SECTION 3. CHANGES RELATING

TO PARTIALLY QUALIFYING PROPERTY

Under the permanent rule, property that would be energy efficient commercial building property but for the failure to achieve the target 50-percent reduction in energy and power costs required under § 179D(c)(1)(D) is partially qualifying commercial building property if it is in

1 Any reference in this notice to Standard 90.1–2001 should be treated as a reference to ANSI/ASHRAE/IESNA Standard 90.1–2001, Energy Standard for Buildings Except Low-Rise Residential Buildings, developed for the American National Standards Institute by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on April 2, 2003, including addenda 90.1a–2003, 90.1b–2002, 90.1c–2002, 90.1d–2002, and 90.1k–2002 as in effect on that date).

2012–17 I.R.B. 847 April 23, 2012

heating, cooling, ventilation, and hot water systems, and 10 percent for the building envelope.

The energy savings percentages permitted under this notice are available for property placed in service on or after the effective date of this notice. If § 179D is extended beyond December 31, 2013, the Internal Revenue Service and the Treasury Department expect, in the absence of other changes to § 179D, that the substitute energy savings percentages set forth in this notice will be the only energy savings percentages used in determining whether property placed in service after December 31, 2013, is partially qualifying property. Until December 31, 2013, taxpayers may use either the energy savings percentages provided in section 7.01 of Notice 2008–40 or the substitute energy savings percentages provided under this notice.

Notwithstanding the foregoing provisions of this section 3.03 or any other provision of this notice, if a taxpayer claims or previously claimed a partial deduction with respect to a commercial building under Notice 2006–52 or Notice 2008–40 and the system for which the deduction is or was claimed does not satisfy the applicable energy savings percentage specified for such system in this section 3.03, the taxpayer may not claim a partial deduction for any other system in the same building using the energy savings percentages permitted under this section 3.03.

The following table summarizes the energy savings percentages permitted under Notice 2006–52, Notice 2008–40 and this notice.

stalled as part of a system that satisfies the applicable energy savings percentage.

.01 Energy Savings Percentages Provided in Notice 2006–52 . Section 2.03(1)(a) of Notice 2006–52 provides that property installed as part of the interior lighting system is partially qualifying property under the permanent rule if the installation of such property will reduce the total annual energy and power costs with respect to the combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 16 ² /3 percent or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1–2001. Notice 2006–52 provides an identical rule for heating, cooling, ventilation and hot water systems in section 2.04(1), and for the building envelope in section 2.05(1). Thus, the applicable energy savings percentage under Notice 2006–52 is 16 ² /3 percent for each of the three systems.

.02 Energy Savings Percentages Pro- vided in Notice 2008–40 . Section 7.01 of Notice 2008–40 provides that when calculating a partial deduction for the building envelope, a taxpayer may apply section 2.05 of Notice 2006–52 by substituting “10” for “16 ² /3” in section 2.05(1) of such notice. However, a taxpayer that makes this substitution must apply sections 2.03 (relating to the partial deduction for interior lighting systems) and 2.04 (relating to the partial deduction for heating, cooling, ventilation, and hot water systems) of Notice 2006–52 by substituting “20” for “16 ² /3” in section 2.03(1)(a) and section 2.04(1) of such notice, respectively.

Thus, the alternative energy savings percentages permitted under Notice 2008–40 are 20 percent for the interior lighting system and the heating, cooling, ventilation, and hot water systems, and 10 percent for the building envelope.

Section 7.01 of Notice 2008–40 also provides that if § 179D is extended beyond December 31, 2008, taxpayers should use these updated energy savings percentages to determine whether property placed in service after December 31, 2008, is partially qualifying property. Accordingly, the energy savings percentages provided in Notice 2006–52 (16 ² /3 for each system) may not be used to determine whether property placed in service after December 31, 2008, is partially qualifying property.

.03 Energy Savings Percentages Pro- vided in Current Notice . Under this notice, when calculating a partial deduction for heating, cooling, ventilation, and hot water systems, a taxpayer may apply section 2.04 of Notice 2006–52 by substituting “15” for “16 ² /3” in section 2.04(1) of such notice. However, a taxpayer that makes this substitution must apply section 2.03 of Notice 2006–52 (relating to the partial deduction for interior lighting systems) by substituting “25” for “16 ² /3” in section 2.03(1)(a) of such notice, and must apply section 2.05 of Notice 2006–52 (relating to the partial deduction for the building envelope) by substituting “10” for “16 ² /3” in section 2.05(1) of such notice. Thus, the applicable energy savings percentages permitted under this notice are 25 percent for the interior lighting system, 15 percent for the

Summary of Energy Savings Percentages Provided by IRS Guidance

April 23, 2012 848 2012–17 I.R.B.

.04 Limitation on Deduction for Par- tially Qualifying Property .

(1) In General . A taxpayer who owns, or is a lessee of, a commercial building and installs partially qualifying energy efficient commercial building property may claim a partial deduction for each system that meets the requirements provided in sections 2.03, 2.04 and 2.05 of Notice 2006–52 (as modified by Notice 2008–40 and this notice). However, because the deduction for each such system is limited to $0.60 per square foot, the sum of all partial § 179D deductions claimed cannot exceed the excess (if any) of (i) the product of $1.80 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.

(2) Application to Multiple Taxpayers . If two or more taxpayers install property on or in the same building and the deduction for the cost of the property is subject to the limitation in section 3.04(1) of this notice, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not exceed the amount determined under section 3.04(1) of this notice.