BBI, Revision to Commercial Building Tax Deduction to Help Industry
December 8, 2011

By Sahely Mukerji, smukerji@glass.com

Serious Energy of Sunnyvale, Calif., and Alcoa of Pittsburgh, among others, joined the Better Building Initiative (BBI) on December 2, the same day that President Obama announced nearly $4 billion in public and private investments in energy upgrades as part of the BBI.

The president also announced the same day that the Treasury is revisiting its guidance to section 179D of the Internal Revenue Code that provides a deduction for the cost of qualifying energy-efficient commercial building property.

"The Better Buildings Initiative is a new drive from the White House and Department of Energy (DOE) to reduce reasons not to upgrade buildings for energy efficiency," says Kevin Surace, CEO of Serious Energy. "First cost is the largest reason owners don't upgrade. Those committed to the program are delivering solutions which address first cost and drive payback periods down to where it would be hard to not upgrade your building."

In joining the BBI, Alcoa is implementing an enterprise-wide energy reduction initiative to decrease energy use in its Global Primary Products division by 10 percent and its other businesses by 20 percent by 2020.

"Last year, the buildings in which we work and live used roughly 40 percent of the energy in the U.S. economy at a cost of over $400 billion," says Glen Morrison, president of Alcoa Building and Construction Systems. "Through a variety of efficiency improvements we can make these buildings more energy efficient, while creating jobs and building a stronger economy."

One of those "efficiency improvements" would be the guidance revision to section 179D. In the coming weeks, the Treasury will issue new guidance to modify the existing targets for claiming the partial deduction. The Treasury, in consultation with the DOE, also will continue to work on streamlining the requirements for claiming a deduction, including a simplified approach for modeling common energy upgrade measures, which would reduce modeling requirement costs for building owners.

Revision and simplification of the commercial building tax deduction has been long overdue says Sneh Kumar, manager of DOE Projects at Traco in Cranberry Township, Pa. "It would help the commercial building industry and provide added incentive for the building owners to upgrade their buildings," he says. "Current claim process requires building owners to do whole building energy analysis to be able to claim the tax deductions, except in case of lighting upgrades, which has a simplified (prescriptive) method of claiming deductions. Building envelope, HVAC, etc., do not have a simplified approach for claim calculation."

As whole building energy analysis is expensive, not many building owners have been able to take advantage of this tax deduction, Kumar says. "In addition, when someone is upgrading only a certain building system, for example, lighting or façade or HVAC, it is too cumbersome and does not justify the additional cost to do whole building energy analysis.

"I did not see any timeline for the revision though I hope the Internal Revenue Service and DOE are able to come up with the simplification soon," Kumar says. "There are still two years left before this tax deduction expires."

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