Green IT Tax Credits and Incentives
More and more often, tax and enterprise sustainability issues are becoming intertwined. Many state and local governments have passed tax incentives to attract data centers, hoping to convert struggling regions into high-tech hubs. However, at the same time, states are also becoming more concerned about their own carbon footprint.
How can these two strategies coexist? Often, states approach the issue by encouraging green IT practices and green data centers. As an example, consider the question: “What is your company’s power consumption per employee?” Did you know that when you approach a state to negotiate an incentive for any new building – including a new data center – the state will likely ask this question? The following are some specific tax areas to consider as part of a green IT and/or green data center program.
- Alternative energy planning including: joint venture partnership structures, leasing structuring and incentives
- Green building incentives related to Leadership in Energy and Environmental Design (LEED) certification and other “green” upgrades
- Energy efficiency incentives – specifically, IRC Section 179D deduction for energy efficiency, IRC Section 48 Energy Tax Credits, and accelerated depreciation
- Research and development tax credits for eligible expenditure for IT improvements
- Property and sales tax incentives for “green buildings” and “green jobs”
- Sales and use tax opportunities around de-bundling construction contracts
- Apportionment calculations related to cloud computing or increased telecommuting enabled by strengthened IT efficiencies
Tax strategies and processes depend on capturing tax-relevant source data. A tax-efficient design as part of a larger green IT initiative considers:
- Data requirements – capturing tax-relevant data to track organization, finance, supply chain, and sales data in the appropriate level of detail
- Compliance – instituting automated and procedural processes to improve financial reporting and tax return accuracy
- Efficiency – standardizing processes and procedures to effectively increase automation and mitigate tax risk
- Strategic planning – improving tax department resource allocation to increase focus on strategic planning