Last night the 113th Congress passed the Tax Increase Prevention Act, better known as the tax extenders bill, when H.R. 5771 passed the Senate 76 to 16. President Obama is expected to sign the bill into law later this week.
And while this legislation is significant, it should be lost on no one that the bill expires 14 days from now on December 31, 2014, and, as such is only applicable to the 2014 tax year. Each of the tax provisions in the bill had previously expired at the end of 2013.
For those interested in green building, the most important tax provision extended in the bill is the 179D energy efficient commercial building deduction that had expired on December 31, 2013. The bill retroactively brings the deduction back to life, simply providing:
SEC. 158. EXTENSION OF ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.
(a) IN GENERAL. - Subsection (h) of section 179D is amended by striking ‘‘December 31, 2013’’ and inserting ‘‘December 31, 2014’’.
(b) EFFECTIVE DATE. - The amendment made by this section shall apply to property placed in service after December 31, 2013.
Using the 179D deduction, building owners and tenants who make expenditures to cause new or renovated commercial buildings to be more energy efficient will again be eligible for a significant Federal tax deduction, an immediate one time depreciation deduction of up to $1.80 per square foot.
Significantly, with the LEED 2009 prerequisite of a 10 percent improvement in the proposed building performance rating for a new building compared with the baseline in Appendix G of ANSI Standard 90.1-2007, many if not most LEED 2009 certified buildings may be eligible for this tax deduction. It is curious that despite the benefit to green building, the U.S. Green Building Council and others in the environmental industrial complex had throughout the year lobbied, unsuccessfully, to have the deduction replaced with some performance based tax credit. Those efforts were not supported by real estate interests. And the valuable deduction has now been extended, without modification, just as it has existed.
You can review the text of H.R. 5771 for the list of 54 other tax extenders which might affect you.
Others may offer commentary on the efficacy of tax policy by extenders a year at a time, but the purpose of this blog post is to make you aware that a bipartisan effort by Congress has greatly advantaged green building by extended the 179D energy efficient commercial buildings deduction.