Green Building Tax Incentives: Creating Sustainable Buildings, While Increasing ROI

Written by Bill Mark. Updated Nov 17, 2017.

earth-2581631_640.jpgThe Protecting Americans from Tax Hikes Act, known as the PATH Act, protects taxpayers against fraud. Some components of the act have expired, but there are still many active components that could benefit your business.

Green building tax incentives remain an important tax savings strategy for businesses. In relation to the growing efforts to reduce energy consumption, companies that own commercial or industrial property will continue to need insight and guidance on green building incentives.

The section 179D deduction provides benefits for businesses, architects, engineers and contractors when they build or renovate a building that is energy efficient. That being said, the 179D deduction expired at the end of 2016. In addition to the 179D deduction, the 45L tax credit is also not applicable in 2017. The 45L tax credit was applicable when building units provided a level of heating and cooling energy consumption that is lower than national energy standards. However, the good news is any project placed in service prior to 1/1/2017 is still eligible to have a 179D or 45L study conducted.

State And Local Tax Benefits

Although some incentive programs expired, hundreds of other programs exist, specifically at the state and local level. For example, if your company invests in green building equipment, like energy efficient HVAC units or LED lighting retrofits, tax benefits are available to help with the cost of these projects.

Section 48 Tax Credit

The section 48 tax credit is still active for 2017. This green building tax incentive is for project owners and investors who establish, expand or re-equip a manufacturing facility for the production of:

  • property designed to be used to produce energy from the sun, wind, geothermal deposits or other renewable resources,
  • fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles,
  • electric grids to support the transmission of intermittent sources of renewable energy, including storage of such energy,
  • property designed to capture and sequester carbon dioxide emissions,
  • property designed to refine or blend renewable fuels or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies),
  • new qualified plug-in electric drive motor vehicles, qualified plug-in electric vehicles, or components which are designed specifically for use with such vehicles, including electric motors, generators, and power control units, or
  • other advanced energy property designed to reduce greenhouse gas emissions.1

This is a 30% tax credit that is responsible for a significant increase in solar installations. Companies can qualify for section 48 until its’ expiration in 2023.

Outsourcing Green Building Incentives and Implementation

Outsourced tax consultants offer the expertise needed to help your business achieve specific green building tax incentives.

Technically, a cost segregation study isn’t required to capture green building incentives, but it’s recommended because it helps with documentation as well as compliance with repair regulations. Also, the MACRS process used in a cost segregation study establishes a set of class lives for green building property investments that include solar, wind, water and geothermal renewable energy technologies.

This study is the best way to get detailed information on the costs and construction/engineering specifics of your building. Additionally, the study naturally lends you the tax benefit of accelerated depreciation.

For more information about green building tax incentives available in your area, find your state on the map below.

Find My Savings

  1. The IRS

Topics: Property Incentives

Bill Mark

Written by Bill Mark

Bill serves as CTI's director of cost segregation for the last four years after previously working as a project manager for Property Incentives for seven years, culminating to more than ten years of tenure with Corporate Tax Incentives. He additionally has over ten years of construction management experience relating to commercial construction as a general contractor. Mark specializes in estimating construction costs and verifying personal versus real property through detailed construction document review or on-site investigations.