The Bipartisan Budget Act of 2018 extended a number of provisions that had expired at the end of 2016. Among these provisions was Section 179D, Energy Efficient Commercial Building Deduction, now available for newly constructed buildings or building improvements placed in service during 2017. The deduction is available to owners and tenants of commercial properties who have built or installed improvements. The benefit is also available to architects and engineers who are the designers on government-owned, energy-efficient building improvements if the tax deduction is allocated to them by the government owner.
As it stands, taxpayers can receive as much as $1.80 per square foot for commercial building efficiency improvements above certain thresholds. Buildings that went into service or use between January 1, 2006 and December 31, 2015 must use at least 50% less energy than baselines established in ASHRAE Standard 90.1-2001. Projects put into service or use in 2016 and 2017 must meet the ASHRAE 90.1-2007 standards. A licensed third party has to provide the certification that the design meets these criteria.
Architecture and engineering firms should be aware that government owners are increasingly seeking the right to negotiate reduced fees in exchange for the transfer of the tax deductions that are benefiting the architects and engineers. The University of Texas System and the University of Houston System have filed lawsuits arguing that they were misled into transferring incentives worth millions of dollars without compensation. A&E firms should also be aware that the concern that private businesses may be improperly filing claims on work done in public buildings has prompted the Internal Revenue Service to add the 179D deduction to its watch list of claims that warrant extra scrutiny.