179D energy efficient commercial buildingAccording to a recent article by Ellen Bell of Energy Manager Today, “Green Building Boom Is Pumping Billions into US Economy, Retrofits Are Fueling Trend,” the green building sector has become one of the most vibrate sectors of the American economy, with the article citing newly released numbers from the U.S. Green Building Council to illustrate the economic impact of this current trend and where it is projected to lead the economy in the coming years.

Citing the USGBC’s study from Booz Allen Hamilton, over the next three years new-LEED certified construction is estimated to contribute more than $303 billion to the U.S. economy and over 2.3 million jobs just this year alone. By 2018, the article further notes that green construction is anticipated to save more than $1 billion in energy usage and $100 million in water use­.

When keeping these statistics in mind, Bell points out that these numbers are actually a conservative estimate considering that they do not account for another major trend with respect to green building—the energy saving renovations and retrofits for already constructed buildings. Naming specific examples such as a JLL managed property in Chicago that found ways to reduce its energy usage by 32%, Bell observes how the renovation of already existing buildings will be a huge factor in further stimulating an already booming green building market.

Section 179D: Energy-Saving Renovations and Their Tax Rewards

With the statistics showing an undeniable link between energy efficiency and economic growth, it would naturally seem like smart fiscal policy to encourage designers and construction companies to think greener about their work, be it when they are making new buildings or while renovating existing ones.

And when it comes to incentivizing green buildings, it appears that Congress, to their credit, has actually been ahead of the curve. Ten years ago, as part of the Energy Policy Act of 2005, Congress passed the Energy-Efficient Commercial Building Deduction, better known as Section 179D of the tax code. As Bell alludes to in her article, buildings make up almost 40% of all energy usage in the United States—and 179D provides yet another financial incentive for designers and construction companies to reduce their energy usage by offering an up to $1.80 per square foot tax deduction among the buildings an eligible business makes energy-efficient.

Generally, there are two groups that can qualify for 179D: the owner of the energy-efficient commercial building and—perhaps the most overlooked opportunity with respect to the deduction—designers and construction companies that work on government-owned buildings. In the latter case, the government entity that owns the building (be it from the federal, state or local level) can allocate the tax savings to the company responsible for the energy-efficient enhancements made to the structure. It’s a step that most government entities should have little reservations making, considering most are tax exempt and are unable to benefit from 179D.

Taking into account retrofits and renovations of existing buildings, I am sure the average designer or contractor is aware that work on government structures such as universities, schools and other older government buildings requires upkeep and modernization. Such updates are often related to energy usage, and many times even the simplest energy saving renovations can absolutely qualify for the Section 179D Energy-Efficient Commercial Building Deduction.

For those companies seeking the full benefits of the blooming green economy, 179D offers yet another opportunity to profit from their green buildings­—both the new ones and the old ones.

Contact us today for more information on the Energy-Efficient Commercial Building Deduction and alliantgroup’s tax consulting services.