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179D ENERGY TAX DEDUCTION

Energy efficient tax deduction for commercial buildings.

The 179D Energy Policy Act certification calculates the tax deduction achieved from the installation of energy-efficient assets, including HVAC, building envelope, and lighting. The building may qualify for up to $1.80 per square foot ($0.60 per square foot for each system); however, partial deductions are allowed for lighting.  The deduction is available for newly constructed or energy renovated commercial buildings as well as apartment buildings 4 stories or more. Commercial property owners who pay taxes can claim the benefit with the exception of government-owned buildings where the tax deduction may be allocated to the designer.


ETS has provided thousands of Energy Policy Act tax certifications since 2005. Handling over 100 certifications every month, we have perfected the process by working closely with the IRS. Our precise documentation meets and exceeds the standards required by the Department of Energy and the IRS and has consistently withstood the toughest scrutiny.

Why Choose Engineered Tax Services for Your Energy Certification?

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How much is the 179D Energy Policy Act Deduction?

  • Maximum Deduction – $1.80 per square foot = 50% reduction in total annual energy and power costs (compared to a reference building that meets the minimum requirements of ASHRAE Standard 90.1-2001) not to exceed the amount equal to the cost of energy efficient commercial property placed in service during the taxable year.
  • Partial Deduction – $0.60 per square foot  / per system for reduction of energy consumption through building envelope, HVAC, and Lighting
  • Partial Deduction (interim lighting) From  $0.30 to  $0.60 per square foot = 25 – 40% reduction in lighting power density (50% in the case of warehouses)

What qualifies?

  • Commercial buildings (any size)
  • Apartments, four or more stories, for lease
  • Commercial energy renovations

Who qualifies for the deduction? (Click here to see if you qualify)

  • Building owner at the time of building improvements
  • Public Buildings – The owner may allocate the deduction to the designer (architect, engineer, contractor, environmental consultant, or energy services provider) for the taxable year that includes the date on which the property is placed in service

What are the Requirements?

Must reduce total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems by 50%. However, partial deductions are allowed. Energy simulation is required to justify the deduction; inspection and testing must be completed by a qualified engineer or contractor registered in the jurisdiction. A breakdown of the percentage of energy reduction per system is in the chart below.

Table 1: 179D Interim Rules
System: Lighting HVAC Building Envelope Whole Building
2006 Revision 16 2/3% 16 2/3% 16 2/3% 50%
2008 Revision 20% 20% 10% 50%
2012 Revision 25% 15% 10% 50%

Looking for Qualifying Specifications?

Free Downlaod: 179D Pre-Qualification Checklist

Lighting
Lighting is the only component that can partially qualify for the deduction. Depending on the reduction of Lighting Power Density (LPDs), the owner/designer can qualify from $0.30 – $0.60 per square foot. Lighting is dependent on square footage, building type, bi-level switching, and energy consumption. There are also multiple ways for qualifying a property based on the code revisions. Please contact us to provide a complimentary energy review of your project.

HVAC
A project must have new equipment installed which can include, Air or Water Cooled Chillers, Rooftop Units, PTAC Units, Geothermal Systems, or High-Efficiency Unit Heaters. Certain options will enhance your property’s likelihood of qualifying. These would include, VAV systems, VFD’s, economizers, Energy Recovery Ventilation, and High SEER or EER Ratings.

Building Envelope
The building envelope can be the most difficult system to qualify in a renovation/retrofit. Typically if at least two of these items have been upgraded it may qualify. These systems include: Windows, Roofing Improvements, Window film or tint, Doors, and Wall-Roof or Floor Insulation.

What is the time frame for eligibility?

Properties placed in service (New Construction or Renovation) after December 31, 2005 through December 31, 2016.

What is needed from the builder?

  • Current full set of architectural plans that include all specifications
  • Energy compliance documents for lighting, HVAC, and envelope (Title 24 or IECC)
  • EnergyPro File – computer file used to generate T-24 documentation
  • A contact person and phone number

What do I get from a 179D review?

  • Federal Tax Deduction (FTD) certificate package – requires documentation for deduction
  • Review of existing T-24 or IECC to verify compliance with current code requirements
  • Review of the building’s lighting, HVAC, and envelope systems for FTD qualification
  • Contract for analysis and certification documentation

How do I claim the deduction?

  • The deduction is taken on the “Other Deductions” line of the taxpayer’s return
  • Tax returns may be amended going back three consecutive tax years

ETS will provide you with a summary of compliance with a Department of Energy certified software and engineer or contractor verification documentation. According to your preference, ETS will provide all documentation in either paper or electronic format.

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