Last December Congress brought back the 179D Energy Efficient Commercial Buildings Tax Deduction, which had expired in 2017, setting a new deadline of December 31, 2020. This extension means commercial building owners and tenants may be able to take advantage of this tax deduction for lighting and other energy saving projects completed in 2018, 2019 and 2020.
While you will want to check with your tax professional for how this applies to your business, here’s what we know:
What is it?
The 179D Commercial Buildings Energy Efficiency Tax Deduction primarily enables building owners to claim a tax deduction for installing qualifying systems and buildings. Tenants may be eligible if they make construction expenditures. If the system or building is installed on federal, state or local government property, the 179D Tax Deduction may be taken by the person primarily responsible for the system’s design.
The systems and buildings must have been placed in service by December 31, 2020, which is when 179D expires. Deductions are taken in the year in which systems and buildings are placed in service. The 179D Tax Deduction has been in effect since January 1, 2006.
What are the deductions?
According to the US Office of Energy Efficiency and Renewable Energy, a tax deduction of up to $1.80 per square foot is available to owners of new or existing buildings who install (1) interior lighting, (2) building envelope, or (3) heating, cooling, ventilation, or hot water systems that reduce the building’s total energy and power cost by 50% or more 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 90.1-2007 (for buildings and systems placed in service after January 1, 2016).
Building owners who complete individual projects that fall into one of the three categories (individual lighting, building envelope, or heating and cooling systems) are eligible for deductions of $0.60 per square foot by meeting certain target levels or through the interim lighting rule, which applies to properties where the installed lighting power is reduced at least 25% below ANSI/ASHRAE/IESNA Standard 90.1-2001.
How can EMC help?
The 179D Tax Deduction extension is great news for your capital projects. Contact EMC’s Incentives Team to apply it to your lighting and controls projects and for expert help in preparing the reports for IRS filings to claim your credit.