Apparently my earlier news reporting the death of the 179d tax deduction was premature. The Bipartisan Budget Act, signed into law on Friday, included a provision extending the deduction for projects completed in 2017.
Previously, the 179d tax deduction expired on December 31, 2016. The new expiration date for project is now December 31, 2017. Any projects completed before that date are now eligible for the tax deduction. We will have to watch for news of any further extension, but based on new rules enacted by the 2017 Tax Cuts and Jobs Act, deductions that essentially accelerate depreciation may no longer be needed.
If you aren’t familiar with the 179d tax deduction, it was established by the federal Energy Policy Act of 2005 and is for energy-efficient commercial buildings placed in service from January 1, 2006, through December 31, 2017. Throughout the years, it has expired and been renewed multiple times with bipartisan support. The deduction is available primarily to building owners, although tenants may be eligible if they make construction expenditures and own the new equipment for tax purposes.
The tax deduction of $1.80 per square foot is available to owners of new or existing buildings who install (1) interior lighting; (2) building envelope, or (3) heating, cooling, ventilation, or hot water systems that reduce the building’s total energy and power cost by 50% or more in comparison to a set baseline. Partial deductions of $0.60 per square foot are available for buildings that do not meet the 50% threshold, but individual systems provide sufficient savings to justify certification (25% for lighting, 15% for HVAC and 10% for the envelope). The deduction may not be more than the capitalized cost of the installed systems (this generally includes the cost of labor and may include recycling costs).
Ultimately, this is exciting news for owners of energy efficient equipment that completed a project in 2017. If you have a project that you think might qualify for the 179d tax deduction, please contact us today for more information. We would love to help you take advantage of this tax deduction.
