IRS Issues Guidance on Energy Efficiency Deduction for Commercial Building Owners

Building owners or leaseholders can deduct the cost of energy-efficient property installed in commercial buildings, and recent guidance issued by the Internal Revenue Service (IRS) describes what taxpayers need to do to qualify. Qualifying for the deduction, enacted in the Energy Policy Act of 2005, and currently set to expire at the end of 2007, means receiving certification of energy savings from a qualified source. IRS will work with the Department of Energy to maintain a list of software that can be used to calculate the savings for certification purposes. The amount deductible may be as much as $1.80 per square foot of floor area for buildings that achieve 50% energy savings, down to $0.60 per square foot for achieving 162⁄3% savings. More information is online at www.irs.gov/pub/irs-drop/n-06-52.pdf.