Now Permanent - The 179D Tax Deduction
January 8, 2021.
15 years in the making. IRS Section 179d tax deductions can NOW provide proper incentive for green building proponents, facility designers, architects, contractors, engineers, and building owners. This is LONG overdue but the benefits will be far-reaching. For many of us in the green building design industry this is a wonderful step in America's quest to incentivize green building.
Since introduced in the 2005 Energy Policy Act, the IRS Section 179D tax deduction encouraging energy efficient building design was ONLY provided with short extensions, sometimes as little as one year and often, ironically, retroactively for the prior year. Yes, retroactively, often eliminating the one thing it was designed to encourage... PLANNING AHEAD for energy efficient designs.
How does it encourage this? Through a tax deduction worth up to $1.88 per square foot (through 2022) for both private building owners and designers of municipal facilities. So while much of the industry still leans heavily on first costs, not life-cycle costs which are extremely important to consider (and I am saying this from the perspective of an independent unbiased licensed engineer), this incentive turns the tables.
For anyone interested in learning more about this deduction, feel free to reach out to us. While taxes are normally associated with CPAs, this 179D tax deduction for your facility or facility design requires the analysis and prep work of a licensed engineer* independent of the project (our certifications and reports are then provided to your CPA). Our team has been involved with 179D since its inception, is remarkably competitive, has one of the best reputations in the industry with one of the nations largest CPA firms partnered to back you up, and we are licensed in many regions across the United States.
So no more will you feel there is limited incentive to plan for energy efficiency. No more will you wonder if the 179D deduction will be renewed for your thoughtful lighting or HVAC design. No worries now when it comes to efficient building planning. Here's to a great 2021 and beyond, to some healthy incentive for green building and giving a little energy back to the health of our planet.
Keith Dohn, P.E., LEED AP, CEM
References:
* https://www.irs.gov/pub/irs-irbs/irb06-26.pdf - Requirements of an independent licensed engineer to oversee the study. Note that a licensed contractor is also an option but they must be extremely familiar with one of the qualified energy modeling programs found at https://www.energy.gov/eere/buildings/qualified-software-calculating-commercial-building-tax-deductions (something that is rather unheard of within the expertise of our wonderful licensed contractor friends, and I have many who do shrug their shoulders too at this, so this is a small misunderstanding by the writers of the IRS bulletin), and the licensed contractor must sign and certify to this. Be particularly wary of any 179d providers who have 3rd party licensed contractors sign for energy models and other work created by the 179d provider as this creates a questionable and possibly unstable situation (to put it lightly) in the event of an audit (also partly because we have understood that some companies surprise their 3rd party licensed contractors with certification slips to sign testifying that they reviewed all work involved in the project [they didn't] AFTER they complete other required site work in order to get paid by the provider for the site work). We encourage you to play it safe. Working directly with a licensed engineering firm specialized and well-experienced in 179d not only cuts out the middle man, but also keeps your analysis tied close to the solid-backing of our licensing to ensure your analysis is completed by qualified engineers... the best of both worlds for you when your budget rests on this deduction.
