On February 27, 2025, the IRS Large Business and International (LB&I) division released a comprehensive Practice Unit on the IRC 179D Energy Efficient Commercial Building Deduction. This document—aimed at IRS examiners—serves as both a training tool and procedural guide for audits and claims involving 179D deductions. While not official law, these Practice Units offer a revealing look at how the IRS expects taxpayers and practitioners to comply.
With this latest release, it’s clearer than ever: documentation, technical accuracy, and procedural integrity are no longer optional—they’re essential. That’s why working with experienced professionals like Walker Reid Strategies can be the deciding factor between a smooth deduction process and a costly IRS challenge.
What Is LB&I and What Are Practice Units?
The Large Business and International (LB&I) division of the IRS oversees tax compliance for corporations, partnerships, and high-wealth individuals—especially those with complex tax filings and international implications.
Practice Units are internal IRS training materials that break down key tax issues into examiner-friendly, step-by-step procedures. While not binding legal guidance, they signal how IRS agents are instructed to evaluate tax positions, and they reflect the agency’s current thinking on legal interpretation and audit procedures.
What Does the New 179D Practice Unit Cover?
This new Practice Unit offers a detailed walk-through of the entire lifecycle of an IRC 179D deduction claim, including:
- Verification of the deduction’s validity
- Requirements for third-party certifications by qualified professionals
- Allocation procedures for designers on government and tax-exempt projects
- Use of DOE-approved energy modeling software
- Compliance with prevailing wage and apprenticeship rules (post-IRA)
- Required documentation and forms, such as Form 7205 and allocation letters
- Conditions for penalties, should deductions be found inaccurate or unsupported
The Practice Unit also sets forth a 14-step examination process IRS agents may follow during an audit. This includes scrutinizing certifications, designer qualifications, contract responsibilities, and even detailed review of building plans and computer modeling outputs.
Why Compliance Isn’t Just a Best Practice—It’s a Necessity
As this Practice Unit demonstrates, IRS scrutiny of 179D deductions is intensifying. Even minor procedural missteps—such as using outdated ASHRAE standards or incomplete allocation letters—can lead to disallowance of the deduction, amended returns, or worse, penalties.
For firms involved in claiming the deduction—whether as building owners or designers—compliance isn’t just about filing a form. It’s about:
- Maintaining rigorous documentation
- Ensuring energy modeling is done by qualified professionals using approved software
- Confirming that all certification and allocation requirements are satisfied
- Understanding how PWA rules affect deduction amounts
Why Partnering with Experts Like Walker Reid Matters
With over 15 years of proven experience, Walker Reid Strategies is a nationally recognized leader in 179D consulting and certification. Our team of licensed engineers and tax professionals specialize in delivering IRS-compliant 179D studies that stand up to scrutiny—even under the new LB&I framework.
We have successfully helped thousands of clients—ranging from Fortune 500 companies to public agencies—secure and defend millions in deductions. Our services include:
- Complete 179D energy studies
- Third-party certifications that meet IRS and DOE standards
- Audit support and documentation review
- Allocation assistance for designers working on public or non-profit buildings
- Guidance on IRA-era updates including prevailing wage and apprenticeship compliance
Don’t Risk Your Deduction—Secure It with Confidence
The IRS has made it clear: accuracy, transparency, and compliance are the keys to a successful 179D claim. With the release of this new Practice Unit, there’s no room for uncertainty.
Let Walker Reid help you navigate this complex landscape with clarity and confidence.
