Energy Efficiency Tax Credits – Section 45L and 179D

Section 45L New Homes Tax Credit

The Section 45L Energy-Efficient New Homes Tax Credit applies to properties three stories and lower. Created as part of the 2005 Energy Policy Act, it was extended a number of times, and expired on December 31st, 2016. To claim this credit, buildings must be substantially completed and have been issued their certificate of occupancy prior to January 1st, 2017.

Qualifying for Section 45L Energy Tax credits

How does a home or multifamily unit qualify? It must be tested and verified to have achieved a minimum 50% reduction in heating and cooling when compared to the 2006 International Energy Conservation Code. In addition, at least one fifth of improvements must relate to the building envelope.

The 45L Tax Credit provides developers of energy efficient apartment buildings and homes up to $2,000 per dwelling unit. Based on current construction trends, and due to current energy codes, many buildings already exceed these standards and qualify for the 45L tax credit. If you are involved with an apartment building or residential condominium development completed within the last four years, contact us to evaluate your potential for 45L tax credits. Eligible construction also includes substantial reconstruction and rehabilitation (gut rehab). And best of all, developers can still claim the 45L tax credit retroactively.

Example Benefit Scenarios:

▪ New construction apartment with 50 qualified units = $100,000 in 45L tax credits for the owner
▪ Gut rehab completed in 2013 with 250 qualified units = $500,000 in 45L tax credits
▪ Development of mulitple condo buildings with 1000 qualified units = $2,000,000 in 45L tax credits

How the Section 45L Tax Credit Process Works

The basis for developing and supporting the 45L tax credit is a detailed energy analysis by a qualified energy rating firm such as Eco Achievers. Our team of raters and engineers will ensure that you obtain the maximum tax credits and provide you with the documentation necessary to substantiate your claims in the event of an IRS audit. First, we’ll develop an energy model from architectural plans. Next, we’ll conduct field measurements and verify the building's performance, using tools such as a blower door and duct blaster, to assess the efficiency of the envelope and duct work. Lastly, we'll reconcile the field conditions with the energy model and generate a final report showing the unit’s efficiency and qualification.

Who can Benefit from the Section45L Tax Credit?

The tax credits are a windfall for multifamily owners and developers, along with single-family home builders and developers. Although not all homeowners qualify, those considered an "eligible contractor" do. If that sounds like you, let us know, and we'll walk through the necessary criteria.

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