Architect and Engineers Section 179D Designer Tax Benefits

Posted by Deltek on September 20, 2014

A&E Industry

Although Sections 179 and 179D are similar in name, they are completely separate tax benefits. Section 179 is a tax benefit that allows small businesses to immediately expense machinery and equipment with a tax recovery period of 20 years or less up to a specified cap for the year (that cap for 2014 is $25,000). Property that typically qualifies for Section 179 are computers, software, office furniture, machines, and large business vehicles.

Section 179D is a tax incentive that allows any taxpaying entity (regardless of size) to deduct the cost of energy efficient lighting, HVAC and building envelope installations/improvements to their building (considered to have a 39 year tax recovery period), up to $1.80 per square foot. The building’s energy systems must be a specified percentage more efficient than ASHRAE 2001 standards to qualify. There is also a provision in 179D that allows designers of government buildings (which includes architects and engineers) to take the deduction for any federal, state, or municipal project they designed.  179D is capped by the $1.80 per square foot not by any total dollar amount.


The Importance of Architect and Engineers Section 179D Designer Tax Benefits

by Charles R. Goulding and Raymond Kumar


Architects and engineers working on energy efficient government building projects should consider supporting the extension of the Federal 179D tax incentive for government building designers, which is currently before Congress.  The Section 179D tax incentive for energy efficient buildings has helped federal, state and local buildings (including K-12 public schools) greatly reduce energy consumption for the eight years between January 1, 2006 and December 31, 2013.  With Section 179D, those architects and engineers who design an energy efficient government building receive a designer tax incentive of up to $1.80 per square foot. When the law first became effective in 2006, most architects designing government buildings didn’t qualify for the energy building tax incentive because their designs weren’t efficient enough. Through the eight year period of Section 179D’s availability, architects and engineers who were encouraged by the law have embraced new lighting and HVAC technologies in order to design more energy efficient buildings and obtain the tax incentive.

Under the proposed extension, the standards would be raised, meaning that architects and engineers will strive to make government buildings even more energy efficient. The federal government is the largest building owner in the country and local governments and in-turn local taxpayers bear the added energy cost burden of energy inefficient schools, libraries, fire houses, and police stations.  When government buildings permanently reduce their energy related operating costs, it enables the government to lower annual tax increases.  The Section 179D tax incentive is actually one of the few tax incentives that quickly pays for itself.  In return for an architect or engineer receiving a small tax incentive, the government agency saves on energy costs and can use the savings for other government purposes and/or to lower prospective tax increases. When architects and engineers learn of design improvements that qualify for tax savings, they can often use their newfound government building design knowledge to help make their designs for commercial building clients much more energy efficient.

Many architects and engineers who earn Section 179D benefits use the added cash to hire and train staff, in addition to purchase equipment and software that may include CAD systems, modeling software, BIM software and 3D printers. These are kinds of investments that are crucial to modern architectural and engineering practices, and the kind of technologies that recent graduates expect to work with. 

Charles R. Goulding is the President of Energy Tax Savers, an interdisciplinary tax and engineering firm and the nation’s leading provider of EPAct 179D tax services. Raymond Kumar is a Senior Project Manager with Energy Tax Savers. To learn more visit:http://www.energytaxsavers.com/