The underlying intent behind §179D was two-fold. First and foremost, §179D intended to further America’s energy independence by reducing our energy consumption in the area of greatest need, commercial buildings. Second, §179D also sought to bolster the AEC (Architecture, Engineering and Construction) Industry by allowing for federal tax deductions to be claimed by companies that performed the work on qualified buildings that helped such buildings achieve greater energy efficiency.

All that said, it is interesting to note that many companies in America that perform work that qualifies for 179D do not realize that they are eligible to claim §179D deductions. There is no confusion amongst Architects and Engineers on how their work qualifies for §179D. It is the contractors who are often unclear about how their contribution to government-owned projects qualifies under §179D. This includes mechanical and electrical contractors in addition to general contractors.

Although they are specifically enumerated in the tax code as “designer,” contractors sometimes do not view themselves as designers despite the numerous ways in which they contribute to the technical specification of the energy efficient property in commercial buildings.

Here are just a few of the ways contractors qualify for §179D:

  1. Estimating/Pre-Construction Process – Often, contractors develop a more efficient way (value engineer) to design part of the building while maintaining the results intended for that part of the project.
  2. Means and Methods – Contractors are responsible for the means and methods to perform construction. Means and methods require incidental design and engineering on the contractors part in order to complete a construction project. This is often enumerated in the contracts between owners and contractors.
  3. As-Built Drawings – Most government projects require contractors and subcontractors to prepare as-built drawings. These drawings reflect all the changes that were made during construction and become the final set of drawings the government keeps for their records. This is another example of the documents that show the changes made in the design during the construction process. These changes are made with the technical input and/or expertise of the general contractor.
  4. Submittals – Contractors are required to process submittals (aka shop drawings, product data). The submittal process gives another level of detail usually not included as part of the design documents which are generated and/or reviewed by the contractor.
  5. Request for Information – This document is initiated and drafted by the contractor to obtain clarification or direction on changes needed to the project’s initial design. This document often includes a design suggested by the contractor.
  6. Change Orders – This is work that is added to or deleted from the original scope of work of a contract, often initiated and designed by the contractor or subcontractor.

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