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Advocacy and Action

179D Extension Lays a Foundation for Next Steps

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In late December 2019, with time running out on a continuing resolution, Congress and President Trump came to agreement on a set of bills to fund the federal government through the end of FY20. In addition to keeping the lights on in Washington and around the country, the bills had several important tax provisions including, among other NACUBO priorities, a two-year retroactive and one-year prospective extension of the Section 179D deduction on energy-efficient commercial construction. This extension revived an earlier version of the tax credit that expired at the end of 2017.

While this extension was a success for Section 179D advocates, it was greeted with tempered fanfare by many of those organizations that have worked on the legislation over the past two years—primarily due to a feeling that this limited extension is less than they had hoped for. However, the extension may provide a foundation on which advocates can build the case for impactful changes and a long-term solution. The extension also signals a bipartisan, bicameral appetite for incentivizing energy efficiency, a promising sign for several pieces of recently introduced or reintroduced legislation that could benefit colleges and universities.

179D: The State of Play

Section 179D became law in 2005 in an effort to increase energy independence by promoting environmentally efficient construction of private, and primarily public, buildings. The provision provides a deduction of up to $1.80 per square foot for energy-efficient construction and retrofits and is calculated by segmenting and measuring the environmental efficiency of three building components: interior lighting; building envelope; and heating, cooling, ventilation, and hot water. To qualify for the deduction, each segment must perform 50 percent better than the standards set by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE). The deduction can also be broken into its three component parts, with$0.60 available per square foot for partial use. In addition to reducing tax liability, Section 179D allows users to access future tax savings in the near-term through accelerated depreciation deductions.

The public organizations that constitute the bulk of 179D users generally do not pay taxes, so the law includes an allocation provision that enables public colleges and universities to assign the benefit to a project’s tax-paying engineer, architect, or contractor. To share in the deduction, administrators at some NACUBO member institutions have worked with their contractors to valuate the benefit and negotiate a quid pro quo. While this method is perhaps less clear than administrators would like, it is undoubtedly preferable to the treatment of private nonprofit institutions in the law, which makes them statutorily ineligible for the 179D benefit.

NACUBO will continue to make the case that private nonprofit institutions should be eligible for Section 179D.

Cause for Optimism

Last summer, the Senate Committee on Finance, chaired by Sen. Chuck Grassley (R-IA), formed six task forces to examine more than 40 tax extenders—those tax breaks implemented on a temporary basis to lessen the budgetary impact of a permanent cut—that had recently expired or would have expired at the end of 2019. The committee’s report language was highly favorable to Section 179D and suggested that a NACUBO letter requesting that Section 179D be expanded to all nonprofit entities had been received favorably. Although the year-end extension did not include any substantive changes, the committee’s work is cause for optimism in 2020.

With better footing afforded by the extension and a clearer understanding of allies and priorities in the 116th Congress, advocacy efforts are likely to focus on substantive changes to Section 179D and its long-term implementation. Increasing the maximum deduction from $1.80, which has not changed since 2005, to somewhere around $3 and tying that increase to an updated, and more stringent, ASHRAE standard will be a likely goal. Together, these changes would better serve those who employ Section 179D, their communities, and the environment.

In another promising sign, these changes were included in a U.S. House bill in late 2019. In the House Committee on Ways and Means, Rep. Mike Thompson (D-CA) introduced the discussion draft of the Growing Renewable Energy and Efficiency Now (GREEN) Act to provide what he calls a “comprehensive approach to addressing the threat of climate change through our tax code.” The draft, which is primarily a messaging bill meant to encourage discussion of the issue, proposes to increase the maximum Section 179D benefit to $3 per square foot and reconfigure the efficiency requirements. The GREEN Act would require that qualifying buildings reduce energy costs by 30 percent or more in comparison to a building that meets the ASHRAE standards as of two years prior to construction. Again, these changes would better reward users who pursue optimal resource efficiency. However, the GREEN Act would remove the allocation provision in favor of a simpler, but less valuable, direct benefit for public institutions. Instead of allocating the entirety of the benefit to a contractor, public institutions would be treated as “having made a payment of tax equivalent to 10 percent of the value of the amount otherwise available for deduction.” In other words, schools would be eligible for only a fraction of the benefit that corporations receive.

Other Priorities in 2020

Of course, Section 179D is only one of many potentially beneficial efficiency efforts that legislators are considering. The 116th Congress has made headway with several efficiency efforts, including its reintroduction of a holistic energy efficiency bill and hearings on infrastructure.

The Energy Savings and Industrial Competitiveness Act, which had significant momentum in 2014 before election-year fallout related to the Keystone XL pipeline caused it to stall, was reintroduced in the Senate in 2019. Championed by Sen. Rob Portman (R-OH) and Sen. Jeanne Shaheen (D-NH), the bill proposes to help build an energy-efficient economy through adoption of available technologies and creation of new jobs in energy efficiency professions. The bill would impact higher education from multiple angles through grants to help schools offer programs on energy-efficient design and construction, grants for retrofits that increase energy efficiency in buildings, and the streamlining of federal programs to increase energy efficiency and lower costs at schools. Notably, the bill includes colleges and universities as eligible recipients for energy retrofitting assistance.

House Democrats began 2020 with a hearing in the House Committee on Ways and Means on infrastructure financing and introduction of a $760 billion infrastructure framework. Calling tax exempt bonds “one of our most powerful tools,” committee chairman Rep. Richard Neal (D-MA) stressed his commitment to strengthening this important financing tool and called for permanently reinstating Build America Bonds. Further, House Democrats’ infrastructure framework includes a provision to bring back advance refunding for tax exempt bonds. Advance refunding, which was eliminated as part of the Tax Cuts and Jobs Act of 2017, enables public institutions to save millions through favorable financing terms.

If you are interested in reading more about the latest happenings at the intersection of higher education finance and environmental sustainability, subscribe to the NACUBO quarterly newsletter Campus Sustainability Connection by emailing

NACUBO CONTACT Neil Gavigan, policy and advocacy manager, policy and research

Related Topics

The GREEN Act would require that qualifying buildings reduce energy costs by 30 percent or more in comparison to a building that meets the ASHRAE standards as of two years prior to construction.