The Section 179 Tax Credit has been a great help to many commercial businesses. Whether a business has just started building or they have been established, if structures were built with energy efficient systems, they can easily be certified to use the 179D deduction. Currently tax reform is being revamped by the government. The Chairman of the Committee called the House Ways and Means, Dave Camp, is getting ready to release a draft that outlines tax reform. This reform is expected to widen the base of the 179D tax deduction which encourages builders and commercial building owners to lower their use of energy and help America lower the overall carbon footprint of the country. Senator Ron Wyden has announced that an extension of tax breaks that have lapsed is going to be an immediate focus, as well.
The Energy Policy Act of 2005
President Bush signed the EPAct of 2005 to create a tax deduction for commercial buildings that were currently being constructed with energy saving systems. This tax deduction has been known to aid multiple businesses and give them a decent deduction although it has been fairly unknown by many. The expiration of this deduction was even extended to December 31, 2013 by an act called the Emergency Economic Stabilization Act, issued in 2008. It created a $0.30 to $1.80 tax deduction per square meter of a commercial building, depending on systems that were installed.
Is the 179D a Deduction or a Credit?
It is imperative to understand that 179D is not a credit, but instead a tax deduction. Deductions reduce taxable income for one year while credits are dollar by dollar reductions for taxes that are owed. In order for a building to qualify for a tax credit 179D section, they must qualify and prove they have 50% energy savings. Deductions that are available for businesses of qualifying systems are all determined by their energy efficiency numbers. Those numbers are specified by qualified and board approved expert engineers. They must follow IRS guidelines in determining the energy efficiency of a building in order to provide certification. One of the methods used is called a PRM, a Performance Rating Method. This proves whether or not a building qualifies for certification.
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