The Senate Finance Committee recently voted to approve a two-year extension of the Energy Efficient Commercial Buildings Tax Deduction, also known as Section 179D, as part of the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act.
The provision allows a taxpayer to take a deduction equal to commercial building energy-efficiency expenditures made by the taxpayer as part of the building’s interior lighting systems, heating, cooling, ventilation, and hot water systems, or building envelope. Certification must be obtained to verify that the retrofits are installed as part of a plan to reduce energy costs by 50% or more in comparison to a specified minimum standard.
The bill passed today makes some modifications to the 179D incentive. Tribal governments and 501(c)(3)non-profit organizations would be permitted to transfer the deduction to the architect or designer primarily responsible for designing the energy efficiency project. The ability to transfer the deduction is currently available only for public building projects.
Also, under the new provision the 50% energy savings certification would be calculated on energy efficiency improvements above a new baseline reference. The approved modification moves the baseline to a more current standard. This will make achieving the accelerated tax deduction with lighting more difficult.
The Commercial Building Tax Deduction was enacted into law as a provision of the Energy Policy Act of 2005, and represented the first performance-based federal tax incentive aimed at energy efficiency improvements in commercial buildings. Congress has acted twice to extend the provision. The last extension was for five years and expired on December 31, 2013.
In other news, Senators Ben Cardin (D-MD), Dianne Feinstein (D-CA), and Brian Schatz (D-HI) recently introduced the Energy Efficiency Tax Incentives Act (S.2189), which includes language that would similarly reinstate and improve the Commercial Building Tax Deduction.