As part of the Energy Policy Act of 2005, the Commercial Building or 179D Deduction encourages increased energy efficiency in new and remodeled buildings by providing an immediate tax reduction for costs incurred to increase the energy efficiency of the building. The deduction is $1.80 per square foot of building space.
To qualify, the building must achieve a reduction in energy cost of at least 50% in total annual energy and power costs. A partial deduction is also available up to $.60 per square foot that do not meet the 50% savings threshold overall. In these instances, the individual system for which the deduction was claimed must meet various reductions in energy use.
The energy savings are measured by interior lighting, heating, cooling, ventilation, hot water systems, or building envelope. Qualifying buildings include new construction commercial buildings, residential rental buildings of four stories or more, and renovations/retrofits built in the US.
The deduction is available to the building owner at the time it is constructed or when the renovation is made. Renovations placed in service after December 31, 2015 and before January 1, 2017 are available. For property placed in prior years, a taxpayer may take the deduction on an amended return or possibly using form 3115, Application for Change in Accounting Method.
These energy savings must be certified by a qualified engineer or contractor who is licensed in the jurisdiction where the property is located. These savings must be calculated using qualified computer software.
Interested in learning how your facility can qualify for this tax deduction? BCS Performance Solutions are the experts in energy efficiency and saving you money.