New Tax Deduction for Energy Efficient Commercial Buildings

"The Energy Tax Incentives Act of 2005 creates a brand-new deduction for expenses incurred for energy-efficient commercial buildings (Code Sec. 179D). It's a major incentive for building owners to upgrade their systems and for those building new structures to design them in an energy-efficient manner. The deduction is available whether the building is new or used.

The maximum energy efficient commercial building (EECB) deduction is equal to (1) $1.80 per building square foot (60¢ per building square foot, for certain separate building systems), less (2) the aggregate amount of EECB deductions allowed for the building for prior years...

The new deduction is available only if the EECB property meets all of the following conditions:
... It is property that is otherwise depreciable or amortizable.
... It is installed on or in any building located in the U.S. that is within the scope of Standard 90.1-2001 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (ASHRAE/IESNA).
... It is installed as part of (a) the interior lighting systems, (b) the heating, cooling, ventilation, and hot water systems, or (c) the building envelope.
... It is certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building, by 50% or more in comparison to a reference building which meets the minimum requirements of Standard 90.1-2001 (as in effect on April 2, 2003). Detailed certification requirements must be met in order to qualify for the deduction, with IRS to promulgate regs explaining how the fuel savings targets are to be measured. Any energy or power cost savings calculation must be prepared by “qualified computer software.” “Qualified computer software” is software that:
... the software designer has certified meets all procedures and detailed methods for calculating energy and power consumption and costs as IRS requires;
... provides the forms that IRS requires to be filed in connection with the energy efficiency of property and the deduction for energy efficient commercial property; and
... provides a notice form that summarizes the energy efficiency features of the building and its projected annual energy costs...

Effective Date. The new deduction for energy-efficient commercial building property applies for property placed in service after Dec. 31, 2005, and before Jan. 1, 2008."

Thanks for the information goes to
Harry R. Veltum, Jr.
Sobol Bosco & Associates
615 Iron City Drive
Pittsburgh, PA 15205
e-mail: harryv-at-sobolbosco-dot-com

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