26 U.S.C. § 179D (INTERNAL REVENUE CODE)
§ 179D. Energy efficient commercial buildings deduction
(a) In general
There shall be allowed as a deduction an amount equal to the cost of energy efficient commercial building property placed in service during the taxable year.
(b) Maximum amount of deduction
The deduction under subsection (a) with respect to any building for any taxable year shall not exceed the excess (if any) of—
(1) the product of—
(A) $1.80, and
(B) the square footage of the building, over
(2) the aggregate amount of the deductions under subsection (a) with respect to the building for all prior taxable years.
(c) Definitions
For purposes of this section—
(1) Energy efficient commercial building property
The term “energy efficient commercial building property” means property—
(A) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,
(B) which is installed on or in any building which is—
(i) located in the United States, and
(ii) within the scope of Reference Standard 90.1,
(C) which is installed as part of—
(i) the interior lighting systems,
(ii) the heating, cooling, ventilation, and hot water systems, or
(iii) the building envelope, and
(D) which is certified in accordance with subsection (d)(6) as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison to a reference building which meets the minimum requirements of Reference Standard 90.1 using methods of calculation under subsection (d)(2).
(2) Reference Standard 90.1
The term “Reference Standard 90.1” means, with respect to any property, the most recent Standard 90.1 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America which has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of this section not later than the date that is 2 years before the date that construction of such property begins.
(d) Special rules
(1) Partial allowance
(A) In general
Except as provided in subsection (f), if—
(i) the requirement of subsection (c)(1)(D) is not met, but
(ii) there is a certification in accordance with paragraph (6) that any system referred to in subsection (c)(1)(C) satisfies the energy-savings targets established by the Secretary under subparagraph (B) with respect to such system,
then the requirement of subsection (c)(1)(D) shall be treated as met with respect to such system, and the deduction under subsection (a) shall be allowed with respect to energy efficient commercial building property installed as part of such system and as part of a plan to meet such targets, except that subsection (b) shall be applied to such property by substituting “$.60” for “$1.80”.
(B) Regulations
The Secretary, after consultation with the Secretary of Energy, shall establish a target for each system described in subsection (c)(1)(C) such that, if such targets were met for all such systems, the building would meet the requirements of subsection (c)(1)(D).
(2) Methods of calculation
The Secretary, after consultation with the Secretary of Energy, shall promulgate regulations which describe in detail methods for calculating and verifying energy and power consumption and cost with respect to any property, based on the provisions of the most recent California Nonresidential Alternative Calculation Method Approval Manual which has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of this section not later than the date that is 2 years before the date that construction of such property begins.
(3) Computer software
(A) In general
Any calculation under paragraph (2) shall be prepared by qualified computer software.
(B) Qualified computer software
For purposes of this paragraph, the term “qualified computer software” means software—
(i) for which the software designer has certified that the software meets all procedures and detailed methods for calculating energy and power consumption and costs as required by the Secretary,
(ii) which provides such forms as required to be filed by the Secretary in connection with energy efficiency of property and the deduction allowed under this section, and
(iii) which provides a notice form which documents the energy efficiency features of the building and its projected annual energy costs.
(4) Allocation of deduction for public property
In the case of energy efficient commercial building property installed on or in property owned by a Federal, State, or local government or a political subdivision thereof, the Secretary shall promulgate a regulation to allow the allocation of the deduction to the person primarily responsible for designing the property in lieu of the owner of such property. Such person shall be treated as the taxpayer for purposes of this section.
(5) Notice to owner
Each certification required under this section shall include an explanation to the building owner regarding the energy efficiency features of the building and its projected annual energy costs as provided in the notice under paragraph (3)(B)(iii).
(6) Certification
(A) In general
The Secretary shall prescribe the manner and method for the making of certifications under this section.
(B) Procedures
The Secretary shall include as part of the certification process procedures for inspection and testing by qualified individuals described in subparagraph (C) to ensure compliance of buildings with energy-savings plans and targets. Such procedures shall be comparable, given the difference between commercial and residential buildings, to the requirements in the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.
(C) Qualified individuals
Individuals qualified to determine compliance shall be only those individuals who are recognized by an organization certified by the Secretary for such purposes.
