How Recycling Can Help Businesses Obtain Tax Breaks

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Last Updated: February 24th, 2020

reusable bag with recycle symbol and earth on it by dead leaves

Guest Post by Peter Spano

It is a well-established fact that recycling has a wide range of benefits on the environment, primarily by reducing our society’s dependence on natural resources. For example, the process of recycling aluminum — a common non-renewable resource — requires 95 percent less energy than creating new aluminum from raw materials.

That’s why it’s important for modern-day businesses to maintain viable waste reduction programs; it’s just the sensible thing to do for our planet.
But apart from the ethical considerations of managing waste properly, recycling also provides some practical bottom-line benefits for companies during tax season. A business that recycles its waste products in accordance with accepted procedures can qualify for one or more tax breaks. What follows is a partial list of tax breaks and related financial incentives that may be available to a business that follows sound recycling practices.

Helping the environment and receiving tax breaks at the same time? It’s a win-win.

IRS tax credits

The Internal Revenue Service offers the following financial incentives connected to a business's compliance with recycling standards: 

Qualified reuse and recycling property allowance

“Qualified reuse and recycling property” refers to any kind of equipment or machinery, along with any software used in conjunction with it, that is dedicated to collecting, distributing, or recycling certain recyclable materials. If your property has been depreciated under the guidelines of the Modified Accelerated Cost Recovery System (MACRS), and the property was initially used after August 31, 2008, then you may qualify for a 50 percent depreciation allowance. To learn more about this allowance, please see IRS Publication 946, How To Depreciate Property.

Qualifying advanced energy project credit

This is accessible to businesses that invest in a qualifying advanced energy project for their manufacturing facility that produces fuel cells, microturbines, electric grids, certain electric motor vehicles, or other materials of this nature. More information can be found on Form 3468, Investment Credit.

State tax incentives

Many tax credits and related incentives are available through state governments in addition to those that can be obtained from the IRS. The majority of U.S. states have tax incentive programs for businesses that adhere to accepted recycling practices. These programs can take the form of rebates, tax credits, sales tax exemptions, or another type of incentive.

Although we don’t have the space here to examine all the programs in force at the state level, we can briefly touch on some state tax incentives currently on the books.

California

The state offers a partial exemption of sales and use tax on specified manufacturing equipment used for generating, producing, storing, or distributing electric power. In addition, Department of Resources Recycling and Recovery (CalRecycle) has a Recycling Market Development Zone Loan (RMDZ) program, which provides loans and free product marketing to businesses that agree to use waste-steam materials from one of the specified zones across California. More information about these and other programs can be viewed on the official CalRecycle website.

Florida

The state offers a sales tax exemption for the purchase of any "resource recovery equipment" used for a local government recycling program. 

Texas

The state has a Tax Relief for Pollution Control Property Program for businesses that maintain property or equipment capable of sufficiently reducing the facility's environmental burden.

Kentucky

The state allows individuals and corporations to claim a 50 percent tax credit on any recycling or composting equipment

Recycling incentives at the state level tend to change frequently, so it’s a good idea to check your local government’s website on a periodic basis for updates.

Department of Energy programs

The Database of State Incentives for Renewables & Efficiency (DSIRE), funded by the U.S. Department of Energy and operated by the North Carolina Clean Energy Technology Center, has a vast number of energy-efficiency incentives and programs. Some of these programs may be of help in lowering your company’s tax burden. The official website lists a variety of loans, grants, rebates, energy audits, advisory services, discount programs, tax exemptions, and other incentives that are available at the city, county, or state level. All fifty states are represented here.

Take the time to search through the DSIRE website — most states have literally dozens of opportunities listed, and it’s likely that you aren’t already aware of some of them.

It's also worth pointing out that maintaining eco-friendly operational practices can lead to additional financial benefits that aren’t as easily quantifiable as tax credits. Modern consumers, by and large, support environmentally positive business practices. They will often go out of their way to patronize companies that demonstrate a dedication to minimizing their impact on the environment. In fact, one survey has found that 88 percent of consumers have a preference for brands that help them live in an eco-positive way.

If your company is doing its part to aid the environment, don’t be shy about advertising that fact. Publicizing your recycling efforts can bolster your bottom line.

How a waste consultant can help

These days, staying environmentally conscious is undoubtedly a wise business policy, but it can be difficult for organizations to reach their sustainability goals. For that reason, many organizations turn to a waste consulting company that delivers advisory services to the business community. Waste consulting services like these can go a long way toward helping businesses manage their recycling needs.

By thoroughly analyzing your facilities and its processes, your consulting company will be able to issue recommendations for improving your waste management procedures. In some cases, a waste management consultant can even sell or rent state-of-the-art recycling equipment such as balers and compactors. It’s an excellent money- and time-saving way to boost your recycling efforts.

Peter Spano is the founder and CEO of Global Trash Solutions, a company dedicated to providing waste management services and products to the business community. He is the inventor of the GTS2000 trash compactor, which has been successfully used by McDonalds, Burger King, Starbucks, and many other major corporations.

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