179D: Energy Efficient Commercial Buildings Deduction

Federal Agency

Sub-Department

Internal Revenue Service (IRS)

Purpose

To invest in energy efficiency improvements to commercial buildings, such as improvements to interior lighting; heating, cooling, and ventilation, hot water; and building envelope.

Applicant and/or Project Eligibility Requirements

Eligible applicants are owners and long-term lessees of commercial buildings. For some tax-exempt owners of commercial properties, deduction can transfer to designers of energy efficient building property (architects, engineers). Entities building a new building are also eligible.

Decarbonization Considerations

Under the Inflation Reduction Act, energy savings must be measured against the latest ASHRAE standard affirmed by the Secretary of Treasury at least 4 years before the property is placed in service. EECBP and EEBRP must be installed on or in a qualified building as part of the interior lighting systems; the heating, cooling, ventilation, and hot water systems; or the building envelope. New buildings can qualify for the deduction when the e?ciency improvements result in a whole building energy use intensity (EUI) that is at least 25% lower than a baseline code.

Equity Considerations

If local prevailing wages are paid and apprenticeship requirements are met, an increased maximum deduction applies.

Helpful Tips

This tax deduction is not eligible for direct pay; however, it can be transferred to the primary designer of the energy-efficient building. For more information on transferability, see here: https://www.irs.gov/credits-deductions/elective-pay-and-transferability

Other Notes

For more information on prevailing wage and apprenticeship requirements, see here: https://www.irs.gov/credits-deductions/prevailing-wage-and-apprenticeship-requirements