New IRS Guidelines for 179D Deductions!

[Julio Gonzalez]

The IRS released new guidelines and best practices for their internal review/audit process of 179D tax deduction claims. If you have claimed this deduction or plan to in the future, ensure that your CPA or tax specialist is keeping up-to-date on the latest filings to ensure your documentation is correct.

The new guidelines established that an allocation letter should include all of the following:

1. The address of the government-owned building
2. The date the systems were placed in service
3. The signatures of the authorized representatives
4. The dollar amount of the deduction allocated to the designer
5. The allocation letter must be in writing
6. The costs of the energy efficiency systems
7. A penalty of perjury statement signed by the authorized representative of the government
8. Must contain contact information for the authorized representative of both the owner of the government buildings and the designer

During the audit, you can expect the IRS to confirm the energy modeling was conducted as well as ensuring that a third party professional completely unrelated to the project was the issuer of the certification.

The 179D tax deduction should be claimed by the individual “primarily responsible for designing the energy efficient systems, and the person who creates the technical specifications for installation” for government buildings and designer allocations.

When analyzing a 179D claim, the auditor will use “the most recent Standard 90.1 published by [ASHRAE] which has been affirmed… not later than the date that is 2 years before the date that construction of such property begins.. The ASHRAE Standard 90.1-2007 is the most current affirmed version as of the publication date of this Practice Unit”.

For more details, here’s the link to the IRS Process Unit.