8C — January 31 - February 13, 2020 — 2020 Forecast — M id A tlantic Real Estate Journal
www.marej.com
2020 F orecast Bruce A. Johnson, CRE, Capstan Tax Strategies Green is Back in the Black: The Retroactive Extension of EPAct 179D/45L
45L, as these energy incen- tives can be quite power- ful, particu- larly for large proper t i es . The Pres i - dent signed the tax ex- W
projects placed-in-service after 12/31/2005 and before 1/1/2021 may qualify for the incentives. Properties eligible for the 179D deduction may be either commercial property or resi- dential rental property at least four stories high. New construc- tion and renovation projects are both eligible for this tax strategy. This is a one-time deduction benefit, and while it is best claimed in the year of construction, it can be claimed retroactively using a 3115 Change in Accounting Method. A 179D deduction of up to $1.80 psf is available for the cost of developing energy-effi- cient property. This is achieved by qualifying for a deduction of up to $0.60 psf in three key areas: interior lighting, HVAC, and building envelope. The deduction is based on total improved square footage but cannot exceed the cost of the energy-efficient improvements. Clearly, the best candidates are the largest candidates, and properties like hotels, retail facilities, warehouses, trucking terminals, and industrial facili- ties are all excellent choices. In order to claim a 179D deduction, a taxpayer must be able to document the reduction in energy consumption gener- ated by the improvements. Reduction in consumption is compared to a set benchmark determined by the American Society of Heating, Refriger- ating, and Air Conditioning Engineers (ASHRAE). Im- provements in interior lighting are the easiest to document—a simple spreadsheet enough to do the trick. Often, retrofits involving LED lighting are efficient enough to qualify for the 179D deduction on their own. Taxpayers who also wish to document improvements in HVAC or building envelope will need to submit a more thorough document, however, including building modeling using software approved by the Department of Energy. Build- ings that qualify for the 179D deduction must be inspected and certified by a professional contractor or engineer who is based in the same jurisdiction as the property. Unlike the 179D tax deduc- tion, the 45L incentive is a tax credit. 45L-eligibility is restricted to for-sale residential homes and residential rental property with a maximum of 3 stories, providing a $2000/unit tax credit for qualifying unit/s. continued on page 10C
e’ve long been hoping to see the extension of EPAct 179D and
Bruce Johnson
tender package Further Consol- idated Appropriations Act into law on Friday December 20th, 2019. This legislation reestab- lishes the Section 179D and 45L programs retroactively back
Fig. 1 Comparison of 179D Tax Deduction and 45L Tax Credit
to 1/1/2018 and extends them forward through 12/31/2020. These programs were initial-
ly enacted as part of the 2005 Energy Policy Act to incentivize taxpayers to design and im-
prove properties for better en- ergy efficiency. The most recent program extension means that
When it comes to getting deals done in today's fast-paced market, time is more important than ever. We think waiting 4-5 weeks for an appraisal is unconscionable
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