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 and the President signed the Tax Increase Prevention Act of 2014 (HR 5771) that retroactively extended the deduction through December 31, 2014.
The deduction expired on January 1, 2015. Projects placed in service prior to January 1, 2015 are eligible, but projects placed in service starting January 1, 2015 are not eligible to use the deduction.
In 2015, Congress may be considering a package of "tax extenders" to address nearly 55 tax provisions that expired at the end of 2014, including the commercial building tax deduction. Congress may also take up overall tax reform in 2015 which would place all tax incentives in the mix for assessment and review.
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.