New IRS Revenue Procedure Creates Urgency for Designers Seeking §179D Deduction

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Walker Reid Strategies Implements New Procedures After the IRS Issues an Advance Copy of Rev. Proc. 2012-39.

On September 4, 2012 The IRS released an advance copy of Rev. Proc. 2012-39, which modifies the automatic change procedures of Rev. Proc. 2011-14. Specifically, the IRS states that designers of Energy Efficient Commercial Property that have been allocated tax deductions under the EPAct’s Section 179D, will not be eligible to apply for a change in accounting method. A designer who takes a Section 179D deduction is making a permanent change in its taxable income, unlike a property owner, the designer is not entitled to deduct the amount of the 179D deduction by another method such as depreciation.
This modification to the original Rev. Proc. 2011-14 creates immediate urgency for the designers of energy efficient commercial buildings who are in the process of or look to utilize the Section 179D Tax Incentive to lower tax liability. For properties placed into service in a prior taxable year, the designer must file an amended return for that taxable year in order to claim the section 179D deduction. Unlike property owners who can go back as far as 2006,this requirement limits how far back a designer can take advantage of the 179D deduction to open tax years only (generally 3 years).
Rev. Proc. 2012-39 is generally effective for Forms 3115 filed on or after September 4, 2012. Designers of government owned buildings that have filed prior to September 4, 2012 shall generally not be affected by the modifications.

About the 179D Tax Deduction
Under the 2005 Energy Policy Act (EPAct), a tax deduction of up to $1.80 per square foot is possible for property owners or designers. The 179D Tax Deduction specifically applies to those commercial buildings that notably reduce their interior lighting energy costs, as well as heating, cooling, and building envelope. Buildings can partially qualify for $0.60 for HVAC, $0.60 building envelope, and $0.60 Lighting.

Walker Reid Strategies
Walker Reid Strategies is a licensed Professional Engineering Firm that specializes exclusively in the Section 179D Tax Studies. Although §179D is a complex engineering based tax incentive, Walker Reid’s expertise in the specialty field allows for a streamline and simple process for Tax Payers.

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Nelson Marin
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