The Energy Tax Incentives Act of 2005: New Deduction for Commercial Buildings

On August 8, 2005, President Bush signed into law the Energy Tax Incentives Act of 2005, which provides $2.7 billion in incentives for energy efficiency and conservation, including a deduction for property owners (the “Commercial Buildings Deduction”) that reduce the total energy and power consumption of commercial buildings by installing energy efficient property as part of the heating, lighting, cooling and/or hot water systems (“Energy Efficient Property”). The Commercial Buildings Deduction is effective for Energy Efficient Property installed after December 31, 2005 and before January 1, 2008 and provides a deduction, and in some circumstances, a partial deduction, equal to the expenses incurred in installing Energy Efficient Property, subject to both a cap on the amount of such deduction and a corresponding basis reduction equal to the permitted deduction.