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Energy Consulting Engineering 179D Energy Efficient Commercial Real Estate Tax Deduction 2016 ASHRAE...
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Transcript of Energy Consulting Engineering 179D Energy Efficient Commercial Real Estate Tax Deduction 2016 ASHRAE...
S E C T I O N 1 7 9 DCommercial Real Estate Energy Efficient Tax Deduction
INTRODUCTION
2SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
What is 179D?
Qualifying %’s $ Savings
What documents are needed
Who can Benefit?
History/Updates
Case Studies
• If a building achieves a 50% reduction in energy usage, it may fully qualify and could receive a $1.80/SF tax deduction
WHAT IS 179D?
3SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
• If the building achieves a 10%-25% reduction in energy usage, for any of three systems (HVAC, Envelope or Lighting), it receives $0.60/SF for each qualifying system
• The energy usage for the building is compared to a reference building based on ASHRAE 90.1-2001 (For buildings built in 2016 or later, the standard is ASHRAE 90.1-2007)
Commercial Real Estate Owners
Lessees of buildings who pay for improvements
Designers of Public Buildings - Engineers, Architects and/or
Contractors that “specify” installation of energy efficient materials
WHO CAN BENEFIT FROM 179D?
4SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
Commercial Real Estate-Offices, industrial, retail, supermarkets, commercial buildings, Multi-family buildings that are more than 4 stories tall
TYPE OF BUILDINGS ELIGIBLE
Public Buildings-Schools, Police and Fire Stations, Libraries, Courthouses, Government Offices, Town Halls
1.
2.
5SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
WHAT IS THE ENERGY EFFICIENT TAX DEDUCTION BASED ON?
25%
Lighting
15%
HVAC Systems
10%
Building EnvelopesInterior, Enclosed Parking garages,
Fluorescent T5, T8 replacements, LEDHeating, Air Conditioning, Hot Water
Heating, Energy Efficient HVAC SystemsUpgraded roofing materials, building
insulation, and windows, low value SHGC and low U Value windows and wall insulation
6SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
2
34
1Partially Qualifying Building (Lighting, HVAC systems or Building Envelope qualifies
individually)
$0.60/SF for each partially Qualifying System
Building Fully Qualifies for $1.80/SF (50% or more energy
efficient)$0.60/SF for each partially
Qualifying System
$1.20/SF for two Qualifying Systems
DIFFERENT WAYS BUILDINGS CAN QUALIFY
7SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
2005 EPAct Issued guidance on multiple stimulus packages to benefit
the environment which included 179DHistory of 179D Legislative Policy
8SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
•Percentages established, interim ltg rule•Performance Rating Method (Appendix G)•Approved software programs
Notice 2006-52
•Extended eligible dates for 179D•Pass through deduction for designers•20/20/10 percentages established
Notice 2008-40
•Extension and clarification of 179D•25/15/10 percentages established
Notice 2012-26
History of Percentages to Qualify
2008
January 1, 2006-December 31, 2008
2013
January 1, 2006-December 31, 2013
2016
February 24, 2012-currentLighting-16.33%
HVAC-16.33%Bldg Env-16.33%
Lighting-20%HVAC-20%
Bldg Env-10%
Lighting-25%HVAC-15%
Bldg Env-10%
9SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
• Retroactive renewal 2015 and Extension through 2016!
• Starting in 2016, buildings placed in service in 2016 are compared to a baseline referencing ASHRAE 90.1-2007 rather than the previous ASHRAE 90.1-2001 Standard
• Taxpayers were able to file for eligible deductions in 2015
• Taxpayers can plan for buildings being put in service in 2016
• Open year tax returns must be amended to obtain the tax deduction for prior years
Recent Congressional budget extends 179D tax deduction!
1 0SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
• Drawings:• Electrical-Lighting• Mechanical Schedules and
Drawings for HVAC equipment• Architectural Drawings for
building footprint • Building Envelope information on
walls, and windows, roofs, floors
• Lighting Schedules• Building Envelope Materials include
Glazing, Roofing Systems, Insulation• Mechanical Equipment Schedules
• Specifications on HVAC Systems, Lighting and Building Envelopes
Documents Required for Study
1 1SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
What is required to qualify for the 179D Deduction?
1 2SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
1 •179D Studies must be completed by a Qualified Individual and Third Party Verifier
2 •A Qualified Individual is licensed as a Professional Engineer, Architect, or Contractor in the state in which the building is located
3 •A Building Simulation or Energy Model is created (using an IRS approved software) and the percentage savings are determined
4 •For lighting only (with bi-level switching), the Interim Lighting Rule can be applied and the LPD (Lighting Power Density) can be completed using a spreadsheet
What is required to qualify for the 179D Deduction?
1 3SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
5 •In the case of a Designer seeking the deduction as a Pass-Through, the government entity must provide a signed “Allocation Letter”
6 •All energy efficient equipment installed must be listed in the report
7 •A site walk is required to verify installation of specified energy efficient equipment
• Report is created listing the building information, building name, address, the name of the certifier, the percentage savings, and a list of all the energy efficient equipment specified
• A site walk is completed to verify specified energy equipment is installed
• The amount of the deduction is reported on the owner or designer’s tax return
• The report is submitted with the tax return and the energy model and all other documentation is kept by the owner with their filed tax documents
What is required to complete a certification?
1 4SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
1 5SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
• 50,000 SF Supermarket updated to include new T5 lighting and more efficient chillers and boilers
• Qualifies for lighting only
• 50,000 SF* $0.60/SF = $30,000 Tax Deduction
• Reduces basis and accelerates depreciation
• Can be combined with a Cost Segregation Study to further accelerate depreciation
CASE STUDY-Lighting:Commercial Real Estate Owners
1 6SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
• 50,000 SF Supermarket updated to include new LED lighting and more efficient chillers and boilers
• Fully Qualifies
• 50,000 SF* $1.80/SF = $90,000 Tax Deduction
• Reduces basis and accelerates depreciation
• Can be combined with a Cost Segregation Study to further accelerate depreciation
CASE STUDY-Fully Qualifies:Commercial Real Estate Owners
• 50,000 SF High School updated to include new T5 lighting and more efficient chillers and boilers
• Qualifies for lighting only
• 50,000 SF* $0.60/SF = $30,000 Income Tax Deduction!
1 7SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
CASE STUDY-Lighting:Designer ofPublic Building
• 50,000 SF High School updated to include new LED lighting and more efficient chillers and boilers
• Fully Qualifies
• 50,000 SF* $1.80/SF = $90,000 Income Tax Deduction!
1 8SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
CASE STUDY-Fully Qualifies:Designer ofPublic Building
• New lighting is the easiest way to qualify for the program
• Qualifying is based on the percentage the building is more efficient than a Baseline building based on ASHRAE code 2001-90.1
• The Baseline building is not the building prior to improvements, it is a model of the building based on ASHRAE 2001-90.1 (or ASHRAE 2007-90.1 for buildings placed in service in 2016 or later)
IMPORTANT THINGS TO REMEMBER ABOUT 179D
1 9SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
• 179D is a Tax Deduction, not a Tax Credit.
• Buildings larger than 75,000 SF are compared to a VAV system baseline, which is an efficient system. So it is difficult to beat the baseline by 15% unless the installed system is highly efficient
• The amount of the deduction can’t be more than the cost of improvements
IMPORTANT THINGS TO REMEMBER ABOUT 179D
2 0SECTION 179DCommercial Real Estate Energy Efficient Tax Deduction
C O N TAC TKari Mueller, PE LEED AP | 1(844) 323-3232 | [email protected]