Before the recent economic downturn, commercial casinos collected at the very least $30 billion in revenues annually from 2005 through 2008.1 In this period, US casino owners built new facilities and expanded how big is their existing facilities. As a result of the economic downturn, new US commercial casino construction has arrive at a screeching halt and casino operators are now focused on existing facility cost reduction.
The Nature of Casino Properties
Commercial casinos often encompass hotel resorts, which provide attractive packages of services for their corporate and family customers. Casinos are particularly worthy of 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 benefit includes a potential for up to 60 cents per square foot for each of the three measures described above. A number of the smallest commercial casinos are about 50,000 square feet while most American casinos are usually 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 is common to think of commercial casinos as positioned in two states Nevada and New Jersey. Whilst it holds true that these two states have the largest commercial casino revenues, you will find 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 these commitments to energy reduction. Reporting casinos include Boyd Gaming Corporation, Harrah’s Entertainment, Inc., and MGM Mirage. They’ve projects including 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 absolute most favored property category for the tax incentive. The rule set requires at the very 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 any hotel or motel lighting installation that meets that building code requirement will automatically qualify for the maximum EPAct tax deduction.
For almost every other building categories, the Section 179D tax provisions require compliance with the bi-level switching requirement. The comparison is obviously based 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 because these rooms work 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 usually able to make use of energy efficient lighting to generate large EPAct tax deductions for the facility.
Back of the House Spaces
Casinos frequently have large kitchen, storage, and laundry (so called back of the house) spaces that have historically used T-12 fluorescent lighting. This lighting is really energy inefficient in comparison to today’s lighting products so 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 expense of replacing these inefficient bulbs will increase. Simply stated, casinos must look into acting now to displace these lighting fixtures to save both energy and lamp replacement costs. The EPAct lighting tax incentive may be used to address the opportunities linked to these legally mandated product changes
Ball Rooms, Banquet Rooms and Restaurants
These regions of casinos have historically used designer type lighting that is energy inefficient and often very expensive to keep up and replace. Specifically, replacing bulbs and lamps in high ceilings is too costly since expensive mobile hydraulic platform equipment should be rented or purchased to deal with the replacements. New lighting products and, specifically, light emitting diode (LED) products, use a fraction of the vitality and have a considerably longer useful life and are now 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 pricey lighting upgrades.
Many casinos have large adjoining parking garages that could save substantial energy costs and generate large tax deductions by upgrading to energy efficient fixtures. Data HK In Notice 2008-40 issued March 7th, 2008, the IRS announced that parking garages are a house class that is specifically eligible to utilize 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
Slot Machines and Gaming Floors
One of many biggest energy users on hotel gaming floors is slot machines. Although they certainly were early adapters of fluorescent technology, even these energy efficient bulbs normally have to be changed 3 times per year as a result of 24/7 operating hours. Due to the high labor maintenance costs, casino owners are now transitioning to LED technology within their slot machines. LED’s, while they’ve higher up front costs, have high energy efficiency and a lot longer life cycle, offering significant savings in labor and maintenance costs.
Casinos because of their typical 24 hour occupancy can perform significant energy cost savings from energy efficient HVAC systems. Specifically, 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 capacity for 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 expect to see more casinos obtain LEED status. (See LEED Building Tax Opportunities Article7). In 2008, The Palazzo, Las Vegas Casino became the largest LEED certified building and one of the first certified LEED casinos in the US.8 Casinos and hotels discover that certain kinds of frequent travelers are very thinking about staying in facilities that have clearly demonstrated they are focused on the surroundings and sustainable design. To become LEED certified, a casino should have a building energy simulation model created by a qualified engineer. Modeling can be needed 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. Like, a 500,000 square foot LEED casino that qualifies for the maximum EPAct tax deduction will receive a sudden 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 expenses linked to achieving LEED status.