IRA Extends & Expands Section 45L Tax Credits for Commercial Real Estate

The Inflation Reduction Act (IRA) can be helpful to commercial real estate owners in a number of ways.

First, the IRA extends and expands the Section 45L tax credit for energy-efficient commercial buildings. This credit can be used to offset the cost of making improvements to existing buildings or constructing new buildings that meet certain energy efficiency standards.

Second, the IRA creates a new tax credit for the installation of electric vehicle charging stations in commercial buildings. This credit can be used to offset the cost of installing EV charging stations in commercial parking lots or garages.

Third, the IRA provides funding for state and local governments to develop and implement energy efficiency programs for commercial buildings. This funding can be used to provide technical assistance, financial incentives, and other resources to help commercial building owners make energy efficiency improvements.

Overall, the IRA provides a number of tax incentives and other resources that can help commercial real estate owners reduce their energy costs and improve the energy efficiency of their buildings. This can lead to lower operating costs, increased property values, and a reduced environmental impact.

The Section 45L tax credit is a tax credit that is available to owners of commercial buildings that make energy efficiency improvements to their buildings. The credit is equal to 10% of the cost of the improvements, up to a maximum credit of $1.80 per square foot of building space.

To qualify for the credit, the improvements must meet certain requirements. The improvements must be made to the building envelope, heating, ventilating, and air conditioning (HVAC) system, or lighting system. The improvements must also result in a reduction in the building’s energy consumption by at least 50%.

The credit is available for both new and existing buildings. The credit is claimed on the owner’s federal income tax return.

The Section 45L tax credit is a valuable incentive for commercial building owners to make energy efficiency improvements to their buildings. The credit can help to offset the cost of the improvements and make them more affordable. The improvements can also lead to lower energy costs and a reduced environmental impact.

Here are some examples of energy efficiency improvements that may qualify for the Section 45L tax credit:

• Installing insulation in the building envelope
• Replacing windows with energy-efficient windows
• Upgrading the HVAC system to a more efficient model
• Installing energy-efficient lighting
• Adding solar panels to the roof
• Installing a geothermal heat pump

The Section 45L tax credit is a great way to save money on energy costs and improve the energy efficiency of your commercial building. If you are considering making energy efficiency improvements to your building, be sure to check with your tax advisor to see if you qualify for the credit. The reporting requirements are complex enough to perhaps justify getting the help of a consultant with expertise in qualifying for Section 45L credits. In addition, guidance on Section 45L tax credits is still being formulated in 2023 by the DOE and IRS. The tax credits per unit can add up in a multi-unit structure so it pays to develop a plan to fully qualify for every possible credit, and that may require expert legal and accounting advice.