(e) Basis reduction
For purposes of this subtitle, if a deduction is allowed under this section with respect to any energy efficient commercial building property, the basis of such property shall be reduced by the amount of the deduction so allowed.
(f) Interim rules for lighting systems
Until such time as the Secretary issues final regulations under subsection (d)(1)(B) with respect to property which is part of a lighting system—
(1) In general
The lighting system target under subsection (d)(1)(A)(ii) shall be a reduction in lighting power density of 25 percent (50 percent in the case of a warehouse) of the minimum requirements in Table 9.5.1 or Table 9.6.1 (not including additional interior lighting power allowances) of Standard 90.1–2007.
(2) Reduction in deduction if reduction less than 40 percent
(A) In general
If, with respect to the lighting system of any building other than a warehouse, the reduction in lighting power density of the lighting system is not at least 40 percent, only the applicable percentage of the amount of deduction otherwise allowable under this section with respect to such property shall be allowed.
(B) Applicable percentage
For purposes of subparagraph (A), the applicable percentage is the number of percentage points (not greater than 100) equal to the sum of—
(i) 50, and
(ii) the amount which bears the same ratio to 50 as the excess of the reduction of lighting power density of the lighting system over 25 percentage points bears to 15.
(C) Exceptions
This subsection shall not apply to any system—
(i) the controls and circuiting of which do not comply fully with the mandatory and prescriptive requirements of Standard 90.1–2007 and which do not include provision for bilevel switching in all occupancies except hotel and motel guest rooms, store rooms, restrooms, and public lobbies, or
(ii) which does not meet the minimum requirements for calculated lighting levels as set forth in the Illuminating Engineering Society of North America Lighting Handbook, Performance and Application, Ninth Edition, 2000.
(g) Inflation adjustment
In the case of a taxable year beginning after 2020, each dollar amount in subsection (b) or subsection (d)(1)(A) shall be increased by an amount equal to—
(1) such dollar amount, multiplied by
(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2019” for “calendar year 2016” in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence which is not a multiple of 1 cent shall be rounded to the nearest cent.
(h) Regulations
The Secretary shall promulgate such regulations as necessary—
(1) to take into account new technologies regarding energy efficiency and renewable energy for purposes of determining energy efficiency and savings under this section, and
(2) to provide for a recapture of the deduction allowed under this section if the plan described in subsection (c)(1)(D) or (d)(1)(A) is not fully implemented.
(Added Pub. L. 109–58, title XIII, § 1331(a), Aug. 8, 2005, 119 Stat. 1020; amended Pub. L. 109–432, div. A, title II, § 204, Dec. 20, 2006, 120 Stat. 2945; Pub. L. 110–343, div. B, title III, § 303, Oct. 3, 2008, 122 Stat. 3845; Pub. L. 113–295, div. A, title I, § 158(a), Dec. 19, 2014, 128 Stat. 4022; Pub. L. 114–113, div. Q, title I, § 190(a), title III, § 341(a), (b), Dec. 18, 2015, 129 Stat. 3075, 3113; Pub. L. 115–123, div. D, title I, § 40413(a), Feb. 9, 2018, 132 Stat. 151; Pub. L. 115–141, div. U, title IV, § 401(a)(54), Mar. 23, 2018, 132 Stat. 1186; Pub. L. 116–94, div. Q, title I, § 131(a), Dec. 20, 2019, 133 Stat. 3232; Pub. L. 116–260, div. EE, title I, § 102(a)–(c), Dec. 27, 2020, 134 Stat. 3039, 3040.)
heading: Editorial Notes
heading: Amendments
text: 2020—Subsec. (c)(1)(B)(ii), (D). Pub. L. 116–260, § 102(c)(1)(A), substituted “Reference Standard 90.1” for “Standard 90.1–2007”.
Subsec. (c)(2). Pub. L. 116–260, § 102(c)(1)(B), amended par. (2) generally. Prior to amendment, text read as follows: “The term ‘Standard 90.1–2007’ means Standard 90.1–2007 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on the day before the date of the adoption of Standard 90.1–2010 of such Societies).”
