ESCOs and Performance Contractors

ESCOs, also known as Energy Services Companies, are eligible to claim the Section 179D deduction for their work in the design of energy efficient systems installed on government owned facilities. Government owned facilities, for the purposes of Section 179D, are defined as buildings owned by a federal, state or local government or a political subdivision.

Section 179D was originally enacted as part of the EPAct of 2005. IRS Notice 2006-52 set forth the guidance for taking the Section 179D deduction and then IRS Notice 2008-40 further clarified and amplified the provisions of Section 179D. Notice 2008-40 added a provision that allows for the lead designers of government owned buildings that have been newly constructed or retrofitted since 12/31/05, to claim federal tax deductions worth up to $1.80 per square foot. As defined in IRS Notice 2008-40, the lead designer of a government owned building or retrofit project does include ESCOs.

Internal Revenue Code Section 179D allows for federal tax deductions worth up to $1.80 per square foot for improvements in the energy efficiency of existing government owned buildings, or for designing highly energy efficient systems for new buildings, as it relates to the building’s interior lighting, HVAC, and building envelope systems. An ESCO, acting as the lead designer of qualifying systems, may be eligible to receive the Section 179D deduction.

Qualification for the deduction is based on the energy efficiency of the newly constructed or retrofitted building, as compared to ASHRAE 90.1-2001. This deduction is available for interior lighting, HVAC, and building envelope systems installed as part of a newly constructed, or retrofitted building placed in service between 12/31/05 and 12/31/2013.

Sample Project Size
(sq ft.)		 Partial Deductions Total Max. Deduction ($1.80/sq ft.)
Lighting
($.30 - $.60/sq ft.)		 HVAC
($.60/sq ft.)		 Building Envelope
($.60/sq ft.)
50,000 $15,000 - $30,000 $30,000 $30,000 $90,000
100,000 $30,000 - $60,000 $60,000 $60,000 $180,000
250,000 $75,000 - $150,000 $150,000 $150,000 $450,000
500,000 $150,000 - $300,000 $300,000 $300,000 $900,000
1,000,000 $300,000 - $600,000 $600,000 $600,000 $1,800,000

For any newly constructed or retrofitted property that meets a 50 percent energy power cost reduction as compared to the ASHRAE 90.1-2001 standard, a deduction worth $1.80 per square foot is available. For those buildings that do not meet the 50 percent reduction, there are partial deductions available for the ESCO.

Designers of government owned buildings, including ESCOs, just like private owners of commercial buildings, must have a Section 179D energy study and certification performed by an independent third party in order to capture the Section 179D federal tax deduction.

Concord Energy Strategies, America's Leading Section 179D Provider, has completed scores of certifications nationwide for a variety of ESCOs and performance contractors. Our team of multi-disciplinary professionals provide the turnkey services required for you to take advantage of the Section 179D federal tax deduction. This federal tax deduction may allow your firm to unlock the capital that would otherwise be left trapped in the walls of the government owned buildings.

FOR MORE INFORMATION

To learn more about the Section 179D deduction, and to see if your firm may be eligible to claim significant federal tax benefits for your government design projects, please contact Concord Energy Strategies today! Please call us at 888-897-5445 or email info@concordenergystrategies.com. You can also complete our project feasibility form by clicking here.