On July 27, 2017, House Representatives Dave Reichert (R-WA), Earl Blumenauer (D-OR), and Tom Reed (R-NY) introduced new legislation to permanently extend and modify the §179D Energy Efficient Commercial Building Deduction (§179D Deduction). While there has been previous legislation to extend the §179D Deduction beyond 2016, this is the first to receive bipartisan support.

CURRENT LAW

The §179D Deduction is a Federal tax incentive promoting energy efficient buildings for both new and existing structures. Further, architects, engineers, contractors, environmental consultants or energy services providers may also be eligible for the incentive on public projects. This incentive is often referred to as the EPAct Deduction after the Energy Policy Act of 2005 that created it, or as the §179D Deduction, which relates to its tax code section. Commercial building owners can take a Federal tax deduction of up to $1.80 per square foot of the building’s floor area if they install certain property (e.g., efficient lights or HVAC systems, added wall or roof insulation, etc.) that reduces energy and power costs. The §179D Deduction is allowed for both new construction and renovations completed between 2006 through 2016.

PROPOSED LAW

The proposed legislation makes §179D Deduction permanent. Further, while only public agencies are able to allocate the deduction under current law, the new law provides that non-profit organizations would be able to allocate the §179D Deduction as well.

ECONOMIC IMPACT

A recent study published by a leading regional economic modeling and policy analysis firm published a report on of the economic effects of extending the §179D Deduction and the results were astounding. The analysis shows that in addition to advancing the goal of energy independence, the §179D Deduction is an engine of economic and employment growth.

HOW WE CAN HELP

Out of all the buildings that qualify, very few taxpayers are taking the steps necessary to claim this valuable incentive. While currently expired, the §179D Deduction often provides current benefit on projects from 2016 and prior. ICS can provide a free analysis to determine if this incentive is feasible, and if so, provide the necessary third-party certifications and other assistance to benefit from it. For a free consultation, please contact an ICS Tax representative.

ABOUT ICS TAX, LLC

ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS collaborates with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides nationwide service through its Twin Cities headquarters as well as its offices located in Northeast Ohio, on the Pacific Coast, in the Tristate area, and the Dakotas.

Author: Alexander Bagne, JD, CPA, MBA, CCSP. Contributing Authors: Mike Piper, LEED AP and Kevin Johnson, LEED AP