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alliantgroup's Dean Zerbe in Forbes - A Little Known Tax Break For Building Green

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Let's take a pause from the constant back-and-forth of what will or won't happen in Washington regarding taxes and President Obama's proposal for a jobs bill. Instead, for a change, let's talk about a little-known big tax break that is available now and that can put cash now into the pocket of your business - especially if you are an architect or engineer. Surprisingly, this break can also can benefit local, state, and federal agencies.

What is this wonder tax break? 179D. This is the section of the tax code that provides a benefit for businesses, architects, engineers and governments when they build or renovate a building (or design a government building in the case of an architect or engineering firm ) that is energy efficient. The maximum deduction is $1.80 per square ft.

For this tax incentive there are three different groups that can benefit – business owners; architects and engineers; local state and federal government agencies. And in this Reader's Digest discussion (more details here especially on how your building is certified as energy efficient) there are three things you need to know about the law.


The first thing you need to know is that for an energy efficient building to qualify, or partially qualify, it does not have to have grass growing on the roof or a windmill powering its electrical systems. The reality is that in working with hundreds of clients, alliantgroup (my firm) has found that the vast majority of new construction (and many energy efficient redos) will qualify or partially qualify for 179D just by meeting today's stricter building code requirements.





GOVERNMENT. In drafting this legislation, the Senate intended to encourage government agencies to also build energy efficient buildings. In that light, the law allows a state, local or federal government (think also schools and public universities) entity to transfer the tax benefit to the architect or engineer who designed the building for consideration. The government can go back to buildings and improvements placed in service in the last three years. This provision is not available for nonprofit entities such as charities.

ARCHITECTS/ENGINEERS. It naturally follows from the above paragraph that the final group benefiting from 179D are those architect and engineering firms that engage in design work on behalf of state, local and federal government. The architect or engineering firm is assigned the tax benefit from the government agency. In practice, the government may be able to assign the tax benefit to a number of different architect or engineering firms. Therefore, it is crucial that the architect or engineering firm without delay request an official letter from the responsible government employee assigning the tax benefit to their firm (recall – good for buildings in service last three years) – – or even better incorporate the tax benefit in the contract negotiations.

At the end of the day, this tax break has provided millions of dollars in tax benefits for business owners and architect and engineering firms as well as providing real assistance to local, state, and federal government, while helping lower energy costs, improve energy efficiency and the environment . One tax break that does all these things. It is the tax code answer to baking soda. Unfortunately, it is a tax break that many are overlooking.


Visit Dean's Forbes Blog at http://blogs.forbes.com/deanzerbe and share your comment.