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July 27, 2006: ASHRAE Energy Standard Key to Earning Tax Deduction

July 27, 2006
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ATLANTA - Commercial property owners can earn a tax deduction for making their buildings more energy efficient. Eligibility requires a 50 percent performance improvement (energy use reduction) relative to the American Society of Heating, Refrigerating and Air-Conditioning Engineers' (ASHRAE's) energy standard.

Under requirements of the Building Energy Efficiency Standards Program set by the Energy Policy Act (EPAct) of 2005, businesses are eligible for tax deductions for improving the energy efficiency of commercial buildings.

Specifically, tax deductions are allowed for energy-efficient commercial buildings that reduce annual energy and power consumption by 50 percent as compared to Standard 90.1-2001, Energy Standard for Buildings Except Low-Rise Residential Buildings.

Recently, the Internal Revenue Service issued rules on how commercial building owners can qualify for deductions. The IRS states that "the amount deductible may be as much as $1.80 per square foot of building floor area for buildings that achieve a 50 percent energy savings target (relative to 90.1). The notice provides that buildings below the 50-percent threshold may qualify for a deduction of up to 60 cents per square foot of building floor area if they meet at least the 16 2/3-percent energy savings target" for any of three areas - lighting, HVAC and water heating, and building envelope.

"ASHRAE strives to help the Department of Energy implement the Building Energy Efficiency Standards Program," said Terry Townsend, P.E., ASHRAE president. "ASHRAE is proud of our role and responsibility to help engineers and their clients earn these tax credits from EPAct. We take that role very seriously."

Appendix G from Standard 90.1-2004 is referenced to determine the method of calculating the baseline building energy use performance. In addition, the taxpayers' building energy use performance, under the IRS rules, must be calculated using software that has been tested according to ANSI/ASHRAE Standard 140-2004, Standard Method of Test for the Evaluation of Building Energy Analysis Computer Programs.

"By creating and maintaining these standards, which are recognized by the American National Standards Institute, ASHRAE fulfills our mission and continues our longstanding partnership with the DOE," Townsend said.

Publication date: 07/24/2006

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