One distinctive aspect of Section 179D is that you can’t self-certify your building’s energy savings. The IRS requires an independent, qualified professional to verify that the building meets the efficiency targets and to sign off on a certification statement. In practice, this means a licensed Professional Engineer (PE) or a licensed contractor/architect (with proper credentials) must conduct an energy analysis and provide a certification report for your project. Let’s break down what that involves and why it’s needed.

Third-Party Certification

According to IRS Notice 2006-52 (which established the 179D procedures), the energy modeling and deduction certification must be done by a third party who is not related to the taxpayer claiming the deduction. This is to ensure an unbiased assessment of energy savings. Typically, building owners or designers will hire a specialized 179D study firm or an engineering consulting company that offers 179D certification services. These firms have expertise in building energy simulations and tax requirements. The key is that the certifier cannot be the same entity that is benefitting from the deduction. For example, if you’re an architecture firm claiming 179D for a school you designed, you must engage an unrelated engineer or contractor to review and certify the project – you can’t just have your in-house engineer do it.

Who Qualifies as a “Qualified Individual”? 

The law defines a qualified certifier as an unrelated party who is a licensed professional engineer or contractor in the jurisdiction of the building. In practice, it is almost always a Professional Engineer (PE) who performs the certification. The PE should be licensed in the state where the building is located (e.g., a Texas building needs a TX-licensed engineer’s stamp). They will review the building’s plans, visit the site to verify installation, and ensure the energy model inputs match reality. After performing or reviewing the energy calculations, the PE signs a certification letter attesting that the building meets the required efficiency standard (at least 25% savings vs ASHRAE baseline) and stating the deduction amount the building qualifies for. This certification statement is what the taxpayer (owner or designer) keeps in their records and provides to the IRS if ever audited. It’s essentially the proof that the government incentive was legitimately earned.

What the Certification Involves

The certification package typically includes: (1) a report of the energy modeling results comparing the building’s performance to the reference baseline, (2) identification of the DOE-approved software used for the simulation, (3) a signed letter by the PE with their stamp/seal, and (4) an explanation of which systems were upgraded and that they meet the requirements. The IRS has specific guidance on what the certifier’s statement must contain – for example, a declaration that qualified software was used and the percentage energy savings achieved. In the case of government building projects, there’s an additional allocation letter process (e.g., for federal projects, the GSA requires certain forms like Appendix A and B to be filled and a third-party PE certification submitted). But for a typical private building owner, the main focus is getting that independent engineering study done.

Why a Professional Engineer? 

The requirement for a licensed professional adds credibility and rigor. A PE is bound by ethics and training to ensure public safety and accuracy; their license is on the line if they certify something false. The government essentially leverages the PE’s expertise to validate energy savings claims. The engineer’s site inspection is also important – they may check that the installed equipment (lighting fixtures, HVAC units, insulation levels) matches what was modeled and meets the standards. This helps prevent a scenario where someone might be tempted to exaggerate energy savings to get a bigger deduction. In short, the PE acts as the gatekeeper ensuring the integrity of the 179D program.

Timeline and Documentation

If you’re pursuing a 179D deduction, it’s wise to engage the certifier early or at least shortly after project completion. They can advise on what documentation to collect (equipment specs, construction costs, as-built drawings, etc.) to feed into the modeling. After the study, you’ll receive the certification documents. When filing taxes, Form 7205 (for 179D) will be included with your return, and while you don’t send the PE’s report to the IRS proactively, you must keep it on file in case of audit. The statute and IRS notices require you to obtain the certification by the time you file the return on which you claim the deduction. So, don’t wait too long after placing the property in service to start the process.

Summary

In summary, claiming 179D is a team effort: you, as the taxpayer, will need to bring in a qualified third-party (usually a professional engineer) to do an energy analysis and certify the results. It’s an extra step compared to many other tax deductions, but it ensures that only legitimately efficient buildings get the reward. The cost of hiring a certifier is itself a business expense (often modest relative to the tax savings potential). Regardless of how you go about it, remember that without the PE-signed certification, you cannot legally claim the 179D deduction. This safeguard is what lends credibility to Section 179D and has helped it survive through multiple extensions – lawmakers know the claims are being vetted by professionals.