(1) In new construction no deduction is allowed for that portion of capital expense incurred in meeting established standards. In new buildings only the cost for that portion of a capital expenditure that is in excess of established standards will be entitled to a deduction in computing taxable income. The standards utilized by the department in determining allowances will be taken from the currently recognized energy building code in Montana. If Montana does not have an applicable energy building code, then national standards meeting the demands of this geographical area will be followed. The energy code or standard relied upon by the department is to be updated on an annual basis.

(2) In the improvement of existing structures a deduction will be given for capital investments that are recognized to substantially reduce the waste or dissipation of energy or reduce the amount of energy required for proper utilization of the building.

(3) Deductions will not be allowed for capital investments that are directly used in a production or manufacturing processor rendering a service to customers.