I.R.C. § 179D(a) In General —
There shall be allowed as a deduction an amount equal to the cost of energy efficient
commercial building property placed in service during the taxable year.
I.R.C. § 179D(b) Maximum Amount Of Deduction —
The deduction under subsection (a) with respect to any building for any taxable year shall not exceed the excess (if
any) of—
I.R.C. § 179D(b)(1) —
the product of—
I.R.C. § 179D(b)(1)(A) —
$1.80, and
I.R.C. § 179D(b)(1)(B) —
the square footage of the building, over
I.R.C. § 179D(b)(2) —
the aggregate amount of the deductions under subsection (a) with respect to the building for all prior taxable years.
I.R.C. § 179D(c) Definitions —
For purposes of this section—
I.R.C. § 179D(c)(1) Energy Efficient Commercial Building Property —
The term “energy efficient commercial building property"
means property—
I.R.C. § 179D(c)(1)(A) —
with respect to which depreciation
(or amortization in lieu of depreciation) is allowable,
I.R.C. § 179D(c)(1)(B) —
which is installed on or in any building which is--
I.R.C. § 179D(c)(1)(B)(i) —
located in the United States, and
I.R.C. § 179D(c)(1)(B)(ii) —
within the scope of Reference Standard 90.1,
I.R.C. § 179D(c)(1)(C) —
which is installed as part of--
I.R.C. § 179D(c)(1)(C)(i) —
the interior lighting systems,
I.R.C. § 179D(c)(1)(C)(ii) —
the heating, cooling, ventilation, and hot water systems, or
I.R.C. § 179D(c)(1)(C)(iii) —
the building envelope, and
I.R.C. § 179D(c)(1)(D) —
which is certified in accordance with subsection (d)(6) as being installed as part of a plan designed to reduce the total annual energy
and power costs with respect to the interior lighting systems, heating, cooling,
ventilation, and hot water systems of the building by 50 percent or more in comparison
to a reference building which meets the minimum requirements of Reference Standard
90.1 using methods of calculation under subsection (d)(2).
I.R.C. § 179D(c)(2) Reference Standard 90.1— —
The term “Reference Standard 90.1” means, with respect to any property, the most recent
Standard 90.1 published by the American Society of Heating, Refrigerating, and Air
Conditioning Engineers and the Illuminating Engineering Society of North America which
has been affirmed by the Secretary, after consultation with the Secretary of Energy,
for purposes of this section not later than the date that is 2 years before the date
that construction of such property begins.
I.R.C. § 179D(d) Special Rules
I.R.C. § 179D(d)(1) Partial Allowance
I.R.C. § 179D(d)(1)(A) In General —
Except as provided in subsection (f), if—
I.R.C. § 179D(d)(1)(A)(i) —
the requirement of subsection (c)(1)(D) is not met, but
I.R.C. § 179D(d)(1)(A)(ii) —
there is a certification in accordance with paragraph (6) that any system referred to in subsection (c)(1)(C) satisfies the energy-savings targets established by the Secretary under subparagraph
(B) with respect to such system,
then the requirement of subsection (c)(1)(D) shall be treated as met with respect to such system, and the deduction under subsection
(a) shall be allowed with respect to energy efficient commercial building property
installed as part of such system and as part of a plan to meet such targets, except
that subsection (b) shall be applied to such property by substituting “$.60” for “$1.80”.
I.R.C. § 179D(d)(1)(B) Regulations —
The Secretary, after consultation with the Secretary of Energy, shall establish
a target for each system described in subsection (c)(1)(C) such that, if such targets were met for all such systems, the building
would meet the requirements of subsection (c)(1)(D).
I.R.C. § 179D(d)(2) Methods Of Calculation —
The Secretary, after consultation with the Secretary of Energy, shall promulgate
regulations which describe in detail methods for calculating and verifying energy
and power consumption and cost, with respect to any property, based on the provisions
of the most recent California Nonresidential Alternative Calculation Method Approval
Manual which has been affirmed by the Secretary, after consultation with the Secretary
of Energy, for purposes of this section not later than the date that is 2 years before
the date that construction of such property begins.
