Underused Financial Incentives In the Design and Construction Industry

According to the U.S. Green Building Council, over a third of all non-residential construction and design today is considered green. The council is predicting for more than half of all construction in the U.S. to meet “green” requirements over the next five years.

Designing and constructing buildings to green guidelines requires certain demands. Two federal tax incentives are there to benefit architects, engineers, contractors and builders who work under these demands. The Research and Development (R&D) Tax Credit and the Energy Efficient Commercial Building Deduction (aka Section 179D) are two effective economic incentives that are missed and underutilized every year by the design and construction industry. Large Public Corporations seem to be the only ones reaping the benefits. A study shows that less than 20 percent of SMEs are aware they might qualify.  

The R&D Tax Credit is an incentive to encourage innovation among U.S. companies. Regulations and guidelines have loosened since its creation in 1981, making it easier for taxpayers to qualify and claim the credit. In simple terms, it’s a tax incentive that rewards the creation of something new – an improved product, a more efficient process or even a cheaper development.

The Energy Efficient Commercial Building Deduction (Section 179D) is a powerful financial tax incentive for designers to meet or exceed energy reduction requirements for new and existing constructions. The more energy-efficient the building is, the bigger the deduction will be. Currently, one can receive up to $1.80 per square foot. Typically, owners of the building may qualify, but in the case of  a government-owned building, the government may allocate the deduction to the person(s) – architect, engineer or contractor – responsible for designing the qualified energy-efficient requirements.

Read a case study exemplifying the application of essential legislative requirements for eligible R&D activities as they apply to activities in the design and construction industry.



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