The Tax Court has found that an engineering company that installed energy efficient commercial building property (EECBP) in a Veterans Affairs hospital was entitled to a Code Sec. 179D deduction for the cost of the installation. (Johnson et al., (1/25/2023) 160 TC No. 2)
Relying on Notice 2006-52, in the absence of congressional regulations, the Tax Court found that the installed property was EECBP within the meaning of Code Sec. 179D(c)(1).
In addition, since the VA hospital is a government entity that does not benefit from tax deductions, it is allowed to allocate the Code Sec. 179D deduction “to the person primarily responsible for designing the property in lieu of the owner of such property.” (Code Sec. 179D(d)(4)). Upon the engineering company’s request, the VA building’s chief maintenance officer signed a letter that agreed, pursuant to Code Sec. 179D(d)(4), to allocate to the engineering company the full amount of the Code Sec. 179D deduction to which the VA would otherwise be entitled for the installation of the property.
The Tax Court found that the letter conformed to the requirements of Code Sec. 179D since the letter followed the requirements of Notice 2008-40, which sets forth interim guidance on the requirements for the allocation of the Code Sec. 179D deduction with respect to government-owned buildings in the absence of congressional regulations.
For more information about the energy efficient commercial building property deduction, see Checkpoint’s Federal Tax Coordinator ¶L-3170.
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