Following the trends in the construction industry and the overall emphasis on environmentally friendly or green building projects, it is important to note that the Internal Revenue Code (IRC) may provide incentives as you decide how to fund the cost of this development.
The Energy Efficient Commercial Building Deduction, included in IRC Section 179D, is commonly known as the Commercial Building Deduction or the 179D deduction. The provision, enacted as part of the Energy Policy Act of 2005, encourages building owners to increase energy efficiency in new and remodeled buildings by providing an immediate tax deduction for costs incurred that increase the energy efficiency of a building. Many of these costs would have otherwise been depreciated over 39 years.
The maximum cost of energy-efficient commercial building property that may be deducted in any tax year is limited to the product of $1.80 and the square footage of the building, over the total deductions claimed under 179D for energy-efficient commercial building property in any prior tax years. The deduction is allowed for improvements placed in service after December 31, 2005 and before January 1, 2014.
To qualify as energy-efficient commercial building property, the property must be depreciable and installed as part of three main building system categories: the interior lighting system; the heating, cooling, ventilation, and hot water system; and the building envelope. In addition, the building must achieve a reduction in total annual energy and power costs of the above-mentioned categories by 50% or more when compared to a similar reference building that meets minimum specified energy standards described in ASHRAE 90.1-2001.
If the overall 50% energy reduction standard is not satisfied but the specified category improvements reduce energy usage by 16 2/3%, a partial deduction is available of up to 60 cents per square foot of building space less total deductions claimed under 179D in prior tax years.
Please contact Jennifer Cowles at firstname.lastname@example.org or Gennaro DiBello at email@example.com for more information on this strategy that may accelerate deductions for your energy-efficient commercial building property.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.