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by Dean Zerbe, Former Senior Counsel to the U.S. Senate Finance Committee; alliantgroup National Managing Director
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Within the IRA was an enhancement to the 179D Energy Efficient Commercial Buildings Deduction.
The Inflation Reduction Act (IRA) was signed into law last summer in an effort to stem the rising inflation. Within the IRA was an enhancement to the 179D Energy Efficient Commercial Buildings Deduction. 179D itself is essentially providing an incentive for organizations to use more energy efficient technologies for their buildings.
However, there is more to 179D.
“The program out there [179D] encourages energy efficient commercial buildings and it has existed since 2005,” says Dean Zerbe, national managing director for alliantgroup. “What you have got now is in the most recent bill, the Inflation Reduction Act, they had several energy provisions and one of them was expanded 179D. It did two main things. One, it expanded up to $5 per square foot from $1.80 per square foot, adjusted for inflation, that you would get if you kind of overcome various ASHRAE standards. There is a significant tax benefit in that regard. It also expanded 179D for C3 and C4 nonprofits, which would encompass the tax-exempt hospitals.”
However, there are requirements organizations must meet so they can qualify for these tax benefits. As Zerbe mentioned, ASHRAE standards must be met but they are not the only prerequisites for qualification.
“It is a little bit of the Lord giveth the Lord taketh. That higher benefit only applies if the building was providing union wages,” says Zerbe. “So, if you are not doing that, then you still get a benefit, but it is a more reduced benefit that you are getting.”
How can healthcare facilities take advantage of this program? According to Zerbe, there are two main methods: “baked-in” design and retrofitting.
“Baked-in” design is exactly as it sounds, that is, designing with energy efficient technologies already in mind. By doing this, facilities would have this technology integrated into their designs long before construction ever started. However, this method is not viable for current facilities.
Retrofitting involves taking newer energy efficient technology and implementing it into already built facilities. This method tends to be more common and is just as qualified for receiving the 179D tax benefits.
“What I think hospitals and healthcare facilities should be thinking about is any technology that they are placing into service now or down the road as being potentially eligible for it,” says Zerbe.
About the Author
Dean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington D.C. office. Prior to joining alliantgroup, Mr. Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman and current Ranking Member of the Finance Committee, Senator Charles Grassley (R-IA), on tax legislation. During his tenure on the Finance Committee, Mr. Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law – including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform), and the Pension Protection Act. Mr. Zerbe is a frequent speaker and author on the outlook for short-term and long-term changes in tax policy, as well as ways accounting firms can help their clients lower their tax bill. He holds an LL.M. in Taxation from NYU and a J.D. from George Mason University.
