What Construction Qualifies for the Section 45L Energy Tax Credit?
- Construction of Apartments, Condos, Single Family Homes, Townhomes – 3 stories or less
- $2,000 tax credit per unit (per apartment unit for example) – if modeling software shows that the energy efficiency of the unit is at least 50 % more energy efficient than the 2006 Energy Code
- We review items such as HVAC SEER/AFUE factors, energy efficient lighting, window U-Factors, Insulation R-Values, overall building envelope and other factors that are input into our software model to determine qualification for the 45L Energy Tax Credit.
Who Qualifies for the Section 45L Energy Efficient Home Tax Credit?
- Developers, builders who construct the property, then sell the units/homes (i.e., developer/builder gets the 45L tax credit as opposed to the homeowner).
The IRS has issued guidance to provide information about the certification process that a builder must complete to qualify for the credit. IRS Notice 2006-27 provides more information on the IRS guidance. Warner Robinson has the Section 45L credit expertise to fully conduct these studies and certify units as qualified under the energy guidelines including the required IRS approved software.
The process starts with a no-cost review of your construction projects (in process or completed projects) including the initial software modeling at no cost. Once we determine which units and how many will qualify for the energy credits, we will discuss with you the necessary next steps in fully completing the certification and documentation required by the IRS under 45L. This process generally takes 30-60 days to completion, but the initial free scoping can be performed much quicker – typically in 1-2 weeks once we obtain the necessary specs and data on your projects.
We can also assist you with the certifications under IRC Section 179D which provides up to $1.80 per square foot in tax deductions for commercial buildings that achieve a 50% reduction in total energy and power costs. This is not related to Section 179 expensing but a separate tax benefit for energy efficient commercial construction.
This is also not an ‘all or nothing’ deduction. Builders could have partially qualifying property up to the $1.80/square foot deduction. For example:
- Up to $0.60/sf for Building Envelope
- Up to $0.60/sf for HVAC
- Up to $0.60/sf for Interior Lighting
- Fractional deduction through Interim Rule
What Types of Commercial Buildings Qualify under Section 179D for Energy Deductions?
Many types of buildings can qualify; some include:
- Typical commercial (i.e. office, big box retail, industrial)
- Public & government (Student housing, prisons, schools, etc..)
- Multifamily & Apartments 4 stories & up
- Ground Up Construction
- Renovations and Retrofits
- Must be located in US
Who Qualifies under Section 179D?
Whoever makes the investment and places the property in service for the first time, which could be the:
- Building owner or landlord
- The developer
- Investors in the partnership who own the property – tax credit flows through to investors
179D benefits available for architects & engineers
Our Energy Credits team is co-led by Managing Directors Cedar Robinson and Bruce Warner. Cedar has been working in the building cost segregation and fixed asset study areas since 1996. Prior to founding Warner Robinson in 2009, Cedar’s cost segregation and tax consulting experience also includes 11 years at PricewaterhouseCoopers LLP and nearly 6 years as a partner and Strategic Federal Tax Services practice leader at Grant Thornton LLP. Bruce Warner, Managing Director, has a degree in Real Estate and started his career as an IRS attorney, including litigating tax credit cases. Bruce is also a former partner with Deloitte Tax and Bruce has 20 years of experience with tax credits.
CPA Firms: Warner Robinson can partner with your firm in providing Energy Tax Credit expertise and certification to your clients and we serve clients throughout the country. Please call us to discuss how we can team with your firm in providing the highest level of expertise in the area of Energy Tax Credits and Commercial Energy Deductions.
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