Expensing of mechanical insulation property

(a)

In general

Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 179E the following new section:

179F.

Mechanical insulation property

(a)

Treatment as expenses

In addition to any other deduction in this subtitle, there shall be allowed as a deduction an amount equal to the applicable percentage of the cost of mechanical insulation property placed in service during the taxable year. (b)

Applicable percentage

For purposes of subsection (a)— (1)

In general

The term applicable percentage means the lesser of— (A)30 percent, and (B)the reduction in energy loss (expressed as a percentage) from the installed mechanical insulation property compared to reference mechanical insulation property which meets the minimum requirements of ASHRAE standard 90.1–2007. (2)

Special rule relating to maintenance

In the case of mechanical insulation property placed in service as a replacement for insulation property— (A)paragraph (1)(B) shall not apply, and (B)the cost of such property shall be treated as an expense for which a deduction is allowed under section 162 instead of being treated as depreciable for purposes of the deduction provided by section 167. (c)

Definitions

For purposes of this section— (1)

Mechanical insulation property

The term mechanical insulation property means insulation materials, facings, and accessory products— (A)placed in service in connection with a mechanical system which— (i)is located in the United States, and (ii)is of a character subject to an allowance for depreciation, and (B)utilized for thermal requirements for mechanical piping and equipment, hot and cold applications, and heating, venting and air conditioning applications which can be used in a variety of facilities. (2)

Cost

The cost of mechanical insulation property includes— (A)the amounts paid or incurred for the installation of such property for that incremental portion above the minimums in ASHRAE standard 90.1–2007 and the total insulation cost for maintenance applications, (B)in the case of removal and disposal of the old mechanical insulation property, 10 percent of the cost of the new mechanical insulation property (determined without regard to this subparagraph), and (C)expenditures for labor costs properly allocable to the preparation, assembly, and installation of mechanical insulation property. (d)

Coordination

Subsection (a) shall not apply to the cost of mechanical insulation property which is taken into account under section 179D or which, but for subsection (b) of section 179D, would be taken into account under such section. (e)

Allocation of deduction for tax-Exempt property

In the case of mechanical insulation property installed on or in property owned by an entity described in paragraph (3) or (4) of section 50(b), the person who is the primary contractor for the installation of such property shall be treated as the taxpayer that placed such property in service. (f)

Certification

For purposes of this section, energy savings shall be certified under regulations or other guidance provided by the Secretary, in consultation with the Secretary of Energy. (g)

Termination

This section shall not apply to any property placed in service after the end of the 5-year period beginning on the date of the enactment of this section.

(b)

Deduction for capital expenditures

Section 263(a)(1) of such Code (relating to capital expenditures) is amended by striking or at the end of subparagraph (K), by striking the period at the end of paragraph (L) and inserting , or, and by adding at the end the following new subparagraph:

(M)expenditures for which a deduction is allowed under section 179F.

(c)

Technical and clerical amendments

(1)Section 312(k)(3)(B) of such Code is amended by striking or 179E each place it appears in the text or heading thereof and inserting 179E, or 179F. (2)Paragraphs (2)(C) and (3)(C) of section 1245(a) of such Code are each amended by inserting 179F, after 179E,. (3)The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 179E the following new item:

Sec. 179F. Mechanical insulation property.

(d)

Effective date

The amendments made by this section shall apply to property placed in service after the date of enactment of this Act.