Why The USA Needed The 179D Energy Tax Deduction

While there is an ongoing debate about climate change there is no argument that the amount of energy consumed on a yearly basis in the world is on the increase. Most of this energy comes from the use of fossil fuels with the United States being the second largest consumer of total electricity in the world, falling only behind China in electricity consumption. To help to address this the Energy Policy Act of 2005 and the 179D energy tax deduction was put in place.


The Problem in the Commercial Sector


Not surprisingly commercial buildings are one of the major sources of energy use of all types in this country as well as around the world in developed and developing countries. The commercial sector, as tracked by the U.S Department of Energy, includes any type of service or manufacturing facilities and their equipment. This includes all types of office buildings, government buildings and public buildings such as schools, prisons, courthouses and other types of institutions.


Within this sector about 25% of energy use is for indoor lighting, 24% for heating and cooling and about 6% each for refrigeration, ventilation, electronics and water heating. Cutting down the percentage of energy used in the two big categories of indoor lighting and heating and cooling and also addressing energy efficiency of the building envelope provided a way to give a 179D energy tax deduction for those commercial buildings that lowered their use by at least the required standards.


Voluntary Compliance


The main benefit to the 179D energy tax deduction, at least at this point, is that it is entirely voluntary for the commercial building owner. This is particularly true for renovations or retrofits, but most building architects and contractors are trying to encourage these standards.


Not only does this allow for the 179D energy tax deduction, but it also contributes to ongoing reduction in energy bills, decreased demands on the environment, a more sustainable energy demand into the future. Businesses that comply and get the 179D energy tax deduction do receive a significant income tax deduction and also have greater energy efficiency going into the future. Lower energy bills for years to come are a welcome by-product of this program for many commercial building owners.

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