After months of speculation and delay on the “tax extenders” legislation, the Tax Increase Prevention Act of 2014 (HR 5771) was signed into law by President Obama on December 19, 2014. Both taxpayers and their advisors were eagerly awaiting the renewal of these tax provisions, as many have a significant impact on the tax burden of individuals and businesses. The passage of HR 5771 continues these benefits retroactively for one year– tax year 2014.
While the Act contains items relevant to all industries, two specific topics should be considered by contractors and other companies involved in the construction industry– the Energy-Efficient Commercial Buildings Deduction under IRC § 179D and the Credit for New Energy-Efficient Homes under IRC § 45L.
Energy Efficient Commercial Buildings Deduction
The § 179D deduction is available for the cost of certain energy-efficient improvements made to a depreciable building in the United States, placed into service before January 1, 2015. These improvements must be installed as part of the building’s interior lighting, HVAC or envelope as part of a certified plan to reduce the annual energy and power costs attributable to the building when compared to certain historical energy standards.
Generally, the deduction is based upon the building square footage and is claimed by the building’s owner. In the case of public facilities, however, the deduction can be allocated to any contractor involved in the design of the building.
For more specifics on the deduction and the corresponding calculation, please see the article, “Using a 179D Study to Increase Your Return on Investment,” written by Mark DiPietrantonio, Schneider Downs Director of Construction and Real Estate Services.
Credit for New Energy Efficient Homes
Contractors involved in the construction or manufacture of a new energy-efficient home can be eligible for this income tax credit. The renewal of the § 45L provision allows these contractors a tax credit for homes acquired through December 31, 2014. The credit amount per dwelling unit is based upon the energy savings realized by the home.
Additional details on the tax credit can be found in the article, "Extension of the Energy-Efficient Home Credit," by Mark DiPietrantonio, Schneider Downs Director of Construction and Real Estate Services.
For more information on these tax provisions, please contact your Schneider Downs representative.
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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.