NEW FUNDING AVAILABLE THROUGH INFLATION REDUCTION ACT (IRA)

Updated October 17, 2022

Please note, final guidance has yet to be issued by DOE, EPA and most importantly, the IRS.  Regardless of the confidence with which many consultants are presenting these updates, we are all eagerly awaiting these details to confirm understanding of how to utilize these programs. We will update this page with more information as updates are released.

Covered in this Article:

 

What is 45L Tax Credit                                 179 Tax Deduction                                 Additional Funds & Programs

 
 

What is 45L?

 

A Federal tax credit for residential new construction that has recently been expanded under the Inflation Reduction Act.  Starting January 1, 2023 projects certifying under ENERGY STAR or Zero Energy Ready Home programs may be eligible for tax credits on a per unit basis.

What's it Worth?

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What We Think We Know

  • The program will now be in place for 10 years (January 1, 2023 – December 31, 2032).  No more annual expirations and retroactive renewals – for the next ten years anyway!

  • Prevailing wage is NOT required on projects to leverage this funding.  Rather, there are bonuses available on a per unit basis for projects using prevailing wage.

  • There is no longer a building height limit specified.  Since the ENERGY STAR Multifamily New Construction (MFNC) pathway allows buildings of any height, our understanding is that multifamily properties of any height are now eligible for this credit

 

What We’re Not So Sure About

  • Which units currently under construction will qualify in the new year.  IRS language references eligibility beginning 1/1/2023 based on the date of acquisition.  Previous guidance defines “acquired” to mean “when the person that constructed the home sells or leases the home to another person for use as a residence”.  Since sale date may have little correlation with construction timeline, and Certificate of Occupancy was not mentioned, we are awaiting further guidance on this point.

  • If or how projects qualifying for Low Income Housing Tax Credits (LIHTC)  and the certification programs specified may also leverage the new 45L tax credit.

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What is 179D?

A commercial tax deduction program that promote energy efficiency in commercial and applicable multifamily projects on a square footage basis.

What's it Worth?

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What We Know

  • 179D is a tax deduction, not a tax credit.  Consult with you tax professional to better understand the implications of this distinction.

  • The deduction is based on site Energy Use Intensity (EUI) reduction on a whole building basis.

  • Unlike 45L (which uses the same rating-based methodology that underlies the ENERGY STAR and ZERO Energy Ready programs), we employ ASHRAE 90.1 modeling to determine the % savings on each 179D project.

 

Additional Funds & Programs We Are Following

  • High-Efficiency Electric Home Rebate Program: Grants to States through the State Energy Program for rebates up to a total of $14,000 per unit/home. This will include  both single-family and multifamily housing and cover electric measures including: Heat pump, heat pump water heater, electric oven/cooktop appliances, clothes dryer, electric wiring, air sealing, ventilation, insulation, and more…
     

  • HOPE for HOMES Program: Home Owner Managing Energy Savings (”HOMES”) Rebate Program will provide direct rebates of up to $4,000 for insulation, HVAC, and heat pumps with at least 35% modeled energy savings. Rebates can reach up to $8,000 for low- and moderate-income residents.

  • Greenhouse Gas Reduction Fund: competitive grants through EPA to reduce emissions on low to moderate disadvantaged communities.

Can You Stack IRA Benefits?

  • Talk to your tax advisor or tax credit consultant.  Based on the specifics of your organization or project’s financial structure, tax credits and deductions may be able to be combined with rebates and other funding available under various IRS and other federal stimulus programs. 

  • We can help you leverage 45L or 179D as well as other potential sources of funding for high performance construction and building electrification.  Talk to us now so you’re ready for January 1, 2023!

If you would like to review the program or discuss options, please reach out through this form so we can set up a time to review.