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Federal

Incentives/Policies for Energy Efficiency

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Energy-Efficient Commercial Buildings Tax Deduction   

Last DSIRE Review: 10/01/2012
Program Overview:
State: Federal
Incentive Type: Corporate Deduction
Eligible Efficiency Technologies: Equipment Insulation, Water Heaters, Lighting, Lighting Controls/Sensors, Chillers , Furnaces , Boilers, Heat pumps, Central Air conditioners, Caulking/Weather-stripping, Duct/Air sealing, Building Insulation, Windows, Siding, Roofs, Comprehensive Measures/Whole Building, Tankless Water Heaters, Heat Pump Water Heaters
Applicable Sectors: Commercial, Construction, State Government, Fed. Government, (Deductions associated with government buildings are transferred to the designer)
Amount:$0.30-$1.80 per square foot, depending on technology and amount of energy reduction
Maximum Incentive:$1.80 per square foot
Equipment Requirements:Not specified, but building must be certified as meeting specific energy reduction targets as a result of improvements in interior lighting; building envelope; or heating, cooling, ventilation, or hot water systems.
Start Date:1/1/2006
Expiration Date:12/31/2013
Web Site: http://www.efficientbuildings.org
Authority 1:
Date Enacted:
Date Effective:
Expiration Date:
26 USC ยง 179D
8/8/2005 (subsequently amended)
1/1/2006
12/31/2013
Summary:

The federal Energy Policy Act of 2005 established a tax deduction for energy-efficient commercial buildings applicable to qualifying systems and buildings placed in service from January 1, 2006, through December 31, 2007. This deduction was subsequently extended through 2008, and then again through 2013 by Section 303 of the federal Energy Improvement and Extension Act of 2008 (H.R. 1424, Division B), enacted in October 2008.

A tax deduction of $1.80 per square foot is available to owners of new or existing buildings who install (1) interior lighting; (2) building envelope, or (3) heating, cooling, ventilation, or hot water systems that reduce the building’s total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1-2001. Energy savings must be calculated using qualified computer software approved by the IRS. Click here for the list of approved software.

Deductions of $0.60 per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems meet target levels that would reasonably contribute to an overall building savings of 50% if additional systems were installed.

The deductions are available primarily to building owners, although tenants may be eligible if they make construction expenditures. In the case of energy efficient systems installed on or in government property, tax deductions will be awarded to the person primarily responsible for the system's design. Deductions are taken in the year when construction is completed.

The IRS released interim guidance (IRS Notice 2006-52) in June 2006 to establish a process to allow taxpayers to obtain a certification that the property satisfies the energy efficiency requirements contained in the statute. IRS Notice 2008-40 was issued in March of 2008 to further clarify the rules. NREL published a report (NREL/TP-550-40228) in February 2007 which provides guidelines for the modeling and inspection of energy savings required by the statute.

Click here for answers to frequently asked questions provided by the Commercial Building Tax Deduction Coalition. For more information on this deduction, visit the Energy Star web site.


 
Contact:
  Public Information - IRS
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web Site: http://www.irs.gov
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2013 - 2014 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.