Energy credits in tax bill benefit residential, commercial builders

Investors, developers, designers, contractors, and others involved in building or renovating residential or commercial buildings may benefit from new “tax extender” legislation, which prolongs the existing sustainability incentives in real estate development and diminishes some of the uncertainty that has surrounded these rules in past years.

Section 45L: home credit
Investors and developers of residential buildings may qualify for credits of up to $2,000 per qualifying unit. The credit applies to apartments, condominiums, mixeduse developments production homes, and senior, student and affordable housing. The buildings must be three stories or less above grade, and should be constructed and leased over the last three years.

Section179D: commercial building deduction
Section 179D building deduction allows the owner of a commercial building to receive a tax deduction for a building that is constructed or renovated in an energy-efficient manner. It providers an immediate firstyear tax deduction for specific energy-efficient portions of a new or remodeled commercial building. A maximum deduction is allowed if the overall components attain a 50 percent energy savings compared to standard, limited to $1.80 per square foot. An opportunity also exists for government entities. Although they do not pay federal taxes, they can assign tax benefits to taxpaying commercial businesses involved in designing these buildings, such as architects, engineers, contractors and energy service providers.

These credits originally expired on Dec. 31, 2014, but under the amended provisions, the credit deductions are extended until Dec. 31, 2016.

The benefits of building green extend beyond the environment, the longterm savings of efficient, sustainable building practices are significant. As energy-related tax incentives have grown, so have the strategies to capitalize on the opportunities they create. Independent certifications can help maximize tax deductions and improve a company’s bottom line. CliftonLarsonAllen has helped numerous clients take advantage of these valuable credits.