A manufacturing company contracted Calvetti Ferguson to perform a Section 179D analysis for their 106,000 SF manufacturing facility. The building was purchased in 2013 and underwent several renovations to the energy-efficient systems, including:
- Replacement of several aging rooftop units with new, high-efficiency units.
- LED lighting in the manufacturing space with occupancy sensors installed in many areas of the building.
- Replacement of the existing roof with a reflective, tapered insulation roof system (average R-30) and new skylights.
Image of Manufacturing Facility from eQUEST energy model
An energy analysis was conducted using Department of Energy approved software, eQUEST, to determine the annual energy cost savings of the project. Our engineering team created a reference building utilizing the IRS-prescribed standard, ASHRAE 90.1-2007, and compared that to a model of the manufacturing facility, which included the HVAC, interior lighting, and building envelope features that were installed by the client. The chart below shows the resulting analysis of annual energy costs broken out by system:
The results of the energy analysis for this building identify a reduced annual energy cost of 58% when compared to ASHRAE 90.1-2007. Specifically, the analysis highlights a significant decrease in the energy costs for the cooling and lighting systems as a result of the installation of the new roof, HVAC units, and LED lighting.
Because the annual energy cost savings exceeded 50%, this manufacturing client was eligible for the maximum $1.80 per square foot rate, resulting in over $190,000 in accelerated depreciation deductions.
The energy-efficient commercial buildings deduction (Section 179D) allows commercial building owners to claim a tax deduction for new construction or renovation projects that have been completed since 2006. A maximum deduction rate is $1.80 per square foot is available for projects placed into service prior to 2023. The Inflation Reduction Act enhances Section 179D, increasing the maximum deduction to $5.00 per square foot for projects completed in 2023 and the future.
Have you completed or are you considering a new construction project for your building? Reach out to our tax incentives team to understand the value you can obtain with a Section 179D study. We have the engineering and tax expertise to analyze and certify the Section 179D deduction. Please complete the form below, and we will follow up with you shortly.