Congress Offers Two Tax Incentives Tailor Made for the Construction Industry. Are You Taking Advantage?
By Linda McCluskey, alliantgroup Managing Director – Energy Credits and Incentives
For construction firms looking for ways to increase their bottom line, take a second look at the tax code – the work you do on a daily basis could qualify you for massive tax savings.
The research and development (R&D) tax credit and the Energy Efficient Commercial Building Deduction (better known as section 179D of the tax code) are viable and valuable incentives for builders and designers seeking to reduce their tax liability, potentially providing qualifying firms hundreds of thousands in tax savings. In many instances, the R&D tax credit and the 179D tax deduction have provided construction firms the means to hire new employees and expand their practices.
Curious on what the R&D tax credit and 179D can do for you? Read on.
The R&D Tax Credit
Providing $10 billion a year for U.S. businesses, the R&D tax credit is one of the most generous and lucrative tax incentives offered by the federal government. It is also one of the most overlooked, with only one out of every 20 eligible small and mid-sized businesses applying for the credit. When it comes to ignoring R&D, construction firms are some of the worst offenders – and that is a shame considering the many activities that can qualify builders and designers for the credit. If your construction firm has improved a product, process or technique in the course of your daily activities, chances are you could substantially benefit from the R&D tax credit.
For activities as diverse as structure and facility design, means and methods construction techniques, construction equipment development and improvement, HVAC design, LEED/green initiatives, electrical system design, BIM modeling, request for information processes, mechanical equipment sizing and much more, construction firms can be handsomely rewarded in the form of federal credits. Case in point, an electrical contracting client of alliantgroup received $648,000 in federal credits for their eligible activities.
If your firm performs any of the above activities or has improved any construction techniques over time, looking into the R&D tax credit would be a wise investment.
179D Deduction
In addition to R&D, those construction firms making any eco-friendly alterations should look into another federal incentive.
The 179D deduction benefits eligible designers and builders, including architects, engineers, contractors and energy service providers when they design a new energy-efficient construction or renovation for a government building. The definition of a government building under section 179D is very broad and includes a variety of structures such as office buildings, factories, warehouses, parking garages, schools, universities, airports, etc. – basically any structure that is built for any level of government. Any business performing the above services on buildings at the federal, state and local levels may receive a deduction of up to $1.80 per square foot, an obvious financial benefit for builders and designers depending on the size and scope of the project.
While “green” building may sound intimidating to contactors, eligibility requirements are actually surprisingly simple as businesses need only to surpass 2001 ASHRAE standards – standards that most state codes already surpass. If your firm has made any improvements to the interior lighting, heating, ventilation and air conditioning (HVAC), hot water systems, or enhancements to a building’s envelope within the last three years to a government building, there is a very good chance you qualify for 179D.
In both the R&D tax credit and the 179D deduction, construction firms have been given a golden opportunity to remain competitive and grow their business – but only if they apply. Don’t be the company that leaves money on the table – look into these valuable incentives today to secure the future of your business.
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Linda McCluskey is the Managing Director of Energy Credits and Incentives for alliantgroup as well as a member of AIA and The Green Building Council. She is also a published author of numerous articles and a sought after speaker on topics relating to energy incentives. Linda is instrumental in helping hundreds of architecture, engineering, and contracting firms claim valuable energy deductions that help them remain competitive.