Just about every month, a glitzy tower rises somewhere in the country, boasting the latest in “green” design and technology. To many people, that is an encouraging trend, especially when considering that commercial buildings account for more than 60 percent of the nation’s electricity consumption, according to government estimates, and generate 30 percent of all greenhouse gas emissions.

Yet these buildings represent a small fraction of the nation’s estimated 4.5 million commercial properties, many of which were erected decades ago before sustainable, or green, designs became de rigueur. This vast stock of older buildings presents a much bigger opportunity to cut down on energy consumption and carbon emissions that contribute to the warming of the planet.

The real estate industry has recently begun to turn its attention to “greening” existing buildings. The United States Green Building Council — whose Leadership in Energy and Environment Design, or LEED, program has become the de facto standard for sustainable building — has guidelines that address older buildings. Called LEED for Existing Buildings, or LEED-EB, the three-year-old program provides a laundry list of steps that building owners and managers can take to operate and manage their properties more efficiently. See story

With rising energy costs and with many commercial buildings exceeding 15 years in age, many business owners and landlords may be considering significant updates to enable more economical operation. Sec. 179D provides an immediate deduction for the cost of energy-efficient improvements to commercial property. If your company owns or leases commercial buildings including residential buildings with four or more stories above grade and you have installed or retrofitted the property to be more energy efficient, you may be eligible for a deduction for part or all of the costs associated with the installation or retrofit. In other words, instead of capitalizing and recovering through depreciation over 27.5 years or 39 years this allows for potential immediate expensing of costs.

Tax Deduction Eligibility:
The person or organization that makes the expenditures for construction is generally the recipient of the allowed tax deductions. This is usually the building owner, but for some HVAC or lighting efficiency projects, it could be the tenant. For government-owned buildings, the building or system designer may take the deduction.

Government-Owned Buildings:
If the property is a Federal, State, or local government or a political subdivision, the owner of the property may allocate the section 179D deduction to the person primarily responsible for designing the property. For example, a designer may include the architect, engineer, contractor, environmental consultant or energy services provider.

Energy Efficient 179D Tax Deduction Certification:
Before a taxpayer may claim the section deduction, the taxpayer must obtain a certification (not to be confused with LEED certification) with respect to the property. The certification must be provided by a qualified individual and satisfy the requirements of section 179D(c)(1).

A qualified individual must be properly licensed as a professional engineer or contractor in the jurisdiction in which the building is located, not be “related” to the taxpayer taking the deduction (as defined by the IRS), and represent to the taxpayer in writing that he or she has the requisite qualifications to provide the certification. The certifier must also use IRS qualified computer software. Software must be on a list of products approved by the U.S. Department of Energy.

The Energy Tax Incentives Act greatly encourages commercial building energy conservation. If you think you qualify for this deduction and want to increase your cash flow, contact your accounting professional or an Energy Efficient Green Building 179D Certifier today who can help you realize the benefits of your energy-efficient commercial building.

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In our last report on the Election 08 thread, we touched on how the two likely candidates might affect the real estate industry. Perhaps an even more widespread question among a majority of folks would be, “What will they do to my tax bill?”

John McCain and Barack Obama have starkly different philosophies about tax policy – how to raise the revenue needed to support government programs, spur growth and ensure economic fairness.

According to a report released recently by a nonpartisan policy group in Washington, D.C., the common assumptions most people make about the plans of McCain, the presumptive Republican nominee, and Obama, the Democrats’ pick, are not wildly off-base.

McCain: The average taxpayer in every income group would see a lower tax bill, but high-income taxpayers would benefit more than everyone else.

Obama: High-income taxpayers would pay more in taxes, while everyone else’s tax bill would be reduced. Those who benefit the most – in terms of reducing their taxes as a percentage of after-tax income – are in the lowest income groups.

This one report estimates that over 10 years, McCain’s tax proposals could increase the national debt by as much as $4.5 trillion with interest, while Obama’s could add as much as $3.3 trillion.

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