Energy Efficiency Incentives

The IRS has updated its Practice Unit on the §179D Energy Efficient Commercial Buildings Deduction. While not official guidance, these units provide valuable insights into IRS audit and enforcement approaches. The latest §179D updates introduce new eligibility rules, compliance requirements, and higher deduction limits. Given the complexity of these provisions, non-compliance can increase audit risks. Engaging qualified tax professionals and engineers is crucial to ensuring compliance and maximizing deductions....

In a 2024 case, United States of America v. Oehler et al, the tax court denied the Energy Efficient Commercial Building Deduction under IRC §179D to a lighting contractor for work they performed upon public schools since it failed to meet the definition of a “designer”....

The IRS released final regulations and related guidance regarding bonus credits and deductions for taxpayers that satisfy prevailing wage and apprenticeship (PWA) requirements. The regulations apply to certain “green” energy tax provisions, such as the §179D Energy Efficient Commercial Building Deduction and the §45L Energy Efficient Home Credit, as well as others like the §48 Energy Investment Credit, which were modified or enacted by the Inflation Reduction Act of 2022....

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....

The §179D Energy Efficient Commercial Building Deduction is a federal tax incentive encouraging energy efficient construction by providing building owners and designers with substantial financial benefits. An exciting aspect in 2024 is the inflationary increase of the maximum §179D Deduction to $5.65 per square foot for projects meeting the prevailing wage and apprenticeship requirements and $1.13 per square foot for those that do not. In 2023, the maximum deduction was $5.36 per square foot and $1.07 per square foot, respectively. In 2022 and prior years, the maximum deduction ranged between $1.80 to $1.88 per square foot....