In June, the Internal Revenue Service (IRS) gave commercial building owners another reason to shift to energy-efficient building components: tax deductions enacted as a result of the Energy Policy Act of 2005.
In its advance copy of Notice 2006-52, "Deduction for Energy-Efficient Commercial Buildings," the IRS says commercial building owners can deduct as much as $1.80 per square foot of building floor area for buildings that achieve a 50 percent energy savings target. However, even buildings that fall below the 50 percent benchmark may qualify for deductions up to 60 cents per square foot. Properties receiving the deduction must be in service after Dec. 31, 2005, and before Jan. 1, 2008.
Building components that can qualify a building for the tax deduction are interior lighting systems; heating, cooling and ventilating systems; hot water systems; and the building envelope.
Owners seeking to claim deductions must obtain certification provided by a qualified individual, such as a licensed engineer or contractor in the jurisdiction where the building is located. Furthermore, the energy savings calculated by the qualified individual must be calculated using software approved by the Department of Energy.