What is a Section 179D Energy Tax Deduction?
This is a very specific tax deduction allowed for energy efficient commercial buildings. It was enacted as part of the Energy Policy Act of 2005 (as amended). It allows owners and designers of certain energy efficient buildings to take a tax deduction up to $1.80 per square foot. It is a tax deduction, not a credit.
Who Qualifies for a 179D Energy Tax Deductions?
You may qualify for a 179D Energy Tax Deduction if:
- You built or renovated an energy efficient commercial building since 2006
- You are the person primarily responsible for designing an energy efficient commercial building owned by a local, state or federal government agency.
- Your energy efficient building meets or exceeds certain efficiency standards set by Congress
Which energy efficient building systems are targeting in 179D?
The energy efficient systems that are contemplated under the law are the electrical lighting systems, mechanical (heating and cooling) systems and the building envelope. Each system can qualify for up to $0.60 per square foot, for a total of $1.80 per square foot for an entire building. The systems can qualify independently, or can be taken together to qualify under the ‘whole building’ approach.
How do you know if a building qualifies for 179D tax benefits?
Once a building is identified as potentially having 179D tax benefits, the building’s plans are inspected by a qualified individual. This individual enters the specifications of the building into a software program and produces an energy model of the building’s energy consumption. This ‘modeling’ analysis determines, based on the use of IRS approved software, which of the three systems qualifies.
If the modeling shows that the building qualifies, what happens next?
If the building is determined to have qualified for 179D benefits, a site inspection is scheduled. The site inspection is required to see if the same energy efficient equipment that was modeled from the plans is actually installed on the property. The inspection must be carried out by a licensed engineer or contractor. Once the energy efficient property is verified, a certification report is issued by Veracity. In the case of government-owned buildings, an additional step is required. The designer must secure an allocation letter from the government agency that owns the property. The letter must contain certain specific language relating to the designer and the building.
Why Choose Veracity?
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.
Frequently Asked Questions
Most CPA firms 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.
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.
|Building Cost||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.
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.
In all of our projects,we prepare an initialno-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.