Subsec. (d)(2). Pub. L. 116–260, § 102(c)(2), substituted “with respect to any property, based on the provisions of the most recent California Nonresidential Alternative Calculation Method Approval Manual which has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of this section not later than the date that is 2 years before the date that construction of such property begins” for “, based on the provisions of the 2005 California Nonresidential Alternative Calculation Method Approval Manual”.
Subsecs. (g), (h). Pub. L. 116–260, § 102(a), (b), added subsec. (g), redesignated former subsec. (g) as (h), and struck out former subsec. (h). Prior to amendment, text of subsec. (h) read as follows: “This section shall not apply with respect to property placed in service after December 31, 2020.”
2019—Subsec. (h). Pub. L. 116–94 substituted “December 31, 2020” for “December 31, 2017”.
2018—Subsec. (d)(1)(B). Pub. L. 115–141 substituted “such that” for “which”.
Subsec. (h). Pub. L. 115–123 substituted “December 31, 2017” for “December 31, 2016”.
2015—Subsec. (c)(1)(B)(ii), (D). Pub. L. 114–113, § 341(a), substituted “Standard 90.1–2007” for “Standard 90.1–2001”.
Subsec. (c)(2). Pub. L. 114–113, § 341(b)(1), amended par. (2) generally. Prior to amendment, text read as follows: “The term ‘Standard 90.1–2001’ means Standard 90.1–2001 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on April 2, 2003).”
Subsec. (f)(1). Pub. L. 114–113, § 341(b)(2), (3), substituted “Table 9.5.1” for “Table 9.3.1.1”, “Table 9.6.1” for “Table 9.3.1.2”, and “Standard 90.1–2007” for “Standard 90.1–2001”.
Subsec. (f)(2)(C)(i). Pub. L. 114–113, § 341(b)(2), substituted “Standard 90.1–2007” for “Standard 90.1–2001”.
Subsec. (h). Pub. L. 114–113, § 190(a), substituted “December 31, 2016” for “December 31, 2014”.
2014—Subsec. (h). Pub. L. 113–295 substituted “December 31, 2014” for “December 31, 2013”.
2008—Subsec. (h). Pub. L. 110–343 substituted “December 31, 2013” for “December 31, 2008”.
2006—Subsec. (h). Pub. L. 109–432 substituted “2008” for “2007”.
heading: Statutory Notes and Related Subsidiaries
heading: Effective Date of 2020 Amendment
text: Pub. L. 116–260, div. EE, title I, § 102(d), Dec. 27, 2020, 134 Stat. 3040, provided that: “The amendments made by this section [amending this section] shall apply to property placed in service after December 31, 2020.”
heading: Effective Date of 2019 Amendment
text: Pub. L. 116–94, div. Q, title I, § 131(b), Dec. 20, 2019, 133 Stat. 3232, provided that: “The amendment made by subsection (a) [amending this section] shall apply to property placed in service after December 31, 2017.”
heading: Effective Date of 2018 Amendment
text: Pub. L. 115–123, div. D, title I, § 40413(b), Feb. 9, 2018, 132 Stat. 151, provided that: “The amendment made by this section [amending this section] shall apply to property placed in service after December 31, 2016.”
heading: Effective Date of 2015 Amendment
text: Pub. L. 114–113, div. Q, title I, § 190(b), Dec. 18, 2015, 129 Stat. 3075, provided that: “The amendment made by subsection (a) [amending this section] shall apply to property placed in service after December 31, 2014.”
Pub. L. 114–113, div. Q, title III, § 341(c), Dec. 18, 2015, 129 Stat. 3113, provided that: “The amendments made by this subsection [probably means this section, amending this section] shall apply to property placed in service after December 31, 2015.”
heading: Effective Date of 2014 Amendment
text: Pub. L. 113–295, div. A, title I, § 158(b), Dec. 19, 2014, 128 Stat. 4022, provided that: “The amendment made by this section [amending this section] shall apply to property placed in service after December 31, 2013.”
heading: Effective Date
text: Pub. L. 109–58, title XIII, § 1331(d), Aug. 8, 2005, 119 Stat. 1024, provided that: “The amendments made by this section [enacting this section and amending sections 263, 312, 1016, 1245, and 1250 of this title] shall apply to property placed in service after December 31, 2005.”