In an era where sustainability is at the forefront of corporate responsibility, the 179D tax deduction emerges as a beacon, encouraging innovation and excellence in energy efficiency within commercial buildings. Enacted through the Energy Policy Act of 2005, this incentive is a catalyst for change, motivating property owners, designers, and contractors to embrace environmentally responsible practices during construction or renovation projects. The 179D tax deduction can significantly improve the return on investment for energy projects.
Driving Forces Behind 179D:
At its core, the 179D tax deduction seeks to recognize and reward those who champion energy efficient design in buildings. By focusing on key areas such as building envelopes, HVAC systems, interior lighting, and controls systems, the program aims to transform commercial, residential, government and non-profit buildings into sustainable hubs.
Eligibility and Evolution:
The beauty of the 179D deduction lies in its inclusivity. Both new constructions and existing buildings are eligible, emphasizing their adaptability to diverse projects. From its inception, the program has continually evolved to meet the dynamic needs of the industry. In a landmark move in 2020, the deduction became a permanent fixture in the tax code, solidifying its role as a long-term driver of positive change.
Financial Incentives:
The financial rewards offered by the 179D deduction are a game-changer. For projects completed between 2006 and 2022, a generous tax deduction of up to $1.80 per square foot. For commercial and multifamily building owners, 179D is a tax deduction in lieu of depreciation. For designers of tax-exempt buildings, 179D is an added benefit for providing an energy efficient design in buildings. Looking ahead to the future, the landscape becomes even more enticing for projects completed in 2023 and beyond, with the maximum 179D deduction now exceeding $5.00 per square foot, opening new possibilities for those committed to excellence.
Key Takeaways:
Immediate Tax Benefits: The 179D deduction provides an immediate tax deduction for building owners and design firms, ensuring that the financial benefits are realized promptly. The deduction is capped at net project cost and can help to fund typically expensive projects.
Comprehensive Eligibility: Projects encompassing lighting, HVAC, building envelopes, and controls can all reap the rewards of the 179D deduction, creating a holistic approach to energy efficiency. New construction buildings are well platformed for qualifying under 179D, as many jurisdictions throughout the country are adopting stricter building energy codes.
Long-Term Impact: Projects completed since 1/1/2006are eligible, showcasing the program's commitment to creating a lasting impact on the industry. Commercial and multifamily building owners can utilize the 179D deduction every three years on new projects to a particular building.
Who Qualifies?
The inclusivity of the 179D deduction extends to buildings owned by for-profit companies, governments and non-profits (charitable organizations, churches, private schools, universities, foundations, political organizations, nonprofits)., making it a truly democratic force for positive change. For governments and non-profit entities, design firms (which include architects, engineers, energy service companies, and systems designers) can take the 179D deduction.
Conclusion:
The 179D tax deduction is not just a financial incentive; it's a call to action for the commercial building sector to embrace sustainability wholeheartedly. As we stand at the intersection of fiscal responsibility and environmental consciousness, the 179D deduction offers a roadmap for businesses to thrive while contributing to a greener, more sustainable future. It's time for industry to seize this opportunity, unlock the potential for change, and redefine the landscape of commercial construction and renovation. Contact STRATCO today to discuss how you can benefit from 179D.
STRATCO is a third-party specialist that navigates New York State incentive programs. STRATCO specializes in creating unique business plans for its clients to solve underserved needs in the marketplace. STRATCO serves the entire value chain with in-depth services to obtain the government incentives available for projects. To learn more about how the new incentives may impact on your development, please contact the below for a free of charge consultation.
Caoimhe Banahan
929 353 2768
cb@stratcoproperty.com
