UNITED STATES CODE
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
26 USC § 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
(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