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179D Federal Energy Efficiency Tax Deduction for Commercial Property Owners and Leaseholders

As an Eligible Certifier under the provisions of Federal Energy Policy Act of 2005, ConSol is able to complete the qualification, certification and application process for the 179D Federal Energy Efficiency Tax Deduction on behalf of the building owner or lessee.

What is the 179D Federal Energy Efficiency Tax Deduction?

Under the Federal Energy Policy Act of 2005 (EPACT), the provision allows a deduction to a taxpayer who owns, or is a lessee of, a commercial building and installs energy efficient measures as part of the commercial building's interior lighting systems, heating, cooling, ventilation, and hot water systems, or building envelope. The amount deductible under section 179D may be as much as, but not to exceed, $1.80 per square foot of building floor area for buildings that achieve a 50-percent reduction in energy and power costs. Buildings that achieve a reduction in energy and power costs of less than 50-percent may qualify for a deduction of up to $0.60 cents per square foot of building floor area if the building achieves a reduction in energy and power costs based on the table below.

There are 3 pathways to qualify for the 179D partial deduction.
  1. Whole building qualification with 50% energy and power cost savings shown through energy modeling.
  2. Partial qualification for envelope, HVAC and HW, and lighting with energy and power cost savings with threshold options:

    Date Placed in Service Envelope HVAC Lighting
    Effective January 1, 2013 through December 31, 2016 16 2/3%
    Envelope
    16 2/3%
    HVAC
    16 2/3%
    Lighting

  3. Partial qualification through the interim lighting rule based on reductions in installed lighting power.
    • Section 179D(f) provides an interim lighting rule, which is an alternate method of calculating a partial deduction for interior lighting systems. This rule provides a partial deduction for part or all of the cost of certain energy efficient commercial building property installed as part of a lighting system that reduces the lighting power density of the building by more than 25 percent (50 percent in the case of a warehouse).
What Qualifies?
  1. Commercial buildings (any size)
  2. Apartments, four or more stories, for lease
  3. Commercial energy renovations
Who gets deduction?
  1. Building owner or building lessee at the time of building improvements
  2. Public buildings the owner may allocate the deduction to the designer (architect, engineer, contractor, environmental consultant or energy services provider) for the taxable year that includes the date on which the property is placed in service.
Items Needed from Client?
  1. Current set of architectural plans that include floor plans
  2. Energy compliance documents for lighting, HVAC and envelope (Title 24 or IECC)
  3. EnergyPro File – computer file used to generate Title 24 documentation
What are the 179D Tax Deduction Building Certification Requirements?

A building owner or lessee must have an independent third party 179D Eligible Certifier (qualified engineer or contractor registered in the jurisdiction) perform the energy modeling, site visit and certification before claiming a 179D Federal Energy Efficient Tax Deduction.

A 179D Eligible Certifier will determine:
  1. Whether the building newly constructed or retrofitted is a qualified 179D Energy Efficient Building
  2. If appropriate, issue a certification for each building which meets the 179D requirements
ConSol 179D Federal Tax Deduction Service Process
  1. Review of existing Title 24 or International Energy Conservation Code (IECC)
  2. Review of building lighting, HVAC and envelope systems for 179D qualification
  3. Site visit
  4. 179D certification and documentation
What software does ConSol use?

EnergyPro v.6.0 or as approved per current 179D criteria

ConSol Federal Tax Deduction Documentation

ConSol will provide client with summary of compliance, Department of Energy certified software, and engineer or contractor verification documentation. As directed by client, ConSol will provide all documentation including a certificate in paper and/or electronic format.

Links

Case Study: Majestic Realty Co. Qualifies for Federal Energy Tax Deductions by Installing Energy Efficient Lighting
IRS 2012-17 Notice: http://www.irs.gov/irb/2012-17_IRB/ar08.html
IRS 2008-14 Notice: http://www.irs.gov/irb/2008-14_IRB/ar12.html
Notice 2008-40: http://www.efficientbuildings.org/PDFs/n-08-40.pdf
Notice 2006-52: http://www.efficientbuildings.org/PDFs/internal-rev-bulletin06-26.pdf