If Energy Efficient Commercial Building property was placed in service between 1/1/2006 and 12/31/2022, it would be considered a legacy 179D opportunity, Section 179D is an engineered-based tax incentive available for the reduction of energy and power costs in commercial buildings. The incentive was initially enacted under the 2005 Energy Policy Act (EPACT) and allows for a tax deduction of up to $1.80 per square foot. The 179D Tax Deduction specifically applies to those commercial buildings that notably reduce their interior lighting energy costs, as well as heating, cooling, and building envelope. the projects may qualify for the whole building deduction of $1.80/sf (plus inflation adjustments when applicable) or a partial deduction of $0.60 for HVAC, $0.60 for building envelope, and $0.60 for Lighting systems. (plus inflation adjustments when applicable).

• Commercial Buildings of any type
• Apartment Buildings of 4 Stories or more
• Government-owned buildings
• Parking Garages (prior to 1/1/2023)
• All Tax Exempt owned commercial buildings (Placed in service after 1/1/2023)

The §179D tax incentive was developed with a technology neutral approach. In general, new construction as well as retrofits with improvements made in a building’s lighting, HVAC, or envelope systems which reduce energy consumption and can be properly modeled by one of the DOE approved software, can qualify. These include energy management systems, VFD’s,  heat recovery, motion sensors and many others.

The IRS has provided guidance on the requirements needed to satisfy a Section §179D Deduction. Walker Reid Strategies will provide all the documentation meeting and exceeding these requirements. 

YES! Starting after 1/1/2023 any tax-exempt entity that has a commercial building eligible for a section §179D Tax Deduction may allocate the deduction to the designer that is primarily responsible for the design of the energy-efficient commercial building property.

Lighting systems eligible for a §179D deduction are specific to the interior of buildings only.

Although many states do allow for federal expensing and depreciation provisions such as §179D, the current treatment should be verified on a state by state basis.

It is possible that your CPA has taken other deductions but not necessarily the §179D Tax Deduction. The deduction is an engineering based approach that CPA’s typically are not qualified to perform in their day to day functions. We would be happy to discuss this further with your CPA and provide any information that your CPA may want regarding the deduction.

This depends on what year the energy-efficient commercial buildings property is placed into service.

From 1/1/2006 to 12/31/2022 the max available section §179D Tax Deduction is limited to $1.80/sf (plus inflation adjustments if applicable)

After 1/1/2023 the §179D is enhanced to a maximum of $5.00/sf (plus inflation adjustments if applicable)

Starting in 2023, privately owned commercial buildings can recertify the buildings for section §179D Tax Deduction once every 3 years (if new energy-efficient commercial building property is installed on the building) and tax-exempt entities may recertify the building once every 4 years. (if new energy-efficient commercial building property is installed on the building)

For commercial building owners, a Change in Accounting Method Form 3115 may be used to take a §179D deduction in the current year’s tax filing to avoid amending the previous year’s tax returns.

For designers/contractors of government-owned and tax-exempt buildings, it is required to amend tax returns for projects that were placed into service in a previous year.

In order to benefit from the §179D tax incentive, the building owner must have installed property as part of a plan designed to reduce the total annual energy and power costs. Simply purchasing an existing energy efficient building will not meet these requirements.

Contact Walker Reid Strategies today and we will get you started. After a brief conversation determining viability, a §179D adviser will initiate the process for a full energy and financial benefit analysis.  

A typical time frame for a full §179D Study is 4-6 weeks. Projects with full sets of design documents and immediate access for inspections will often result in shorter turn around times. For projects with shorter deadlines, please contact us for an assessment.

Walker Reid Strategies provides full audit defense through appeals, we can explain our audit policy in more detail during our initial consultation.

Walker Reid Strategies is committed to limiting our clients internal efforts and costs when pursuing a §179D certification. Any project information which cannot be effortlessly provided will be field gathered during the site inspection.

Government and Tax Exempt building owners are required to reduce the basis of the energy-efficient commercial building property by the amount of the §179D deduction allocated. Because it is not typical for a state agency to file an income tax return or to keep tax depreciation records, governments should not be at all affected by adjusting tax basis in the property. GAAP books and records are not affected by a tax basis reduction.

IRS guidance simply states that an “authorized representative of the owner of the government-owned building” must sign the declaration of the allocation letter. Typically, this would be any personnel familiar with the project and having the ability to verify information such as completion date and cost of the project.