An architecture firm in Connecticut was hired by a government entity to design an 89,693 square-foot elementary school. The design, which was completed in 2020, included several energy efficiency measures in the school’s lighting, HVAC systems, and the building envelope. These measures were found to exceed the standards of ASHRAE 90.1-2007 by over 50 percent, indicating that the project satisfied the latest widely accepted requirements for energy-efficient buildings.
Faced with a substantial tax burden after completing the elementary school project, the architecture firm consulted Capital Review Group for assistance in determining whether they qualified for the §179D tax deduction based on the energy efficiency measures designed for the school.
The §179D deduction for primary designers
The federal tax code provides a powerful incentive for the implementation of energy efficiency measures in commercial and public buildings: the §179D deduction, which offers up to $0.60 per square foot for qualifying improvements to a building’s lighting system, $0.60 per square foot for improvements to the HVAC system, and $0.60 per square foot for improvements to the building envelope. Therefore, the deduction is worth up to $1.80 per square foot for improvements to the whole building.
The §179D deduction is available to commercial building owners, as well as primary designers—such as architects, engineers, and contractors—who design qualifying energy efficiency measures for buildings owned by local, state, or federal governments. Since government entities do not pay taxes and therefore cannot use the deduction, they may allocate it to their primary designers. This valuable incentive is currently due to expire on December 31, 2020, so now is the time for building owners and designers to determine whether their projects qualify.
Minimizing taxes with the §179D deduction
In order to claim the §179D deduction, building owners and primary designers must have their projects certified by a qualified third party, such as Capital Review Group. Our team combines tax and engineering expertise to help our clients minimize their tax burdens through state and federal incentives, including §179D.
After reviewing the architecture firm’s project records and certifying eligibility, we were able to help the firm receive a §179D deduction of $161,447 for the elementary school project–which yielded over $60,000 in federal tax savings. These savings will enable the firm to continue pursuing innovative designs and promoting sustainability in their community.
Have you designed energy efficiency measures for a government-owned building? Act now to find out if you qualify for the §179D deduction—contact Capital Review Group today to schedule a consultation!