179D Epact Tax Deduction
Now Permanent! Read full details here.
Under the Consolidated Appropriation Act of 2021, the 179D Commercial Buildings Tax Deduction, also known as the 179D EPACT Tax Deduction, was made permanent. Note: the tax deduction now compares to the building standard from two years prior to the start of construction, rather than ASHRAE 2009 standards.
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 four 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.
Note: The 179D Energy Policy Act was retroactively extended in 2019 to include 2018 and 2019.
ETS has provided thousands of Energy Policy Act tax certifications since 2005. By managing 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 it has consistently withstood the toughest scrutiny.
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, 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 for the 179D tax deduction?
- Commercial buildings (any size)
- Apartments, four or more stories, for lease
- Commercial energy renovations
Who qualifies for the 179D tax deduction?
- 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.
|2006 Revision||16 2/3%||16 2/3%||16 2/3%||50%|
Looking for Qualifying Specifications?
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.
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, VFDs, economizers, energy recovery ventilation, and high-SEER or EER ratings.
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 179D tax deduction eligibility?
- The 179D tax deduction is now permanent for properties placed in service (both new construction and renovation) after December 31, 2005.
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 179D tax 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.
Why Use Engineered Tax Services for Your Energy Certification?
Since the Energy Policy Act of 2005 (EPACT) was enacted, ETS has been at the forefront of the energy accreditation and related tax benefits field. We speak regularly before national and regional energy groups and work closely with the IRS on evolving energy-related issues. We have been retained by some of the country's leading CPA firms to provide services to their clients. In addition, we have worked directly with several Fortune 500 companies as well as some highly recognizable brands, including Google, IKEA, MSNBC. Our technical expertise in energy accreditation is unmatched.
We effectively marry the sciences of engineering and accounting through our utilization of exceptional tax and accounting professionals as well as licensed engineers.
ETS engineering professionals have over 100 years of combined experience in energy modeling. The ETS engagement team includes multidisciplinary professionals such as professional engineers, LEED accredited professionals, CPAs and architectural professionals. Our collaborative and proactive approach has made us the leading provider of energy tax services. Through strategic partnerships, we work in tandem with CPA firms, architectural firms, contractors and attorneys.
We perform engineering-based specialty tax services for firms of all sizes around the country, resulting in considerable tax savings for their clients. Through a partnership with ETS, you'll benefit from having professional, licensed engineers who possess the specific expertise to perform accurate, thorough and compliant engineering-based specialty tax services—with little or no capital investment to your firm.
Top 10 ETS Energy Tax Credit Advantages:
- Our multidisciplinary expertise and vast, specialized experience enable us to deliver unmatched quality and continuum of service.
- We understand the IRS technical issues involved in energy tax credits, including the benefit of donating the credits from public buildings to designers.
- Nationally sought, we have been asked to participate in local, regional and national conferences by making presentations to share our knowledge and expertise.
- We have LEED accredited professionals on staff.
- All of our reports are forensic, fully insured and provide audit defense.
- ETS is approved by NASBA and the USGBC to provide continuing professional education (CPE and CE) on energy topics.
- We are nationally published and recognized as experts.
- ETS is a member of ASHRAE and USGBC.
- We have been engaged by the Los Angeles Community College District to certify over 250 buildings to benefit the local stimulus.
- We have worked with Fortune 500 companies, Top 100-ranked accounting firms, national real estate firms, international architects and many of the top lighting firms in the country.
Ask us about our Hidden Treasures program, an innovative assessment system designed to boost your profitability based on your real estate investments. Please ask us how we are helping CPA firms, attorneys, architects, contractors, real estate investors, property owners and tenants benefit from their real estate investments in such areas as:
- Cost Segregation Studies
- Historical Tax Credits
- Historical Appraisals
- New Market Tax Credits
- 179D EPAct Tax Deductions
- Energy Audits
- DEIRA Insurance
- Abandonment Studies
- Enterprise Zone Tax Credits
- Research & Development Tax Credits
- BrownField Tax Credits
- Green Leasing
Recent 179D Case Studies
To learn more about how ETS can assist you with 179D tax deduction services, please complete the form below or contact us at (800) 236-6519.