Commercial Tax Deduction Extended

The commercial building tax deduction, originally provided in the Energy Policy Act of 2005 and set to expire Dec. 31, 2007, was extended one year when lawmakers passed the Tax Relief and Health Care Act of 2006 (H.R. 6111).

For commercial buildings, the tax incentives provide a deduction of up to $1.80 per square foot for buildings designed to use 50 percent less energy than required by the model commercial building energy code, American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 90.1. Before the extension, the deduction applied to buildings placed in service between Jan. 1, 2006, through Dec. 31, 2007.

In a jointly sponsored Capitol Hill briefing on Dec. 7, ASHRAE and the Air-Conditioning and Refrigeration Institute (ARI) explained to congressional staff that the two-year lifespan of the deduction was too short a period for commercial builders to take advantage of it.

“We asked Congress to give these incentives time to work and they have given us another year, but this still falls short of the four-year extension we believe is needed,” said Stephen Yurek, general counsel, ARI. “ARI and ASHRAE will continue to work in partnership to strengthen and extend energy-efficiency tax incentives during the next legislative session.”

Also tied to the Tax Relief and Health Care Act of 2006 is an amendment that requires all government entities - federal, state, and local - to deduct and withhold from all payments made to any individual or business providing any goods or services an amount equal to 3 percent of the total payment. The law is to take effect in 2011. According to the Air Conditioning Contractors of America (ACCA), this withholding requirement affects all government contracts as well as any payment to any person for a service or product provided to a government entity. The construction and building industries are currently working to have the amendment repealed before 2011.

Publication date: 01/08/2007

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