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The Casino Environment

Ahead of the recent economic downturn, commercial casinos collected at the least $30 billion in revenues every year 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 actually centered on existing facility cost reduction.

The Section 179(D) Tax Provisions

Increasingly, casino operators are using the EPAct IRC section 179(D) commercial building energy efficiency tax provisions, that have been extended through 2013. EPAct tax deductions can be found 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, which control the flow of energy between the interior and exterior of the building.)

The Nature of Casino Properties

Commercial casinos often encompass hotel resorts, which provide attractive packages of services due to their corporate and family customers. Casinos are particularly worthy of EPAct due to 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 features 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 normally over 100,000 square feet. One of many largest ones, MGM Grand on the Las Vegas strip is nearly 2 million square feet. Hotels themselves are probably the most favored of Section 179 building category. (See “Hotels and Motels Most Favored Energy Policy Act Tax Properties”)

It’s common to think of commercial casinos as positioned in two states Nevada and New Jersey. Although it does work that these two states have the biggest 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 these commitments to energy reduction. Reporting casinos include Boyd Gaming Corporation, Harrah’s Entertainment, Inc., and MGM Mirage. They have 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.kingcobratoto

The underlying rule set to qualify for the Section 179D lighting tax deduction makes casinos and particularly casino hotels probably the most favored property category for the tax incentive. The rule set requires at the 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 most EPAct tax deduction.

Occupancy Rooms

For other building categories, the Section 179D tax provisions require compliance with the bi-level switching requirement. The comparison is definitely predicated on wired rather than plug-in lighting. Casino hotel occupancy rooms have an important advantage in which they often use plug-in lighting, and because these rooms function as hotel and motel spaces, they are specifically excluded from the tax bi-level switching requirement. Since occupant rooms are usually one of many larger spaces in hotel casinos, casinos are normally 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 which have historically used T-12 fluorescent lighting. This lighting is really energy inefficient in comparison 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 cost 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 deal with the opportunities related to these legally mandated product changes

Ball Rooms, Banquet Rooms and Restaurants

These areas of casinos have historically used designer type lighting that’s energy inefficient and often very costly to steadfastly keep up and replace. In particular, replacing bulbs and lamps in high ceilings is very expensive since expensive mobile hydraulic platform equipment should be rented or purchased to handle the replacements. New lighting products and, specifically, light emitting diode (LED) products, use a fraction of the vitality and have a much longer useful life and are increasingly 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 expensive lighting upgrades.

Parking Garages

Many casinos have large adjoining parking garages that will 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’s specifically eligible to use 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 we were holding early adapters of fluorescent technology, even these energy efficient bulbs normally have to be changed 3 times annually due to 24/7 operating hours. Because of the high labor maintenance costs, casino owners are actually transitioning to LED technology in 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 due to their typical 24 hour occupancy can achieve significant energy cost savings from energy efficient HVAC systems. In particular, Nevada’s hot climate further makes energy efficient HVAC an extremely worthwhile investment. Fortunately. Nevada with the greatest revenues from casinos has America’s second highest capacity for energy efficiency through renewable geothermal energy.6 Certain types of very efficient HVAC investments will often qualify for the HVAC EPAct tax incentive including geothermal and thermal storage.

LEED Casinos

We expect to see more casinos obtain LEED status. (See LEED Building Tax Opportunities Article7). In 2008, The Palazzo, Las Vegas Casino became the biggest LEED certified building and one of many first certified LEED casinos in the US.8 Casinos and hotels realize that certain types of frequent travelers are extremely enthusiastic about remaining in facilities which have clearly demonstrated they are centered on the environment and sustainable design. To become LEED certified, a casino must have a building energy simulation model developed by a qualified engineer. Modeling is also necessary for the EPAct, HVAC and Building Envelope tax deductions. Qualified tax experts that know steps to make the adjustments to convert LEED computer models to EPAct tax deduction models can evaluate LEED models and determine whether large tax deductions are probable. For example, a 500,000 square foot LEED casino that qualifies for the most 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 use the tax savings to help justify the expenses related to achieving LEED status.


Casinos due to 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 present economic downturn to improve their facilities, reduce operating costs and potentially become LEED certified facilities.

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