Energy-Efficient Commercial Building Tax Deduction
The Energy Policy Act of 2005 (P.L. 109-58) authorized the Energy-Efficient Commercial Buildings Tax Deduction for expenses incurred for qualified energy efficient building investments made by a building owner. In government-owned buildings, the government may allocate this deduction to the person or persons primarily responsible for designing the qualified improvements. The deduction may be taken in the year the energy-efficient improvements are placed in service. The provisions authorizing the deduction are codified in the 26 U.S.C. § 179D [PDF - 229 KB].
The Consolidated Appropriations Act, 2021, H.R. 133, the 179D energy efficient commercial buildings federal tax deduction was made permanent. SEC. 102. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION. (a) DEDUCTION MADE PERMANENT.—Section 179D is amended by striking subsection (h). H. R. 133—1859. (b) INFLATION ADJUSTMENT.—Section 179D, as amended by subsection (a), is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection: ‘‘(g) INFLATION ADJUSTMENT.—In the case of a taxable year beginning after 2020, each dollar amount in subsection (b) or subsection (d)(1)(A) shall be increased by an amount equal to— ‘‘(1) such dollar amount, multiplied by ‘‘(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2019’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof. Any increase determined under the preceding sentence which is not a multiple of 1 cent shall be rounded to the nearest cent.’’ (c) UPDATE OF STANDARDS.— (1) ASHRAE STANDARDS.—Section 179D(c) is amended— (A) in paragraphs (1)(B)(ii) and (1)(D), by striking ‘‘Standard 90.1–2007’’ and inserting ‘‘Reference Standard 90.1’’, and (B) by amending paragraph (2) to read as follows: ‘‘(2) REFERENCE STANDARD 90.1.—The term ‘Reference Standard 90.1’ means, with respect to any property, the most recent Standard 90.1 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America which has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of this section not later than the date that is 2 years before the date that construction of such property begins.’’. (2) CALIFORNIA NONRESIDENTIAL ALTERNATIVE CALCULATION METHOD APPROVAL MANUAL.—Section 179D(d)(2) is amended by striking ‘‘, based on the provisions of the 2005 California Nonresidential Alternative Calculation Method Approval Manual’’ and inserting ‘‘with respect to any property, based on the provisions of the most recent California Nonresidential Alternative Calculation Method Approval Manual which has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of this section not later than the date that is 2 years before the date that construction of such property begins’’and (d) EFFECTIVE DATE.—The amendments made by this section shall apply to property placed in service after December 31, 2020. (d) is part of that congressional appropriations act.
The Energy-Efficient Commercial Buildings Tax Deduction is a significant financial incentive for designers to meet or exceed an agency’s energy reduction requirements for new and existing buildings. Prior to GSA allocating the deduction, the Contractor must submit to GSA at email@example.com the following documents:
1. First, provide the standard two forms, Letter Of Intent (LOI) and certification Appendix A. Also, include a one page complete project description with the energy efficiency improvements and a separate written verification from the GSA Project Manager that the project was completed as stated in the contractor's project description (email from GSA PM is sufficient).
2. Once the LOI and Appendix A are verified and signed by the Office of Facilities Management (OFM), the contractor may proceed with a Third-Party Certification as required by the Internal Revenue Service (IRS). In addition to the information required by the IRS, the Third-Party Certification must include the maximum per-square-foot deduction amount for which the Contractor qualifies, and signed by a licensed professional engineer.
3. Upon completion of the Third Party Certification, submit it with the signed deduction allocation form Appendix B.
4. OFM will review and sign if all conditions are met.