This notice modifies former guidelines for tax deductions on recently built energy-efficient commercial buildings.
Internal Revenue Code §179D
Amended by Notice 2012-22
Effective date: March 12, 2012 – December 31, 2013
Energy-efficient improvements placed in service on commercial buildings between February 24, 2012 and December 31, 2013 qualify for tax deductions if the improvements show a 50% total energy reduction compared to minimum set requirements.
If an energy-efficient building does not meet the 50% energy reduction standard, a partial deduction may be taken if energy savings total at least:
- 25% for interior lighting systems;
- 15% for heating, cooling, ventilation and hot water systems; and
- 10% for the building envelope; OR
- 20% for interior lighting systems;
- 20% for heating, cooling, ventilation and hot water systems; and
- 10% for the building envelope.
This partial deduction cannot exceed $0.60 x square footage for each energy efficient system. Further, the total partial deductions cannot exceed the difference between $1.80 x square footage of the building and the amount of energy efficiency deductions allowed for all prior taxable years.
Editor’s note – This change allows energy-efficient buildings to qualify more easily for partial deductions, as the new notice increases the minimum for interior lighting systems and decreases the minimum for HVAC and ventilation systems, which are more difficult to make energy-efficient than lighting systems.