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Energy & Taxes

Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers
If you own or lease a commercial property, and have recently installed energy efficient systems but have not heard of Section 179D, you may be missing out on a significant tax deduction.
The Internal Revenue Service and the Department of Energy have teamed to give potential tax deductions of up to $1.80 per square foot of your building for energy savings on high-efficiency lighting, heating, ventilation, air conditioning, hot water, and building envelope (roof, insulation, windows) systems put in place since 2006.
To obtain the tax deduction, you must certify that your systems reduce consumption of energy and power costs by 50 percent, as compared to a baseline set by DOE.  It is not necessary to have energy savings in all the named systems. (Lighting is perhaps the easiest sector in which to reach the minimum goals.) With reductions certified as low as 16.6 percent in one of the major system sectors (lighting, HVAC, or building envelope), the tax deduction reduces to 60 cents per square foot.
For public buildings, the tax regulations allow the tax savings to be passed on to the system designer in lieu of the public entity.
If you have not heard of this program, do not be surprised.  It is not well known, and the calculations can be challenging.  You will probably want some help – and in fact, the IRS requires you have a third party certify the savings for your records. This usually means engaging a licensed engineer utilizing DOE-approved computer software.
If you have built, or plan to build or renovate, talk to your designer to see if your systems might qualify.  Systems installed by multiple leasers can produce shared tax deductions. So if you are thinking green these days, why not let Uncle Sam give you a hand?