A structural engineering firm was hired by the State of Washington to design three new schools, which totaled an estimated 281,558 square feet. The designs incorporated several energy efficiency measures in the lighting systems, HVAC systems, and the building envelope. These measures exceeded ASHRAE Standard 90.1-2007, indicating that the buildings met the latest widely accepted guidelines for energy efficiency.
After completing the school design projects, the engineering firm consulted Capital Review Group for assistance with identifying options for reducing the significant tax burden it was facing.
Qualifying for the §179D deduction as a primary designer
Enacted under the Energy Policy Act (EPAct) of 2005, §179D of the federal tax code provides a deduction of up to $1.80 per square foot for qualifying energy efficiency measures installed in new or existing buildings. Specifically, the deduction is worth up to $0.60 per square foot for improvements to a building’s lighting systems, $0.60 per square foot for improvements to the HVAC systems, and $0.60 per square foot for improvements to the building envelope.
In the case of privately owned commercial buildings, the building owner claims the §179D deduction. However, since government entities are tax-exempt, they may allocate their deductions to the primary designers—such as the architects, engineers, contractors, or green building consultants—of qualifying measures designed for public buildings, including schools. The §179D deduction is currently due to expire on December 31, 2020, so now is the time for commercial building owners and primary designers to review their past and upcoming projects to determine whether they may qualify for this valuable incentive.
Claiming the §179D deduction
To claim the §179D deduction, taxpayers must have their projects certified by a qualified third party, such as Capital Review Group. Offering the ideal combination of tax, engineering, and commercial building expertise, our team is uniquely suited to help our clients maximize their tax savings through the §179D deduction and other state and federal incentives.
After reviewing the engineering firm’s project records for the three schools, we identified an additional 16,484 square feet that qualified for a whole-building deduction of $1.80 per square foot. With the help of the substantial tax savings available through the §179D deduction, the engineering firm will be able to continue pursuing innovative and sustainable designs for publicly and privately owned buildings alike.
Has your firm designed energy efficiency measures for a public building? Contact Capital Review Group today to schedule a consultation!