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Interim
Guidance, Pending the Issuance of Regulations, Regarding the Tax
Deduction for Energy Efficient Commercial Buildings - June 2, 2006
Click
here to view full text of notice #2006-52.
"The Internal Revenue Service and the
Treasury Department expect that the rules set forth in this notice
will be incorporated in regulations."
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General Information
This notice:
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allows a taxpayer who owns, or is
a lessee of, a commercial building and installs property as part
of the commercial building’s interior lighting systems, heating,
cooling, ventilation, and hot water systems, or building
envelope to obtain a certification that the property satisfies
the energy efficiency requirements of § 179D(c)(1) and (d).
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applies to commercial building
property
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placed in service after
December 31, 2005 and before January 1, 2008.
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located in the United States,
and
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within the scope of
ASHRAE/IESNA 90.1-2001including the following addenda:
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90.1a-2003
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90.1b-2002
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90.1c-2002
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90.1d-2002, and
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90.1k-2002
Requirements
1.0 -
Fully Qualifying
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Reduce the total annual energy
and power costs with respect to combined usage of the building’s
heating, cooling, ventilation, hot water, and interior lighting
systems by 50 percent or more as compared to a Reference
Building that meets the minimum requirements of Standard
90.1-2001. Reductions in any other energy uses, such as
receptacles, process loads, refrigeration, cooking, and
elevators, are not taken into account in determining whether the
50-percent reduction is achieved.
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The deduction for the cost of
energy efficient commercial building property installed on
or in a building shall not exceed the excess (if any) of--
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(i) the product of $1.80 and the square footage of the
building, over
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(ii) the aggregate amount of the § 179D
deductions allowed
with respect to the building for all prior taxable years
2.0 -
Partially Qualifying - Lighting
2.1 Permanent Rule
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Partially qualifying property is
subject to the permanent rule if it is installed as part of the
interior lighting systems of a building and it is certified that
the interior lighting systems that have been incorporated into
the building, or that the taxpayer plans to incorporate into the
building subsequent to the installation of such property, will
reduce the total annual energy and power costs with respect to
combined usage of the building’s heating, cooling, ventilation,
hot water, and interior lighting systems by 16⅔ percent or more
as compared to a Reference Building that meets the minimum
requirements of Standard 90.1-2001.
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Qualifies for
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(i) the
product of $0.60 and the square footage of the building,
over
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(ii) the aggregate amount of the § 179D deductions
allowed with respect to energy efficient lighting property
installed on or in the building for all prior taxable years
2.2 Interim Rules
These rules apply if the partially
qualifying property is installed as part of the interior lighting
system of a building before the date on which final regulations are
published in the Federal Register (NOTE: Further discussion
with the various groups involved indicates that no one expects these
final regulations to be published during the term of the deduction,
therefore it is expected that the interim rules will be available
thru CY07.):
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Achieve a reduction in lighting
power density of at least 25 percent (50 percent in the case of
a warehouse) of the minimum requirements in Table 9.3.1.1 or
Table 9.3.1.2 (not including additional interior lighting power
allowances) of Standard 90.1-2001,
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Have controls and circuiting that
comply fully with the mandatory and prescriptive requirements of
Standard 90.1-2001,
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Include provision for bi-level
switching in all occupancies except hotel and motel guest rooms,
store rooms, restrooms, and public lobbies. and
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Meet the minimum requirements for
calculated lighting levels as set forth in the IESNA Lighting
Handbook, Performance and Application, Ninth Edition, 2000.
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Qualifies for
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(i) the 'applicable
percentage' of the product of $0.60 and the square footage of
the building, over
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(ii) the aggregate amount of the § 179D
deductions allowed with respect to energy efficient lighting
property installed on or in the building for all prior taxable
years.
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The 'applicable percentage' is a sliding scale over the
range of 25% below ASHRAE (where the applicable percentage = 0)
to 40% below (where the applicable percentage = 100). For
example, if the interior lighting systems achieve a reduction in
lighting power density of 36.25 percent, the applicable
percentage is 75
percent (100 - (3⅓ x (40 – 36.25)))
Certification
(blank certificate is available in
Epact/Energy Estimator)
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The certification must be
provided by a qualified individual and satisfy the requirements
of § 179D(c)(1).
