IRS Renumbers Guidance on Energy-Efficient Commercial Buildings Deduction (Notice 2012-26)

The IRS has renumbered and rereleased guidance relating to the deduction for energy-efficient commercial buildings under Code Sec. 179D. The guidance, originally released on February 23, 2012, as Notice 2012-22 (TAXDAY, 2012/02/24, I.4), is now Notice 2012-26.

Under the “permanent rule,” property that would be energy-efficient commercial property but for the failure to achieve the target 50-percent reduction in energy and power costs required by Code Sec. 179(c)(1)(D) is partially qualifying commercial building property if it is installed as part of a system that satisfies the applicable energy savings percentage.

Notice 2006-52, 2006-1 CB 1175, provided the requirements for achieving a partial deduction under the permanent rule for: (1) interior lighting systems, (2) heating, cooling, ventilation, and hot water systems, and (3) the building envelope. That notice provided that, for a partial deduction, the system must reduce the total annual energy and power costs with respect to the combined usage of the building’s systems by a specified percentage as compared to a reference building that meets certain requirements.

Notice 2008-40, 2008-1 CB 725, provided alternative energy savings percentages that taxpayers could use to qualify for the partial deduction under the permanent rule. The new guidance, which is effective March 12, 2012, provides energy savings percentages, which are available for property placed in service on or after the effective date of the guidance.

Notice 2008-40, 2008-1 CB 725, is modified.

Notice 2012-26, 2012FED ¶46,299

Other References:

Code Sec. 179D

CCH Reference – 2012FED ¶12,138D.04

CCH Reference – 2012FED ¶12,138D.05

CCH Reference – 2012FED ¶12,138D.20

Tax Research Consultant

CCH Reference – TRC BUSEXP: 18,950


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