The Simple Version Of Information In The IRC Section 179D

The IRC or Internal Revenue Code for the United States is certainly not something that most people in the USA are familiar with unless they have a specific tax related question. For businesses and commercial property owners, however, having a basis understanding of the IRC Section 179D information is helpful in understanding if your building may qualify for a tax deduction based on energy savings.

The IRC Section 179D deals with the EPACT or Energy Policy ACT of 2005 which provides businesses and commercial property owners the opportunity to earn a tax deduction of up to $1.80 per square foot. The developer, or an architect or energy consulting firm, may also be awarded the deduction in the event that it is publically owned building.

Qualifications under IRC Section 179D

One of the most important aspects of the IRC Section 179D is that it clearly defines the qualifications for a building to be eligible for this type of deduction. There are some obvious qualifications such as the fact that the building has to be located in the United States and has to be within the scope of Standard 90.1-2001 and include the interior lighting system, the heating, cooling, ventilation and hot water systems, and the building envelope.

In addition the systems have to be certified that they have been tested and will result in a specific reduction in the total annual energy and power costs to the building by 50% or by individual percentages by subsystems by Standard 90.1-2001. This standard is further defined as being set forward by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America.

Partial Allowance

The IRC Section 179D provides for a partial allowance for a building should any systems meet the energy savings targets that are individualized for each system. These targets are developed by the Secretary in consultation with the Secretary of Energy.

The other essential component to consider when reviewing the IRC Section 179D is that it clearly indicates what types of documentation, including the computer software, that can be used to certify that the energy savings have been met by the building. It also outlines the certification process to ensure that all buildings are certified following identical guidelines regardless of which company provides the certification. For more information click here.

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