Naden/Leans’ industry expertise includes manufacturing, technology, professional services, healthcare, nonprofit, contractors and real estate, and this month’s focus: Restaurants. In September’s Industry Focus, we explore the tax benefits for restaurant owners who make sustainable investments in their establishments.
Out of the more than one million restaurants in the U.S., there are more than 13,800 in the Maryland and Washington, D.C. areas. Where does your restaurant compare with the following industry-wide trends?
Restaurant Sustainability Trends
Restaurants consume a significant amount of energy and water and produce around 100,000 pounds of garbage every year, on average. The move to become more sustainable represents growing concern among consumers and restaurant owners alike about the impacts of their operations on the environment. Sustainability is also an opportunity for restaurants to drive innovative business practices, save costs, and identify with environmentally conscious guests.
Most restaurants recycle cardboard, paper, and fats, oils, and grease, but far fewer – 26 to 29 percent – recycle glass, aluminum or metal cans, or plastics. Independent restaurants are more likely to recycle more items, but across the board most places don’t recycle rigid or flexible plastics or glass. One option is to implement a reusable incentive program for customers, like reusable containers, to not only add a revenue line but also increase customer engagement. There are other ways to recycle, too: from wine bottle corks to not serving bottled or canned beverages.
Less than half of restaurants track food waste, and only about 22 percent donate leftover food to qualified charities. This represents a key area where restaurants can reduce waste and contribute to their local community. Food scarcity is a big issue in most communities, and there aren’t as many barriers to donating leftover food as many restaurants may think.
If your restaurant is new to tracking food waste, using pen and paper is a good place to start but Excel is a better tool. Start monthly with the goal of tracking waste daily. When the budget allows, there is software that will track food waste easily and efficiently.
When it comes to energy usage, most restaurants are already using CFL or LED lighting and programmable thermostats. There are additional opportunities to cut down on water and sewage costs by using low-flush toilets, low-flow faucets, and especially EnergyStar dishwashers.
About half of a restaurant’s entire water use occurs in the kitchen. But most establishments aren’t using Energy Star-rated dishwashers or fryers, which are 30 to 40 percent more efficient than conventional appliances.
To conserve energy, make sure to implement a start-up/shut-down schedule to avoid wasting energy with too much idling time. And, using low-flow faucet aerators, which are inexpensive, reduces hot water usage by up to 60 percent at a hand sink. That’s a huge savings for a little device.
Tax Incentives for Restaurant Sustainability Efforts
Donating Food to Charity Thanks to a Good Samaritan law, donating unused food to a nonprofit organization is a protected act, meaning there is no liability as long as the food is “apparently wholesome” and donated in good faith. For restaurants that are intimidated by the number of constraints in donating food, think about this: there are federal and state tax deductions for donating food.
Any type of food business can donate unused food (or other property) up to 15 percent of net income (or taxable income for C-Corps), with a five-year carryforward.
Energy Rebates Restaurants use five to seven times more energy per square foot than other commercial buildings, and account for one-third of all electricity in the retail industry. Local utilities offer rebates for energy usage and there are federal tax incentives for using Energy Star appliances as well as energy efficient practices.
Less than 20 percent of restaurants are currently taking advantage of energy rebates, so make sure to locate where and how your restaurant can start earning money back. In the Maryland and Washington, D.C. area, the following programs are available:
- Baltimore Gas & Electric: Large Building Tune-Up Services provide incentives to cover up to 75 percent of the cost to benchmark energy usage with a per-project cap of $30,000. Applies to buildings with more than 75,000 square feet with complex HVAC systems.
- Baltimore Gas & Electric: BGE Automated Benchmarking Tool is for building owners who want to optimize energy usage.
- DC Sustainable Energy Utility: Benchmarking Help Center provides technical assistance to building owners and property managers who need to comply with D.C.’s benchmarking mandate.
- Delmarva Power, MD: The Retro-Commissioning Program for Existing Buildings helps customers determine energy usage, identify energy saving opportunities, and optimize existing systems. The facility must have higher than average electrical usage, be more than two years old, and more than 75,000 square feet of conditioned space.
- Delmarva Power, MD: Resource Advisor is an online tool to obtain electrical data for benchmarking.
- Pepco, MD: The Retro-Commissioning Program for Existing Buildings is the same as Delmarva Power.
- Pepco, MD: Resource Advisor is the same tool as Delmarva Power.
- Washington Gas, D.C.: Energy Benchmarking is for buildings with five or more separate electric meters/accounts where the owner wants consumption data for individual meters.
Click here for the full list of Energy Star Energy Efficiency Programs.
In Maryland, there are nearly 100 programs offering rebates, grants, financing, tax credits, deductions, and exemptions, and other tax incentives for investments in energy efficiency. For example, Baltimore Gas & Electric offers a per-appliance rebate for energy efficient equipment. For commercial kitchen equipment, it ranges from $75 to $1,000 per unit, plus more than a dozen other rebates.
Click here to view the entire list of tax and other incentives for energy efficiency in Maryland.
For more information about the state of the restaurant industry, view this comprehensive report from the National Restaurant Association. Don’t forget to make an appointment with your CPA soon to discuss these and any other year-end tax savings tips.