Claim Section 179D Tax Deduction—Set to Expire at Year-End—on 2016 Tax Returns

While tax deductions for energy-efficient commercial buildings under Section 179D are set to expire December 31, 2016, they can still be claimed on 2016 tax returns that are filed in 2017.

Taxpayers can receive as much as $1.80 per square foot for commercial building efficiency improvements above certain thresholds. Eligible improvements made between January 1, 2006, and December 31, 2016, include, among others:

  • Heating, ventilation, and air conditioning (HVAC) systems
  • Interior lighting retrofits
  • Building envelopes that are part of new construction or remodels

Who's Impacted?

Both building owners and designers can claim the deduction. More specifically, these categories include:

  • Owners and tenants of commercial properties who have built or installed improvements
  • Architects, engineers, or contractors who are the designers on government-owned, energy-efficient buildings

For buildings owned by government entities, those entities may elect to allocate the deduction to the designer, or multiple designers, at the owner’s discretion. A designer may be an architect, engineer, contractor, environmental consultant, or energy-services provider who creates the technical specifications for a building. A person who merely installs, repairs, or maintains the property isn’t considered a designer for the purposes of this deduction.

A contractor or professional engineer licensed in the state where the building is located must model the energy performance of the building and compare it with a reference building that meets the minimum energy and power cost requirements under standards set by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers.

We're Here to Help

Moss Adams can help prepare the energy model and certification required to obtain the deduction for energy-efficient commercial building improvements. We can also help determine your eligibility for additional credits and incentives that may affect your tax liability. If you have questions about how your business can benefit or claiming missed deductions, contact your Moss Adams professional or e-mail creditsandincentives@mossadams.com.