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A taxpayer is not required to
attach the certification to the return on which the deduction is
taken but, as always, all records must be maintained by the
taxpayer.
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A certification will be treated
as satisfying the requirements of § 179D(c)(1) if the
certification contains all
of the following:
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The name, address, and
telephone number of the qualified individual.
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The address of the building
to which the certification applies.
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One of the following
statements by the qualified individual:
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(1) Statement for energy
efficient commercial building property: The
interior lighting systems, heating, cooling, ventilation
and hot water systems, and building envelope that have
been, or are planned to be, incorporated into the
building will reduce the total annual energy and power
costs with respect to combined usage of the building’s
heating, cooling, ventilation, hot water, and interior
lighting systems by 50
percent or more as compared to a Reference Building that
meets the minimum requirements of Standard 90.1-2001.
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(2) Statement for energy
efficient lighting property that satisfies the
requirements of the permanent rule of section 2.03(1)(a)
of this notice: The interior lighting systems that have
been, or are planned to be, incorporated into the
building will reduce the total annual energy and power
costs with respect to combined usage of the building’s
heating, cooling, ventilation, hot water, and interior
lighting systems by 16⅔
percent or more as compared to a Reference Building that
meets the minimum requirements of Standard 90.1-2001.
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(3) Statement for energy
efficient lighting property that satisfies the
requirements of the interim rule of section 2.03(1)(b)
of this notice: The interior lighting systems that have
been, or are planned to be, incorporated into the
building satisfy the requirements of the interim rule of
section 2.03(1)(b) of Notice 2006-52.
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A statement by the qualified
individual that the amount of such reduction has been
determined under the rules of Notice 2006-52.
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A statement by the qualified
individual that field inspections of the building
performed by a qualified individual after the property has
been placed in service have confirmed that the building has
met, or will meet, the energy-saving targets contained in
the design plans and specifications,
and that the field inspections were performed in accordance
with any inspection and testing procedures that (1) have
been prescribed by the National Renewable Energy Laboratory
(NREL) as Energy Savings Modeling and Inspection Guidelines
for Commercial Building Federal Tax Deductions and (2) are
in effect at the time the certification is given.
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A statement that the building
owner has received an explanation of the energy efficiency
features of the building and its projected annual energy
costs;
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A statement that qualified
computer software was used to calculate energy
and power consumption and costs and identification of the
qualified computer software used. (NOTE:
further discussions with the various groups involved
indicates that if you are qualifying under the interim
lighting rules, you need not use the 'qualified computer
software' as defined in the notice.)
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A list identifying the
components of the interior lighting systems, heating,
cooling, ventilation, and hot water systems, and building
envelope installed on or in the building, the energy
efficiency features of the building, and its projected
annual energy costs.
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A declaration, applicable to
the certification and any accompanying documents, signed by
the qualified individual, in the following form:
“Under penalties of perjury, I declare that I have examined
this certification, including accompanying documents, and to
the best of my knowledge and belief, the facts presented in
support of this certification are true, correct, and
complete.”
Qualified Computer Software
Software that meets the following
requirements:
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The software is included (at the
time the certification is given) on the Department of Energy’s
published list of qualified software as described in section 6
of this notice.
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The software provides any
information that regulations or other guidance require the
taxpayer to file in connection with energy efficiency of
property and the deduction allowed under § 179D.
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The software provides information
that allows the user to document the
energy efficiency features of the building and its projected
annual energy costs.
Qualified Individual
An individual that--
- Is not related (within the
meaning of §45(e)(4)) to the taxpayer claiming the deduction
under § 179D;
- Is an engineer or contractor
that is properly licensed as a professional engineer or
contractor in the jurisdiction in which the building is located;
and
- Has represented in writing to
the taxpayer that he or she has the requisite qualifications to
provide the certification required under this
notice (in the case of an individual providing the
certification) or to perform the inspection and
testing described in this notice (in the case of
an individual performing the inspection).
Additional information regarding The Energy Efficient Commercial Building Tax
Deduction can be obtained at
www.efficientbuildings.org.
The above summary is meant to provide a general overview of the tax
provisions of the Energy
Policy Act 2005. Please contact your tax advisor to determine the
specific tax treatment
appropriate for your company. |
