Using Section 179D

To Grow your Commercial Real Estate Niche Practice

Architects, engineers and owners of commercial buildings all qualify

By: Jennifer Birkemeier, CPA, Senior Manager

Green energy is hot. Business owners—looking to create goodwill with environmentally conscious customers and investors and save money on energy costs—are eagerly installing energy efficient lighting, windows, HVAC and insulation.

As a result of these retrofits, CPA firms are using the Section 179D Energy Efficient Commercial Building tax deduction as a way to open doors with commercial real estate owners and leaseholders—and in certain cases with architects and engineers.

Sec. 179D Spurs Real Estate Investment

 While Sec. 179D is set to expire at the end of the year, property owners and politicians are exerting considerable pressure to extend and enhance its provisions. For example, the Commercial Building Modernization Act would not only extend the popular 179D deduction, but also establish a tax credit for homeowners and short-term incentives for manufacturers.

A coalition of business and environmental groups spearheaded by the Real Estate Roundtable, recently wrote to Congress in support of the bill, calling Sec. 179D a “key incentive to leverage significant amounts of private sector investment capital in buildings.”

Leverage Outside Engineering Expertise

Given that qualifying for Sec. 179D requires a certification by a qualified engineer, many CPA firms that lack this expertise have shied away from offering an energy study. Those CPA firms are missing out on opportunities to put money in their clients’ pockets—leaving the door wide open for your firm to swoop in and be a tax-slashing hero.

The fact that your firm doesn’t have engineers on staff shouldn’t keep you from offering this engineering-based tax deduction to your clients. By affiliating with a strategic partner with the resources to certify projects in all 50 states, you can outsource the back-office work and offer a private-labeled Sec. 179D product.

Architects of Government-Owned Buildings Qualify
The opportunity to help your clients claim Sec. 179D deductions may be even greater than you realize, especially if you serve architects, engineers and other professionals who design energy efficient improvements for government-owned buildings.

Since federal, state and local governments can’t claim the tax deduction, the IRS created a special rule whereby architects and engineers who are primarly responsible for the design of energy efficient improvement property installed in government-owned buildings can qualify for the tax deduction even though they don't own the building.

Of course, the bulk of clients who will qualify for the Sec. 179D deduction will still be owners and leaseholders of commercial buildings. Retail businesses, in particular, are constantly refreshing their locations to make them more appealing to shoppers. Similarly, medical facilities seek to improve their lighting and HVAC systems with their patients’ comfort and safety in mind. Manufacturers also are probably upgrading their lighting, HVAC, ventilation and building envelope to improve the efficiency of their production and finishing processes.

Get In on The Ground Floor
The manner in which the building or retrofit is performed can be critical to maximizing the Sec. 179D deduction. That means building owners and designers who are aware of these nuances before they start the retrofitting project are at a distinct advantage.

Grow Your Firm's Client Base

CPA firms looking to use Sec. 179D to grow their client base should spend time educating their clients and prospects about the potential tax benefits of energy efficient upgrades. Articles about what’s new in green energy, in your quarterly newsletter or your CPA firm blog, can keep the opportunity top-of-mind with clients and prospects. Also consider hosting a seminar on the tax implications of energy efficiency projects, perhaps drawing on the technical expertise of your back-office strategic partner.

Remember: The key to growing your commercial real estate practice is to get in front of your clients’ activities. So don’t wait until that property owner happens to mention those new energy efficient lights or HVAC system. Educate them early on about the opportunities to lower their tax bills along with their energy bills, and infuse your own tax practice with a new stream of opportunities with commercial real estate owners and architects.

If you’d like to schedule an information session on how to spot 179D opportunities in your own client base, call us at (800) 591-0148.

ABOUT US: CSP360, headquartered in Buffalo, New York, is one of the nation's leading providers of cost segregation and tax minimization services including tangible property regulation compliance, IRC 179D/45L energy efficiency studies, research tax credits, 263(a) maintenance repairs, fixed asset depreciation review and 179d analysis/45L to cpa, accounting and chartered accounting firms across the United States. Through our CPA Partnership Program we provide services to their qualified clients who have constructed, bought, expanded or remodeled real estate. We are affiliated with Freed Maxick CPAs, P.C., a Top 100 Firm in the United States, and have been providing cost segregation studies for over twenty years.