Energy efficient commercial buildings deduction

(a)

Temporary increase in deduction, etc

Section 179D is amended by adding at the end the following:

(i)

Temporary rules

(1)

Period of application

The provisions of this subsection shall apply only to taxable years beginning after December 31, 2021, and before January 1, 2032.(2)

Modification of efficiency standard

Subsection (c)(1)(D) shall be applied by substituting 25 for 50.(3)

Maximum amount of deduction

(A)

In general

The deduction under subsection (a) with respect to any building for any taxable year shall not exceed the excess (if any) of—(i)the product of—(I)the applicable dollar value, and(II)the square footage of the building, over(ii)the aggregate amount of the deductions under subsection (a) and paragraph (6) with respect to the building for the 3 taxable years immediately preceding such taxable year (or, in the case of any such deduction allowable to a person other than the taxpayer, for any taxable year ending during the 4-taxable-year period ending with such taxable year).(B)

Applicable dollar value

For purposes of paragraph (3)(A)(i), the applicable dollar value shall be an amount equal to $2.50 increased (but not above $5.00) by $0.10 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent.(C)

Application of inflation adjustment

Subsection (g) shall be applied—(i)by substituting 2022 for 2020,(ii)by substituting subsection (i)(3)(B) for subsection (b) or subsection (d)(1)(A), and(iii)by substituting 2021 for 2019. (D)

Limitation to apply in lieu of current limitation and partial allowance

Subsections (b) and (d)(1) shall not apply.(4)

Allocation of deduction by certain tax-exempt entities

(A)

In general

A specified tax-exempt entity shall be treated in the same manner as a Federal, State, or local government for purposes of applying subsection (d)(4).(B)

Specified tax-exempt entity

For purposes of this paragraph, the term specified tax-exempt entity means—(i)the United States, any State or political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing,(ii)any Indian tribal government (within the meaning of section 139E), and(iii)any organization exempt from tax imposed by this chapter.(5)

Alternative deduction for energy efficient retrofit building property

(A)

In general

In the case of a taxpayer which elects (at such time and in such manner as the Secretary may provide) the application of this paragraph with respect to any qualified building, there shall be allowed as a deduction for the taxable year which includes the date of the qualifying final certification with respect to the qualified retrofit plan of such building, an amount equal to the lesser of—(i)the excess described in paragraph (3) (determined by substituting energy usage intensity for total annual energy and power costs in subparagraph (B) thereof), or(ii)the aggregate adjusted basis (determined after taking into account all adjustments with respect to such taxable year other than the reduction under subsection (e)) of energy efficient retrofit building property placed in service by the taxpayer pursuant to such qualified retrofit plan.(B)

Qualified retrofit plan

For purposes of this paragraph, the term qualified retrofit plan means a written plan prepared by a qualified professional which specifies modifications to a building which, in the aggregate, are expected to reduce such building’s energy usage intensity by 25 percent or more in comparison to the baseline energy usage intensity of such building. Such plan shall provide for a qualified professional to—(i)as of any date during the 1-year period ending on the date of the first certification described in clause (ii), certify the energy usage intensity of such building as of such date,(ii)certify the status of property installed pursuant to such plan as meeting the requirements of clauses (ii) and (iii) subparagraph (C), and(iii)as of any date that is more than 1 year after completion of the plan, certify the energy usage intensity of such building as of such date.(C)

Energy efficient retrofit building property

For purposes of this paragraph, the term energy efficient retrofit building property means property—(i)with respect to which depreciation (or amortization in lieu of depreciation) is allowable,(ii)which is installed on or in any qualified building,(iii)which is installed as part of—(I)the interior lighting systems,(II)the heating, cooling, ventilation, and hot water systems, or(III)the building envelope, and(iv)which is certified in accordance with subparagraph (B)(ii) as meeting the requirements of clauses (ii) and (iii). (D)

Qualified building

For purposes of this paragraph, the term qualified building means any building which—(i)is located in the United States, and(ii)was originally placed in service not less than 5 years before the establishment of the qualified retrofit plan with respect to such building.(E)

Qualifying final certification

For purposes of this paragraph, the term qualifying final certification means, with respect to any qualified retrofit plan, the certification described in subparagraph (B)(iii) if the energy usage intensity certified in such certification is not more than 75 percent of the baseline energy usage intensity of the building.(F)

Baseline energy usage intensity

(i)

In general

The term baseline energy usage intensity means the energy usage intensity certified under subparagraph (B)(i), as adjusted to take into account weather as compared to the energy usage intensity determined under subparagraph (B)(iii)(I).(ii)

Determination of adjustment

For purposes of clause (i), the adjustments described in such clause shall be determined in such manner as the Secretary, after consultation with the Administrator of the Environmental Protection Agency, may provide.(G)

Other definitions

For purposes of this paragraph—(i)

Energy usage intensity

The term energy usage intensity means the site energy usage intensity determined in accordance with such regulations or other guidance as the Secretary may provide and measured in British thermal units.(ii)

Qualified professional

The term qualified professional means an individual who is a licenced architect or a licenced engineer and meets such other requirements as the Secretary may provide.(H)

Coordination with deduction otherwise allowed under subsection (a)

(i)

In general

In the case of any building with respect to which an election is made under subparagraph (A), the term energy efficient commercial building property shall not include any energy efficient retrofit building property with respect to which a deduction is allowable under this paragraph.(ii)

Certain rules not applicable

(I)

In general

Except as provided in subclause (II), subsection (d) shall not apply for purposes of this paragraph.(II)

Allocation of deduction by certain tax-exempt entities

Rules similar to subsection (d)(4) (determined after application of paragraph (5)) shall apply for purposes of this paragraph.

(b)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendment made by this section shall apply to taxable years beginning after December 31, 2021.(2)

Alternative deduction for energy efficient retrofit building property

Paragraph (6) of section 179D(i) of the Internal Revenue Code of 1986 (as added by this section), and any other provision of such section solely for purposes of applying such paragraph, shall apply to property placed in service after December 31, 2021 (in taxable years ending after such date) if such property is placed in service pursuant to qualified retrofit plan (within the meaning of such section) established after such date.