I.R.C. § 179D(d)(3) Computer Software
I.R.C. § 179D(d)(3)(A) In General —
Any calculation under paragraph (2) shall be prepared by qualified computer software.
I.R.C. § 179D(d)(3)(B) Qualified Computer Software —
For purposes of this paragraph, the term “qualified computer software” means software—
I.R.C. § 179D(d)(3)(B)(i) —
for which the software designer has certified that the software meets all procedures
and detailed methods for calculating energy and power consumption and costs as required
by the Secretary,
I.R.C. § 179D(d)(3)(B)(ii) —
which provides such forms as required to be filed by the Secretary in connection
with energy efficiency of property and the deduction allowed under this section,
and
I.R.C. § 179D(d)(3)(B)(iii) —
which provides a notice form which documents the energy efficiency features of the
building and its projected annual energy costs.
I.R.C. § 179D(d)(4) Allocation Of Deduction For Public Property —
In the case of energy efficient commercial building property installed on or in
property owned by a Federal, State, or local government or a political subdivision
thereof, the Secretary shall promulgate a regulation to allow the allocation of
the deduction
to the person primarily responsible for designing the property in lieu of the owner
of such property. Such person shall be treated as the taxpayer for purposes of this
section.
I.R.C. § 179D(d)(5) Notice To Owner —
Each certification required under this section shall
include an explanation to the building owner regarding the energy efficiency features
of the building and its projected annual energy costs as provided in the notice
under paragraph (3)(B)(iii).
I.R.C. § 179D(d)(6) Certification
I.R.C. § 179D(d)(6)(A) In General —
The Secretary shall prescribe the manner and method for the making of certifications
under this section.
I.R.C. § 179D(d)(6)(B) Procedures —
The Secretary shall include as part of the certification
process procedures for inspection and testing by qualified individuals described
in subparagraph (C) to ensure compliance of buildings with energy-savings plans and targets. Such procedures
shall be comparable, given the difference between
commercial and residential buildings, to the requirements in the Mortgage Industry
National Accreditation Procedures for Home Energy Rating Systems.
I.R.C. § 179D(d)(6)(C) Qualified Individuals —
Individuals qualified to determine compliance shall be only those individuals who
are recognized by an organization certified
by the Secretary for such purposes.
I.R.C. § 179D(e) Basis Reduction —
For purposes of this subtitle, if a deduction is allowed under this section with
respect to any energy efficient commercial
building property, the basis of such property shall be reduced by the amount of
the deduction so allowed.
I.R.C. § 179D(f) Interim Rules For Lighting Systems —
Until such time as the Secretary issues final regulations under subsection (d)(1)(B) with respect to property which is part of a lighting system--
I.R.C. § 179D(f)(1) In General —
The lighting system target under subsection (d)(1)(A)(ii) shall be a
reduction in lighting power density of 25 percent (50 percent in the case of a warehouse)
of the minimum requirements in Table 9.5.1 or Table 9.6.1 (not including additional
interior lighting power allowances) of Standard 90.1-2007.
I.R.C. § 179D(f)(2) Reduction In Deduction If Reduction Less Than 40 Percent
I.R.C. § 179D(f)(2)(A) In General —
If, with respect to the lighting system of any building
other than a warehouse, the reduction in lighting power density of the lighting
system is not at least 40 percent, only the applicable percentage of the amount
of deduction otherwise allowable under this section with respect to such property
shall be allowed.
I.R.C. § 179D(f)(2)(B) Applicable Percentage —
For purposes of subparagraph (A), the applicable percentage is the number of percentage points (not greater than
100) equal to
the sum of—
I.R.C. § 179D(f)(2)(B)(i) —
50, and
I.R.C. § 179D(f)(2)(B)(ii) —
the amount which bears the same ratio to 50 as the excess of the reduction of lighting
power density of the lighting system over 25 percentage points bears to 15.
