Energy Policy Act 2005

The tax deduction provision in EPAct 2005 applies to specific energy-efficient commercial property (new construction, renovation, and retrofit work) placed in service between January 1, 2006 and December 31, 2008, inclusive.

To potentially qualify for the tax deduction, energy-efficient commercial building property:

• Must be located in the US
• Paid to be constructed by the taxpayer seeking the deduction

A potential tax deduction is available through a whole or partial building deduction.

Whole Building Deduction

• Must be specific energy-efficient commercial building property that reduces total annual energy and power costs by 50% or more in comparison to a building satisfying the American Society of Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE) 90.1–2001 Standard
• A one-time tax deduction of the lesser of $1.80 per square foot or the costs incurred or paid for the energy-efficient property

Partial Tax Deduction for Building Sub-Systems

• A one time tax deduction is available for an upgrade of any one system (lighting, HVAC/hot water, and building envelope) that surpasses ASHRAE 90.1–2001 as set forth in EPAct2005.
• Partial tax deduction per system is the lesser of $0.60 per square foot or the costs incurred or paid for the energy-efficient system

Certification Requirements

• Property must be certified by either a professional engineer or licensed contractor in the building’s jurisdiction to show compliance with EPAct 2005. The certifier or inspector can not be an employee of the asset owner
• The qualified individual must provide the taxpayer with the required components and statements in the certification document, which must be retained in their records.
• Approved software for whole building modeling is listed on the Department of Energy website.

Allocation of Tax Deduction

• If the asset is privately owned, the asset owner can claim the tax deduction
• If the asset is publicly owned (ex. Government buildings), the person primarily responsible for the design can claim the deduction.