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Energy-Efficient Commercial Building Property Deduction
A deduction is allowed for all or part of the cost of energy efficient commercial building property (i.e., certain major energy-savings improvements made to domestic commercial buildings) placed in service after December 31, 2005 and before January 1, 2014 (see references below).¹
The deduction is claimed on the "Other deductions" line of the tax return. There is no special form for computing the deduction.
To qualify as energy efficient commercial building property the property must be:
- depreciable and installed as part of:
- the interior lighting systems;
- the heating, cooling, ventilation, or hot water systems; or
- the building envelope and
- certified by a qualified professional to reduce total annual energy and power costs of the building's heating, cooling, ventilation, hot water, and interior lighting systems by 50 percent or more when compared to a similar reference building that meets minimum specified energy standards described in Standard 90.1-2001, Energy Standard for Buildings Except Low-Rise Residential Buildings, of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America.
The certification statement does not include a calculation of the tax deduction and is not included with the taxpayer's return (see references below)².
The maximum cost of energy efficient commercial building property that may be deducted in any tax year is limited to the product of $1.80 and the square footage of the building, over the total deductions claimed under Code Sec. 179D for energy efficient commercial building property in any prior tax years (see references below).³
If the overall 50 percent energy reduction standard is not satisfied, but improvements to one of the three energy efficient commercial building property types described in (1) above reduce energy usage by 16 2/3percent, then the cost of the improvements to that particular subsystem (referred to as partially qualifying property) may also be deducted in the tax year placed in service, but the cost that is deducted is limited to 60 cents per square foot of building space less total deductions claimed under Code Sec. 179D in prior tax years.
Additional Links: http://www.efficientbuildings.org/PDFs/Senate_Finance_Tax_Package.pdf http://www.ahrinet.org/ARI/util/showdoc.aspx?doc=1241
http://www.ahrinet.org/
References:
¹ - Code Sec. 179D, as added by the Energy Tax Incentives Act of 2005 ( P.L. 109-58) and amended by the Tax Relief and Health Care Act of 2006 ( P.L. 109-432) and the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343); Notice 2006-52, I.R.B. 2006-26, June 2, 2006 at Section 12,138D.20; Notice 2008-40, I.R.B. 2008-24, March 11, 2008.
² - See Section 12,138D.04.
³ - Code Sec. 179D(b). In other words, the deduction is the lesser of: (1) the cost of the energy efficient commercial building property placed in service during the tax year or (2) the product of $1.80 and the square footage of the building, reduced by all deductions claimed with respect to the building in any prior tax years.
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