How EPAct Building Tax Incentives Support Retrofits

Catching Up On Missed Deductions

In January 2011, the Washington, D.C.-based Internal Revenue Service released Rev. Proc. 2011-14, which enables all property owners to catch up on missed EPAct deductions. Conveniently, the deductions can be reported on the current-year tax return without having to amend returns from previous years. The retroactive filing is accomplished by filing tax form 3115 with the building owner’s current tax return. This change can be used proactively as a tax-planning tool.

Building owners who missed one or more prior tax deductions can combine the missed project(s) with a new project and secure a much larger combined tax deduction. For example, a warehouse owner installed energy-efficient lighting in a 200,000-square-foot warehouse for $100,000 in 2006 but missed the EPAct tax deduction. Presume that, in 2012, this same owner has a new project involving natural gas heaters and some roof improvements for $260,000. Using Rev. Proc. 2011-14, this warehouse owner may be eligible to deduct the entire $360,000 in 2012 ($100,000 prior project plus $260,000 current project).

As of September 2012, the catch-up opportunity is available to building owners only; designers of government buildings may only take current-year EPAct deductions.

Increased EPAct HVAC and Building Envelope Projects

From 2008 to the present, EPAct 179D utilization for HVAC and the building envelope has skyrocketed. Particularly for HVAC, certain technologies have proven to reliably beat EPAct standards, especially once they were lowered slightly in March 2011. These technologies

  • Geothermal (ground-source heat pumps)
  • Thermal storage
  • High-efficiency variable refrigerant flow units in rental apartments/dorms/hotels
  • Centralized HVAC in rental apartments/dorms/hotels
  • Energy recovery ventilation
  • Demand control ventilation
  • Chillers in buildings less than 150,000 square feet
  • Direct-fired heaters in non-air-conditioned industrial spaces
  • Variable-air-volume devices in buildings less than 75,000 square feet
  • Chilled beam
  • Magnetic bearing chillers
  • Gas-fired/electric chillers combined with electric chillers to peak shave
  • Indirect evaporative cooling, such as Coolorado air-conditioning units

The EPAct 179D writers provided the foundation for useful incentives in HVAC and envelope. Thoughtful tweaks and clarifications have evolved the law into a much more useful incentive.

EPAct tax incentives have become an important element in retrofit projects. Those lighting, HVAC and building envelope retrofitters who know how to incorporate the incentives into their proposals and designs will reap more projects.

Online Buzz

Are you interested in articles about specific building types that achieve EPAct tax incentives? Visit the authors’ website for a collection of articles, providing specific guidance.

About the Author

Charles R. Goulding, CPA; Charles G. Goulding; and Raymond Kumar, CPA
Charles R. Goulding is an attorney, certified public accountant and president of Energy Tax Savers, Syosset, N.Y. Charles G. Goulding and Raymond Kumar, CPA, are senior tax analysts with the firm.

1 Comment on "How EPAct Building Tax Incentives Support Retrofits"

  1. retrofitadmin | March 17, 2014 at 10:11 am |

    UPDATE from Energy Tax Savers:

    The section 179D commercial building energy tax incentive expired as of Dec. 31, 2013. Sen. Ron Wyden (D-Ore.) the new head of the Senate Finance Committee has stated he will introduce legislation to extend 55 expired tax provisions including EPAct as of April 2014. President Obama’s recently released budget also contains funding for extending section 179D. Those interested in extension should continue writing in support to their state U.S. Senators and Congressmen. Locate your representatives here:

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