On Dec. 16, the U.S. Senate voted to extend the 179D tax deduction for energy-efficient commercial buildings, which expired on Dec. 31, 2013 and was never reauthorized. Under 179D, building owners who spend money to render new or renovated commercial buildings more energy efficient will again be eligible for an immediate, one-time federal tax deduction.
The legislation, which already passed through the U.S. House of Representatives, determines three components that measure a building’s performance—lighting, HVAC systems, and the building envelope—that are each available for a deduction of up to 60 cents per square foot if the building meets the designated criteria in each category, meaning the building's total deduction would max out at $1.80 per square foot.
Congressional action retroactively brings the deduction back to life—for two more weeks. Though 179D will expire on Dec. 31, 2014, the vote authorizes the deductions for only projects placed into service in 2014. There is no word yet on whether the legislation will be extended for 2015.
The extension also permits public building owners to allocate the deduction to the architect of the energy-efficient property, allowing the design firm to take advantage of all the resources necessary to create the most energy efficient structure possible while giving the building owner another financing tool.
Section 179D was first introduced in the tax code in the Energy Policy Act of 2005 in an effort to incentive the public and private sectors to build energy-efficient buildings.
Restoring this tax incentive has been one of the AIA’s key legislative priorities since it expired at the end of 2013.
“The 179D deduction has leveraged billions of dollars in private capital, resulted in the energy-efficient construction of thousands of public and private buildings, and created and preserved hundreds of thousands of jobs. It has lowered demands on the power grid, moved our country closer to energy independence, and reduced carbon emissions,” said AIA president Elizabeth Chu Richter, FAIA, in a press release. “The AIA looks forward to continuing to work with Congress to improve 179D, and make it permanent within the context of comprehensive tax reform.”
The bill will now go to President Obama, who is expected to sign it in the coming days.