179D Deductions as Architect/Primary Designer

Enhancing Community, Cutting Tax Burden and Improving Cash Flow  

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179D Deductions as Architect/Primary Designer

Note: The §179D deduction has expired and is currently only available for qualifying projects completed through 2017. However, there is a chance that this widely popular incentive will be renewed for subsequent tax years. Stay tuned for the latest §179D news!

A large architectural firm on the West Coast had a dilemma. They had secured and performed on several government contracts (primarily school buildings); acting as a designer for the building construction and/or the energy retrofit, varying by project. The great news was that the Company implemented positive efficiency systems for each and every building and made strong profits. The bad news was that the Company was facing having to deal with significant tax liabilities over the multiple years of the projects.

Energy and Tax Challenges for Architectural Firm

•Continuing to support the community and school systems through energy initiatives.
•Eliminating tax burden while keeping cash flows strong.
•Utilizing tax opportunities through strategic planning.
•Continuing to grow the company to secure further projects and maintain cash from contract profits.

Community Impact of Energy Solutions

The architectural firm has a desire to help government properties build and implement lighting, HVAC and envelope energy solutions. These solutions not only have an immediate impact on the quality of the light, air and performance of the buildings, they also have long-term positive effects, promoting efficiency and sustainability.

Solutions & Capital Discovery®

The Energy Policy Act of 2005 contained several tax measures, including deductions available under §179D and became effective January 1, 2006. §179D allowed “designers” of energy efficiency measures in government owned buildings (non-taxpaying entities) to receive deductions of $.60 per sq/ft for energy efficient lighting design. $.60 per sq/ft for HVAC and $.60 per sq/ft for building envelope, creating a potential deduction of $1.80 per sq/ft that could be directly taken by the architectural firm. This is described in IRS Notice 2006-52 and amplified by IRS Notice 2008-40.

Based on the square footage of the multiple government buildings worked on as well as the sustainable design implemented by the firm, they were ultimately entitled to deductions nearing $7,000,000 over a 5 year span.

Utilizing these deductions enabled the firm to continue to support the sustainability of the community and eliminate an enormous amount of tax liability.

Are you a Primary Designer, Architect, or Contractor and want to learn more about taking the §179D Deductions?  Contact Capital Review Group today at 877-666-5539.

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