Some promising news for responsible building owners, home builders, and those who design energy efficient public buildings…the “Moving Forward Act” seeks to modify and extend the §179D Energy Efficient Commercial Building Deduction (§179D Deduction) and the §45L Energy Efficient Home Credit (§45L Credit).  The Act would extend these incentives through December 31, 2025, increase their benefits, and modify the energy saving requirements. This new legislation has just passed the House of Representatives and is awaiting Senate approval before it can make its way to the President for signature. The full Act is below:

THE §179D ENERGY EFFICIENT COMMERCIAL BUILDING DEDUCTION

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 applies to both new construction and renovations completed between 2006 through 2020.

Under the Moving Forward Act, the §179D Deduction would be extended through the end of 2025. The maximum amount of the deduction would be increased from $1.80 to $3.00 and subsequently increased by an inflation factor. The qualification standards would be modified as well.

THE §45L ENERGY EFFICIENT HOME CREDIT

The §45L Credit allows eligible developers to claim a $2,000 tax credit for each newly constructed or substantially reconstructed qualifying residence. It applies to single family homes, apartments, condominiums, assisted living homes, student housing, and other types of residences. The residences must not be more than three stories above grade in height. Like the §179D Deduction, this incentive is set to expire in 2020.

The Moving Forward Act would extend the §45L Credit through the end of 2025. The amount of the credit would be increased to from $2,000 to $2,500. The energy efficiency thresholds to qualify would be changed as well.

HOW WE CAN HELP

Taxpayers with construction projects completed prior to December 31, 2020 may benefit under current tax law. Out of all the buildings and homes that qualify for these incentives, very few taxpayers are taking the steps necessary to claim them. ICS can provide a free analysis to determine if these incentives are 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.

Authors: Alexander Bagne, JD, CPA, MBA, CCSP; Travis Cansler

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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 offices throughout the country.