How can building owners use the EPAct §179D tax deduction?
If your company builds, owns or leases commercial buildings, and you have installed or retrofitted the property to be more energy efficient, you may be eligible to deduct all or part of the costs associated with the installation or retrofit.
The Energy Policy Act (EPAct) §179D tax deduction provides a deduction of up to $1.80 per square foot for the installation of systems that reduce the total energy and power costs by 50 percent in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1-2001 for buildings and systems placed in service before January 1, 2016, or ASHRAE 90.1-2007 for buildings and systems placed in service before January 1, 2017. Eligible building systems include the building envelope, interior lighting systems, heating, cooling, ventilation, and hot water systems.
To qualify for a full or partial deduction, the energy-efficient building property must meet the following criteria. The building:
must have been placed in service after December 31, 2005.
must be located in the United States.
installation made is part of interior lighting systems, HVAC and hot water systems or the building envelope (insulation, exterior doors, exterior windows, roofing material).
has been certified that installation will reduce total annual energy and power costs by 50 percent or more as compared to a reference building.
energy and power consumption calculations are based on IRS-approved software programs that compare the subject facility to an ASHRAE reference building.
must be certified by an IRS-qualified professional engineer or contractor licensed in the same jurisdiction as the proposed building.
The company or person that makes the expenditures for construction is generally the recipient of the §179D deduction. Usually this is the building owner, except in the case of government-owned buildings. The deduction can be claimed for projects placed in service after January 1, 2006 by filing a Form 3115.