Commercial Tax Deductions

Energy Efficient Commercial Deduction Facts:

• Building owners who save at least 50% of the heating, cooling, water heating, and interior lighting energy cost based on ASHRAE Standard 90.1-2001 are eligible for a $1.80 a square foot tax deduction.
• A partial deduction of $0.60 are allowed if owners meet certain criteria.
• Calculating and verifying energy and power costs are based on the 2005 California Nonresidential Alternative Calculation Method Approval Manual.
• Designer professionals are eligible for the deduction in the case of government buildings.
• Update: Oct. 2008. Tax deductions have been extended through 2013.

History
In 2005, President George Bush signed the United States Energy Policy Act, which gives financial incentives to commercial building owners that build energy efficient buildings. The sweeping legislation presents an amazing opportunity to the ICF industry, as the financial incentives help promote the use of insulating concrete forms and other energy efficient building materials. This bill has since been extended, most recently on Oct 3, 2008. The tax deductions for energy efficient commerical buildings has been extended through 2013.

Provisions
A tax deduction of up to $1.80 per square foot is available to owners (or designers, in the case of government-owned buildings) of new or existing commercial buildings that are constructed or reconstructed to save at least 50% of the heating, cooling, water heating, and interior lighting energy cost of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for comparable reductions from any one of three building systems—the building envelope, lighting, or heating and cooling system—that meets goals consistent with achieving the 50% savings for the entire building.

Partial Deductions In the case of a building that does not meet the whole building requirement of a 50 percent energy savings, a partial deduction is allowed with respect to each separate building system that comprises energy-efficient property and which is certified by a qualified professional as meeting or exceeding the applicable system savings targets established by the secretary of the treasury. The applicable system savings targets to be established by the secretary are those that would result in a total annual energy savings of 50 percent for the whole building, if each of the separate systems met the system target; note that the maximum allowable deduction is $0.60 per square foot. The separate building systems are the:

1. Interior lighting system; 2. Heating, cooling, ventilation, and hot water systems; and 3. Building envelope.

How to Qualify and Apply for the Tax Credit
Click here view IRS Notice 2006-52 which provides guidance for the deduction for energy efficient commercial buildings.

Since the financial incentive is a tax deduction, the Internal Revenue Service will continue to use standard forms to apply it to your taxes each year. Please consult a tax professional to learn how you can maximize your deduction.