Section 179D Federal Tax Deduction Program

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The Energy Policy Act of 2005 (Pub. L. 109-58) authorized the Energy-Efficient Commercial Buildings Tax Deduction for expenses incurred for qualified energy efficient building investments made by a building owner. The deduction may be taken in the year the energy-efficient improvements are placed in service. In government-owned buildings, the government may allocate this deduction to the person, or persons, primarily responsible for designing the qualified improvements.

The Division of Administration, Office of Facility Planning and Control, is required "to provide written allocation of the deduction allowed under Section 179D of the Code, as defined in G.S. 105-228.90, for designing energy efficient commercial building property that is installed on or in the property owned by the State. The allocation must be made in accordance with Section 179D of the Code."

Any designer requesting a written allocation should contact this office to ensure the 179D allocation is available on the building in question.

FP&C recognizes there may be multiple parties entitled to the 179D allocation. If a party has contributed to the technical specifications of the HVAC and Hot Water Systems, Building Envelope, and/or Interior Lighting they are entitled to apply for the 179D allocation.

Any party interested in securing an allocation can find links to the forms that need to be submitted listed below:

1.) Allocation
2.) Consultation with Participants
3.) Agreement to Hold Harmless
4.) Consultation with Prime Contractors and Subcontractors for Shared Allocation
5.) Government-Owned Building 179D Forfeiture of Allocation to Designer
6.) Qualification Statement
7.) Scope of Work Review

In addition, a Shared Allocation (4) or Forfeiture of Allocation form (5) must be completed and submitted from each party involved. In the event a party seeking the 179D Deduction on a state project does not receive the Forfeiture of Allocation form (5), and reaches out multiple times to other participants but does not receive a response after two weeks, written documentation of the repeated attempts will serve as a notice of forfeiture on said project.

Please note that it is the responsibility of any parties seeking the 179D allocation to procure the services of a qualified individual to complete the certification required by IRS Notice 2006-52.

For additional information, please see Internal Revenue Service guidance on the allocation of the Energy Efficient Commercial Building Tax Deduction for government-owned buildings set forth in Notice 2008-40, Internal Revenue Bulletin 2008-14, "Amplification of Notice 2006-52; Deduction for Energy Efficient Commercial Buildings." Notice 2008-40 can be found here.

If you have any questions regarding this memorandum, please contact Jason Sooter, Director of FP&C, 225.342.0820.