The underutilized 179D tax deduction can benefit your design-build projects.

Written by: Dean Zerbe
Published: May 1, 2013

For anyone who has relocated to a new office building or high-rise apartment, one of the most frustrating experiences is lugging furniture up flights of stairs only to discover a hidden freight elevator the moment after setting down the last box. For architecture, construction, design and engineering firms, the 179D tax deduction is just like that elevator, an easily accessible means of improving business by utilizing work already underway. The 179D tax deduction is intended to incentivize energy and eco-friendly building and design, and your business projects may well meet the deduction’s requirements.

179D isn’t new. Congress enacted Section 179D of the Internal Revenue Code as part of its 2005 Energy Policy Act to encourage the energy-efficient design and construction of new or renovated properties. While the deduction was originally created to reward commercial building owners and design-build contractors for environmentally friendly design, Congress realized after enacting it that the benefit was not being claimed in many government-owned construction projects. For this reason, the tax code was amended to allocate deductions for providers responsible for the energy efficiency of a qualifying building. Now, qualifying businesses can receive up to $1.80 per square foot in deductions for eligible projects placed into service any time from 2008 to 2013.

With both economic and environmental concerns weighing upon the public conscience, 179D bridges the “either-or” divide. The long-term energy conservation has the potential to save money while reducing pollutants and waste.
So, if companies are already “going green,” why aren’t more taking advantage of this tax deduction? Almost every time, companies are simply unaware of it or mistakenly believe they don’t qualify.

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