Understand the Limitations When Using a Section 179D Tax Deduction

Understand the Limitations When Using a Section 179D Tax Deduction

When you want to qualify for the Section 179 Deduction, you need to make sure that your establishment is ready to be inspected and analyzed to generate reports with the data that shows whether you can be certified to receive the tax credit or not. The IRS has certain requirements that a commercial building must meet in order to enjoy the generous tax deduction. The whole point is to encourage new and existing businesses to lower their carbon footprint and conserve energy.

Have Your Commercial Building Certified

The process begins with having a qualified and certified engineering inspector certify that the premises meets the standards the IRS has set under Section 179D. The standards go so far as to even recommend the type of software used to calculate the energy and power usage. As of 2008, under the 2008-40 notice, the Internal Revenue Service decided to allow nontax paying entities, and government entities, to be able to pass the tax deduction to the designer of the buildings that qualify.

Section 179D Limitations

As per limitations in Section 179 Deduction, a business seeking to utilize the tax deduction 179D is restricted per a three year statute of limitation to file any amended tax returns. This amendment was introduced in 2011, and then lifted through 2011-14 of the Distribution of Revenue Procedure. The newer amendment allowed some taxpayers to bypass the current statute of limitation. Instead taxpayers are allowed to claim as far back as January 1, 2006 and not have to file an amended return.

The Revenue Procedure

The Revenue Procedure allows a business that qualifies and is certified to claim the tax deduction when they fill out a 3115 form, also known as the Application for Change in Accounting Method form. This allows a taxpayer to receive a catch up tax deduction on the return that is being filed. In essence this means that deductions can be claimed from 2006-2012 in a single return. This reduces and even eliminates some tax burdens for businesses. Be sure to be certified by a professional engineering firm then supply your accountant with the proper certification to see if you are eligible for this type of return.

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