EPAct Extension

EPAct 179D is currently set to expire on Dec. 31, 2013. The Senate Finance Committee is requesting that each senator send promising tax legislation by July 27, 2013. Congress has a version of the bill, and we hope you will send a letter to your senators to help ensure its passage. The new extension has provisions for up to $3 per square foot incentives with new methods of obtaining the tax deduction.

Please find below a suggested letter for you to send to your U.S. senators via their websites. Do not hesitate to add additional information directly related to your company and how EPAct 179D has helped you retain and create new jobs, as well as allowed for additional projects that would not otherwise be pursued. Let’s ensure EPAct gets extended into 2014 and beyond.

The Letter

Re: Senate Finance Committee Request on Tax Reform
179D Inclusion
Commercial Building Energy Tax Incentives
A Crucial Part of Tax Reform

Dear Senator:

We are writing to you today in support of including former Sen. Snowe’s sponsored Extension of Section 179D, Extension and Modification of Deduction for Energy-Efficient Commercial Buildings, (Introduced 9/20/12 as S.3591) as an essential element of Comprehensive Tax Reform. 179D was introduced into the tax code with the Energy Policy Act of 2005. It was further extended in 2008, with current expiration set for Dec. 31, 2013. Since the inception of 179D it has assisted tens of thousands of building owners retain jobs and increase profitability. It has also increased job creation in the trades, where energy-efficiency retrofits create large numbers of high-paying jobs for a labor pool particularly impacted by the economic downturn, while simultaneously reducing our nation’s dependence on foreign oil and thereby increasing America’s energy security.

The Energy Efficient Commercial Building Deduction was created by the Energy Policy Act of 2005, in recognition of the fact that a substantial portion of U.S. energy consumption is attributable to commercial buildings. The law provides a tax incentive to help offset the costs associated with enhancing energy efficiency. Section 179D of the Internal Revenue Code provides a deduction for certain energy-efficient commercial building property expenditures. Eligible expenditures are for property which is installed on or in any building that is within the scope of Standard 90.1-2001 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America; installed as part of the interior lighting systems, heating, cooling, ventilation, and hot water systems, or building envelope; and certified as being installed as part of a plan designed to reduce total annual energy and power costs by 50 percent or more. Critically, the deduction is effective only for property placed in service prior to Jan. 1, 2014.

The maximum deduction is $1.80 per square foot. In the case that a building does not meet the 50 percent energy-savings requirement, a partial deduction of $0.60 per square foot is allowed for each separate building system that comprises energy-efficient property and that is certified as meeting required savings targets. To encourage the public sector to utilize these same energy-efficient enhancements, the 179D deduction also provides a federal, state or local government owner of a commercial building an election to allocate the tax deduction to the primary person responsible for designing the energy-efficient enhancements installed in the building. This is an important feature of the law. By assigning the 179D deduction to the primary person responsible for designing the energy efficient enhancements, it creates a targeted incentive that encourages design and construction teams to put extra effort into identifying and implementing energy saving enhancements in public buildings.

In the short-term, the 179D deduction enables building owners to offset a small portion of the often costly expenses associated with energy-efficiency enhancements. In the longer-term, building owners who take advantage of the 179D deduction realize significantly lower energy costs, the benefits of leading-edge design and construction that enhances the building’s long-term market value. Building owners utilize the deduction for new construction projects and retrofits of existing buildings.

In the case of a public entity, the allocation of the 179D deduction, in the short-term, results in savings by allowing the public entity to negotiate a better deal and, in the long-term, allows the public entity to realize material, ongoing energy savings. The average 179D project (typically $0.60 per square foot for lighting upgrades) saves a public entity an average of 20 percent on their energy expenses. Even in cases where there are minimal upgrades that qualify for 179D, public entities have saved relatively large amounts.

Energy efficiency projects require large skilled and semi-skilled workforces. The role EPAct plays in cost-justifying projects therefore plays a direct role in supporting a major source of employment in our state. Lighting retrofits require lighting designers, laborers to remove and dispose existing fixtures, distribution centers to store the new lighting material, laborers to stage the new material near the job site and electricians to install the new fixtures. HVAC retrofits require engineers for project system design, substantial U.S. manufacturing activity (most HVAC equipment is heavy and made in the U.S.), U.S. steel procurement and HVAC mechanics to install. The building envelope involves a wide variety of manufactured and workshop materials, including roofs, walls, windows, doors, foundations and insulation. In addition to the labor required to create these products, large numbers of roofers, carpenters, installers and laborers are needed to handle the material and incorporate it into a building. In addition, building owners’ reduced building expenses allow for the retention of jobs.

