The Casino Environment
Before the recent economic downturn, commercial casinos collected at least $30 billion in revenues annually from 2005 through 2008.1 During 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 come to a screeching halt and casino operators are actually 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, that have been 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, that 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 provide attractive packages of services for his or her corporate and family customers. Casinos are particularly suited to EPAct for 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 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 many American casinos are typically over 100,000 square feet. One of many largest ones, MGM Grand on the Las Vegas strip is practically 2 million square feet. Hotels themselves are the absolute most favored of Section 179 building category. (See “Hotels and Motels Most Favored Energy Policy Act Tax Properties”)
It’s common to think about commercial casinos as located in two states Nevada and New Jersey. Whilst it holds true that these two states have the greatest 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 the commitments to energy reduction. Reporting casinos include Boyd Gaming Corporation, Harrah’s Entertainment, Inc., and MGM Mirage. They’ve projects such as significant energy savings via cogeneration, ERV(energy recovery ventilation), more effective 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 absolute most favored property category for the tax incentive. The rule set requires at least a 25% watts-per-square foot reduction as set alongside 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 set alongside the ASHRAE 2001 standard. The ASHRAE 2004 hotel/motel building code standard requires 40% wattage reduction, meaning that any hotel or motel lighting installation that fits that building code requirement will automatically qualify for the most 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 centered on wired as opposed to plug-in lighting. Casino hotel occupancy rooms have a major advantage in which they often use plug-in lighting, and since these rooms function as hotel and motel spaces, they are specifically excluded from the tax bi-level switching requirement. Since occupant rooms are generally one of the larger spaces in hotel casinos, casinos are typically able to utilize energy efficient lighting to generate large EPAct tax deductions for the facility.
Back of the House Spaces
Casinos usually have large kitchen, storage, and laundry (so called back of the house) spaces which have historically used T-12 fluorescent lighting. This lighting is indeed energy inefficient compared to today’s lighting products so it is going to 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 lots of both energy and lamp replacement costs. The EPAct lighting tax incentive can be utilized to handle the opportunities linked to these legally mandated product changes
Ball Rooms, Banquet Rooms and Restaurants
These aspects of casinos have historically used designer type lighting that is energy inefficient and often extremely expensive to steadfastly keep up and replace. In particular, replacing bulbs and lamps in high ceilings is very costly since expensive mobile hydraulic platform equipment must certanly be rented or purchased to take care of the replacements. New lighting products and, particularly, 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 mixture of large energy cost reduction, operating cost reductions, utility rebates and EPAct tax deductions can greatly enhance 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 utilize the EPAct tax deductions. Also, parking garages are excluded from the tax bi-level switching requirement. Please begin to see the September, 2008 International Parking Institute article dedicated to 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 have to be changed 3 times a year because of 24/7 operating hours. Due to the high labor maintenance costs, casino owners are actually transitioning to LED technology within their slot machines. LED’s, while they’ve higher at the start costs, have high energy efficiency and considerably longer life cycle, offering significant savings in labor and maintenance costs.
Casinos for their typical 24 hour occupancy can perform significant energy cost savings from energy efficient HVAC systems. In particular, Nevada’s hot climate further makes energy efficient HVAC a very worthwhile investment. Fortunately. Nevada with the best revenues from casinos has America’s second highest convenience of energy efficiency through renewable geothermal energy.6 Certain kinds of very efficient HVAC investments will often qualify for the HVAC EPAct tax incentive including geothermal and thermal storage.
We be prepared to 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 the first certified LEED casinos in the US.8 Casinos and hotels realize that certain kinds of frequent travelers are very thinking about staying in facilities which have clearly demonstrated they are focused on the surroundings and sustainable design. To become LEED certified, a casino must have a building energy simulation model developed by a qualified engineer. Modeling can be necessary for the EPAct, HVAC and Building Envelope tax deductions. Qualified tax experts that know making the adjustments to convert LEED computer models to EPAct tax deduction models can evaluate LEED models and determine whether large tax deductions are probable. As an example, a 500,000 square foot LEED casino that qualifies for the most 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 utilize the tax savings to greatly help justify the expense linked to achieving LEED status.
Casinos for their large subspaces are a favored building category under the EPAct commercial building tax deduction legislation. Property owners who understand these opportunities can act during the existing economic downturn to improve their facilities, reduce operating costs and potentially become LEED certified facilities.