A/E Firms May Be Eligible for the Section 179D Deduction: No Amended Returns Necessary

Earlier this year, the IRS issued a Revenue Procedure (IRC 2011-14) that impacts taxpayers eligible for the Section 179D deduction. This may include architects and engineers as designers of municipal projects (public schools, government and municipal buildings) by allowing these eligible taxpayers to claim the Section 179D deduction (energy efficient building property) by filing an automatic "change of accounting" method instead of amending prior tax returns, which was the case prior to this provision. This deduction was part of the Energy Policy Act of 2005 and was intended as an incentive for taxpayers to incorporate energy-efficient commercial building components in their designs. This could be great news for your firm.

Qualified property under these procedures must be:

• Energy-efficient commercial building property that is installed on or in any building that is located in the United States and is within the scope of ANSI/ASHRAE/IESNA Standard 90.1-2001,
• Energy-efficient commercial building property that is installed as part of the interior lighting systems, HVAC, hot water systems or building envelope of a commercial building; and
• Property for which the taxpayer has retained certification that the interior lighting systems, HVAC and hot water systems or building envelope will reduce the total annual energy and power costs with respect to combined usage of the building's heating, cooling, ventilation, hot water and interior lighting systems by 50 percent or more as compared to a reference building that meets the minimum requirements of Standard 90.1-2001.

Whether or not the Revenue Procedure makes it possible for you to make adjustments to prior year tax deductions (back as far as 2006) will need to be determined. Many factors are involved and the Revenue Procedure in its entirety is rather complex including issues affecting tax basis, accounting methods and multiple income and expense issues in addition to just 179D.

Somerset Can Help. This is a unique deduction that could create significant tax benefits for your firm, and we would like to begin working with you immediately to explore applying this Revenue Procedure-- This e-mail address is being protected from spambots. You need JavaScript enabled to view it. .

More Details. Revenue Procedure 2011-14 is generally effective for Forms 3115 filed under the automatic procedures on or after January 10, 2011, for a year of change ending on or after April 30, 2010. To read the full Revenue Procedure 2011-14, here is a link to the IRS resource page.