incentives are for solar energy, which is still expensive. Another reason is that CIOs -- who don't often talk with tax experts -- may not be aware of what's available.
Among the federal tax incentives is the Energy-Efficient Commercial Buildings Tax Deduction, part of the Energy Policy Act of 2005. (Subsequent legislation extended this deduction through 2013.)
Companies can claim a tax deduction of $1.80 per square foot on new or existing buildings by installing interior lighting, heating, cooling, ventilation or hot water systems that reduce a building's total energy and power costs by 50 percent or more.
"If an IT manager is looking to retrofit or construct a data center, this particular incentive is absolutely appropriate -- almost a given," says Jenny Bravo, a director at Deloitte Tax LLP. "A 50 percent reduction [in energy and power costs] for a well-planned data center is absolutely doable."
If a building doesn't qualify for the full deduction, it could be eligible for a partial one. For example, if a building doesn't meet the requirement for 50 percent energy savings, it could still qualify for a $0.60-per-square-foot deduction if renovations reduce energy costs by at least 16.66 percent.
In addition, the American Recovery and Reinvestment Act of 2009 -- as the federal government's economic stimulus package is officially known -- extends or modifies existing incentives for renewable energy investments. The ARRA extends the duration of the 30% tax credits for solar energy, fuel cells and microturbines for eight years. It also establishes new 10 percent tax credits for small wind-energy systems, geothermal heat pumps, and combined heat and power systems.
Incentives for green IT
A survey of 752 IT managers found that only 44 percent of them get some form of incentive for improving energy efficiency. The 331 respondents who do receive incentives cited the following types:
- Part of employee's performance appraisal: 39 percent
- Green award or certificate for the organization: 34 percent
- Internal award for the responsible staff member(s): 22 percent
- Utility rebate for the organization: 20 percent
- Federal tax credit for the organization: 20 percent
Base: 331 IT managers who receive incentives; multiple responses allowed.
Source: CDW Corp. Energy Efficient IT Study, August 2009
The business energy investment tax credits are available for systems up and running by Dec. 31, 2016. The ARRA also allows businesses to receive federal cash grants for new installations, which can lure organizations that aren't eligible for tax credits.