§179D Deduction for Architects, Designers: FAQ

What is §179D and how can it apply to architects?
With the introduction of Notice 2008-40, the architectural firm in charge of designing schools and other public buildings can claim the §179D deduction. Section 179D provides a deduction for commercial construction or retrofit that meets certain energy-efficient criteria.

What improvements qualify?
The incentive is specifically for lighting, HVAC and hot water systems, and building envelope.

How much can I save by installing energy-efficient systems?
Section 179D provides a deduction of up to $1.80 per square foot for the installation of systems that reduce the total energy and power costs of the entire building by 50 percent or more when compared with a reference building. Partial deductions are allowed for separate building systems that are certified by a qualified professional as meeting or exceeding the applicable system savings targets established by federal government. For partial deductions, the requirement for the building envelope is a 10% improvement. For HVAC/hot water systems, the improvement must be 15% and lighting must reach a 25% percent threshold.

Do my schools qualify?
The deduction is available for new construction and existing buildings that have been retrofitted or have energy-efficient additions. An analysis is required to determine if a school or other public building meets the §179D criteria.

What is the qualifying timeframe?
The provision is effective for schools and other public buildings for all open tax years through December 31, 2013. Taxpayers may go back and claim the deduction in prior open tax years by amending the tax returns.

Do public buildings qualify?
Since schools and other public buildings aren’t subject to tax, they are not eligible for the deduction. However, the deduction can be allocated to the primary designer of these buildings. The designer can include an architect, engineer, contractor, environmental consultant, or energy services provider who creates the technical specifications for a new building, or an addition to an existing building, that incorporates EPAct §179D property. In a case where there is both a designer and architect, the deduction may be split.