179D Tax Deduction

What You Should Know About The 179D Tax Deduction

President Barack Obama concluded a difficult situation initiated by Congress and Senate institutions that were seeking to end the expiry of over 50 provisions of the American tax code. On December 18, 2015, he signed the H.R. 2029 motion featuring the Consolidated Appropriations Act 2016 (also named the 2016 omnibus spending bill) that allowed the spending of several federal agencies for the fiscal year of 2016. This bill authorizes $1.1 trillion in spending and $700 billion in tax breaks. The Act received an overwhelming two-thirds majority in Senate, prompting the President of the United States (POTUS) to sign it into law immediately.

The highlight of our focus will be taking apart the 179D provision of commercial deduction for energy efficient buildings that had expired before the intervention of the Legislative bodies. Despite the excitement by the tax breaks brought to rum makers, film productions and many other constituents of the tax bill, we shall lay emphasis on the issue of green building, the green movement and energy efficiency measures related to construction and building engineering.

The Section 190 of the H.R 2029 on the pages 834-887:

The document declared that the expiry date for the 179D tax deduction was prolonged from December 31, 2014, to December 31, 2016’ giving it an extra life of two years for building owners that could benefit from it. The extension was to take immediate effect and encourage individuals to take action and implement green energy measures to buildings.

The tax deductions applied to any construction projects that were implemented between December 31, 2014, and the date the Act was signed into law on December 18, 2015. Planning for construction projects that meet the energy saving criteria was highly encouraged, and the 179D tax deduction was included in the budget preparation for such structures.

Building owners and tenants alike intending to make renovations in the commercial premises to enhance the energy efficiency of such facilities earn the eligibility of Federal Tax deduction through the 179D provision. Successful applicants of such tenants and landowners are entitled to an immediate reduction of close to 1.8 dollars for every square foot of the premise costs.

However, the bill made alterations that demanded higher qualifications for these one-time deductions that applied to such constructions and renovations. Section 341 of the H.R. 2029 titled “Updated ASHRAE Standards for Energy Efficient Commercial Buildings Deduction”, inserts different standards of qualification that were to be effective starting with December 31, 2015. The bill allowed a one-year time-frame for industry players to adjust to the raised threshold of the provision. The lifted standards were stipulated and signed into law in 2007. They were considered a bit more demanding than the 2015 IECC ones.

Who can Quality

The Owner of the Building. The building owner can evaluate the energy efficiency improvements he made during the last six years. Upon validation, he will receive the deduction in the current year and will be able to reduce his basis for the building or energy efficiency upgrades. Furthermore, the 179D tax deduction may provide a benefit in paying taxes.

Engineers/ Architects/ Contractors. A government agency (local, state or federal) can allocate the tax benefits to a third party that was involved in designing the building. The government has to send a letter to the IRS, stipulating that the tax benefit should be awarded to the contractor that is involved in designing the building.

The energy efficiency measures are measured by reference to the three largest construction system categories:

  1. Interior lighting system;
  2. Heating, cooling, ventilation, and hot water systems;
  3. Building envelope system;

However, even with the ten percent enhancement required for new constructions, many buildings that were certified by the LEED of 2009 will hit the mark and remain eligible for the H.R. 2029 of the 179D deduction. Some other provisions allowed by the Section 179 of the H.R. 2029 include:

  • Extension of the small business expensing restriction and phase-out totals;
  • Targeted threshold sums of 500,00 and two million dollars from the previous 25,000and 200,000 dollars respectively;
  • Extension of two years for the credits available for;
  1. Purchase of particular non-profit energy saving property of up to 500 dollars;
  2. Manufacturers of energy saving buildings of up to 2,00 dollars;

Both credits are to bring a general advantage for green constructions.

The H.R. 2029 bill does not only have the 179D deduction provision which allows for green building projects. It features several other power saving requirements that include extending the phase out of the wind production tax credit. The extension was to be valid until 2020, while the phasing down of solar investment tax credit was put off until 2022. The bill also states that such production tax credits will be open for other energy efficient conveniences like landfill gas and geothermal projects as long as their construction starts by December 2016.

The 111th, 112th, 113th and 114th Congress and the Senate of the United States have continually expressed their appreciation by the American Legislature for the need of exercising utmost goodwill in the facilitation and encouragement of energy efficient projects all across the construction and production sectors of the American Economy. This is evident when talking about the overwhelming decisions of the majority of their members. The extension of the 179D tax deduction from the year 2007 to the year 2016 through series of bills being passed, the last being the H.R. 2029, are bold statements for the necessity of energy-efficient constructions.

As interested parties in the concept of energy efficiency in construction, Walker Reid Strategies thrives in providing consultative information on environmental law and sustainability for business. As a concerned party in environmental conservation and energy efficient structures, you should give us a call. We will assist you to in developing plans that are saving power consumption and exponentially cut construction costs by taking full advantage of the two years in which the 179D tax deduction provision will still be available.