Posts
Are you a
property owner or are you considering buying or constructing a new
building? Are you a tenant, in need of
expanded or repurposed space? Are you
interested in installing more energy efficient systems to help save on your
operating costs? Has the economy of the
past few years forced you to put off these plans? Well, a tax benefit hidden within the Energy
Policy Act of 2005 (EPAct 2005) might help soften the blow of the cost of these
improvements, while saving on energy and maintenance costs!
More
specifically, Section 179D can make it worthwhile for a building owner or
tenant to make improvements to their lighting, HVAC or building envelope. Do I have your attention? I hope so, because not many people seem to
know about this, and you can earn a tax deduction for any new building or
renovation completed between 2006 and 2013 that exceeds the 2001 energy code
requirements. How hard is that, given
that the code has become significantly more stringent in the past ten
years?
The maximum
deduction available under Section 179D is $1.80 per square foot for projects
that exceed the overall code requirements by 50% or that meet the individual
criteria for these three categories ($.60 per square foot each). While
the HVAC and envelope incentives are awarded on an “all or nothing” basis,
partial deductions are available for lighting, ranging from $.30 to $.60 per
square foot. If your lighting meets
today’s code, you can be sure that you’d be able to claim at least a partial
deduction.
For private
owners and tenants, this deduction applies to all types of commercial buildings
including hotels, retail stores, parking decks, office buildings, etc as well
as apartment complexes of more than four stories. However – and now I’m talking to the
architects, engineers, and others responsible for the design of these buildings
– deductions are available for publicly-owned buildings as well! In that case the deduction goes to the members
of the design team (architect, engineer, and/or lighting designer) responsible
for specifying the energy efficient systems.
Meeting the
criteria for the deduction requires the participation of an accounting
professional as well as an engineer who was not involved in the project
design. The engineer is responsible for
the review and evaluation of project documents and preparation of the required
third-party documentation, including energy modeling. The accountant is,
of course, responsible for preparation of the appropriate IRS documentation.
Particularly
in these difficult economic times, EPAct 2005 offers opportunities for an owner
or tenant to move forward with a project that has been stalled due to concerns
about cost. For public projects, it can
help design firms offset some of the losses they’ve suffered in reduced fees
and expanded project schedules, which are side effects of the financial
crisis. In either case, making it
possible for new projects to move forward is a win-win for everyone involved,
including the employees, residents and guests of the spaces they build.
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