May 23, 2024 §179D Energy Efficient Commercial Building Deduction Future Reference Standards

The IRS recently released Announcement 2024-24, notifying taxpayers that Reference Standard 90.1-2022 is the applicable reference standard required under the §179D Energy Efficient Commercial Building Deduction for ‘Energy Efficient Commercial Building Property’ (EECBP) placed in service after December 31, 2028, and the construction of which did not begin by December 31, 2022.

Background

The §179D Energy Efficient Commercial Building Deduction is a tax incentive to encourage energy efficient design. It applies to both newly constructed and renovated buildings targeting HVAC and lighting systems as well as the building envelope. The deduction is available to commercial building owners as well as engineers, architects, and designers of buildings owned by government agencies and tax-exempt entities.

The Reference Standard

Claiming the §179D Deduction requires preparing an energy model that compares the actual building to a baseline standard provided by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE). The specific standard used for §179D is the ASHRAE Standard 90.1, which provides the minimum energy-efficient design requirements for most buildings. The comparable reference standard for §179D varies by year, as summarized in the table below.

Date EECBP Placed In Service	Applicable Reference Standard
Before 1/1/2015	Reference Standard 90.1-2001
After 12/31/2014 and before 1/1/2027	Reference Standard 90.1-2007
After 12/31/2026 and before 1/1/2029	Reference Standard 90.1-2019
After 12/31/2028	Reference Standard 90.1-2022

Qualifying buildings for §179D will be significantly harder after 2026 when the Reference Standard increases to ASHRAE 90.1-2019. It will then become more stringent in 2029 when the standard changes to 90.1-2022, which was designed to save 8.9% in national energy cost compared to 90.1-2019.

Talk to the Experts

At ICS Tax, our experts include CPAs, attorneys and Professional Engineers licensed in all states to perform energy modeling, building inspections, and processing certificates of compliance. Our service includes obtaining allocation letters from public and tax-exempt building owners in addition to free audit support on all projects. Contact us to learn more about the IRS Announcement 2024-24 and to secure the §179D Energy Efficient Commercial Building Deduction.