The 179D Program was a temporary tax law within the Energy Policy Act of 2005 (EPACT), but, as of December 2020, these tax deductions were made permanent by the Consolidated Appropriations Act (CAA). This change could prove very beneficial to private building owners and designers of government buildings with investments in energy-efficient buildings and systems.
The original purpose of 179D was to encourage building owners to focus on designing properties with sustainable strategies for reducing energy consumption. The new permanent 179D tax law provides tax deductions — not tax credits — for new construction, remodels and upgrades featuring energy-efficient designs and includes eligible projects “placed in service” from 2006 through the present (or within the statute of limitation years designated for designers). Here are some highlights of the 179D program:
- Deductions can be taken by the owner of a private taxpayer building for themselves.
- Deductions can be taken by a designer of a government-owned building.
- A full deduction is $1.80 per square foot and will be adjusted for inflation.
- Taxpayers are eligible for partial deductions of $0.30 to $1.20 per square foot.
To claim the deduction, taxpayers must provide certification of the energy-efficient designs from a qualified individual or entity unrelated to the taxpayer, such as an engineer licensed in the project’s jurisdiction. The 179D tax law energy modeling follows different criteria than LEED certification modeling, so taxpayers will want to consult with a trusted advisor as well.
Additionally, this tax law benefits larger square footage projects, so a cost-benefit analysis can best help you determine your next steps.
How DHG Can Help
Look to the DHG Construction team to deliver valuable insights regarding the complex tax and accounting requirements of the industry. With us, you gain professional advisors and construction business veterans who work together to support all facets of your business. Our team credentials include:
- Certified Construction Industry Financial Professionals
- Certified Professional Contracts Managers
- Certified Management Accountants
General Contractors License Holders
Our active involvement in several construction industry associations enables us to monitor trends, best practices and regulatory changes and better understand your ever-evolving challenges. With that insight and experience, we will integrate our comprehensive knowledge with innovation to craft a strategy for your success.
Robert Bradham is a Partner in DHG’s Charleston office.