Section 179D Status Update

Many of our clients have requested updates on the status of IRS Code Section 179D, the Energy Efficient Commercial Building Deduction. This deduction which expired on December 31, 2016 has provided significant value to commercial property owners, and the Architectural, Engineering, and Contractor (AEC) Industry.

Here at ETS we have been heavily involved with legislation to encourage the Trump administration to consider the effects of a large Tax Reform Bill and its impact on the Real Estate Industry. 179D is a large component on the proposed change.

This month we have seen a new proposal to enhance and extend the Section 179D deduction, and are hopeful that it will be heard by the house and senate this year. Some of the proposed changes include:

  1. Strengthening and Modernizing Section 179D: 1 which would increase the value of the deduction to $3.00 per square foot from $1.80, increase the applicable energy efficiency standards, make it available to support improvements to existing as well as new buildings, and extend the deduction.
  2. Extension of Current Law Section 179D plus Expansion to Non-Profits and Tribal Governments: 2 modeled on 2015 legislation developed by the Senate Finance Committee under Chairman Orrin Hatch (R-UT), which would extend the deduction, expand availability of the deduction to nonprofit organizations and tribal governments and increase the applicable energy efficiency standards.
  3. Extension of Current Law Section 179D: 3 modeled on the two-year extension of current law enacted as part of the Protecting Americans from Tax Hikes (“PATH”) Act of 2015. (Excerpt from REMI proposal May, 2017)

We are encouraged to see the movement on this bill and expect to see action prior to the end of 2017.

Section 179D currently offer $1.80 per square foot for property owners meeting the energy efficient building standards through new construction, or retrofits of existing properties. The deduction has also been widely applied in the AEC industry for the design of energy efficient buildings that are publicly funded, offering substantial tax savings to an industry hard-hit by the economic downturn of 2008.

If you would like to receive notifications of this pending change, or other tax related changes, please join our newsletter, blog, or follow us on LinkedIn. If you have questions relating to tax incentives please contact Heidi Henderson at Engineered Tax Services or your current point of contact within ETS.


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