2005 Energy Policy Act (EPAct)
The energy-efficient commercial-building property deduction (Section 179D) provides taxpayers with an immediate deduction of up to $1.80 per square foot for the installation of interior lighting, building envelope property, and heating, cooling, ventilation and hot water systems that significantly reduce power use. The cost of this property normally would be depreciated over 39 years. The use of accelerated depreciation techniques (rather than straight-line depreciation) increases the NPV of a project by shifting the cash flows forward in th e project's life thereby increasing present value of these cash flows.
"Energy-efficient property" is defined by EPAct 2005 to be commercial building property that is certified to reduce total annual energy and power costs to at least 50% less than a building satisfying ASHRAE 90.1-2001 Standard. Qualifying systems include 1) interior lighting systems, 2) heating, cooling, ventilation and hot water systems, and 3) building envelope. In addition, the property must 1) be otherwise depreciable property, 2) located in the United States, 3) paid to be constructed by the taxpayer seeking the deduction.
The Emergency Economic Stabilization Act of 2008 extended the Section 179 tax deduction for the cost of energy efficient commercial building property placed into service during the taxable year. Under the extension, the property can be placed in service through December 31, 2013. Based on guidance issued by the IRS, a qualifying taxpayer is permitted to make a Section 179 election retroactively by filing Form 3115 with the IRS.
CIC Energy Construction can assist commercial building owners by performing energy simulation studies using IRS approved software and conducting on site inspection which will be documented to meet IRS requirements. The certification can generate tax refunds for past projects, while pre-certification report can assure that building owner's proposed design meets the requirements to claim the tax deduction after completion of the project. As licensed general contractor CIC Energy can issue a 179D Certificate of Compliance, which is a prerequisite for taxpayer building owner to claim the $1.80 tax deduction.
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