We provide clients with industry-leading service for their Section 179D tax deductions.
For over 30 years ABGi has helped business leaders accelerate profit by maximizing tax credits and deductions.
Section 179D of the Internal Revenue Code (IRC) allows commercial building owners and AEC companies who work on commercial buildings owned by the government or tax-exempt organizations to claim deductions on their federal income taxes if they exceed baseline energy efficiency standards by 25% or more.
Read our 179D FAQ article that answers specific questions about how 179D works.
We work with AEC companies that design, build, or renovate commercial buildings owned by the government or tax-exempt organizations.
These firms use energy-efficient improvements in their projects that include installations of and upgrades to HVAC systems, interior lighting, and the building envelope, which includes the structural components that separate the building’s interior from its exterior.
We consult with AEC companies directly and partner with an expansive network of certified public accountants (CPAs) to provide trustworthy consulting services to their AEC clients.
Once your 179D project manager gets assigned, they will schedule a kick-off meeting and :
We lead you through the 179D tax deduction process for open tax years (usually within the past three years). We can also work with you to anticipate, model, and file deductions for the next tax year, offering you proactive value.
The 179D Tax deduction offers a variety of benefits to commercial building owners and design professionals. These include:
The most obvious benefit is the cost savings associated with the deduction. The 179D deduction can save commercial building owners and designers from $1.88 up to $5.00 per square foot on energy-efficient improvements and reduce their taxable income.
The 179D deduction helps building owners save money in the long term, as well as designers benefit from tax savings in the short term, by incentivizing investments in energy-efficient infrastructure. By making these upgrades, they can benefit from the long-term cost savings associated with lower energy consumption.
The tax dollars it immediately saves can also be reinvested into future energy-efficient improvements or other areas of business, increasing net profit for AEC firms.
By reducing the cost of energy-efficient upgrades, 179D encourages building owners and designers to invest in efficient technology that might otherwise be too expensive. This makes sustainability more accessible and encourages AEC firms to design energy efficient buildings.
The 179D tax deduction applies to commercial building owners undertaking energy-efficiency improvements on their property. In cases where the building is publicly owned or operated by a non-tax-paying entity, the incentive gets passed on to the designer or builder involved in the project.
Architectural, engineering, and construction firms can receive the deduction. They must fulfill three main criteria to claim 179D:
The AEC firm should be directly involved in designing, developing, and implementing energy-efficient systems or a significant building envelope component. They need documented proof that they are substantially involved in the development of technical specifications for the energy efficient systems of the building.
Allocation letters are required when the tax incentives for projects completed for non-tax paying entities, such as government or non-profit organization owned buildings, are passed down to associated designers or engineers. This document is a legal agreement between the AEC firm and the building owner to ensure that the 179D deduction associated with the project is correctly allocated.
The energy-efficiency improvements must meet specific standards to qualify for the tax deduction. These include ASHRAE 90.1-2007 building energy standards and any other applicable local or state energy efficiency codes. 3D Energy Modeling Analysis is used to determine the overall energy efficiency of a building and whether it meets the requirements.
The 179D tax deduction applies to most commercial buildings, including apartment complexes of 4 or more stories and any size of commercial building. Renovations, new construction projects, and retrofits can qualify.
Examples of qualifying improvements include:
Like all pieces of tax law, Section 179D is always subject to changes. The Inflation Reduction Act 2023 is just one example of recent updates to the incentive, which includes the following:
The government has also stated that businesses that meet higher prevailing wage and apprenticeship requirements and achieve a 25% reduction in energy and power costs can claim a deduction of $2.50 per square foot. The deduction increases by $0.10 for each additional reduction percentage – up to a maximum deduction of $5.00 per square foot.
To claim the 179D deduction, a Section 179D compliance study (also known as a Section 179D Certification) must be performed by a qualified independent firm – like ABGi’s 179D deduction service – or an individual who specializes in energy engineering and meets the requirements laid out in Section 179D.
No. Claiming the 179D deduction does not trigger an audit, although we highly recommend that businesses have all their documentation in order before filing a tax return to avoid any issues. Companies should keep all relevant documents, including the allocation letter and Section 179D certification letter, in case the IRS requests additional information.
CPAs partner with us for their client’s 179D tax deduction needs because, for over 30 years, our expertise has allowed us to maximize credits and deductions, decreasing their clients’ tax liability. As a publicly traded company, we are accountable for our business practices annually, ensuring compliance and quality work that a CPA can trust.
Accounting firms recognize our company as a go-to source for navigating IRC 179D’s stringent qualification requirements and mandated engineering processes to demonstrate results and accuracy. We also diligently follow any changes to the IRC with evolving best practices.
That’s why CPAs trust us to serve their clients to maximize deductions.
We have over 30 years of experience working with American businesses to reduce their tax liability by maximizing tax incentives that stimulate business growth, innovation, and advancement.
Here are a few ways we are different than our competitors: