A recently enacted spending package extended the 179D deduction, among other deductions and credits that had originally expired at the end of 2017.
What Is Section 179D?
179D is a section of the tax code that provides a deduction of up to $1.80 per square foot for energy efficient commercial building property (EECBP). Property qualified for the deduction includes interior lighting, the building envelope and mechanical systems. The deduction is now available through Dec. 31, 2020 for both privately owned and government-owned buildings.
Learn more about 179D and its impact.
How much is the deduction worth?
The maximum deduction allowable under 179D is $1.80 per square foot of building space. As an example, a 100,000 square foot building may qualify for up to a $180,000 deduction under 179D. The deduction is most beneficial for projects of 50,000 square feet or more.
Who Can Take Advantage of the Deduction?
The “designer” of government-owned EECBP is eligible for the deduction. A designer creates the technical specifications for installation of EECBP and could include architects, engineers, general contractors and subcontractors. However, a person that merely installs, repairs, or maintains the property is not a designer. If you were the designer for the EECBP of a government-owned facility placed in service in an open tax year (typically the last three), you could benefit from the Section 179D deduction.
A Recent Example
We worked with an architectural firm who designed the EECBP for several government-owned buildings to obtain the Section 179D deduction, spanning the prior three tax years. A total of 799,000 square feet were analyzed, netting them a $872,400 deduction.
Who Can Take Advantage of the Section 179D Certification?
Properties placed in service between December 31, 2005, through December 31, 2020, could benefit from the Section 179D deduction. The deduction is available for building owners as well as tenants who paid for the energy efficient improvements. The deduction is typically most beneficial for buildings that are 50,000 square feet or greater.
A Recent Example
We worked with a manufacturing company to obtain the Section 179D deduction. The manufacturing facility underwent an 183,000 square foot expansion, which included installation of both energy efficient HVAC and lighting. By gathering the necessary information and completing the certification, the client received over $325,000 in deductions on their current year tax return.
How is the deduction obtained?
To claim the 179D deduction, energy savings must be certified by an unrelated “qualified individual” who is a contractor or engineer licensed in the same jurisdiction as the building. Eide Bailly’s energy incentives team includes Professional Engineers who are able to certify these deductions. A site visit of the property is required, as well as energy modeling using software approved by the Department of Energy.
Get the tax savings you deserve with the 179D credit.