As governments offer both incentives and penalties to promote sustainability, tax leaders need to understand how this landscape may impact their business, including potential sales, property and excise taxes as well as indirect tax benefits.

Implementing sustainable and green business practices may require initial investments costs and employee training costs; however, doing so could unlock significant funding opportunities and tax benefits for your company.

Energy Efficiency Credits

With the passing of the Inflation Reduction Act in August 2022, energy efficiency and green building projects received a major boost. Under this act, federal tax credits and rebates target both home improvements and commercial equipment upgrades.

Credits can help reduce or cancel out part of a taxpayer’s income tax liability, thus decreasing or even eliminating their tax burden. Since credits are nonrefundable, they don’t impact an entire taxpayer’s bill entirely.

Energy efficient lighting, windows and doors; heat pumps; insulation; HVAC equipment; solar panels and ductwork are eligible for federal tax credits under two federal programs – Residential Clean Energy Credit and Energy Efficient Buildings Credit – that could cover up to 30% of their respective costs.

Businesses that strive to be environmentally-friendly may receive support from state and local programs, including process evaluation, audits and improvements, pollution prevention strategies and staff training. Such assistance can help your company become more sustainable while decreasing its carbon footprint; furthermore, costs could decrease and allow more funds for investment into growth of the business.

Green Building Credits

No matter if it is for new construction or expansion of an existing facility, green construction can help lower costs and environmental impacts. According to a 2007 United Nations study, sustainable design and green buildings contribute to conservation of ecological resources, water conservation and energy use preservation, lower electricity and fossil fuel consumption, reduced pollution levels and waste disposal as well as higher occupant satisfaction levels.

Green building ratings and certification systems exist on the market today, from those focused on energy or water consumption, to others that consider aspects such as site, design, construction, operation maintenance and renovation of projects.

State and local incentives exist to support green building practices. New York’s Greener Greater Buildings program, for instance, includes rebates, energy audits, retro-commissioning upgrades for larger buildings as well as sub-metering of larger properties; additionally it encourages reusing brownfield sites for green projects.

Waste Reduction Credits

Companies that implement environmentally responsible business practices reap many advantages, including improved reputation, utility bill savings and tax credits as well as creating an inviting workplace for employees. Furthermore, these practices could attract environmentally conscious customers and investors.

Reduce Waste and Recycling – To decrease paper use (two-sided copying, digital files), purchase recycled products, implement recycling/composting programs, use energy efficient equipment like timers on lights and computers and modify driving habits to minimize emissions from transportation-related emissions, these steps should help to decrease waste and recycling rates.

Plastics Credits provide global efforts to reduce plastic waste entering nature by scaling and streamlining collection, sorting, and recycling operations. Created by Verra and BVRio with support from major food packaging companies, these credits use the “Polluter Pays” principle by giving informal waste pickers financial access. This innovative global environmental finance standard sets new benchmarks.

Renewable Energy Credits

Federal governments offer tax incentives, such as investment tax credits, to businesses investing in renewable energy technologies like solar panels, fuel cells and geothermal heat pumps. State and local governments also provide various forms of incentive programs designed to promote green business practices such as rebates on construction permit fees for using such technologies in their business practices.

RECs enable businesses to claim carbon emissions reductions by purchasing credits generated by renewable energy sources such as solar, wind and biomass. Once purchased they may be resold at less than their face value to buyers who may use them offset taxes due.

Some states such as California and New York mandate companies source a certain percentage of their electricity from renewable sources, such as purchasing renewable energy credits (RECs). Doing so allows these companies to meet these requirements without investing in costly energy efficiency upgrades – unlike tax deductions which simply reduce tax liabilities but cannot pay them completely off!

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