Phil Squair, Vice President, Government Relations, NEMA
On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020. This law included a provision extending the Energy Efficient Commercial Buildings Deduction originally authorized under the Energy Policy Act of 2005 (EPACT) through December 31, 2020. With this extension, new installations or retrofits placed in service after December 31, 2017, through December 31, 2020, that meet the requirements can claim the tax deduction.
In general, the Energy Efficient Commercial Buildings Deduction (Section 179D) allows a deduction for certain expenses associated with placing in service energy-efficient commercial building property during the taxable year. Section 179D allows building owners to claim a tax deduction up to $1.80 per sq. ft. of building area to install systems that reduce the total energy and power costs by 50 percent or more when compared with a reference building in ASHRAE 90.1-2001 or 90.1-2007, depending on when the building and/or system was placed in service. An alternate partial deduction of up to $0.60 per sq. ft. is available for individual lighting, building envelop, or HVAC systems.
Additional information is available at the following links:
- DOE webpage on the Energy Efficient Commercial Buildings Deduction
- United States Code text of the law
- IRS Practice Unit Material for Agents on Section 179D
Section 179D has had a significant impact over the years. It has helped to spur construction and manufacturing jobs through retrofits, saved businesses billions of dollars in fuel bills as buildings become more energy-efficient, placed lower demands on the power grid, and moved our country closer to energy independence. NEMA is very pleased that the electroindustry’s advocacy work was successful in getting this beneficial deduction extended through December 31, 2020.
Note: The above links and others available online may not yet have been updated to reflect the extension of the deduction to December 31, 2020. For individual company information on how this deduction can be utilized, please consult an accounting professional.