Are you leaving energy efficiency money on the table? Section 179D, a provision of the 2005 Energy Policy Act (EPAct), offers tax incentives to building owners and designers, but many organizations aren’t claiming this free money, either due to perceived complexity or lack of awareness. The 179D version for buildings put in service through 2014 provides incentives ranging from $0.30/sf to $1.80/sf for energy efficient lighting, HVAC, and envelop systems. The tax credit was originally intended for property owners, but in 2008 Congress amended the requirements to allow government entities to pass on the incentives to designers, which may include architects, engineers, builders, energy modelers, and sustainability consultants.
Designers, Take Advantage of Section 179D Tax Incentives
One downside to consider is mandatory third party verification. Verifiers generally charge as a flat fee that needs to be balanced with the potential payoff. But these groups can help you navigate the required documentation.
Another potential inconvenience is that while 179D allows credits for projects built in previous tax years, you must resubmit taxes for that year in order to claim the credit.
Still, if you are wondering how to pay the additional soft costs for sustainability consulting, the tax credit is often enough to pay for those fees, making the hassle worthwhile.
Although the tax credit has officially expired, on July 21, 2015 the Senate Finance Committee cleared a tax extender, paving the way for an extension through Dec 31, 2016 that allows retroactive submissions for previous years. The proposed changes include more rigorous energy efficiency standards that align 179D better with current best practices. However, the biggest positive change is to allow 501(c) 3 organizations, in addition to government clients, to pass on the tax credits, greatly expanding financial opportunities for designers. Be on the lookout for congressional approval so you can claim your free money for energy efficient design.