I.R.C. § 179D(f)(2)(C) Exceptions —
This subsection shall not apply to any system—
I.R.C. § 179D(f)(2)(C)(i) —
the controls and circuiting of which do not comply fully with the mandatory and
prescriptive requirements of Standard 90.1-2007 and which do not include provision
for bilevel switching in all occupancies except hotel and motel guest rooms, store
rooms, restrooms, and public lobbies, or
I.R.C. § 179D(f)(2)(C)(ii) —
which does not meet the minimum requirements for calculated lighting levels as set
forth in the
Illuminating Engineering Society of North America Lighting Handbook, Performance
and Application, Ninth Edition, 2000.
I.R.C. § 179D(g) Inflation Adjustment— —
In the case of a taxable year beginning after 2020, each dollar amount in subsection
(b) or subsection (d)(1)(A) shall be increased by an amount equal to—
I.R.C. § 179D(g)(1) —
such dollar amount, multiplied by
I.R.C. § 179D(g)(2) —
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year
in which the taxable year begins, determined by substituting “calendar year 2019”
for “calendar year 2016” in subparagraph (A)(ii) thereof. Any increase determined
under the preceding sentence which is not a multiple of 1 cent shall be rounded to
the nearest cent.
I.R.C. § 179D(h) Regulations —
The Secretary shall promulgate such regulations as
necessary—
I.R.C. § 179D(h)(1) —
to take into account new technologies regarding energy efficiency and renewable
energy for purposes of determining energy efficiency and savings under this section,
and
I.R.C. § 179D(h)(2) —
to provide for a recapture of the deduction allowed under this section if the plan
described in subsection (c)(1)(D) or (d)(1)(A) is not fully implemented.
(Added by Pub. L. 109-58, title XIII, Sec. 1331(a), Aug. 8, 2005, 119 Stat. 594; and amended by Pub. L. 109-432, div. A, title II, Sec. 204, Dec. 20, 2006, 120 Stat. 2922; Pub. L. 110-343, div. B, title III, Sec. 303, Oct. 3, 2008, 122 Stat. 3765; Pub. L. 113-295, Div. A, title I, Sec. 158(a), Dec. 19, 2014, 128 Stat. 4010; Pub. L. 114-113, Div. Q, title I, Sec. 190(a), title III, Sec. 341, Dec. 18, 2015; Pub. L. 115-123, Div. D, title I, Sec. 40413(a), Feb. 9, 2018, 132 Stat. 64; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(54), Mar. 23, 2018, 132 Stat. 348; Pub. L. 116-94, Div. Q, title I, Sec. 131(a), Dec. 20, 2019; Pub. L. 116-260, Div. EE, title I, Sec. 102, Dec. 27, 2020, 134 Stat. 1182.)
BACKGROUND NOTES
AMENDMENTS
2020 - Subsec. (c)(1)(B)(ii). Pub. L. 116-260, Div. EE, Sec. 102(c)(1)(A), amended clause (ii) by substituting “Reference Standard
90.1”
for “Standard 90.1–2007”.
Subsec. (c)(1)(D). Pub. L. 116-260, Div. EE, Sec. 102(c)(1)(A), amended subpar. (D) by substituting “Reference Standard
90.1”
for “Standard 90.1–2007”.
Subsec. (c)(2). Pub. L. 116-260, Div. EE, Sec. 102(c)(1)(B), amended par. (2). Prior to amendment it read as follows:
“(2) Standard 90.1–2007.—The term “Standard 90.1–2007” means Standard 90.1–2007 of
the American Society of Heating, Refrigerating, and Air Conditioning Engineers and
the Illuminating Engineering Society of North America
(as in effect on the day before the date of the adoption of Standard 90.1–2010 of
such Societies).”
Subsec. (d)(2). Pub. L. 116-260, Div. EE, Sec. 102(c)(2), amended par. (2) by substituting “with respect to any property,
based on the provisions of the most recent California Nonresidential Alternative Calculation
Method Approval Manual which has been affirmed by the Secretary, after consultation
with the Secretary of Energy, for purposes of this section not later than the date
that is 2 years before the date that construction of such property begins” for “based
on the provisions of the 2005 California Nonresidential Alternative Calculation
Method Approval Manual”.
Subsec. (h). Pub. L. 116-260, Div. EE, Sec. 102(a), struck subsec. (h). Before being struck it read as follows:
“(h) Termination.—This section shall not apply with respect to property placed in
service after December 31, 2020.”
