179D Tax Deduction and tax extenders during Lame Duck

A message to our clients and interested parties regarding the extension of 179D Tax Deduction

As we approach the end of 2014 with Tax extenders still in limbo, we see the same question asked over and over again…is Congress going to get a Tax Extenders Bill done? Currently the real answer is that no one really knows, we can all speculate and everyone is calling for extenders to get passed in this lame duck session, the business community and even the IRS are calling for extenders to pass sooner rather than later. Almost daily Congress and their staff are coming out with statements regarding what they expect or would like to see happen with tax extenders, but in reality with our current political climate no one can truly be sure of anything.

If you are reading this blog odds are you are only concerned with the tax extenders that are related to energy, like the 179D Tax Deduction for energy efficient commercial buildings, the 45L Tax Credit and possibly even the R&D Tax Credit.  Though there is much uncertainty, this is what we expect and have been able to determine from our lobbying efforts. We have seen overwhelming support for tax extenders and though we are as skeptical as the next guy, we do still expect to see some version of the extenders bill to pass before the end of the year or as a worst case scenario early in 2015. Our firm has been involved in multiple fly-ins recently to Congress, and we have seen overwhelming support for tax extenders in both the senate and the house. We expect that the tax extenders package that will be generated in the House may be a correct date change of mostly all expired tax provisions.

What should you do to prepare for the 179D Tax Deduction to get extended?

For Architects, Engineers, Contractors, ESCO’s looking to use 179D Tax Deductions on Government-owned buildings as a tax strategy in 2014 and 2015 you should consider the following;

Allocation letters

If it’s not already part of your process, you should incorporate getting the allocation letters on all of your projects as soon as you can from the government building owners. I cannot stress enough how important it is to get the allocation letters in your possession even before we see the tax extenders go through. As the popularity of the 179D Tax Deduction is increased, we have seen a skyrocketing number of Allocation disputes by contractors and designers at all levels of the project. Therefore taking the time now to secure the allocation letters is the safest bet.

Increase Energy Efficiency Design Standards 

Starting in 2015 you may want to consider increasing you energy efficiency standards on projects whenever possible and the budget allows for it, you don’t have to do this alone, feel free to involve Walker Reid Strategies nearly on  in your projects development, so that we can advise at what potential qualification level you are currently at and what changes could be made to get possibly you to the next level.

Be prepared to file an extension on your tax returns

If you file on extension either way then there is no need to worry, but if you are used to filing on time be prepared to have possibly to file an extension on your business and personal returns if you are planning on taking advantage of 179D Tax Deduction. I know that this may be a shock to many of our clients who are used to working with our firm, considering that we will bend over backward to make sure that we always meet tax filing deadlines. Nonetheless, we expect delays with items that are sometimes out of our control like getting allocation letters signed in a short span of time and even gaining inspection access and clearances to public projects. These possible delays may force some clients to either file their tax returns on an extension or possibly file on time but have to amend returns in the future once straggler projects get completed. I recommend that you communicate with your tax professionals as to these potential deadline delays and also make sure that your shareholders are aware that this may be a potential issue going into tax season. We will always do everything within in our power to get your projects completed in a timely fashion and will communicate any potential delays that we see. Most importantly taking action to get your 179D Projects going sooner rather than later is going to help keep the process moving along smoothly.

Claim past 179D opportunities

You never know what is going actually to happen with the extension of 179D Tax Deduction so you may want to consider claiming opportunities for past 179D Tax Deductions for open amendable tax years (Typically 2011 through 2013). Going back and claiming these deductions is easy to do and it usually simply requires you to compile a complete list of the projects and we will carry the remainder of the load, keep in mind that you can typically amend tax returns going back 3 years from the date of filing so odds are you likely have unclaimed deductions sitting in your project list, bring us in on a discussion with your tax professional so we can discuss the feasibility of claiming these deductions before they are gone.

Don’t leave 179D Tax deductions behind

Nothing bothers me more than taking over a client’s account only to realize that the previous provider they were using was taking the easy way out and only claiming $0.60/sq ft for interim rule lighting. If you have taken the time to claim the 179D Tax Deduction, it is important that you maximize and take the fully available benefit whenever possible. If you have had another firm or if you internally claimed 179D Tax Deduction in the past we will review the completed studies at no cost to make sure that you are not leaving funds unclaimed for the 179D Tax Deduction.

The current uncertainty created by allowing for the lapse of tax extenders is unfortunate and ultimately hinders the use of the incentives by many business owners. If you use a couple applicable strategies above you should be able to navigate the uncertainty with ease, let us know if you need any help while you plan.