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179D Energy Tax Certifications

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What is the 179D Tax Deduction?

The 179D Energy Tax Deduction is a very specific deduction allowed for energy efficient commercial buildings that was enacted as part of the Energy Policy Act of 2005. The engineered based tax incentive is available for the reduction of energy and power costs in commercial buildings and allows for a tax deduction of up to $1.80 per square foot. 

The 179D Tax Deduction specifically applies to those commercial buildings that significantly reduce their interior lighting costs or their HVAC and building envelope. 

The deduction may be claimed for new construction or improvements placed into service after Jan. 1, 2006, for commercial building owners (a Change in Accounting Method may be used to retroactively take the deductions). Designers of government-owned buildings are able to take the 179D deduction for all “open” tax years, which generally allows 3 years from the date of filing (buildings placed in service earlier than that require an amended return). 

WHAT BUILDINGS QUALIFY?

N
Commercial buildings of any type
N
Residential buildings of 4 stories or more
N
Government-owned buildings
N
Parking garages

WHO CAN BENEFIT?

N
For-profit owners of commercial buildings
N
For-profit owners of apartment buildings 4 stories or more
N
Designers of government buildings (architects, engineers, ESCO's and energy consultants)

savings per square foot of improved space

Section 179D requires the taxpayers building to meet or exceed a 50% savings in energy and power costs when compared to a theoretical ASHRAE 90.1-2007 baseline building.

CERTIFICATION REQUIREMENTS

I
The energy and power costs savings calculations must be performed with a Dept. of Energy approved software.
I
Field inspections must be performed after the energy efficient property has been placed into service in accordance with NREL Guidelines
I
Certifications and inspections must be completed by a qualified Engineer or Contractor in the Jurisdiction of the qualifying building.
I
The taxpayer shall maintain the certification in their records to establish the entitlement to, and amount of, the deduction claimed.

PARTIAL SAVINGS

Even if you don’t meet or exceed the 50% baseline savings in energy and power costs, your building may still be eligible for partial tax savings. 

$0.60/SF

for lighting systems meeting 25% savings

$0.60/SF

for HVAC systems meeting 15% savings

$0.60/SF

for building envelope systems meeting 10% savings

Frequently Asked Questions about Research Tax Credits

DOES MY TAX PREPARER ALREADY DO THIS?

Most tax preparers provide a wide range of services to their clients. However, no one person can know everything about the tax code. Section 179D is a very specific part of the tax code that the average tax preparer may know little about. Instead, the CPA community relies on providers like Veracity to supply their clients with the expertise and know-how to deliver the necessary certifications and documentation to take the 179D tax deduction.

Do I HAVE TO GET A CERTIFICATION TO TAKE THE DEDUCTION?
A Section 179D deduction is like any other deduction you claim on a tax return. If you are ever questioned about the amount of the deduction taken, you will be expected to produce a certification report produced by an independent third party. IRS Revenue Procedures 2006-52, 2008-40 and 2012-22 are the rules that dictate who can claim the deduction. At Veracity, we make sure that all our certification and related procedures are in compliance with all IRS guidelines.
DOES IT MATTER WHEN I TAKE THE 179D DEDUCTION?

It does. Section 179D deductions are to be taken in the year the building is placed in service and receive a certificate of occupancy.

WHAT IF I DIDN'T TAKE THE DEDUCTION THE YEAR THE BUILDING WAS FINISHED?

You can still take the deduction, but will have to amend the tax return for the year the deduction should have been taken. You can amend tax returns for up to three years from the date you filed them, so time is of the essence.

HOW MUCH DOES IT COST AND HOW MUCH WILL I SAVE?

In all of our projects,we prepare an initial no-cost analysis to determine the benefits of doing a certification study. From this analysis,we determine the cost of the certification and then you can make a final decision whether a study would be beneficial to you. The study fee is 100 percent deductible and,from our experience,the benefit will be three to five times the cost of the study.

HOW DO I GET STARTED?

Contact Veracity today at tax@taxveracity.com or call 888.968.4094 to request your no-cost estimate. You can also book a free consultation today. 

 

Ready to get started?

Veracity’s personnel have years of experience in understanding 179D and how it can benefit taxpayers. Our energy modelers have modeled hundreds of buildings using IRS approved software.

Our principals have spent years educating the CPA and design communities about the benefits of Section 179D. No other company has more experience dealing with the ins and outs of 179D than Veracity.

Book a no-commitment introductory call today.