Policy Issues

Depreciation of Energy Efficient Building Equipment

May 8, 2019

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A broad coalition of real estate and environmental organizations urged congressional tax writersto establish an accelerated depreciation schedule for a new category of Energy Efficient Qualified Improvement Property installed in buildings – or "E-QUIP."  

  • The coalition, led by The Real Estate Roundtable, recommends "a uniform E-QUIP 10-year recovery period [to] promote productive business investment by spurring high performance upgrades in commercial and multifamily buildings. In turn, optimizing energy efficient building performance will help create well-paying jobs in the construction, design, and energy sectors; boost equipment manufacturing; enhance our country's energy independence; and reduce the built environment's carbon footprint."    

Accordingly, to stimulate robust building investments in E-QUIP, our groups respectfully recommend legislation that includes the following elements:

  • Elective 10-year, straight-line cost recovery period for a new category of E-QUIP expenditures for taxable income, as well as for earnings and profits purposes;
  • Six year duration of incentive;
  • Applies to improvements in commercial buildings – as well as multifamily buildings subject to the same code requirements;
  • E-QUIP benefit available to all taxpayers, including an electing real property trade or business under section 163(j);
  • Covers interior and exterior components of, and controls for, the main systems that most impact building energy consumption: (1) heating and cooling; (2) lighting; and (3) envelope;
  • Pertains to equipment and systems manufactured to meet above-code, high performance specifications to be subsequently defined by statutory language, that exceed levels of performance ordinarily required through energy codes and standards; and
  • Certification that E-QUIP is installed to maximize the performance for which it is designed, accompanied by an on-going operations and maintenance plan.