Section 179D

In August of 2022, President Biden signed the Inflation Reduction Act, allocating almost $370 billion over the next ten years for infrastructure improvements. These changes include three major revisions that effect new construction and value-add rehabilitation projects:

1. Section 179D includes deductions to incentivize improved energy-efficiency in commercial and multifamily properties and increases potential credits from $1.80 per square foot up to $5.00.
2. Section 45L contains credits for energy-efficient new residential and multifamily construction, up to a possible $5,000 per unit.
3. Section 30C offers credits for installing EV charging stations, in certain markets, up to $100,000.

Tax Deduction for Energy Efficient Buildings – 179D:
This deduction is a permanent part of the tax code and applies to new construction or retrofitted commercial properties and larger multifamily buildings (four stories or higher). Owners are eligible to reuse this deduction every 3-4 years, as capital events and upgrades occur. The credit is a tiered system based on the percentage of energy reduction and includes a significant bonus for those companies that pay their workers a prevailing wage. Eligible improvements include interior lighting, HVAC and hot water systems, and envelope upgrades. Energy efficiency is determined relative to the most recent ASHRAE Standard 90.1 scale and will need to be certified by a qualified third party. An additional expansion is that REITs are now eligible, and non-profit organizations can allocate them to architects and designers responsible for the project.