Pending Legislation to Strengthen the 45L and 179D Energy Efficiency Tax Incentives

Pending Legislation to Strengthen the 45L and 179D Energy Efficiency Tax Incentives

Posted by Jeffrey Feingold on 04.23.21

The ‘Growing Renewable Energy and Efficiency Now’ (GREEN) Act - should the Bill be enacted into law - will extend and strengthen tax incentives for energy efficiency and renewable energy. 

THE 45L ENERGY EFFICIENT HOME CREDIT

At present, the 45L Credit allows eligible developers to claim a $2,000 tax credit for each newly constructed or substantially reconstructed qualifying residence. It applies to single family homes, apartments, condominiums, assisted living homes, student housing, and other types of residences. The residences must be three stories above grade in height or less. The 45L Credit requires a HERS Rater, a credentialed professional who tests residential energy efficiency, to inspect the home, perform energy modeling and prepare certificates of compliance. The 45L Credit is set to expire at the end of 2021.

The GREEN Act would increase the 45L Credit from $2,000 to $2,500 per residential unit. It also seeks to extend the incentive to 2026, as it is set to expire in 2021. The energy efficiency standards would increase, going from a 50% to 60% savings over the IRS baseline.

THE 179D ENERGY EFFICIENT COMMERCIAL BUILDING DEDUCTION 

The 179D Deduction, often referred to as the EPAct Deduction, is a Federal tax incentive promoting energy efficient buildings for both new and existing structures. Further, architects, engineers, contractors, and other building design professionals may also be eligible for the incentive on public projects. Commercial building owners can take a Federal tax deduction of up to $1.80 per square foot of the building’s floor area if they install certain property (e.g., efficient lights or HVAC systems, added wall or roof insulation, etc.) that reduces energy and power costs. The 179D Deduction, which applies to both new construction and renovations, was recently made permanent by the ‘Consolidated Appropriations Act, 2021’. However, that Act significantly increased the energy efficiency standards needed to qualify.

For the 179D Deduction, the GREEN Act would raise the maximum amount of the deduction from $1.80 to $3.00 per square foot for improvements made after December 31, 2021. It would also lower the threshold needed to qualify for the maximum deduction. The current standard compares the building to the ASHRAE standard that was in existence 2 years prior to the start of construction and requires a hypothetical 50% reduction in energy and power costs. The GREEN Act would lower those standards to 30%. 

Tax Point Advisors will continue to monitor developments related to the proposed new law and update all our relationships as the proposed Bill works through the legislative process.

Contact Tax Point Advisors for further information, at 800-260-4138, or email at info@taxpointadvisors.com


Fill out my online form.



Latest from the blog

Does Your Ohio Business Qualify for R&D Tax Credits?

Read More

Use the R&D tax credit to offset the S Corp. tax in California

Read More

Why CPA Firms Should Build Business with R&D Tax Credits

Read More

Contact Us Today for a No Risk Assessment

Get Started