26 USC 179 - Energy efficient commercial buildings deduction

View all text of Part VI [§ 161 - § 199A]

§ 179D. Energy efficient commercial buildings deduction

(a) In general

(b) Maximum amount of deduction

(1) In generalThe deduction under subsection (a) with respect to any building for any taxable year shall not exceed the excess (if any) of—

(A) the product of—

(i) the applicable dollar value, and

(ii) the square footage of the building, over

(B) the aggregate amount of the deductions under subsections (a) and (f) with respect to the building for the 3 taxable years immediately preceding such taxable year (or, in the case of any such deduction allowable to a person other than the taxpayer, for any taxable year ending during the 4-taxable-year period ending with such taxable year).

(2) Applicable dollar value

(3) Increased deduction amount for certain property

(A) In general

(B) Property requirementsIn the case of any energy efficient commercial building property, energy efficient building retrofit property, or property installed pursuant to a qualified retrofit plan, such property shall meet the requirements of this subparagraph if—

(i) installation of such property begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (4)(A) and (5), or

(ii) installation of such property satisfies the requirements of paragraphs (4)(A) and (5).

(4) Prevailing wage requirements

(A) In general

(B) Correction and penalty related to failure to satisfy wage requirements

(5) Apprenticeship requirements

(6) Regulations

(1) Energy efficient commercial building propertyThe term “energy efficient commercial building property” means property—

(A) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

(B) which is installed on or in any building which is—

(i) located in the United States, and

(ii) within the scope of Reference Standard 90.1,

(i) the interior lighting systems,

(ii) the heating, cooling, ventilation, and hot water systems, or

(iii) the building envelope, and

(D) which is certified in accordance with subsection (d)(5) as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 25 percent or more in comparison to a reference building which meets the minimum requirements of Reference Standard 90.1 using methods of calculation under subsection (d)(1).

(2) Reference Standard 90.1The term “Reference Standard 90.1” means, with respect to any property, the more recent of—

(A) Standard 90.1-2007 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America, or

(B) the most recent Standard 90.1 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America for which the Department of Energy has issued a final determination and which has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of this section not later than the date that is 4 years before the date such property is placed in service.

(d) Special rules

(1) Methods of calculation

(2) Computer software

(A) In general

(B) Qualified computer softwareFor purposes of this paragraph, the term “qualified computer software” means software—

(i) for which the software designer has certified that the software meets all procedures and detailed methods for calculating energy and power consumption and costs as required by the Secretary,

(ii) which provides such forms as required to be filed by the Secretary in connection with energy efficiency of property and the deduction allowed under this section, and

(iii) which provides a notice form which documents the energy efficiency features of the building and its projected annual energy costs.

(3) Allocation of deduction by certain tax-exempt entities

(A) In general

(B) Specified tax-exempt entityFor purposes of this paragraph, the term “specified tax-exempt entity” means—

(i) the United States, any State or political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing,

(ii) an Indian tribal government (as defined in section 30D(g)(9)) or Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)),1

1 So in original. Another closing parenthesis probably should precede the comma.

and

(iii) any organization exempt from tax imposed by this chapter.

(4) Notice to owner

(5) Certification

(A) In general

(B) Procedures

(e) Basis reduction

(f) Alternative deduction for energy efficient building retrofit property

(1) In generalIn the case of a taxpayer which elects (at such time and in such manner as the Secretary may provide) the application of this subsection with respect to any qualified building, there shall be allowed as a deduction for the taxable year which includes the date of the qualifying final certification with respect to the qualified retrofit plan of such building, an amount equal to the lesser of—

(A) the excess described in subsection (b) (determined by substituting “energy use intensity” for “total annual energy and power costs” in paragraph (2) thereof), or

(B) the aggregate adjusted basis (determined after taking into account all adjustments with respect to such taxable year other than the reduction under subsection (e)) of energy efficient building retrofit property placed in service by the taxpayer pursuant to such qualified retrofit plan.

(2) Qualified retrofit planFor purposes of this subsection, the term “qualified retrofit plan” means a written plan prepared by a qualified professional which specifies modifications to a building which, in the aggregate, are expected to reduce such building’s energy use intensity by 25 percent or more in comparison to the baseline energy use intensity of such building. Such plan shall provide for a qualified professional to—

(A) as of any date during the 1-year period ending on the date on which the property installed pursuant to such plan is placed in service, certify the energy use intensity of such building as of such date,

(B) certify the status of property installed pursuant to such plan as meeting the requirements of subparagraphs (B) and (C) of paragraph (3), and

(C) as of any date that is more than 1 year after the date on which the property installed pursuant to such plan is placed in service, certify the energy use intensity of such building as of such date.

(3) Energy efficient building retrofit propertyFor purposes of this subsection, the term “energy efficient building retrofit property” means property—

(A) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

(B) which is installed on or in any qualified building,

(i) the interior lighting systems,

(ii) the heating, cooling, ventilation, and hot water systems, or

(iii) the building envelope, and

(D) which is certified in accordance with paragraph (2)(B) as meeting the requirements of subparagraphs (B) and (C).

(4) Qualified buildingFor purposes of this subsection, the term “qualified building” means any building which—

(A) is located in the United States, and

(B) was originally placed in service not less than 5 years before the establishment of the qualified retrofit plan with respect to such building.

(5) Qualifying final certification

(6) Baseline energy use intensity

(A) In general

(B) Determination of adjustment

(7) Other definitionsFor purposes of this subsection—

(A) Energy use intensity

(B) Qualified professional

(8) Coordination with deduction otherwise allowed under subsection (a)

(A) In general

(B) Certain rules not applicable

(i) In general

(ii) Allocation of deduction by certain tax-exempt entities

Inflation adjustmentIn the case of a taxable year beginning after 2022, each dollar amount in subsection (b) shall be increased by an amount equal to—

(1) such dollar amount, multiplied by

(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2021” for “calendar year 2016” in subparagraph (A)(ii) thereof.

Any increase determined under the preceding sentence which is not a multiple of 1 cent shall be rounded to the nearest cent.

(h) RegulationsThe Secretary shall promulgate such regulations as necessary—

(1) to take into account new technologies regarding energy efficiency and renewable energy for purposes of determining energy efficiency and savings under this section, and

(2) to provide for a recapture of the deduction allowed under this section if the plan described in subsection (c)(1)(D) is not fully implemented.

(Added Pub. L. 109–58, title XIII, § 1331(a), Aug. 8, 2005, 119 Stat. 1020; amended Pub. L. 109–432, div. A, title II, § 204, Dec. 20, 2006, 120 Stat. 2945; Pub. L. 110–343, div. B, title III, § 303, Oct. 3, 2008, 122 Stat. 3845; Pub. L. 113–295, div. A, title I, § 158(a), Dec. 19, 2014, 128 Stat. 4022; Pub. L. 114–113, div. Q, title I, § 190(a), title III, § 341(a), (b), Dec. 18, 2015, 129 Stat. 3075, 3113; Pub. L. 115–123, div. D, title I, § 40413(a), Feb. 9, 2018, 132 Stat. 151; Pub. L. 115–141, div. U, title IV, § 401(a)(54), Mar. 23, 2018, 132 Stat. 1186; Pub. L. 116–94, div. Q, title I, § 131(a), Dec. 20, 2019, 133 Stat. 3232; Pub. L. 116–260, div. EE, title I, § 102(a)–(c), Dec. 27, 2020, 134 Stat. 3039, 3040; Pub. L. 117–169, title I, § 13303(a), (c), Aug. 16, 2022, 136 Stat. 1947, 1952.)