By David Diaz, Managing Partner at Walker Reid Strategies
Let’s talk about something that’s been bothering me in the energy tax incentive space: success-based fees. If you’re a building owner, tax professional, or a designer/ESCO working on tax-exempt buildings, you need to hear this.
Success-based fees in the §179D deduction process are, in my opinion, nothing more than a clever way to overcharge taxpayers who don’t fully understand the work involved. And in an industry where qualification for these deductions is not uncertain, this pricing model is completely unnecessary—and frankly, unethical.
What Are “Success-Based” Fees?
Success-based fees, also called contingent fees, are when a service provider charges you a percentage of your tax benefit—but only if you qualify. It sounds enticing at first:
“If we don’t get you the deduction, you don’t pay anything!”
“No risk—just share a percentage of your tax savings with us.”
But here’s the issue: there is no real uncertainty in qualifying for §179D if a competent firm does the analysis upfront. A reputable provider can tell you before any certification work begins whether you meet the requirements. So why would anyone charge based on “success” when the outcome is already predictable?
The answer is simple: It’s a way to charge an inflated fee while making it sound like a benefit to you.
The “No Upfront Cost” Trap
I’ve had clients come to us after engaging with contingent-fee providers, thinking they were getting a deal. The reality? They ended up paying two, three, even six times more than they should have for the same certification.
Success-based firms justify their pricing by acting as if qualifying for 179D is some uncertain, high-risk process. It’s not.
For a properly designed energy-efficient building, qualification isn’t a guessing game. There’s no lobbying for approval or hoping for a positive ruling from the IRS. The process involves technical modeling and documentation. If the building meets the required energy savings, it qualifies—period.
Reputable firms (like ours) evaluate feasibility upfront, at no cost or for a nominal fee. If your project doesn’t qualify, we tell you before any further work is done. There’s no need for a success fee model because there’s no gamble involved.
Circular 230 Compliance Concerns
Now, let’s talk about compliance. Circular 230 sets ethical and legal standards for tax professionals. In most cases, it prohibits contingent fees for tax deductions and credits. Why? Because tying fees to the tax outcome creates conflicts of interest and can raise IRS scrutiny.
If a provider is a CPA or tax attorney, they generally can’t charge a contingent fee for 179D. Some success-based firms try to sidestep this by claiming, “We’re engineers, not tax advisors.” But that doesn’t mean the IRS won’t take issue with it during an audit.
In fact, IRS examiners often request copies of service provider contracts during audits. If they see a percentage-based fee, it can raise red flags and increase scrutiny. Why? Because it makes it look like the consultant was overly confident in securing the deduction—which could indicate aggressive or questionable claims.
The last thing you want is an auditor asking, “Why did you pay 10% of your tax deduction to a consultant?” It distracts from the legitimacy of your claim and puts a target on your back.
No IRS or DOE Approval Needed – So Why Pay for “Success”?
Another reason contingent fees don’t belong in 179D certifications is that there’s no government approval process involved.
The IRS does not pre-approve your deduction.
The Department of Energy does not sign off on your qualification.
If your project meets the required energy efficiency thresholds—and a properly credentialed professional certifies it—you claim the deduction. That’s it.
So why would you pay a “success fee” as if there’s some uncertain approval process? There isn’t.
Let’s Do the Math – Success Fees Are Highway Robbery
This is where it really gets frustrating. Some success-based firms charge 6% to 12% of the 179D deduction amount. That might not sound bad—until you look at the actual numbers.
Let’s say your project qualifies for $5.50 per square foot in 179D deductions:
At 6%, you’re paying $0.33 per square foot.
At 12%, you’re paying $0.66 per square foot.
That’s 300% to 600% higher than what a reasonable fixed-fee provider would charge for the same or better certification.
To put it plainly: you’re being ripped off.
A respectable firm charges fair, transparent fees that reflect the actual work done—not an arbitrary percentage of your tax benefit.
Why Reputable Firms Don’t Use Success Fees
At Walker Reid, and among other reputable firms in the industry, we charge a fair fixed fee based on the work required—not on how much tax deduction you’re getting. Why?
Ethics and Compliance: We keep our certifications independent and unbiased.
Circular 230 Standards: We follow tax professional best practices.
No Unnecessary IRS Scrutiny: We don’t give the IRS any reason to question your claim.
Better Value for You: We charge for the actual work, not a percentage of your savings.
And most importantly, we provide better service. When a firm is charging a percentage, they don’t have an incentive to provide a thorough, personalized experience. They just want to certify as many projects as possible to maximize their cut.
How to Avoid Getting Overcharged
If you’re looking to claim 179D, here’s how to ensure you’re getting fair pricing:
✔ Ask for an upfront feasibility review. A good firm can tell you whether you qualify without charging you a percentage-based fee.
✔ Get multiple quotes. Compare flat-fee pricing to contingent-fee pricing and do the math.
✔ Look for firms that follow Circular 230 best practices. If they’re offering success-based fees, they probably don’t.
✔ Read the contract. Look for hidden fees and percentage-based pricing buried in the fine print.
✔ Consult your tax professional. A reputable CPA will steer you away from contingent-fee arrangements.
Bottom Line: Keep More of Your Tax Savings
The §179D deduction is meant to reward energy-efficient buildings—not to line the pockets of consultants using questionable pricing models.
Success-based fees are a gimmick that allows firms to charge far more than their work is worth. Don’t fall for it. Work with a provider that charges fairly, follows IRS best practices, and actually has your best interests in mind.
If you’re looking for transparent, fixed-fee pricing for 179D certifications, reach out. Let’s make sure your tax savings stay where they belong—with you.
