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IRS Revenue Procedure 2011-14 Energy efficiency and claiming the 179D deduction

The 179D tax deduction came about as part of the Energy Policy Act of 2005 (EPAct). Congress wanted to incentivize the utilization of energy-efficiency components in a building to one of the following parties:

1.The owner of the building
2.The tenant
3.The primary designer of an energy-efficient government building. (Architect, engineer, contractor etc.)

The deduction available is up to $.60 per sq./ft. for lighting, HVAC and building envelope, creating potential for $1.80 per sq./ft. if all three components qualify. These deductions are applicable to buildings that were either built or retrofitted after 12/31/2005.

Since EPAct came into effect, the IRS has provided interim guidance on EPAct deductions through several additional notices. IRS Notice 2006-52 describes in detail the rules and how to ensure a building qualifies if it was a new build or a retrofit. It requires the taxpayer to obtain certification that the property satisfies the energy efficiency requirements of 179D and specifies the software that must be used to calculate energy and power consumption. To further the cause, the IRS issued Notice 2008-40, which allowed a government building (non-taxpaying entity) to pass the deduction to the “primary designer” of the qualifying assets.

Until recently, taxpayers looking to claim the 179D deduction were limited by the three year statute of limitations for filing amended income tax returns for a particular tax year. That has changed with the issuance of Revenue Procedure 2011-14, which will allow some taxpayers to bypass this statute of limitations and claim this deduction all the way back to 1/1/2006 without filing one single amended income tax return. Taxpayers who wish to take the deduction without amending any returns will file a Form 3115 (Application for Change in Accounting Method) and will get to take the entire “catch up” deduction on the return that is being filed. This means that a taxpayer could potentially claim deductions from 2006-2010 (or 2011) all on one return and significantly reduce their tax burden, if not eliminate it altogether.

Deciding whether or not to amend returns or file for a Change in Accounting Method (Form 3115) is entirely dependent upon each taxpayers situation. If taxable income was higher in open years and therefore the taxpayer was in a higher tax bracket, it still may make sense to amend those returns. The impact of Revenue Procedure 2011-14 will also depend on whether or not any deductions have already been claimed or returns have been amended. A thorough analysis of each taxpayers scenario by an advisor experienced in 179D is advantageous to determining the best approach and claiming the maximum deduction allowed under the law.

Capital Review Group Publishes White Papers On Tax Savings And Energy Efficiency Incentives

Phoenix, AZ Phoenix-based consulting firm, Capital Review Group (CRG), has released a series of white papers designed to help educate business owners and accounting professionals on some of CRGs most sought after service offerings. White paper titles include:

Benefits of the Cost Segregation Study for Commercial Property Owners
Are you Ready to Take Advantage of the New Green Tax Incentives for Commercial Property Owners?
When is an Energy Audit Indicated?
Passive Activity and Cost Segregation

CRG Founder, Marky Moore, says that the White Papers offer valuable insights into the specialized work that CRG does for their clients. This is an area of growing interest for commercial property and business owners, says Moore. We want to give interested individuals more information on tax savings and incentives they could be applying, as well as how CRG develops strategies – with them- to maximize savings and apply discovered capital to high-value energy projects.

Combining expertise in areas of engineering, architecture, and IRS methodology, CRG is an innovator in identifying tax effects that create dramatic financial advantages for clients, as well as maximizing the positive impact of energy efficiency projects. Moore says, Many business owners, non-profit organizations and even builders and designers have limited knowledge of how to wade through complicated tax codes and develop strategies that combine energy efficiency, tax savings and future financial planning.
Moore hopes that by downloading the new white papers, interested parties will start to gain an understanding of the scope of the potential savings available to them, as well as ways they may experience an enhanced return on investment in energy efficiency projects. We are really hoping to generate some excitement by making this information available, Moore says. We want to build awareness of the kinds of dramatic financial advantages that are possible using our services, as well as the positive impact energy strategies can have on businesses and facilities.
Capital Review Group is a specialized consulting firm combining facility engineering with tax accounting to discover and develop high-value projects related to energy efficiency and Capital Discovery solutions for government, commercial and not-for-profit facilities. The companys team of professionals has a thorough understanding of
green tax incentives, energy tax credit deductions, IRS compliance regulations and energy strategies, including renewables. CRG offers 179d analysis and financial recommendations for energy-related federal tax incentives, as well as providing the required third-party certification to claim those deductions.

Most of CRG’s services begin with a preliminary review and analysis at no cost to clients. For more information, visit www.capitalreviewgroup.com.