A long-awaited reform of the IRS Section 179D tax incentive was introduced in the U.S. Senate and put on a fast track for consideration in the lame duck session of Congress after the November elections.
The Chantilly, Va.-based Sheet Metal and Air Conditioning Contractors’ National Association endorsed the legislation, S.3591, The Commercial Building Modernization Act of 2012, in anticipation that passage of the incentive by December could lead construction’s high-efficiency retrofit sector to improved economic activity for building owners, contractors and their workforce.
Sen. Jeff Bingaman (D-N.M.) and Sen. Olympia Snowe (R-Maine), two leaders on energy-efficiency policy and tax policy, joined forces with three Senate co-sponsors to champion a priority of the commercial building efficiency retrofit community. It is more probable the incentive will be added to the large package of tax provisions set to expire late this year and next year.
Proposed 179D changes include the following:
- Extending the expiration date of the tax benefit from Dec. 31, 2013, to Dec. 31, 2016.
- Increasing the maximum amount of the deduction from $1.80 to $3 per square foot.
- Allowing deductions to be allocated to other parties not only when the property is owned by a government, but also for not-for-profit and privately owned commercial properties.
- Allowing an allocation of the deduction not only to designers of energy-efficient improvements, but also building tenants, financiers, professional engineers, licensed contractors, energy-services companies or other building professionals.
- Permitting a partial allowance for some energy-efficient upgrades with an increase from $1 to $3 and $2.20 to $3 for the relevant energy-efficient part of the upgrade.
By expanding incentives for whole and partial retrofits to encourage a wider variety of retrofit projects and by including real-estate investment trusts in the pool of projects eligible for allocation of 179D, the incentive will jumpstart many projects previously sidelined while industry employment suffered.