TAX PROVISION

Additional Provisions Support Energy Efficiency

Tax & Economic Provisions of 2021 Stimulus | January 2021

The Act continues the trend of supporting the efficient use of energy. The energy efficient commercial buildings deduction under IRC Section 179D, originally set to expire December 31, 2020, is now permanent. This law allows businesses to immediately deduct energy efficient improvements to lighting, heating, cooling, ventilation and hot water systems of commercial buildings.

The deduction ranges from $0.60 to $1.80 per square foot of construction, determined by whether or not the entire building meets certain energy standards. In addition to making this deduction permanent, the Act adds an inflation adjustment.

Several other tax credits related to energy efficiency, originally set to expire at the end of 2020, were extended by the Act. These include the:

  • Credit for electricity produced from certain renewable resources, such as wind and solar energy;
  • Second-generation biofuel producer credit;
  • Alternative fuel refueling property credit; and
  • Excise tax credit relating to alternative fuels.

Other notable extensions through 2025 in the Act attributable to businesses include:

  • The look-thru rule for related Controlled Foreign Corporations for purposes of determining the deemed inclusion under Subpart F;
  • Seven-year recovery period for motorsports entertainment complexes;
  • Deduction (up to $15 million) for qualified film, television and theatrical productions;
  • Various empowerment zone tax incentives; and
  • The carbon oxide sequestration credit.

The following extensions apply through the end of 2021:

  • The Indian employment credit (extended for one year);
  • The mine rescue team training credit (extended for one year);
  • Three-year recovery period for race horses two years old or younger (extended one year); and
  • Accelerated depreciation for business-use property located on an Indian reservation (extended one year).