The EPAct 179D tax incentive relates directly to the design of commercial building properties that incorporate energy-efficiency systems. Up to $1.80 per square foot is the tax incentive allowable qualifying structures under the EPAct 179D. The incentive also allows a retroactively granted deduction for any existing facilities that fall under specific guidelines.

The tax deduction allows commercial builders to offset some of the expenses and costs of implementing energy-efficiency improvements. In normal situations, it could take as much 30+ years to recover depreciation costs for improvements, but the tax incentive encourages businesses to take advantage of its availability. Unfortunately, many businesses aren’t aware that the tax deduction even exists, however, realizing the benefits can be a deciding factor.

How to Qualify for EPAct 179D

A qualified engineer or contractor must inspect and test the improvements before a deduction is given. The energy-efficient improvements must be at least a reduction of 50% of the total energy and power costs in order to qualify. This reduction must be evident in the heating, cooling, ventilation and hot water systems of the structure. Partial deductions are allowed in some cases and the information to determine that is gleaned from the engineer or contractor’s reports.

Qualifying Factors for the EPAct 179D

Businesses can determine if they want to take advantage of this tax incentive by analyzing the company and its structure. Basically, any size commercial buildings and apartments that are more than four stories high are eligible. Owners of public building structures are qualified individuals, although they may allocate the deductions to the engineer, contractor, architect, environmental consultant or energy services provider. This is only valid for the date of the taxable year that the property was deemed serviceable.

Although not all businesses will qualify for the tax deductions, some projects can be pre-qualified beforehand to determine any eligibility. This route allows building owners to avoid any installation costs if his project is deemed ineligible for the tax incentive.

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HVAC represents the largest portion of energy costs for hotel and apartment building owners. But when a VRV system is introduced, these costs can reduce annual energy costs by a minimum of 20%. In addition, total energy costs for a building can be reduced by as much as 40% when VRV technology is implemented.

These variable refrigerant volume systems or VRVs represent the highest energy efficiency of any air conditioning system used in commercial buildings. This is because a VRV allows for individual control of temperatures via room or zone, unlike traditional air conditioning units which do not.

Types of establishments benefiting most from this VRV technology include schools, hotels, apartment building and office buildings, as these are the types of locations where the ability to control temperature individually is most in demand.

For architects and engineers, VRV technology increases the flexibility of building design. But it is not only incredibly convenient; VRV technology is also the most energy-efficient solution available. As a result, those building owners who have made investments into reducing energy using VRV systems may now qualify for a number of tax incentives via the EPAct 179D.

Available Tax Incentives for Building Owners

Building owners who have installed VRV systems, whether in a new or existing location may enjoy instant tax deductions that may reach $1.80 per square foot.  However, there are incentives even if a building does not qualify for this maximum.

Each major building subsystem that an owner implements can receive a deduction of up to $0.60 per square foot. These subsystems include ventilation, air conditioning and heating. In addition, the deduction may apply to the building envelope, which consists of doors, walls, roof windows, insulation and foundation.

For hotel owners, the same potential for deductions applies, which is definitely good news for an industry enjoying rapid recovery following decimation during the recent downturn. Many hotels are now implementing VRV technology as the result of previously-defined and mandatory replacement of HVAC systems.

Qualifying For the EPAct 179D Deductions

Those wishing to apply for tax deductions for VRV system implementation can pre-qualify their project prior to implementation. This will allow building owners to determine whether installation will be eligible for the deduction.

Building owners who have already installed a VRV system will require inspection of the installation by a qualified individual. This individual will survey the site and confirm the proper installation and operation of the system.

Any collected data will be assessed for the ASHRAE Standard 90.1.2001, with any savings coming from the ASHRAE database. The building owner’s compliance will be confirmed, and the building’s efficiency determined. Once the ASHRAE forms have been completed, the final report will be prepared and sent to an engineer for certification. Following an internal review, the final report is issued to the building owner.

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