ACEC Submits Comments on Section 179D: Energy-Efficient Commercial Buildings Tax Deduction

November 9, 2022

ACEC Submits Comments on Section 179D: Energy-Efficient Commercial Buildings Tax Deduction

In response to a request for information from Treasury and the IRS, the Council submitted comments highlighting key issues related to the Section 179D energy-efficient commercial buildings tax deduction. The agencies are drafting regulations to implement the changes to Section 179D in the recently enacted Inflation Reduction Act (IRA).

Section 179D provides a tax incentive for the installation of HVAC, lighting, and building envelopes that meet certain energy-efficiency standards. The law allows governmental and nonprofit entities, which cannot use federal tax deductions, to allocate the deduction to the primary designer of the energy-efficient systems. Due to some past confusion ACEC recommended that Treasury and the IRS consider the transparent allocation model developed by the General Services Administration.

ACEC also highlighted the problem of some governmental entities requiring payments in exchange for allocation of the deduction and asked the agencies to prohibit this practice. Finally, ACEC raised the challenges that S corporations and other passthrough entities face in claiming the deduction.

Treasury and the IRS will consider all comments they received as they developed proposed regulations to implement the IRA. ACEC will have the opportunity to comment again once the proposed rule is released.

All comments to blog posts will be moderated by ACEC staff.