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“Between the six owners of our firm, we have collectively received about $100,000 in tax returns for amended tax returns filed for 2007 and 2008.

AIA membership has proved to be a very high value… [and] in this case, it is even a cash value!   Without participating in AIA, we would have never known about the 179D tax deduction and much of our eligible benefit would have expired without our ever having been aware.”

Bill T. Wilson II, FAIA

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Energy Efficient Commercial Buildings Tax Deduction:
Learn How You and Your Clients Can Benefit from this Federal Program


What is the Energy Efficient Commercial Building Deduction (179D)?

The Energy Policy Act of 2005 (EPAct) created the Energy Efficient Commercial Buildings Deduction (179D), recognizing that a substantial portion of U.S. energy consumption is attributable to commercial buildings, and to provide building owners with a tax incentive to help offset the costs associated with enhancing the energy efficiency of commercial buildings. The provision allows the owner of a commercial building to deduct the installation costs of energy efficiency enhancements, up to $1.80 per square foot.

To encourage the public sector to utilize these same energy efficient enhancements, section 179D (4) provides a federal, state, or local government owner of a commercial building an election to “allocate” the tax deduction to the primary person responsible for designing the technical specifications for the installation of energy efficient enhancements.

Background

The Energy Policy Act of 2005 (Public Law 109-58) created a new tax incentive for constructing energy efficient commercial buildings. Codified in 26 U.S.C §179D, Section 1331, the Commercial Building Tax Deduction, established a tax deduction for expenses related to the design and installation of energy-efficient commercial building systems.

The AIA strongly supported this provision and played a major role in its legislative development. AIA also helped form a partnership with other concerned stakeholders and through this partnership, developed implementation recommendations for building owners to obtain this tax deduction. In 2008, the AIA helped pass legislation to extend the life of the deduction so that it covers property placed in service by December 31, 2013.

How Architects Can Claim the Deduction

The deduction includes a provision that enables architects, in many cases, to claim the deduction directly for their firms. In what tax practitioners call an “allocation”, the tax benefits of the deduction may be given to the designer when the building owner is a public entity.

This means that in the case of energy efficiency improvements in a building owned by a federal, state, or local government, an architect may be able to take a deduction worth up to $1.80 per square foot.

In 2008, at the AIA’s urging, the IRS-issued guidance on how the deduction could be allocated to the designer. Also, you can click on one of the resources to find out more information.

Resources

For more information on the deduction and allocation, use these helpful links:

Expand the Deduction: How You Can Help

The AIA is leading a coalition to expand the deduction from $1.80 to $3.00 per square foot. Tell your member of Congress to support increasing this valuable incentive.

The AIA also supports President Obama’s Better Buildings Initiative that would reduce energy used in commercial buildings by 20 percent over 10 years. In particular, this initiative would enhance and expand the energy efficient tax deduction by turning it into a credit, streamlining the certification process, and making it available to more owners of commercial property.

More Information

The AIA has joined a coalition with other major stakeholders to ensure that this tax deduction is correctly applied and extended beyond its expiration.  The coalition has developed a webpage which provides more information on this tax deduction.  To view the website, click here.

 

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