Op-Ed: Architects and the 179D Energy Efficient Tax Deduction

The AIA’s managing director of government relations and outreach argues for an extension of this tax deduction.

By Andrew Goldberg

As previously reported, the Energy Efficient Commercial Building Tax Deduction (Section 179D) is scheduled to expire at the end of 2013. In this Op-Ed, Andrew Goldberg, the AIA’s Managing Director of Government Relations and Outreach, examines what this deduction has meant for architects and argues for an extension.

With faith in government at historic lows, it’s tempting to presume that any program Congress creates will turn out to be an ineffective mess. That’s certainly true some of the time. But when a government program achieves its goals, even partially, it’s important to sit up and take notice.

In 2005, Congress created the Energy Efficient Commercial Building Tax Deduction, commonly known as Section 179D. The idea is simple: a building owner can reduce his or her tax burden by making a new or renovated building more energy efficient. It sets fairly high energy-saving standards so that owners have to commit to serious reductions. And it uses a performance path to get there, allowing architects to use innovative design solutions.

What’s more, Congress added in a provision to help public building owners make their facilities greener. Since governments don’t pay taxes, the program allows agencies to give the tax break to the designer. The AIA worked to convince the IRS to issue guidelines to make sure architects were eligible.

The result? Many architecture firms have received a sizable reduction in their taxes, all while designing buildings that use less energy and are good for the environment. It has helped firms of all sizes. Says Mark Pape, principal and director of tax for RTKL: “We have taken advantage of 179D deductions on several government projects, which has provided us a tremendous incentive to go above and beyond in designing energy efficient property. 179D has really made a difference in our bottom line and is a great tool for financing energy efficient projects.”

Let’s be clear: 179D is far from perfect. Some of its rules are very complex; there are some building projects where it is not cost-effective; and technical glitches in the tax code mean that some firms do not get the full benefit.

But at a time when the design and construction industry has faced significant economic hardship and building owners are confronting higher energy bills, 179D has made a positive difference.

Unfortunately, what Congress giveth it also might take away. You see, 179D has an expiration date: December 31, 2013. Buildings placed into service after that date can’t take advantage of the deduction unless Congress extends the deadline. Some have argued that because 179D is not perfect, it should be scrapped altogether. Others have proposed ambitious reforms with high price tags. If Congress does not find a way forward, come 2014 a successful program that helps architects design sustainably will be gone, possibly forever.

A far better route would be to keep what works, fix what doesn’t work, and make sure that building owners keep having incentives to push the envelope on energy efficiency.

There may be a good deal wrong with Washington these days. Let’s make sure we don’t lose something that’s right.

Andrew Goldberg is managing director of government relations and outreach for the American Institute of Architects.


Engineered Tax Services

Engineered Tax Services

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