video_overlay_ets

Get Your Free 179D Analysis

Let's get started by talking to one of our Specialty Tax Experts to see how much we can save you by getting a FREE 179D analysis. 

video_overlay_ets

Get Your Free
179D Analysis

Let's get started by talking to one of our Specialty Tax Experts to see how much we can save you by getting a FREE 179D analysis. 

Home » Services » 179D Epact Tax Deduction

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?

What qualifies?

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

Who qualifies for the 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.

SystemLightingHVACBuilding EnvelopeWhole Building
2006 Revision16 2/3%16 2/3%16 2/3%50%
2008 Revision20%20%10%50%
2012 Revision25%15%10%50%
SystemLightingHVACBuilding EnvelopeWhole Building
2006 Revision16 2/3%16 2/3%16 2/3%50%
2008 Revision20%20%10%50%
2012 Revision25%15%10%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, VFD's, 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.

Properties placed in service (New Construction or Renovation) after December 31, 2005 through December 31, 2020.

  • 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
  • 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
  • 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 Ten ETS Energy Advantages:

  1. Our multi-disciplinary expertise and vast, specialized experience enable us to deliver unmatched quality and continuum of service.
  2.  We understand the IRS technical issues involved in energy tax credits, including the benefit of donating the credits from public buildings to designers.
  3.  Nationally sought, we have been asked to participate in local, regional and national conferences by making presentations to share our knowledge and expertise.
  4.  We have LEED Accredited Professionals on staff.
  5.  All of our reports are forensic, fully insured and provide audit defense.
  6.  ETS is approved by NASBA and the USGBC to provide continuing professional education (CPE and CE) on energy topics.
  7.  We are nationally published and recognized as experts.
  8.  ETS is a member of ASHRAE and USGBC.
  9.  We have been engaged by the Los Angeles Community College District to certify over 250 buildings to benefit the local stimulus.
  10.  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.

FAQ: 179D

By claiming a Section 179D deduction, taxpayers can receive as much as $1.80 per square foot if they make eciency improvements above certain energy thresholds to commercial buildings. The $1.80 per square foot deduction also now increases slightly each year to keep up with inflation.

On December 28, 2020, Section 179D was made a permanent part of the U.S. tax code in the Consolidated Appropriations Act of 2021. Now architecture, engineering, and construction companies can claim the deduction beyond 2021, so they can plan for and generate significant tax savings from construction projects for government entities.

Yes. The Section 179D deduction can be allocated to engineering, architecture, and construction entities responsible for the design components of government-owned, energy-ecient buildings.

Since the owners of these public buildings are nontaxable entities, the deduction goes to the primary designers of the buildings—the engineering, architecture, and construction entities that qualify as designers. The deduction incentivizes designers of government-owned buildings to utilize energy efficient systems and components within construction projects.

An entity is considered responsible for the building’s design components if it creates a building’s technical specifications. Any entity that installs, repairs, or maintains a property is not considered a designer for the purposes of this deduction.

No. If you claim the deduction as a designer of government-owned buildings, it won’t automatically trigger an audit from the IRS, but you must follow the right steps to determine qualification for the deduction.

The IRS Large Business and International division (LB&I) has created a Section 179D practice unit to provide a framework for designers that might be eligible to take the deduction. The Section 179D IRS practice unit has released a document that outlines the steps the IRS would take when auditing Section 179D studies.

You can claim the Section 179 deduction by commissioning a Section 179D study in the same tax year your building is placed in service. If your entity meets the requirements of the study, you can report the deduction on your current-year tax return.

The deduction can be up to $1.80 per square foot, adjusted for inflation. If you’re claiming the credit for only one system (for example, the HVAC system), you would claim the credit at $.60 per square foot. You can also do this retroactively if your company files an amended return.

Video Case Study: 179D

179D video case study

eBook: Real Estate Owner's Guide to Specialty Tax Incentives

Are you looking for a comprehensive guide to the tax deductions, tax credits, and other wealth-generating tools available to real estate investors and owners? 

Webinars: 179D

Videos: 179D

Testimonials: Our valued clients

Andrew Krowne, CPA
Andrew Krowne, CPAKrowne Certified Public Accountants
Read More
“We work with Kimberly Lochridge and her expertise and work-product is top notch. They are our #1 resource for Cost Segregation Studies for all of our clients.”
Lewis B. Kevelson, CPA
Lewis B. Kevelson, CPARachlin LLP
Read More
“I wanted to thank you for the cost segregation and energy tax work you have done for several of the firm’s clients. The results have been very favorable and have resulted in significant tax benefits. You have a very talented team, and I look forward to working with you more in the future.”
Lou J. Fuoco, CPA
Lou J. Fuoco, CPAFuoco Group, LLP
Read More
I have worked with Engineered Tax Services for approximately two years and feel that they are the best in the business in terms of providing cost segregation and energy tax services.
Previous
Next

Case Studies 179D

179D Tax Benefits

Cost Segregation Study and 179D Tax Benefits For Auto Dealership

By applying cost segregation, property investors accelerate depreciation, reduce tax liability and increase their bottom line. This aids in future benefits via abandonment, repairs, routine maintenance and …

179D Tax Benefits

179D Study for a Auto Dealership in Ontario, CA

$38,951.70 in Total Realized Tax Savings Project   Partial Benefit Square Feet Tax Benefit Building 1           HVAC $0.60 2,553 $1,531.80 …

179D Tax Benefits

Cost Segregation Study and 179D Tax Benefit for a Auto Dealership in Omaha, NE

By applying cost segregation, property investors accelerate depreciation, reduce tax liability and increase their bottom line. This aids in future benefits via abandonment, repairs, routine …

Top Articles: 179D

earth day 2022

A Message for Earth Day: How Energy Efficient Tax Credits Work to Save the Environment

Because Earth Day is Friday, April 22 this year, our concern for the environment is pretty much uppermost in our minds. We here at Engineered …

Read Full Article
aee

Leverage U.S. Tax Incentives to Maximize Energy and Cost Efficiency

International Journal of Energy Management Volume 4 | Issue 1 | 2022 Learn more about how to “Leverage U.S. Tax Incentives to Maximize Energy and …

Read Full Article
new tax laws

Take Advantage of the New Tax Laws and Boost Your Real Estate Cash Flow

You may not be aware of it, but if you’re a property owner, some changes to current tax laws could put substantial money in your …

Read Full Article