As part of Energy Policy Act (EPact) of 2005, the federal government passed a tax bill that supports building energy efficient measures. Building owners can qualify for up to $1.80 per sq. ft. in tax deductions when energy efficient measures are installed. Go to http:///www.179d.info for more information on the 179d

1. Commercial Building Tax Deduction
June 27, 2013

2. Overview
• Part I: 179D Internal Revenue Code
– Background
– What is 179D?
– Who qualifies
– Financial incentives explained
– Future Expansion of Tax Incentive
– Example Project
• Part II: Services provided by Greenergy?
– Who is Greenergy (credentials, past projects)
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3. 179D Internal Revenue Code
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4. Background
• Commercial building electricity costs:
– 40%/40%/20% - Lighting/Motors &
HVAC/Other *
• 80% of commercial buildings still use pre1986 lighting systems*
– Issue: initial capital investment
– Incentive: 179D Tax Deduction
*Source: US Department of Energy
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5. What is 179D?
• Internal Revenue Code 179D:
– A tax deduction for energy-efficient buildings
“Energy Efficient Commercial Building Tax Deduction” (CBTD)
• Enacted: Energy Policy Act 2005
– Extended twice:
• Energy Independence Act 2007
• Emergency Economic Stabilization Act 2008
• Current expiration: Dec 31st 2013
• Current bill in the US senate will extend tax incentive to the
end of 2016 and increase the deduction from $1.80 per sqft
to $3.00 per sqft
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6. What is 179D?
• Commercial building owners and lessees who purchase and
install energy-saving products in their businesses can qualify
for a tax deduction.
• Buildings achieving a 50% reduction in annual energy costs
as compared to a baseline building defined by the industry
standard ASHRAE/IESNA 90.1-2001 qualify for the full
deduction of $1.80/sqft
• Buildings achieving as little as 10% in annual energy costs
qualify for the minimum tax deduction of $0.60/sqft
179D Code states:
(a) In general
There shall be allowed as a deduction an amount equal to the cost of energy efficient commercial building property placed in
service during the taxable year.
(b) Maximum amount of deduction
The deduction under subsection (a) with respect to any building for any taxable year shall not exceed the excess (if any) of—
(1) the product of—
(A) $1.80, and
(B) the square footage of the building, over
(2) the aggregate amount of the deductions under subsection (a) with respect to the building for all prior taxable years
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7. Qualifying Buildings
• Energy Efficient Buildings means property 1. located in the United States
2. which is installed as part of—
(i) the interior lighting systems,
(ii) the heating, cooling, ventilation, and hot water systems, or
(iii) the building envelope
and
3. installed as part of a plan designed to reduce the
total annual energy and power costs between 1050% in comparison to a reference building
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8. Qualifying Buildings
Building Types:
• Offices
• Retail stores
• Warehouses
• Apartments (4 stories +)
• Public buildings
Construction Types:
• New Construction
• Additions
• Retrofits
– Only applicable to
retrofitted square footage
• NO: Churches
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9. Who Benefits?
Public buildings
• Public building allowed to
pass tax savings on to
Designer
• If more than one
designer, building owner
decides who gets the
deduction
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Private buildings
• Building owner
– Accelerated Depreciation
(Recover Equipment
expense in 1 year compared
to the normal 39 year
recovery period)
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10. Public Buildings
• Allocation of tax deduction to the designer
• A designer is a person that creates the technical
specifications for installation of energy efficient
commercial building property
• Includes: an architect, engineer, contractor, environmental
consultant or energy services provider who creates the
technical specifications for a new building or an addition
to an existing building that incorporates energy efficient
commercial building property
• A person that merely installs, repairs, or maintains the
property is not a designer
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11. Financial Incentive
• Deduction in first year placed in service
• Covers up to the complete cost of the efficient
equipment including labor and designer cost
– Don’t have to depreciate over several years
• Up to $1.80 per sq. ft (tax deduction)
• Accelerated Depreciation for private building
owners
• Allocation of tax deduction to design firm for public
buildings
•
Agreement between public entity and designer is reached for
allocating the funds
–
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e.g. endowments, donations, reduced costs on future jobs
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12. Financial Incentive
Maximum Allowable Tax Savings – EPACT 2005
Source: US Department of Energy-Office of Energy Efficiency & Renewable Energy
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13. Financial Incentive
Maximum Allowable Tax Savings – changes under
Notices 2006-52, 2008-40, 2012-26
Source: National Electrical Manufacturers Association (NEMA) Guide to the Energy Efficient
Commercial Buildings Deduction
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14. Financial Incentive
• Each system is evaluated separately and is eligible
for one third of the tax deduction if it meets its share
of the overall savings goal for the building, a 50
percent reduction in energy costs.
