Internal Revenue Code:Sec. 179D. Energy Efficient Commercial Buildings Deduction.
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TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS
AND CORPORATIONS
Statute
SEC. 179D. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.
(a) In General- There shall be allowed as a deduction an
amount equal to the cost of energy efficient commercial
building property placed in service during the taxable
year.
(b) Maximum Amount of Deduction- The deduction under
subsection (a) with respect to any building for any
taxable year shall not exceed the excess (if any) of--
(1) the product of--
(A) $1.80, and
(B) the square footage of the building, over
(2) the aggregate amount of the deductions under
subsection (a) with respect to the building for all
prior taxable years.
(c) Definitions- For purposes of this section--
(1) ENERGY EFFICIENT COMMERCIAL BUILDING PROPERTY- The
term `energy efficient commercial building property'
means property--
(A) with respect to which depreciation (or amortization
in lieu of depreciation) is allowable,
(B) which is installed on or in any building which is--
(i) located in the United States, and
(ii) within the scope of Standard 90.1-2001,
(C) which is installed as part of--
(i) the interior lighting systems,
(ii) the heating, cooling, ventilation, and hot water
systems, or
(iii) the building envelope, and
(D) which is certified in accordance with subsection (d)
(6) 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 percent or more in comparison to a
reference building which meets the minimum
requirements of Standard 90.1-2001 using methods of
calculation under subsection (d)(2).
(2) STANDARD 90.1-2001- The term `Standard 90.1-2001'
means Standard 90.1-2001 of the American Society of
Heating, Refrigerating, and Air Conditioning Engineers
and the Illuminating Engineering Society of North
America (as in effect on April 2, 2003).
(d) Special Rules-
(1) PARTIAL ALLOWANCE-
(A) IN GENERAL- Except as provided in subsection (f),if--
(i) the requirement of subsection (c)(1)(D) is not
met, but
(ii) there is a certification in accordance with
paragraph (6) that any system referred to in
subsection (c)(1)(C) satisfies the energy-savings
targets established by the Secretary under
subparagraph (B) with respect to such system,
then the requirement of subsection (c)(1)(D) shall be
treated as met with respect to such system, and the
deduction under subsection (a) shall be allowed with
respect to energy efficient commercial building
property installed as part of such system and as
part of a plan to meet such targets, except that
subsection (b) shall be applied to such property by
substituting `$.60' for `$1.80'.
(B) REGULATIONS- The Secretary, after consultation with
the Secretary of Energy, shall establish a target
for each system described in subsection (c)(1)(C)
which, if such targets were met for all such
systems, the building would meet the requirements of
subsection (c)(1)(D).
(2) METHODS OF CALCULATION- The Secretary, after
consultation with the Secretary of Energy, shall
promulgate regulations which describe in detail
methods for calculating and verifying energy and power
consumption and cost, based on the provisions of the
2005 California Nonresidential Alternative Calculation
Method Approval Manual.
(3) COMPUTER SOFTWARE-
(A) IN GENERAL- Any calculation under paragraph (2)
shall be prepared by qualified computer software.
(B) QUALIFIED COMPUTER SOFTWARE- For purposes of this
paragraph, the term `qualified computer software'
means software--
(i) for which the software designer has certified
that the software meets all procedures and detailed
methods for calculating energy and power consumption
and costs as required by the Secretary,
(ii) which provides such forms as required to be filed
by the Secretary in connection with energy
efficiency of property and the deduction allowed
under this section, and
(iii) which provides a notice form which documents the
energy efficiency features of the building and its
projected annual energy costs.
(4) ALLOCATION OF DEDUCTION FOR PUBLIC PROPERTY- In the
case of energy efficient commercial building property
installed on or in property owned by a Federal, State,
or local government or a political subdivision
thereof, the Secretary shall promulgate a regulation
to allow the allocation of the deduction to the person
primarily responsible for designing the property in
lieu of the owner of such property. Such person shall
be treated as the taxpayer for purposes of this
section.
(5) NOTICE TO OWNER- Each certification required under
this section shall include an explanation to the
building owner regarding the energy efficiency
features of the building and its projected annual
energy costs as provided in the notice under paragraph
(3)(B)(iii).
(6) CERTIFICATION-
(A) IN GENERAL- The Secretary shall prescribe the
manner and method for the making of certifications
under this section.
(B) PROCEDURES- The Secretary shall include as part of
the certification process procedures for inspection
and testing by qualified individuals described in
subparagraph (C) to ensure compliance of buildings
with energy-savings plans and targets. Such
procedures shall be comparable, given the difference
between commercial and residential buildings, to the
requirements in the Mortgage Industry National
Accreditation Procedures for Home Energy Rating
Systems.
(C) QUALIFIED INDIVIDUALS- Individuals qualified to
determine compliance shall be only those individuals
who are recognized by an organization certified by
the Secretary for such purposes.
(e) Basis Reduction- For purposes of this subtitle, if a
deduction is allowed under this section with respect to
any energy efficient commercial building property, the
basis of such property shall be reduced by the amount
of the deduction so allowed.
(f) Interim Rules for Lighting Systems- Until such time as
the Secretary issues final regulations under subsection
(d)(1)(B) with respect to property which is part of a
lighting system--
(1) IN GENERAL- The lighting system target under
subsection (d)(1)(A)(ii) shall be a reduction in
lighting power density of 25 percent (50 percent in the
case of a warehouse) of the minimum requirements in
Table 9.3.1.1 or Table 9.3.1.2 (not including additional
interior lighting power allowances) of Standard 90.1-
2001.
(2) REDUCTION IN DEDUCTION IF REDUCTION LESS THAN 40
PERCENT-
(A) IN GENERAL- If, with respect to the lighting system
of any building other than a warehouse, the reduction
in lighting power density of the lighting system is
not at least 40 percent, only the applicable
percentage of the amount of deduction otherwise
allowable under this section with respect to such
property shall be allowed.
(B) APPLICABLE PERCENTAGE- For purposes of subparagraph
(A), the applicable percentage is the number of
percentage points (not greater than 100) equal to the
sum of--
(i) 50, and
(ii) the amount which bears the same ratio to 50 as
the excess of the reduction of lighting power density
of the lighting system over 25 percentage points
bears to 15.
(C) EXCEPTIONS- This subsection shall not apply to any
system--
(i) the controls and circuiting of which do not
comply fully with the mandatory and prescriptive
requirements of Standard 90.1-2001 and which do not
include provision for bilevel switching in all
occupancies except hotel and motel guest rooms,
store rooms, restrooms, and public lobbies, or
(ii) which does not meet the minimum requirements
for calculated lighting levels as set forth in the
Illuminating Engineering Society of North America
Lighting Handbook, Performance and Application,
Ninth Edition, 2000.
(g) Regulations- The Secretary shall promulgate such
regulations as necessary--
(1) to take into account new technologies regarding
energy efficiency and renewable energy for purposes of
determining energy efficiency and savings under this
section, and
(2) to provide for a recapture of the deduction allowed
under this section if the plan described in subsection
(c)(1)(D) or (d)(1)(A) is not fully implemented.
(h) Termination- This section shall not apply with respect
to property placed in service after December 31, 2008.
Sources
2005 - Energy Policy Act of 2005, Sec. 1331, established this
new Section; Effective Date- The amendments made by this
section shall apply to property placed in service after
December 31, 2005.
