Go green, save green

179D is a tax incentive that is available for newly constructed or renovated buildings that have installed energy-saving elements. This tax deduction provides tax-saving benefits for commercial building owners, as well as architectural and design firms that have worked on projects for public agency-owned facilities.

Originally passed under the 2005 Energy Policy, the 179D tax provision allows a tax deduction of up to $5 per square foot for both new and existing buildings.

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We are excited to announce that after years of legislation 179D & 45L have been extended

How Do You Qualify Based on Your Industry?

The 179D Tax Deduction is for Architects, Engineering Firms, Commercial Building Owners, and Construction Firms. This deduction is especially profitable for renovation projects, usually performed by these professional teams.

Qualifying Energy-Savings Are All Around You

It can be difficult to figure out if your building’s energy efficiency improvements qualify for this deduction. National Tax Group makes it easy with an in-depth study of your project and how it qualifies.

EPAct 179D studies are applicable for the following:

  • New construction of commercial buildings
  • Upgrades, renovations and retrofits, improvements to lighting, HVAC, envelope (roof, insulation, and windows), energy performance contracting, CRA redevelopment
  • LEED-certified buildings
  • Green/energy-efficient buildings
  • Residential apartment buildings
  • Public buildings

Impacts of IRA on Section 179D Inflation Adjustments (Notice 2022-61):

TAX YEAR BEFORE JAN 1, 2021 ON OR AFTER JAN 1, 2021 ON OR AFTER JAN 1, 2022 ON OR AFTER JAN 1, 2023** ON OR AFTER JAN 1, 2024**
MAXIMUM FULL AMOUNT ALLOWED $1.80 $1.82 $1.88 $5.36 $5.65
MAXIMUM PARTIAL AMOUNT ALLOWED $0.60 $0.61 $0.63 $1.07 $1.13

Section 179D: A timeline

Here’s a detailed timeline of all the IRS notices released impacting Section 179D:

2006

2006-26 IRB; Notice 2006-52

Initial IRS guidance setting forth the process allowing building owners to take the 179D Deduction; including certification requirements, inspections, and energy modeling guidelines.

2007

NREL /TP-550-40467

Energy Savings Modeling and Inspection Guidelines for Commercial Building Federal Tax Deductions

2008

2008-14 IRB; Notice 2008-40

Allows Government buildings to allocate to designers, expands on the specific technologies the DOE must approve, adjustments to the partially qualifying percentages (10% for building envelope), also extends 179D to the end of 2008.

2008

Public Law 110-343

Emergency Economic Stabilization Act of 2008: Extends 179D through the end of 2013.

2010

Memorandum; AM2010-007

Addresses the application of the 179D deduction to flow through entities.

2011

2011-04 IRB; Rev. Proc. 2011-14

Primarily allows for the use of Form 3115, Change in Accounting Method. Allows taxpayers to take 179D deductions without having to amend prior year tax returns. For both private and public sector buildings.

2012

2012-17 IRB; Notice 2012-26

Adjusts the partially qualifying percentages to 15% for HVAC  and 25% for Lighting.

2012

2012-41 IRB; Rev. Proc. 2012-39

Clarifies that designers taking the 179D deduction for Government-owned buildings may not use Form 3115, Change in Accounting Method.

2014

Public Law 113-295

Tax Increase Prevention Act of 2014; Extends 179D through the end of 2014.

2015

Public Law 114-113

Consolidated Appropriations Act, 2016; Extends 179D through the end of 2016 and increases the ASHRAE 90.1-2001 efficiency standards to ASHRAE 90.1-2007 for property placed into service after January 1st, 2016

2018

Memorandum AM-2018-005

Addresses Eligibility for Allocation of the Deduction for Energy Efficient Commercial Building Property under Section 179D(d)(4).

2020

Public Law No: 116-94

The Further Consolidated Appropriations Act, 2020; Extends Section 179D retroactively from January 1st, 2018 through December 31st, 2020.

2021

Consolidated Appropriations Act, 2021

Makes 179D permanent and extends the energy-efficient commercial building tax deduction.

2021

2021-48 IRB; Rev. Proc. 2021-45

This revenue procedure sets forth inflation-adjusted deduction rates for property placed into service in both 2021 and 2022. The rate increases range from 1.1% to 5%.

2022

Public Law No: 117-169

The inflation reduction act of 2022; expands §179D and §45L drastically, increasing the §179D Tax deduction amount up to $5.00 per square foot, adds new methodology for certification of the deduction, includes benefit for non-profits and tribal governments, in addition to increasing the ASHRAE Standards and adding a Prevailing Wage and Apprenticeship requirements.

2022

2022-61 IRB: Notice 2022-61

Prevailing Wage and Apprenticeship Initial Guidance under Section 45(b)(6)(B)(ii) and Other Substantially Similar Provisions

2023

2023-01: Announcement

Announcement Updating the Reference Standard 90.1 for Section 179D allowing the use of ASHRAE 90.1 through 2026

Other essential resources on Section 179D

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179D Qualification Requirements

179D Qualification Requirements

Properties Placed in Service 2023-2032
Project Tier Bonus Requirements Energy Savings Base Deduction Max Deduction
Base Tier None 25-50% $0.50/sqft $1.00/sqft
Bonus Tier Prevailing Wage and Apprenticeship Program 25-50% $2.50/sqft $5.00/sqft
Properties Placed in Service 2006-2022
Qualifying Components Estimated Tax Deduction
Before 2021 2021 2022
Fully Qualified Property $1.80/sqft $1.82/sqft $1.88/sqft
Partially Qualified Property Envelope $0.60/sqft $0.61/sqft $0.63/sqft
HVAC
Lighting

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