Section 179D Energy Tax Credit Study

FACT: The Section 179D tax credit requirements are not satisfied by LEED certification, and extensive engineering analysis by an expert is essential to realize tax savings.

To Claim the Deduction:

  • a taxpayer must have a qualified individual (either an engineer or a contractor licensed in the same jurisdiction as the building) perform a field inspection of the building
  • a taxpayer or qualified individual must use approved software from the Treasury Department’s list of certified software to calculate the energy savings
  • a qualified individual must certify the results
  • the building or energy renovation must be capitalized after January 1, 2006

The Energy Policy Act of 2005, (“EPAct”) added Code Section 179D creating a new incentive in the form of up to $1.80/sf immediate deduction against the taxpayers Federal Income Tax liability for an investment in Energy Efficient Buildings. The deduction, originally effective from 1/1/2006 through 12/31/2007 was extended through 12/31/2016 by The PATH Tax Act of 2015. The deduction is eligible for buildings that achieve a 50% reduction in energy costs related to the building envelope, heating, ventilation & air conditioning, (HVAC) and lighting & lighting controls.

 

Testimonial or Success Story

Hotel

While not intentional, a 160 room hotel with restaurants and large meeting rooms qualified for the lighting portion of the credit for a first year tax savings of $46,800.

Distribution Center

Refrigeration, freezer, and dry storage areas at this center with sensor controlled lighting, insulated walls and ceilings, and highly reflective roof satisfied the lighting and building envelope requirements and saved $228,000 the first year!

The potential deduction and tax savings for 100%, 66 2/3%, and 33 1/3% qualification is shown below:

 

Gross Sq. Ft. Area Section 179(D) Full Credit Rate Full Credit Potential Deduction  
200,000 1.80 $360,000.00
39% <== Tax Rate
100% Tax Savings ==> $140,400.00
66 2/3% Tax Savings ==> $93,604.68
33 1/3% Tax Savings ==> $46,795.32

 

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