In December, Congress passed and the President signed The Protecting Americans from Tax Hikes ("PATH") Act of 2015. The bill includes the extension of the 179D Tax Deduction and changes ASHRAE requirements for projects placed in service in 2016. The extender package also included the permanent extension AND expansion of the Research and Development ("R&D") Tax Credit. Architecture and engineering firms should reassess their eligibility for the R&D Tax Credit with the new rules in mind.
§179D Energy Efficiency Deductions Extended for 2 More Years
Section 179D provides a tax deduction to architects, engineers, and designers that design government-owned buildings and improvements that are energy efficient. The maximum deduction is $5 per square foot. The three systems that are potentially eligible are the building envelope, HVAC/hot water systems, and the interior lighting systems. As part of the PATH Act, the deduction will be extended for two years through the end of 2016 and the energy criteria has been made more stringent for 2016 with buildings now being compared against ASHRAE Standard 90.1-2007 as opposed to the previous 2001 standard. » Find out if you qualify
R&D Tax Credit Made Permanent & Expanded for Small Businesses and Startups
Architecture and engineering firms can benefit from the federal and state R&D tax credit. Historically, the R&D Tax Credit was geared to only benefit large companies; mostly in manufacturing, software, high-tech and pharmaceutical industries. However, changes to the tax code over the past decade have significantly expanded the industries that can benefit from R&D Tax Credits to include those involved in designing buildings and their systems. » Find out if you qualify
The PATH Act made it easier for architects and engineers to utilize the R&D Tax Credit by allowing eligible businesses the ability to claim the credit against alternative minimum tax and startup companies to claim up to $250,000 of credits against payroll taxes. Both changes are applicable for tax years beginning after December 31, 2015.
These new provisions provide substantial benefits to qualifying small and mid-sized Architect firms.