Commercial
Building
Commercial
Building
What is the tax incentive for commercial buildings?
A tax deduction of up to $1.80 per square foot is available to owners or tenants (or designers, in the case of government-owned buildings) of new or existing commercial buildings that are constructed or reconstructed to save at least 50% of the heating, cooling, water heating, and interior lighting energy cost of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for comparable reductions from any one of three building systems—the building envelope, lighting, or heating and cooling system—that meets goals consistent with achieving the 50% savings for the entire building. An interim system-specific goal for lighting is provided directly in the legislation and is valid until and unless the IRS issues a different final regulation. The interim lighting provision allows prorogated deductions from 30 cents to 60 cents per square foot for lighting systems as described below.
These deductions are available for buildings or systems placed in service from January 1, 2006 December 31, 2007
Who is eligible for the incentives?
The person or organization that makes the expenditures for construction is generally the recipient of the allowed tax deductions. This is usually the building owner, but for some HVAC or lighting efficiency projects, it could be the tenant. For government-owned buildings, the deduction may be taken by the building or system designer.
What are the incentives and how do they work?
The builder (or designer in the case of publicly-owned buildings) can take the deduction in the year the property was placed in service. The building or system must be certified, with inspection and testing, as meeting the energy cost savings goal according to rules to be issued by the IRS in consultation with the Department of Energy. The certification must establish compliance using software that is certified to the IRS as meeting requirements that the IRS will establish .In the case of lighting systems, simpler certification methods should be possible.
For lighting systems, unless and until the IRS issues a different final rule, the law specifies that a deduction of $0.30 per square foot can be taken if the lighting system employs dual switching (ability to switch roughly half the lights off and still have fairly uniform light distribution) and reduces installed lighting power by at least 25% from values specified in specific cited tables in ASHRAE Standard 90.1-2001. As lighting power reductions climb from 25% to 40%, the deduction is increased proportionally, up to $0.60 for a 40% power reduction (plus the dual switching). This prorated credit does not apply to warehouse lighting.
What do I have to do to qualify for the incentives?
Follow the rules issued by IRS, which will be published during 2006. We will post a link here, as soon as these rules are available. At a minimum taxpayers will need information on when the measures were placed in service, the cost of the measures, and a certification, following guidelines in the IRS rules, that the measures meets the qualification criteria.
Where can I learn more about qualifying technologies and designs?
For design advice concerning how to meet the savings goals, please consult the following websites:
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