Tax Extenders Bill Renews 179D Tax Deduction

Amid all of last year's holiday events and New Year’s hubbub, you might have missed a rather important bit of legislative activity that happened on December 19th... President Obama officially passed the Tax Extenders Bill (aka the Tax Increase Prevention Act of 2014; HR 5771).

Wondering why this might be reason to smile? Well, there a number of reasons.

Among a plethora of benefits for both businesses and individuals, 179D includes an energy efficient commercial building tax deduction. Even more beneficial for LEED professionals is that it allows public building owners to allocate the deduction to the designer of the energy efficient property. Thus, those commercial property projects (new and existing) that began after December 31, 2013 and meet the necessary criteria are now retroactively eligible for the financial allowance.

American Institute of Architects (AIA) president Elizabeth Chu Richter lauded the extension by saying, “The 179D deduction has leveraged billions of dollars in private capital, resulted in the energy-efficient construction of thousands of public and private buildings, and created and preserved hundreds of thousands of jobs. It has lowered demands on the power grid, moved our country closer to energy independence, and reduced carbon emissions.”


But there’s another aspect of 179D worth bringing to light for LEED consultants, and that is the opportunity for operating companies first year write-downs on the purchase of personal property being used in trade or business. As opposed to capitalizing and depreciating the asset over a number of years, this immediate write-down deduction freed up cash which could be used for further growth.

When first enacted way back in 1982, the allowable deduction was a mere $5,000, but during 2010-2013, the deduction was used as an economic incentive and had grown to $500,000. As those economic incentives ended, 2014 saw a return to a mere $25,000 deduction limit.

The extension of 179D obviously allows business owners some significant financial savings opportunities – but it might not be here to stay, so don’t get too comfortable.

While the Senate's Joint Committee on Taxation has stated that they’re confident the extension will continue to be renewed, there is some concern that the mere two-week bill won’t last. In fact, Representative Ron Wyden of Oregon stated simply, “This tax bill doesn’t have the shelf life of a carton of eggs.”

To learn more, speak to your tax agent or peruse this FAQ document from the Office of Energy Efficiency and Renewable Energy.