Bob,
Here's my novice understanding of the difference. I never understood the difference until I started direct investing in oil wells. I'm not sure about any incentives a “green” facility might have. Other than free money from uncle Sam. :-)
That tax treatment with regards to $100 million in oil wells verse $100 million in a manufacturing facility have to do with timing. As an oil well investor I get to write off a significant portion of the $100 million to drill the wells whereas the $100 million in the manufacturing facility must be capitalized and written off over many years (20 to 30 years, not sure). That is a huge benefit. Basically, I don't have to start paying taxes on the oil well revenue until I've received back almost all of my investment in the oil well.
Here's some numbers from a well. It is going to cost $973,600 to drill the well. $713,600 are “intangible” cost and $260,000 are tangible. So, for the year this well is drilled, the well owners can write-off $713,600 of the cost of the well against their current income. Try and do that with a building. The remaining $260,000 is depreciated. As I'm new to this, so I'm unsure of how the $260,000 in tangible cost are taken.
Blessings,
Byron |
