Country / Language

General Contractors and Developers: The Time Is Right to Take Advantage of Section 179D


3/9/17

Section 179D of the Internal Revenue Code has been around for quite a while – however, it is often underutilized by contractors. One of the intentions of Section 179D is to reward – and encourage – energy efficient construction. With the increasing emphasis placed on Green LEED Construction, this deduction could be more common and more valuable than ever.

How Does It Work? 
In promoting energy efficient construction, Section 179D allows qualifying building owners and businesses to receive a tax deduction of up to $1.80 per square foot for certain energy efficient buildings placed in service during open tax years. The deduction is available to both private developers and governmental entities. If you are building a retail, office, industrial, warehouse, or apartment building, and can meet prescribed energy efficiency standards, your building can qualify.
 
If as a general contractor you are building for a university, school, library, bus terminal, or government building of any type, the owner – in this case, the public entity – is entitled to the deduction. However, since the tax exempt entity cannot benefit from the deduction, there are provisions in the law that allow the governmental or nonprofit entity to assign those deductions to contractors, architects, or engineers that perform the work that created the energy efficiency required by Section 179D. 

What Does CohnReznick Think?
Studies indicate that as many as 50% of qualifying public buildings are not taking advantage of this deduction. It is up to the tax-exempt building (governmental or non-profit) owner to assign the benefit. It is suggested that the general contractor approach their public entity client about assigning the 179D deductions to them. If this is not done, someone else involved with the project (another contractor) might request – and receive – the benefits. Contractors can negotiate with tax-exempt (governmental or non-profit) building owners upfront for the assignment of any Section 179D benefits as a strategy for sharing some of those tax savings with the owner. This strategy (which will pass some cost savings along to the owner) may well set your company apart from the competition, allowing the owner to perceive you as willing to partner with them on something this meaningful.

Contact
For more information on the credit filing requirements of Section 179D, please contact Jack Callahan, Partner and Construction Industry Practice Leader, at 732-380-8685 or Jack.Callahan@cohnreznick.com, or Richard Shevak, Principal, National Tax Practice, at 862-245-5029 or Richard.Shevak@cohnreznick.com.  
To learn more about CohnReznick’s Construction Industry Practice, please visit our webpage.
 
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 
 
Search Our People

Search Our People

Look ahead. Gain insight. Imagine more. Is your business ready to break through?

View our new TV commercial..

Industry Outlooks

Industry Outlooks

Gain insight into what is ahead for the Commercial Real Estate, Technology and Middle Market Private Equity industries.

READ MORE

Learn about our upcoming events.

READ MORE

Working With Us

Working With Us

What makes CohnReznick different from others in our profession? And what should our clients come to expect when working with us? The answer is The CohnReznick Advantage. Contact us to learn how we can out the CohnReznick Advantage to work for your business.


People

The value of an organization is determined by the skills and qualities of its leaders. With more than 280 partners serving clients nationwide, CohnReznick is renowned for the diverse experiences, knowledge and backgrounds of its leadership.

Learn More

Services

We align our services in three segments: Accounting and Assurance, Tax, and Advisory. This approach allows us to provide holistic solutions to complex business problems and to seize upon opportunities requiring an integrated approach.

Learn More

Industries

Accounting and tax issues different significantly based on an organization's industry. We provide clients with expertise in nearly two dozen industries – we know the opportunities, the obstacles, the competitive landscape.

Learn more

Insights

CohnReznick professionals are thought leaders in their industries. Clients benefit from relevant and timely economic, legislative and industry insights that can keep them a step ahead of competition.

Learn More

Global Reach

Our involvement in the Nexia International network of firms enables us assist our clients wherever they do business-providing local expertise and connections wherever they needed. Nexia is comprised of 20,000 professionals operating in over 100 countries.

Learn More