Chris Henderson, VP of Operations

Chris Henderson, VP of Operations

In January 2011, the IRS issued Revenue Procedure 2011-14 that provided an alternative accounting method for claiming the EPAct 179D tax deduction for sustainable design. Rather than amending tax returns, architectural firms that had not previously taken the deduction were allowed to claim the deduction on their current year’s return using a Form 3115 along with a certification report and an allocation letter.

However, this week, IRS author of 179D guidance, Jennifer Bernardini provided clarification with regard to Form 3115. While admitting that ambiguity exists in Rev Proc 2011-14, she stated the Office of Chief Counsel, the IRS division that reviews accounting methods, was unlikely to grant any accounting method change submitted by architects that have not previously claimed the 179D deduction. She also indicated the IRS is working on guidance that would clarify the ambiguity found in Rev Proc 2011-14 but gave no timetable.

While Ms. Bernardini’s comments represent her own opinion and not those of the IRS, her comments can be interpreted as the prevailing thought at the Service. As such, SourceCorp recommends filing amended returns to claim 179D deductions associated with projects completed in prior tax years. To ensure that all 2008 projects are reviewed while still under statute, firms should gather complete blueprints and specifications as well as applicable allocation letters as quickly as possible.

SourceCorp is keeping close tabs on this issue and will communicate further updates.

6 Thoughts on “IRS Clarifies on Use of Form 3115 for 179D Tax Deduction

  1. Adam on July 27, 2011 at 2:17 pm said:

    In what forum did Ms. Bernardini provide this clarification?

  2. Jennifer on December 5, 2011 at 9:22 am said:

    Have there been any further developments or updates on this issue?

    • Chris Henderson on December 6, 2011 at 11:22 am said:

      While the IRS is still looking into this matter, no further guidance has been issued. We will provide an update as soon as one is available.

  3. As a general contractor that is selling sustainability, can it get the public allocation of potential 179 EPAct deductions if it holds the design contract and not the public entity? Or is the designer only eligible? I would think that if the school/municipality signs the form and assigns the deduction to the general contractor who technically was responsible for managing the design, they could claim the deduction. What advice do you have for general contractors and how they structure their contracts going forward to claim the deduction?

    • Bob McPherson on March 16, 2012 at 8:35 am said:

      According to the regulations, a general contractor that has significant influence on the design and implementation of a project may be assigned the deduction.

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