Special Tax Deductions Extended to Cover
2017 Tax Year
THE 179D ENERGY EFFICIENCY TAX DEDUCTION HAS YET TO BE EXTENDED FOR 2018
Recent legislative activity around the Bipartisan Budget Act of 2018 has
resulted in (once again) extending the
commercial energy efficiency tax deduction
for another year, through the 2017 tax year.
Even if your business has to file an extension, it might be worth it to receive these
special tax deductions.
Of course, it would be better if our federal
government could decide on whether or not
this tax break would be extended in advance
of the year for which it is valid, but you can
still take advantage of this tax deduction.
FYI, because this extension of this special tax benefit has been enabled in 2015,
2016 and now 2017, one could guess that it
might happen in 2018, too. You might use
that information to help you justify more
projects to get approved in 2018.
The 179D commercial energy efficiency
tax deduction is a special tax break that’s
not linked to assets, but related to square
footage of a building that installed energy-efficiency equipment. Therefore it’s an
extra tax deduction to take advantage of
(if your project qualifies).
It’s not extremely difficult to qualify for
this deduction, and I used this approach for
one of my own buildings in 2016, where I was
able to deduct about $34,000 off my taxes,
while only actually spending about $20,000.
That’s an extra $14,000 of tax deduction
(reducing my taxable income by $14,000).
The extra tax deduction is $1.80 per
square foot if you do qualifying energy efficiency projects. For example, if you had a
1,000,000-square-foot building, you could
get an extra $1.8 million tax deduction. For a
company paying a 33% tax rate, this translates to about $600,000 in cash.
Note that to make an equivalent $600,000
in cash (profit), you would have to sell a lot
of products (maybe $6 million at a 10% profit
margin to get the same result as this tax
break). And the tax break approach is far less
risky than assuming you could actually sell
The 179D energy-efficient building deduc-
tion qualification criteria includes:
to change its lights in 2017. It replaced tra-
ditional fluorescent light fixtures with 250
new American-made LED fixtures.
This corporation would qualify for a one-time federal tax deduction of $60,000 and
possibly more if it did any HVAC or insulation
retrofits. To obtain this federal tax deduction,
the corporation would only have to have an
independent engineering certification of the
new lighting system's installation.
Case Study #2: Municipal
Owned Airport Hangar
A design build contractor designs a high
efficiency infrared heating system for a
50,000-square-foot local municipal airport
hangar. Since the municipal airport falls
under the qualification of a government
building, there’s no benefit for them to have
a federal tax deduction. A municipal building doesn’t pay taxes.
However, in an effort to motivate energy
efficiency in government buildings, the federal tax deduction can be passed over to the
entity or person who performs the design
of the energy efficiency building. In this
case, the designer can qualify for a federal
tax deduction. In this case, the deduction is
between $30,000 and $90,000.
Again, to qualify for this federal tax
deduction, the designer would have an
independent engineering certification study
performed, and the designer would receive
a form to submit with his federal income
tax. The designer can then pass on a portion
of the cash value to the client.
Thanks to Dr. EPAct for keeping up with
the legislation and informing us all about
the benefits. Bissmeyer, BSBA, MBA, CEM,
has been a national leader in promoting
the use of government incentives to help
American companies finance their energy
efficiency projects. He is past president of
the Indiana Association of Energy Engineers
as well as president of four ASHRAE chapters in the Midwest.
Feel free to contact Bissmeyer if you
need additional questions or assistance. He
can be reached at (317) 546-3000 or bill@
Eric A. Woodroof, Ph.D., is the Chairman of
the Board for the Certified Carbon Reduction
Manager (CRM) program and he has been
a board member of the Certified Energy
Manager (CEM) Program since 1999.
n Any commercial property or 4-plus story
multifamily property or newly constructed
prior to December 31, 2017;
n With retrofits to lighting, HVAC or enve-
lope components resulting in reduced
Eligible properties qualify for up to $1.80
per square foot or:
n $0.60 for lighting
n $0.60 for HVAC
n $0.60 for envelope retrofits
Thus, if you only qualified for a partial
deduction (such as a lighting retrofit) you
would still get $0.60 a square foot “extra”
deduction. However, you have a short win-
dow to perform certifications so that you can
capture these benefits prior to filing the 2017
In addition to the EPAct federal tax program, there are several other programs that
can be used to supplement a company’s
drive to become more energy-efficient
including utility incentive rebates as well as
other federal and state government grants.
Bill Bissmeyer, aka Dr. EPAct, is the
“$17 million man” because he has helped
American companies receive that amount
in tax benefits via an “additional” deduction for energy projects/retrofits. He shares
two case studies that show the real-world
impact of the EPAct deductions.
Case Study #1: Large
An Indiana corporation which has a
100,000-square-foot warehouse decided
ALTHOUGH 179D HASN'T BEEN EXTENDED
for 2018, you can plan ahead with projects, as it might very well happen again a
year from now.