179D ENERGY EFFICIENCY STUDY

Over the past several years, Congress and recent administrations have placed a huge emphasis on green building and energy independence  initiatives—and none have been more valuable to designers and builders than the Energy-Efficient Commercial Building Deduction (more commonly known as section 179D of the tax code).

The section 179D tax deduction was originally passed by Congress as part of the Energy Policy Act of 2005 in direct response to broader energy usage and independence concerns. According to data released by the U.S. Department of Energy, buildings are responsible for 73 percent of all electricity consumption in the U.S., with about half of that coming from commercial buildings.

In an effort to curb this trend and encourage broader energy efficiency, section 179D allows qualifying building owners and businesses to receive an up to $1.80 per square foot tax deduction for their energy-efficient buildings placed into service during all open tax years (typically the “look back period” for buildings is three years, with some notable exceptions). Any accrued tax deductions from these buildings can be carried-back two tax years or can be carried-forward for up to 20 years.

For a building to qualify for 179D, the energy based improvements must be made to the HVAC or interior lighting systems or to the building’s envelope. Additionally, the enhancements to these systems must surpass ASHRAE 2001 standards for buildings placed into service before 2016—and ASHRAE 2007 standards thereafter.

179D TAX SAVINGS:. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$95,000

179D is available to building owners and lessees that make eligible energy-efficient improvements to their commercial buildings, which can include:

•  Retail Buildings
• Office Buildings
• Industrial Buildings
• Apartment Buildings (at least 4 stories)
• Warehouses

In addition, eligible designers and builders (such as architects, engineers, contractors, environmental consultants and energy service providers) can also qualify for 179D under a special rule for public property. In this case, 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.

179D TAX SAVINGS:. . . . . . . . . . . . . . . . . . . . . . . . . . . .$120,000