FUNDING AVAILABLE THROUGH THE INFLATION REDUCTION ACT (IRA)
Updated September 27, 2024
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On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. This law authorized $369 billion in funding to support energy efficiency, building decarbonization, and other energy-related initiatives. Since the passing of the IRA, this funding has been making its way to the entities charged with program design and deployment, with a variety of programs aimed at promoting energy efficiency and decarbonization in the building sector.
Covered in this Article:
45L Tax Credit 179 Tax Deduction DOE Home Energy Rebate Programs
EPA Greenhouse Gas Reduction Fund HUD Green & Resilient Retrofit Program
What is 45L?
45L is a federal energy tax credit for residential new construction that has been expanded under the IRA. Starting January 1, 2023, projects completed and certified under the ENERGY STAR or Zero Energy Ready Home programs are eligible for applicable tax credits on a per-unit basis.
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What's it Worth?
Key Details:
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The program will now be in place for 10 years (January 1, 2023 – December 31, 2032).  No more annual expirations and retroactive renewals – at least for the term of the IRA!
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Permit date, certification date and acquisition date each play a role in dictating which applicable ENERGY STAR and Zero Energy Ready Homes versions projects need to adhere to for 45L compliance. For more information on minimum eligible versions and applicable timelines for units pursuing the 45L tax credit, please refer our technical bulletin on this subject: EPA & DOE Guidance on 45L Tax Credit.
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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.
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There is no longer a building height limit specified.  Since both the ENERGY STAR Multifamily New Construction (MFNC) and Zero Energy Ready multifamily pathways now allow buildings of any height, our understanding is that multifamily properties of any height are now eligible for this credit
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45L can be stacked with Low Income Housing Tax Credits (LIHTC) and utility/state program incentives.
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What is 179D?
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179D is a Federal tax deduction that promotes energy efficiency in commercial and applicable multifamily projects on a square footage basis. This program is available for existing multifamily buildings and multifamily new construction that are 4+ stories.
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What's it Worth?
Key Details:
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179D is a tax deduction, not a tax credit.  Consult with your tax professional to better understand the implications of this distinction.
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The deduction for new construction is based on modeled energy cost savings over an ASHRAE baseline. 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.
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The deduction for existing buildings is based on the measured reduction of site Energy Use Intensity (EUI) compared to the building’s existing performance. This reduction % is determined one year after project completion via Measurement & Verification (M&V) to confirm the building’s actual performance.
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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.
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179D can be stacked with Low Income Housing Tax Credits (LIHTC) and utility/state incentive programs.
Department of Energy (DOE) Home Energy Rebate Programs
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The two programs summarized below will take the form of grants available to the states, managed by each state’s respective State Energy Office. On July 27th, 2023, program guidelines were released by the DOE. States are now in the process of applying for grant funding and launching their respective versions of each program.
Both programs can be stacked with the tax incentives outlined above, Low Income Housing Tax Credits (LIHTC), and with utility/state incentive programs.
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Home Efficiency Rebates, also known as the “HER” program, will take the form of a rebate for existing residential buildings that achieve at least 20% modeled or measured whole building energy savings, with incentives available on a per unit basis ranging from $2,000-$8,000 per unit, depending on the income status of the property and savings achieved.
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Home Electrification and Appliance Rebates, also known as the “HEAR” program, will take the form of rebates paid out on a per measure basis for residential projects that implement electrification-focused upgrades. There is no whole building energy savings requirement under this program, and it is instead intended to provide funding on a measure-specific basis to promote building electrification. The DOE allows for both new construction and existing buildings to leverage this program, but many states are opting to allocate this funding to existing buildings only.
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Each state is on a different program launch timeline, while also having the authority to dictate certain aspects of program design that have not necessarily been dictated by the DOE. MaGrann is closely tracking these updates and varying program nuances as they come to fruition in our standard service region.
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For more details on our current understanding of state-specific program details and how these programs might be leveraged by your projects, please reach out through this form and we can answer your questions or set up a time to review: Contact | MaGrann Associates.
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Environmental Protection Agency (EPA) Greenhouse Gas Reduction Fund
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The Greenhouse Gas Reduction Fund (GHGRF) is an additional funding stream made available through the IRA. This funding takes the form of competitive grants available to eligible nonprofits intended to spur financing and private capital for solar, energy storage, and emission reduction projects, with an emphasis placed on projects in low income and disadvantaged communities.
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All primary non-profit GHGRF grant recipients have been selected. These primary recipients are now working to create new or expand existing programs through this funding. The National Clean Investment Fund (NCIF) program is one of the categories of funding under the GHGRF MaGrann is closely following, which will establish funding for institutions to provide financing for emission-reducing and clean energy projects nationwide.
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For more details on our current understanding of the various funding streams becoming available through the GHGRF as they relate to multifamily energy efficiency and building decarbonization, contact us through this form: Contact | MaGrann Associates.
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Department of Housing and Urban Development (HUD) Green and Resilient Retrofit Program
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The HUD Green and Resilient Retrofit Program (GRRP) provides competitive grants and loans to HUD-assisted multifamily housing. Multiple funding rounds were announced for projects that reduce carbon emissions, increase energy efficiency, implement renewable energy measures, and/or increase climate resiliency.
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Since the initial announcement of the GRRP Notice of Funding Opportunities, all application round deadlines have passed and the majority of GRRP awards have been announced. If your project was awarded funding under any of the GRRP cohorts –Elements, Leading Edge, or Comprehensive – MaGrann is here to assist with implementation, including MEP engineering, energy modeling, sustainability consulting, commissioning, and more.
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If you would like to review any of these programs in greater detail, please reach out through this form.