The U.S. Internal Revenue Service issued guidance on how commercial building owners or leaseholders can qualify for a federal tax benefit by making their buildings more energy efficient.

Experts cited by the National Lighting Bureau predict that the energy efficiency provisions of the Energy Policy Act of 2005 will generate energy savings equivalent to the output of more than 60 conventional, coal-fired power plants.

The commercial building deduction, which was enacted in the, allows taxpayers to accelerate the depreciation deduction for the cost of energy-efficient property installed in commercial buildings. The accelerated deduction may be as much as $1.80 per square foot of building floor area for buildings that cut their energy use by half. Buildings that fall below that target can still earn a deduction of 60 cents per square foot if they at least cut their energy use by one-sixth.

Owners would take their accelerated deductions in the year in which the property is “placed in service”; i.e., the time at which the property is ready for its intended use. The owners would then be able to depreciate any remaining costs over the customary number of years.

Before claiming the accelerated deduction, the taxpayer must obtain a certification that the required energy savings will be achieved, and the IRS notice describes how to obtain that certification. To support this effort, the U.S. Department Of Energy will create and maintain a public list of software that must be used to calculate energy savings for purposes of providing the certification.

For more information, visit the federal Energy Act information webpage.

6/9/2006