Our nation’s goal of becoming energy independent cannot be achieved through domestic oil and natural gas production alone. Energy efficiency is an untapped natural resource. Commercial buildings represent a large share of our nation’s energy use. “Drilling” for building energy efficiency is the least costly natural resource we have. Retrofitting is expensive, but with utility and government assistance working together with building owners, energy-use reductions between 20 to 50 percent can be obtained.

Commercial building energy efficiency is a critical way by which utilities can meet newly established national guidelines for carbon emission reductions. By improving the cost benefit equation of an energy-efficiency retrofit, Section 179D thereby plays an important role in helping utilities comply with national policy.

Section 179D supports a key investment in the American economy: energy efficiency. Energy efficiency is a force-multiplying investment that saves energy, saves money, and sustains and creates American jobs. Comprehensive energy-efficiency upgrades drastically improve the reliability and performance of the nation’s building stock, while reducing demand on our energy and water supply. We strongly support its inclusion as the Senate Finance Committee contemplates Comprehensive Tax Reform.

[Your name/business]

Locate your senators’ online contact forms:

Alabama: Sen. Sessions , Sen. Shelby
Alaska: Sen. Begich, Sen. Murkowski
Arizona: Sen. Flake, Sen. McCain
Arkansas: Sen. Boozman, Sen. Pryor
California: Sen. Boxer, Sen. Feinstein
Colorado: Sen. Bennet, Sen. Udall
Connecticut: Sen. Blumenthal, Sen. Murphy
Delaware: Sen. Carper, Sen. Coons
Florida: Sen. Nelson, Sen. Rubio
Georgia: Sen. Chambliss, Sen. Isakson
Hawaii: Sen. Hirono, Sen. Schatz
Idaho: Sen. Crapo, Sen. Risch
Illinois: Sen. Durbin, Sen. Kirk
Indiana: Sen. Coats, Sen. Donnelly
Iowa: Sen. Grassley, Sen. Harkin
Kansas: Sen. Moran, Sen. Roberts
Kentucky: Sen. McConnell, Sen. Paul
Louisiana: Sen. Landrieu, Sen. Vitter
Maine: Sen. Collins, Sen. King
Maryland: Sen. Cardin, Sen. Mikulski
Massachusetts: Sen. Cowan, Sen. Warren
Michigan: Sen. Levin, Sen. Stabenow
Minnesota: Sen. Franken, Sen. Klobuchar
Mississippi: Sen. Cochran, Sen. Wicker
Missouri: Sen. Blunt, Sen. McCaskill
Montana: Sen. Baucus, Sen. Tester
Nebraska: Sen. Fischer, Sen. Johanns
Nevada: Sen. Heller, Sen. Reid
New Hampshire: Sen. Ayotte, Sen. Shaheen
New Jersey: Sen. Chiesa, Sen. Menendez
New Mexico: Sen. Heinrich, Sen. Udall
New York: Sen. Gillibrand, Sen. Schumer
North Carolina: Sen. Burr, Sen. Hagan
North Dakota: Sen. Heitkamp, Sen. Hoeven
Ohio: Sen. Brown, Sen. Portman
Oklahoma: Sen. Coburn, Sen. Inhofe
Oregon: Sen. Merkley, Sen. Wyden
Pennsylvania: Sen. Casey, Sen. Toomey
Rhode Island: Sen. Reed, Sen. Whitehouse
South Carolina: Sen. Graham, Sen. Scott
South Dakota: Sen. Johnson, Sen. Thune
Tennessee: Sen. Alexander, Sen. Corker
Texas: Sen. Cornyn, Sen. Cruz
Utah: Sen. Hatch, Sen. Lee
Vermont: Sen. Leahy, Sen. Sanders
Virginia: Sen. Kaine, Sen. Warner
Washington: Sen. Cantwell, Sen. Murray
West Virginia: Sen. Manchin, Sen. Rockefeller
Wisconsin: Sen. Baldwin, Sen. Johnson
Wyoming: Sen. Barrasso, Sen. Enzi

About the Author

Charles R. Goulding, CPA
Charles R. Goulding is an attorney, certified public accountant and president of Energy Tax Savers, Syosset, N.Y.

1 Comment on "EPAct Extension"

  1. Charlie Glynn | December 17, 2013 at 5:55 pm |

    I personalized and sent the recommended letter. Great initiative to propel lighting through next year.

    I’ve heard rumors that EPact could be increased if extended. Do you have any knowledge of this?

    Thank you

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