Tax alert

IRS announces updated Reference Standard for section 179D

Jan 04, 2023
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Executive summary: Guidance for the updated Reference Standard for section 179D

IRS announces updated Reference Standard 90.1 for section 179D with guidance that identifies, affirms and clarifies the ASHRAE Reference Standard for determining deductions for energy efficient commercial building property. 

IRS announces updated Reference Standard for section 179D

In Announcement 2023-01, released Dec. 23, 2022, the Secretary affirms ASHRAE Reference Standard 90.1-2019 and clarifies the ability to use Reference Standard 90.1- 2007 for several more years when determining the amount of the energy efficient commercial building (EECB) property deduction allowed under section 179D. 


In general, section 179D allows taxpayers who own or lease a commercial building in the United States to take a deduction for the cost of installing EECB property placed in service during the taxable year. EECB property includes depreciable property within the U.S. installed as part of the interior lighting systems, heating, cooling, ventilation and hot water systems, or the building envelope. If a qualifying individual certifies that the property reduces the total energy and power costs by a certain percentage when compared to a reference building meeting standards established by the American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE) and the Illuminating Engineering Society of North America (IES), then section 179D allows for a deduction of certain amounts. 

Recent amendments to section 179D by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) and the Inflation Reduction Act of 2022 (IRA) raised some uncertainty among taxpayers regarding the applicable Reference Standard 90.1. The Relief Act defined the Reference Standard 90.1 to mean the most recent Standard published by the ASHRAE and the IES that has been affirmed by the Secretary, after consultation with the Secretary of Energy, not later than the date that is two years before the date that construction of such property begins. The IRA amendments to section 179D designate the appropriate reference standard as the more recent of (A) Reference Standard 90.1-2007, or (B) the most recent Standard 90.1 published by ASHRAE and IES for which the Department of Energy has issued a final determination and which has been affirmed by the Secretary, after consultation with the Secretary of Energy, not later than the date that is four years before the date such property is placed in service. 


Announcement 2023-01 reflects the Secretary following the procedures set forth in section 179D and affirming the 2019 version of Reference Standard 90.1. The Reference Standard 90.1-2019 applies to property that begins construction after Dec. 31, 2022 and is placed in service after Dec. 31, 2026. Reference Standard 90.1-2007 applies to taxpayers with property who began construction by Dec. 31, 2022 or who place in service property by Dec. 31, 2026.

The table below reflects the applicable Reference Standard as provided in Announcement 2023-01:

Date Placed in Service

Applicable Reference Standard 90.1

Before 1/1/2015


After 12/31/2014 and before 1/1/2027*


After 12/31/2026*


* Taxpayers that begin construction before Jan. 1, 2023, may apply Reference Standard 90.1-2007 regardless of when the building is placed in service.

Washington National Tax takeaways

The Announcement provides taxpayers with much needed certainty regarding the appropriate Reference Standard. The ability to apply Reference Standard 90.1-2007 for several years may increase the number of buildings qualifying for the section 179D deduction. 

RSM contributors

  • Tracy Watkins
    Senior Director
  • John Charin
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    Senior Associate
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    Senior Manager

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