Substantial Energy Tax Savings for Building Owners, Architects and Engineers
 
Written by: Charles R. Goulding* and Steven D. Beaucaire, MST

As a result of the recent bailout package tax legislation, the Section 179D energy efficiency tax deduction is now available for the tax years covering January 1, 2006 through December 31, 2013. Section 179D is available to commercial building owners and primary designers of government buildings, for installing energy efficient lighting, HVAC (Heating, Ventilation and Air Conditioning) and building envelopes (windows, walls, etc.). These projects must exceed an energy efficient standard in order to qualify. The majority of qualifying projects tend to be in the lighting area.

What It's Worth

These large benefits illustrate what could be a major opportunity for proactive CPAs firms to inform their design and commercial real estate clients of this valuable strategy.


Architects, Engineers, and Design Firms

There is a tremendous §179D opportunity for architecture and engineering firms who design government buildings. Whenever a §179D project is a government building, including a K-12 public school project, the designer may be entitled to the tax deduction. In fact, some design firms have experienced ZERO income tax liability for 2006, 2007 and beyond.

From our experience, most design firms are not aware of this major opportunity. In addition, there still exists the potential to go back to completed 2006, 2007 and 2008 government projects and obtain §179D deductions for these prior years.


Commercial Building Owners

For commercial building owners doing cost segregation projects, these one-year deductions are in addition to cost segregation deductions. Typically the items deducted under §179D would be 39-year assets and not reallocated to a 5 or 15-year life. However, §179D deductions are available for existing building energy efficiency projects. Key projects to look for are energy efficient lighting retrofits and geothermal or thermal storage. Timing is critical in this area, as the cost segregation study must be done before the energy retrofit is started in order to property identify and value those items that may be replaced as part of an energy retrofit in the future. The IRS takes the position that a pile of rubble is worth nothing. Therefore, once the old property is removed, it has a value of zero.

Bedford Cost Segregation has partnered with Energy Tax Savers, Inc., a leading provider of energy savings services in the country, to offer you and your clients a complete package. For more information, please contact Bruce Johnson, Managing Partner at bjohnson@bedfordcostseg.com or Karen Koch, Partner at kkoch@bedfordcostseg.com.

* Charles Goulding, an Attorney and Certified Public Accountant, is the president of Energy Tax Savers, Inc., an interdisciplinary tax and engineering firm that specializes in the energy efficient aspects of buildings.