Section 179D Energy-Efficient Commercial Buildings Deduction

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BACKGROUND

Since 2005, Section 179D of the Internal Revenue Code has provided an income tax deduction related to the installation of energy-efficient components into commercial buildings, and focuses on 3 systems: HVAC, Building Envelope and Interior Lighting.

The installations may qualify for up to $1.80 per square foot of deductions (60 cents per square foot for each system); however, partial deductions are allowed for lighting systems.

The deduction is available for newly constructed or energy upgraded commercial buildings, including apartment buildings 4 stories or more.

Congress recently extended the Section 179D Deduction for buildings placed in service through December 31, 2020 (it was previously effective for buildings placed in service through December 31, 2017).

WHO QUALIFIES?

The deduction is available to building owners and lessees that make eligible energy-efficient improvements to their commercial buildings, which can include: retail, office, industrial, apartment, warehouse and other buildings.

In addition, eligible designers and builders (such as architects, engineers, contractors, environmental consultants and energy service providers) can also qualify for the deduction under a special rule for public property. Designers and builders that have enhanced the energy efficiency of a new government-owned building or made energy-saving renovations and retrofits to existing government-owned buildings are able to claim the deduction. As government entities do not traditionally pay tax, the owners of these buildings can allocate the accrued tax savings to the business responsible for the energy-saving enhancements.

Government-owned buildings at the federal, state or local level can potentially qualify for this special allocation rule, including:

  • Airports
  • Military bases
  • Courthouses

  • Libraries
  • Schools
  • Government offices

  • Town Halls
  • State Universities
  • Institutions

  • Post Offices
  • Transportation facilities
  • And others

OUR APPROACH

Our approach consists of a thorough review of the qualifying energy efficient components of the respective facility. We perform the following steps to accomplish this objective.

  • Review the total capitalized cost of the project, including fees and other indirect costs;
  • Investigate and analyze all related cost data;
  • Review all available blueprints, lighting schematics, HVAC specifications and thermal protection requirements;
  • Visit the project site to verify that energy efficiency requirements have been met and/or exceeded;
    • Verification is achieved thru field instrumentation and visual inspection
  • Calculate the amount of the Section 179D deduction;
  • For publicly-owned buildings, procure an allocation letter by a representative at the building; and
  • Issue a certification letter that the building meets or exceeds ASHRAE Standards.