The One Big Beautiful Bill Act of 2025 established a June 30, 2026, beginning-of-construction deadline for eligibility under Section 179D. This deadline was not the result of identified policy deficiencies, program misuse, or effectiveness concerns. Section 179D has operated as intended and continues to reflect long-standing bipartisan support for incentivizing energy-efficient building design. Despite that successful impact, the program is now in danger and the proposed sunset is nigh. If you stand to be negatively impacted by this you should inform your congressional representatives in DC of your concerns and ask that they “Retain Sec. 179D in the tax code beyond its June 30th beginning of construction deadline, support American energy dominance incentives, and enable America to accelerate to the forefront of technological development.” To contact the Virginia Congressional delegation (U.S. House and Senate), use the “Find Your Representative” tool at House.gov or Congress.gov and enter your zip code. Those of you with offices in multiple states should encourage your colleagues to solicit support from their congressional delegation. Additional information can be found in the issue brief prepared by AIA.
While our advocacy efforts at the federal level have borne fruit – firms can once again recognize R&D expenses all at once on their federal tax return – Virginia is looking to deconform several sections of the state tax code and that will impact claims for R&D expenses. This means that R&D expenses will need to be amortized over a five-year period in state tax returns. To be clear, the deductibility of R&D expenses is NOT in jeopardy; firms will still be able to claim R&D expenses in state returns and claim the entirety of their value. But those expenses will need to be amortized over a five-year period (rather than claimed all at once, as is now again allowable on the FED return).
This change results from the majority party’s attempt to further their policy priorities (affordable housing, expanded benefits) and mitigate the negative impact of federal policies (federal worker layoffs, costs associated with Medicaid) while avoiding tax increases. Requiring the expenses to be amortized is seen as a delay/deferment that maximizes cash flow without denying/disallowing the credits.
If you sense large forces at play, you are correct. Concerns have been voiced, but expectations should be sober. If you are impacted by these changes, you would do well to advocate for the 179D at the federal level and prepare to amortize the R&D at the state level.