Feds Extend Tax Deductions for Energy Efficiency

WASHINGTON — President Obama signed a bill on Dec. 19 that would extend a tax deduction for energy-efficient commercial buildings. The bill, the Tax Increase Prevention Act includes the 179D deduction, which is only applicable for projects in the 2014 tax year.

Under 179D, building owners and tenants who spend on energy-efficient features for new or renovated commercial buildings will be eligible for a one-time deduction of 60 cents up to $1.80 per square foot. The maximum deduction is given if the owner or tenant can verify at least a 50 percent energy savings, while the minimum requires a verified 25 to 40 percent savings.

The 179D tax deduction for energy-efficient buildings previously expired on Dec. 31, 2013, and was not reauthorized until the president’s authority on Dec. 19. However, the extended legislation was only active for a couple weeks and expired again on Dec. 31, 2014, but will include projects that were placed into service in 2014.

The legislation assesses three components that measure a building’s performance: lighting; building envelope and heating; and ventilation and air condition systems. There are no reports that indicate it will be extended again for the 2015 tax year.

The American Institute of Architects (AIA) praised the vote to extend the 179D energy-efficient commercial building tax deduction. Section 179D provides a tax deduction for energy efficient buildings and allows public building owners to allocate the deduction to the designer of energy efficient property, according to the AIA. In turn this permits the designer to take advantage of all the resources necessary to design the most energy efficient property possible, while giving the building owner a tool for financing.

“Restoring and improving this important tax incentive has been a key priority for the AIA since it expired last year. We commend Congress for recognizing the importance of this deduction by extending it along with other important business provisions,” said AIA President Elizabeth Chu Richter, FAIA, in a statement.

“The 179D deduction has leveraged billions of dollars in private capital, resulted in the energy-efficient construction of thousands of public and private buildings, and created and preserved hundreds of thousands of jobs. It has lowered demands on the power grid, moved our country closer to energy independence, and reduced carbon emissions,” Richter added.

The AIA is making plans to push for the 179D deduction as a permanent part of tax reform.

“The AIA looks forward to continuing to work with Congress to improve 179D, and make it permanent within the context of comprehensive tax reform,” Richter said in a statement.

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