EPAct 179D Retroactively Extended – Major Savings Available to Commercial Businesses

As the country celebrated the 2019 holiday season, President Trump was signing a new tax deal into law. The new tax deal also included new regulations and a retroactive extension for the EPAct 197D. What does this mean for you and your commercial building? We are going to share a more in-depth view of the legislation, but before we do. Here are the main highlights:

  • Lighting retrofits, HVAC, and building envelope upgrades completed in both 2018 and 2019 are retroactively eligible for tax deduction.
  • Lighting retrofits, HVAC, and building envelope upgrades completed in 2020 are eligible for tax deduction.
  • Your commercial buildings could potentially receive a tax deduction of up to $1.80 per square foot for lighting retrofits, HVAC, and building envelope energy-saving upgrades.

This is fantastic news for any commercial building owner who has completed an LED retrofit, HVAC, or building envelope upgrade in 2018, 2019 or is planning one for 2020. This is the time to start getting your tax documents in order. There are several organizations with services available to help with the tax deduction process.

If you are planning to retrofit your lighting in 2020, we have several eBooks to help get the process started.  We suggest starting with A Critical Guide to Setting Criteria Goals for Your LED Project.

A Background on Energy Policy Act (EPAct) 197D

The Energy Policy Act was created in 2005 and offered tax savings for commercial building owners, architects, and engineers. The tax savings were based on improved energy savings from new construction or remodeling projects.

For our purpose, we will focus on section 179D of the Energy Policy Act. Section 179D outlines the available tax deductions offered for commercial buildings.

The new retroactive extension outlined in section 179D has the maximum tax deduction set at $1.80 per square foot of upgraded space. This could equate to substantial savings. The tax savings are broken down into three partial deductions.

  • LED retrofit is set at $.60 per square foot
  • Building envelope improvements is set at $.60 per square foot
  • HVAC upgrades are set at $.60 per square foot

Here is a breakdown of potential tax savings based on square footage.

EPAct 179D Deduction Breakdown

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Qualifications for an EPAct 197D Tax Dedication?

Like all tax deductions, there are certain qualifications you will need to meet to be eligible for the dedication. Listed below are the basic rules for qualifying for the deduction outlined within the EPAct 197D.

  • The EPAct 197D applies to commercial buildings and apartment buildings that are four stories or taller.
  • For a full deduction outlined at $1.80 per square foot, your building’s energy costs need to be reduced by %50.
  • There are partial EPAct 197D deductions available based upon your project and energy deductions.
  • Unless the building is owned by the federal, state, or local government, the building owner qualifies for the tax deduction.
  • If the building is owned by the government, the systems designer may apply for the tax deduction.

What does the EPAct 197D mean for you?

With the retroactive extension of EPAct 197D, it encourages commercial business owners to continue to make capital improvements that promote energy savings to their properties. We would like to remind business owners that we are not tax experts. But with this extension, your organization could be eligible for 2018, 2019, and 2020 LED lighting retrofits. This news could significantly impact the financials of your organization.

Major Note: If you are not responsible for tax returns for your organization, we highly suggest sharing this news with those responsible within your company.

As we close out this article and leave you with what we are sure are dollar signs on the mind. If you would like to start planning an LED lighting retrofit for 2020, please don’t hesitate to contact us here at Action Services Group. We would be happy to help you reach your energy goals for the coming year and beyond. Reach out to us at 800-223-0982 or email info@actionservicesgroup.com.

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Frequently Asked Questions

What is EPAct 179D?

The Energy Policy Act was created in 2005 and offered tax savings for commercial building owners, architects, and engineers. The tax savings were based on improved energy savings from new construction or remodeling projects.

What does the retroactive extension of EPAct 179D mean?

Lighting retrofits, HVAC, and building envelope upgrades completed in both 2018 and 2019 are retroactively eligible for a tax deduction. The tax deduction is also available for any of these upgrades completed in 2020.