• In other words:
– one system meets the goal of reducing costs by 16 2⁄3
percent but the other two systems do not reduce costs
at all, the building owner is entitled to a tax deduction
of 60 cents per square foot off the cost of the system.
– Likewise, the owner is eligible for a deduction of $1.20
per square foot off the cost if two systems
qualify, reducing energy costs by 33 1⁄3 percent.
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15. Future Expansion of Tax Incentive
Proposed to the US Senate on September 20th, 2012
Will extend tax incentive to the end of 2016
Includes buildings located in US territories
Increases tax deduction from $1.80/sqft to $3.00/sqft for new
construction
• For renovations maximum incentive of $4.00/sqft
• Includes multifamily housing of 5 or more units
• The allocation of the deduction for public buildings will include
people responsible for
funding, financing, designing, leasing, operating or placing in
service energy efficient measures
•
•
•
•
– This includes building tenant, financier, architect, professional
engineer, licensed contractor, energy service company or other
building professional
• Nonprofits will be able to allocate deduction for their buildings
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16. Example for a Public Building
•
•
•
•
•
•
1,000,000 sqft newly constructed energy efficient building
Fully qualifies for the tax incentive
Tax Deduction - $1.80/sqft x 1,000,000 = $1,800,000
$1,800,000 deduction passed onto designer
Corporate tax rate - 35%
Tax Savings - 35% x $1,800,000 = $630,000
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17. Services Provided by Greenergy
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18. Credentials
• Professional Engineering license in
IL, CA, OR, WA, UT, AZ, CO, PA, IN, TX, GA, FL
• Insured up to $2M for errors and emissions as a
Professional Engineering company
• Experienced Energy Modelers
• Utilizes Department of Energy EQUEST software
• Working knowledge of ASHRAE 90.12001, Appendix G, and NREL/TP550-40467
• Completed 100s of buildings
• Staff of Verification Engineers
• Certified Public Accountant services
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19. Completed 179D Projects
• Davis Monthan Air Force Base
– 41 buildings modeled
• Toyota Park Dealership
• Dunkin Donuts
• Pasco County Hurricane
Shelter
• Fort Bend Administration
Building
• Austin Parkway Elementary
School
• Dulles High School
• Elkins High School
• Highlands Elementary School
• Hodges Bend Middle School
• Sam Gibbons Federal
Courthouse
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Hunters Glen Elementary School
Kempner High School
Lake Olympia Middle School
Macario Garcis Middle School
Palmer Elementary School
Pecan Grove Elementary School
Quail Valley Middle School
Sienna Crossing Elementary
School
• Sugarmill Elementary School
• Fort Benning Army Base – 56
buildings modeled
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20. Thank You
Visit our website at http://www.go-greenergy.com to obtain more information on the tax
deduction
Call us at (312)469-8387 to find out how much tax deduction your building can qualify
for
Or Email us at info@go-greenergy.com with your building and project details
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21. Terminology
•
•
•
•
Reference Building is a building that is located in the same climate zone as the
taxpayer’s building and is otherwise comparable to the taxpayer’s building except that its
interior lighting systems, heating, cooling, ventilation, and hot water systems, and
building envelope meet the minimum requirements of Standard 90.1-2001
Qualified Individual - (1) Is not related to the taxpayer claiming the deduction under
§ 179D; (2) Is an engineer or contractor that is properly licensed as a professional
engineer or contractor in the jurisdiction in which the building is located; and (3) Has
represented in writing to the taxpayer that he or she has the requisite qualifications to
provide the certification required.
Designer - a person that creates the technical specifications for installation
of energy efficient commercial building property. For example, an architect, engineer,
contractor, environmental consultant or energy services provider who creates the
technical specifications for a new building or an addition to an existing building. A
person that merely installs, repairs, or maintains the property is not a designer.
Interim Rule - (i) Achieve a reduction in lighting power density of at least 25 percent
(50 percent in the case of a warehouse) of the minimum requirements in Table 9.3.1.1 or
Table 9.3.1.2 (not including additional interior lighting power allowances) of Standard
90.1-2001.
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