Subsec. (g). Pub. L. 116-260, Div. EE, Sec. 102(b), redesignated subsec. (g)
as subsec. (h) and added a new subsec. (g).
2019 — Subsec. (h). Pub. L. 116-94, Div. Q, Sec. 131(a), amended subsec. (h) by substituting “December 31, 2020” for
“December 31, 2017”.
2018--Subsec. (d)(1)(B). Pub. L. 115-141, Div. U, Sec. 401(a)(54), amended subpar. (B)
by substituting “such that” for “which”.
Subsec.
(h). Pub. L. 115-123, Sec. 40413(a), amended subsec. (h) by substituting “December 31, 2017”
for “December 31, 2016”.
2015--Subsec. (c)(1). Pub. L. 114-113, Div. Q, Sec. 341(a), amended par. (1) by substituting “Standard 90.1–2007” for “Standard
90.1–2001” each place it appeared.
Subsec. (c)(2). Pub. L. 114-113, Div. Q, Sec. 341(b)(1), amended par. (2). Before amendment, it read as follows:
“(2) Standard 90.1-2001.—The term
“Standard 90.1-2001” means Standard 90.1-2001 of the American Society of Heating,
Refrigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America (as in effect on April 2, 2003).”
Subsec. (f)(1). Pub. L. 114-113, Div. Q, Sec. 341(b)(2), amended par. (1) by substituting “Standard 90.1–2007” for
“Standard 90.1–2001” each place it appears.
Subsec. (f)(1). Pub. L. 114-113, Div. Q, Sec. 341(b)(3), amended par. (1) by substituting “Table 9.5.1” for “Table
9.3.1.1”
and by substituting “Table 9.6.1” for “Table 9.3.1.2”.
Subsec. (f)(2)(C)(i). Pub. L. 114-113, Div. Q, Sec. 341(b)(2), amended clause (i) by substituting “Standard 90.1–2007”
for “Standard 90.1–2001” each place it appears.
Subsec. (h). Pub. L. 114-113, Div. Q, Sec. 190(a), amended subsec. (h) by substituting “December 31, 2016” for
“December 31, 2014”.
2014--Subsec. (h). Pub. L. 113-295, Div. A, Sec. 158(a), amended subsec.
(h) by substituting “2014” for “2013”.
2008--Subsec. (h). Pub. L. 110-343, Div. B, Sec. 303, amended subsec. (h) by substituting “2013” for “2008.
2006--Subsec. (h). Pub. L. 109-432, Sec. 204, amended subsec. (h) by substituting “2008” for “2007”.
EFFECTIVE DATE OF 2020 AMENDMENTS
Amendments by Pub. L. 116-260, Div. EE, Sec. 102, effective for property placed in service after December 31, 2020.
EFFECTIVE DATE OF 2019 AMENDMENT
Amendment by Pub. L. 116-94, Div. Q, Sec. 131(a), effective for property placed in service after December 31,
2017.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(54), effective March 23, 2018.
Amendment by Pub. L. 115-123, Sec. 40413(a), effective for property placed in service after December 31, 2016.
EFFECTIVE DATE OF 2015 AMENDMENTS
Amendment by Pub. L. 114-113, Div. Q, Sec. 190(a), effective for property placed in service after December 31,
2014.
Amendment by Pub. L. 114-113, Div. Q, Sec. 341, effective for property placed in service after December 31, 2015.
EFFECTIVE DATE OF 2014 AMENDMENTS
Amendment by Div. A, Sec. 158(a) of Pub. L. 113-295 effective for property placed in service after December 31, 2013.
EFFECTIVE DATE OF 2008 AMENDMENTS
Amendment by Div. B, Sec. 303 of Pub. L. 110-343 effective on the date of the enactment of this Act [Enacted: Oct. 3, 2008].
EFFECTIVE DATE OF 2006 AMENDMENTS
Amendment by Sec. 204 of Pub. L. 109-432 effective on the date of the enactment of this Act [Enacted: Dec. 20, 2006].
EFFECTIVE DATE
Effective for property placed in service after December 31, 2005.
