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Deduction for Energy Efficiency Commercial Buildings
Internal Revenue Bulletin: 2008-14

The Energy Policy Act of 2005 added section 179D to the Internal Revenue Code. Section 179D permits a deduction to the energy efficient property designer for the costs of installing certain energy efficient building systems in government-owned buildings. For the deduction to apply, the qualifying energy efficient building property must meet five general requirements:

1. The property is placed in service after December 31, 2005 and before January 1, 2008;
2. The property is installed in or on a building located in the United States;
3. The building is within the scope of Standard 90.1-2001, which deals with energy efficiency guidelines;
4. The property is installed as part of the interior lighting systems, the HVAC and hot water systems, or the building envelope; and,
5. An unrelated and qualified party certifies that the property will reduce the total annual energy and power costs by 50% compared to a reference building.

The deduction is for the cost of the qualifying energy efficient property, but it is capped at $1.80 times the square footage of the building, including mezzanines and other intermediate floors. For example, if a government entity places into service $500,000 of qualifying energy efficient building property in 2006 and has a 100,000 square foot building, the available deduction is limited to $180,000. On the other hand, if the government entity had only placed in service $150,000 of qualifying energy efficient building property, then the available deduction would be $150,000. NOTE: There are also reduced deductions available for partially qualifying property. continue reading…

If your clients own, or are lessees of, a commercial building and install property as part of the commercial building’s interior lighting systems, heating, cooling, ventilation, and hot water systems, or building envelope, they may benefit from the availability of substantial tax deductions. continue reading…

Liberty Property Trust has leased the second of two LEED-registered industrial buildings that the developer said were a first for Houston when they broke ground late last year. continue reading…

While many companies are increasingly integrating green building into their practice in order to foster their competitiveness, a new survey has found that most key players in real estate and construction overestimate the cost of green buildings by up to 300%. continue reading…

Los Angeles embarked on one of its most ambitious projects to combat global warming on Monday, becoming the biggest city in the nation to impose “green” building rules that would potentially cut millions of tons of pollution over the next decade.

In a unanimous vote, the City Council passed an ordinance requiring builders of large commercial and residential developments to adopt such measures as planting drought-resistant landscaping and using recycled materials and energy-efficient heating, cooling and lighting.

The law requires new commercial buildings and high-rise residential structures with more than 50,000 square feet of floor space to meet a nationally recognized “Leadership in Energy and Environmental Design” standard, developed by the U.S. Green Building Council, a Washington-based nonprofit. It also would cover major renovations and low-rise developments of 50 units or more.

So far, one state, Connecticut, and 14 cities are requiring private developers to meet green building standards. Source: Los Angeles Times, April 23, 2008

Since 2003 the number of cities with Green Building programs has risen by 418%.

American cities are going green and local leaders are charging ahead with innovative sustainability policies. Buildings currently account for close to one-half of all greenhouse gas emissions, and the design and construction of Green Buildings offers the opportunity to create a more sustainable future.

According to a survey report by the U.S. Conference of Mayors, nine out of ten cities anticipate requiring in the next year that new city buildings be energy efficient, healthy and environmentally sustainable. Forward-looking cities are adopting Green Building Standards to provide for long term operating cost savings, to facilitate positive results for the environment, occupant health, and to practice leadership by example.

Building construction and operation requires vast amounts of resources. A study by the World Watch Institute suggests that these activities account for one-sixth of the world’s fresh water withdrawals, one quarter of its wood harvest, and 40 percent of its material and energy flows. Green Building techniques make more effective use of these resources and reduce the environmental impact of structures over their lifetime.

The American Institute of Architects reports that the U.S. building design, construction, materials, and operation consume more energy than any other part of the economy. U.S. buildings produce as much carbon emission as does the entire economies of Japan, France, and the United Kingdom combined. Additionally, 76% of all power plant generated electricity is used to operate buildings globally.

Capital E findings indicate that average savings of Green Buildings are substantial: 50-90% decrease in waste cost savings; 30-50% decrease in water use savings; 35% decrease in carbon savings; and, a 30% decrease in energy savings.

More and more, Green Building ordinances are requiring that all new construction and building improvements meet certain energy, water, roofing, and lighting efficiency thresholds. For instance, the city of Dallas recently and unanimously voted to implement numerous Green Building regulations: Commercial buildings with less than 50,000 square feet will be required to be 15% more energy efficient and use 20% less water; and, buildings with more than 50,000 square feet will be required to meet strict LEED (Leadership in Energy and Environmental Design) standards. Dallas’ Green Building ordinances most likely will serve as a model for cities across the nation. continue reading…

Section 179D Energy Efficiency Services
You may be eligible for a tax deduction of up to $1.80 per square foot for improving the energy efficiency of your existing commercial buildings or designing high efficiency into new buildings. The Energy Policy Act of 2005 includes a tax deduction for investments in “energy efficient commercial building property” designed to significantly reduce the heating, cooling, water heating, and interior lighting energy cost of new or existing commercial buildings. continue reading…

Fort Worth, TX April 28, 2008 – Environmentally sensitive construction practices are now Dallas law, as the City Council unanimously voted to implement numerous “green building” regulations.

This new ordinance requires that all new construction and building improvements placed into service in 2009 and beyond meet certain energy, water, roofing, and lighting efficiency thresholds. For instance, commercial buildings with less than 50,000 square feet will be required to be 15% more energy efficient and use 20% less water. Buildings with more than 50,000 square feet will be required to meet strict LEED (Leadership in Energy and Environmental Design) standards. Dallas’ efforts to mandate green building should serve as a model for other North Texas cities.

The benefits of building green are not just environmental. For business owners and developers, the 2005 Energy Policy Act created Section 179D which allows a significant federal tax deduction for the costs of installing certain energy efficient systems in commercial buildings. The tax deduction offers up to $1.80 per square foot for improving the energy efficiency of existing commercial buildings or designing high efficiency into new buildings. This specifically applies to commercial properties designed to significantly reduce heating, cooling, water heating, and interior lighting energy costs. The deduction also can apply to architects or engineers who design buildings for the City of Dallas. An Energy Efficiency Study can determine the total applicable tax deduction a building owner can qualify for.

For more information on the Dallas Green Initiative, visit www.GreenDallas.net, or to receive a free copy of SourceCorp’s Green Building 179D Energy Efficiency Report please visit SourceCorpTax.com.