Tax Initiative 179D, also known as the Energy Efficient Commercial Buildings Deduction, is a federal tax incentive program in the United States that encourages energy efficiency improvements in commercial buildings. It provides a deduction for the costs associated with implementing energy-efficient HVAC (heating, ventilation, and air conditioning) systems, lighting systems, and building envelope improvements.
History of Tax Initiative 179D
Tax Initiative 179D was introduced as part of the Energy Policy Act of 2005. The purpose of this initiative was to promote energy conservation and reduce greenhouse gas emissions by providing tax incentives to building owners and designers who invest in energy-efficient building systems. It was originally enacted as a temporary provision and was extended multiple times since its inception. In 2021 it was made permanent by the “Consolidated Appropriations Act”.
How it works
Under Tax Initiative 179D, building owners or tenants who make qualifying energy-efficient improvements to their commercial buildings can be eligible for a tax deduction of up to $1.80 per square foot of the building.
The deduction is divided into three main components:
- Building Envelope: This component focuses on reducing the energy loss through the building envelope, including the insulation, windows, doors, and roof. Upgrades such as enhanced insulation, efficient windows, and improved roofing systems can qualify for this deduction.
- HVAC and Hot Water Systems: The HVAC system component covers improvements made to the heating, cooling, ventilation, and hot water systems. This can include the installation of energy-efficient HVAC equipment, controls, and ventilation systems.
- Interior Lighting Systems: The interior lighting component encourages the use of energy-efficient lighting systems, such as LED lighting, occupancy sensors, and daylight harvesting controls.
To qualify for the 179D deduction, the improvements must meet certain energy efficiency standards set by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE). These standards vary depending on the type of improvement and the year in which the improvements were placed in service.
Who benefits from the deduction?
The deduction is available to three parties:
- Building Owners: The owner of the commercial building at the time the energy-efficient improvements are made can claim the deduction.
- Government Entities: In the case of public buildings, such as government-owned buildings, the deduction can be allocated to the primary designer of the energy-efficient systems. The designer is typically an architect, engineer, contractor, or energy services provider.
- Tenants: Tenants in a commercial building may be eligible for the deduction if they pay for the improvements themselves and meet certain requirements.
How Pure Air Helps
WTI Pure Air Control Services helps you maximize your buildings and HVAC for energy to two distinct ways. First, we assess both the building and HVAC system. Second, based on the data the assessments provide we restore and retrofit HVAC systems.
HVAC Condition Assessments are a useful service that tests the entire mechanical inventory of a building. Essentially, this assessment exceeds that of what ASHRAE 62.1, 8 recommends for creating and maintaining an operations and maintenance manual for HVAC. The data provided is helpful when creating 3-5 year asset management plans for air handler restoration and replacement.
HVAC New Life Restoration is a service that cleans and refurbishes aging air handler units. It begins with a deep cleaning of the unit utilizing our proprietary PURE-Steam service. Steam cleaning removes airflow obstructions, restores static pressure baselines and improves thermal transfer for greater energy efficiency. Next, the AHU is refinished using high performance, anti-microbial, coatings. Finally, retrofit options like a new fan array is installed for even greater performance gains, and energy savings.
These services qualify for tax incentive 179D and also offer fast payback through energy savings.
It’s important to note that Tax Initiative 179D is a federal tax incentive, and eligibility and requirements may vary depending on the specific circumstances. It is recommended to consult with a tax professional or visit the official IRS website for the most up-to-date information and guidelines. Once you have your plan in place, contact WTI – Pure Air Controls to get started optimizing your HVAC equipment and Building Envelope!
- Internal Revenue Service (IRS) – “Notice 2006-52: Interim Guidance Regarding the Deduction for Energy Efficient Commercial Buildings under Section 179D”
- U.S. Department of Energy (DOE) – “Deduction for Energy-Efficient Commercial Buildings (179D)”
- Tax Incentives Assistance Project – “Commercial Building Tax Deduction”
- American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) – “ANSI/ASHRAE/IES Standard 90.1”