The Energy Policy Act of 2005 included a new tax incentive, backed and advocated by the National Electrical Manufacturers Association (NEMA) and the Natural Resources Defense Council (NRDC), to improve the energy efficiency of commercial buildings. The "Commercial Building Tax Deduction" establishes a tax deduction for expenses incurred for energy efficient building expenditures made by a building owner. The deduction is limited to $1.80 per square foot of the property, with allowances for partial deductions for improvements in interior lighting, HVAC and hot water systems, and building envelope systems.
The Emergency Economic Stabilization Act of 2008 (HR-1424), approved and signed on October 3, 2008, extends the benefits of the Energy Policy Act of 2005 through December 31, 2013. In December 2014, Congress passed a one year retroactive extension of the deduction through December 31, 2014.
In December 2015, Congressed passed legislation that reinstated the deduction for 2015 and through December 31 2016. The legislation also modified the referenced ASHRAE standard. For projects placed in service after December 31, 2015, the 2001 edition of the ASHRAE standard has been replaced with the 2007 edition (see "legislative update" for more information).
About the Commercial Building Tax Deduction Coalition
NEMA convened a broad-based coalition of business, trade, government, energy efficiency, and other groups and organizations. The Commercial Building Tax Deduction Coalition is working to ensure the provision is implemented smoothly and to promote awareness and information about its benefits, and energy efficiency improvements in commercial buildings.