IRA 179D and more

Yes we have done. Not sure how one would split the benefit, not-for-profits cannot use tax breaks. We have no idea what direct pay funding is?  

-Have you or your firm split the benefit of the 179D with a client? Is this typical? Lawyers say this is not legal. -Is prevailing wage a requirement for all 179D benefit, or does it follow the same lines as geothermal, where if the system is large enough, prevailing wage requirements kick in, and if it's small enough they do not? Prevailing wage and apprenticeship are both required to get the higher $/sf -And the big one; has anybody started to see direct pay funding yet? Many projects aiming for Direct Pay under section 48 ITC but none placed in service yet. _______________________________________ Katherine Bubriski, AIA CPHC, LEED AP BD+C, Fitwel Ambassador Principal | Director of Sustainability & Building Performance 617.666.7006 Direct Arrowstreet

You get a bigger deduction for 179D with prevailing wages (5X base credit), you still get a decuction for non-prevailing wages...just less, I think base credit is $0.50-$1.00/sf.  This is not a tax credit, so less valuable than 48. If possible, focus on 48 since that is a tax credit, much more valuable. You can get 30% + various adders x the cost of the work, like solar, batteries, and geothermal systems. Geothermal credits apply to the entire heat delivery system - so well field, HVAC equipment, duct, controls, etc. Much of a geothermall system is produced in the US, so you can get the 10% adder for domestic materials. Making these projects really viable.

Just to clarify about the webinar next week--that's all about the back story on the IRA and looking info ideas for future incentives. It WON'T get into this kind of nuts-and-bolts implementation question. (Congress writes the laws, not the regulations). For details on the specifics, I highly recommend the webinar we hosted a couple of months ago with a tax expert. You can find a link to that, and lots of other coverage, on our main IRA info page. Finally, I don't believe you have to choose between the Investment Tax Credit and the 179D deduction. You can actually get both. The tax credit is for investing is specific technologies, while 179D is based on the overall efficiency of the building. There are lots of nuances (many covered in that webinar) on when and why 179D might or might not make sense to pursue.

Sorry, to pile on, but Elizabeth here at BG has written up some great explainers on the various IRA benefits for design firms, owners, and construction companies (see links below). We also have a whole IRA hub page to help you find these explainers as well as some deeper dives and case studies. Note that Section 48 (=Investment Tax Credit=ITC=the source of “direct pay”) will change rather dramatically not that long from now ! 179D Tax Deduction for Energy-Efficient Commercial Buildings <— Design firms can be eligible if working with a tax-exempt client; otherwise, it’s mainly the building owners who are eligible. Section 48 Investment Tax Credit for Energy Property <— This is where that “direct pay” thing comes from: tax-exempt owners can get checks from Janet Yellen—pretty cool! (Design firms do not get this money directly.) 48(e), 48(h) Low-Income Communities Bonus Credit Program <— some bonus adders for the ITC, i.e., Section 48 Investment Tax Credit 45L New Energy-Efficient Homes Credit <—This is the biggie for construction folks! Includes multifamily housing projects. === Paula Melton, she/her, LEED AP BD+C Editorial Director BuildingGreen , Inc. 122 Birge St. #30 Brattleboro, VT 05301 Email: paula@buildinggreen.com LinkedIn | Twitter | Facebook  BuildingGreen champions the changemakers in sustainable design and building with trusted insight, unparalleled education, and communities that are transforming the industry.

Oops, sorry! I failed to paste in the link for 45L, the tax credit for home/MF construction: https://www.buildinggreen.com/news-analysis/be-prepared-ira-eliminates-tech-based-itc-just-over-year === Paula Melton, she/her, LEED AP BD+C Editorial Director BuildingGreen , Inc. 122 Birge St. #30 Brattleboro, VT 05301 Email: paula@buildinggreen.com LinkedIn | Twitter | Facebook  BuildingGreen champions the changemakers in sustainable design and building with trusted insight, unparalleled education, and communities that are transforming the industry.

I was dissappointed to miss the IRA conversation on Feb. 6 but look forward to seeing BuildingGreen's highlights! The IRA Hub has been very useful as GBBN dove into the legislation over the last 18 months. I'm happy to share our recently released IRA Calculator which helps organizations identify potential incentives. www.gbbn.com/news/finding-funds-for-sustainability-gbbns-ira-calculator-goes-live/ It's geared toward IRA incentives for multifamily projects but can be used with any program type. Developing this tool has really helped us understand the legislation and estimate incentive value on projects. If you check it out, please let me what you think.

Tiffany, let me say Thank You for creating this calculator! I gave it a test-drive and its simplicity is wonderful and especially needed for taming this IRA behemouth. I haven't had the time or will-power to learn the nuances of it as it applies to our projects -- and this certainly alleviates that. I ran it on an affordable housing project we are doing in Boston and the calculated $ are quite staggering. I think now, instead of me only suggesting to a client to "talk" with their tax accountant -- I can show them a clear visual of what $ might be on the table for them if they actually look deeper. And the best part of course -- and the intention of the legislation, and I'm sure for your firm's impetus in creating the calculator -- is that clients provide more of the right/sustainable stuff. This will surely facilitate that. Thanks to GBBN for doing this.
(Ps, is it okay to distribute the calculator itself to others outside of BuildingGreen?)
Harry Flamm
Stantec Architecture

LOVE IT!! Thanks TIffany! @ Harry, I believe it is ok to distribute since it states "GBBN has publicly released its Inflation Reduction Act (IRA) Calculator". Best 'napkin math' I have come across in quite some time :)  

Hi - question related to the thread above. Does the ITC credit cover a percentage of the cost of the system only? Or is it the system + labor?

ITC is based on the cost of "equipment" - from my research so far that means not labor or drilling/installation costs, but hard costs including downstream ductwork/piping. It was not clear in the initial text of the ITC exactly what is covered downstream (which BG wrote about) but as of November there is a proposed rule to clarify the definition by explicitly including piping and ductwork. Not sure what the timeline is for making that rule official (according to this article there was a hearing on 2/20 about the whole suite of proposed rule changes). 

Thanks (belatedly) Emily. I am also looking into a geothermal project and there are a couple of articles online which suggest installtion is included but they don't cite their sources! I assume the drilling is a substantial component of the overall project cost, so don't want to mis-advise my client here.

I'm trying to find a more definitive answer on this bcause I've also seen that referenced withut a good citation! What i'm running into is that the text of the law says the percentage tax credit is based on the "cost basis of the energy property." The definition of "energy property" is just the equipment itself. The definition of "cost basis" starts getting way out of my wheelhouse as I try to read it - that one would be a good question for a tax lawyer! It sounds like it *could* include labor costs but I have yet to find a good translation to plain English that confirms that. 

Hmmm...looks like I was wrong originally! (Probably!) I did finally find a source that says installation costs are included and cites its IRS reference - unfortunately, I'm still hitting that wall of not understanding the tax law language it cites. But this IRA guide looks pretty robust and like it's getting at exactly the definition issue I was trying to dig up. 

Hi! I reached out to Jacob Goldsmith from Energy Tax Savers yesterday (he did the Building Green webinar). He said it is "drilling, equipment, labor, controls, design, commissioning, air balancing etc." I asked for a reference and he said "it’s common tax depreciation concepts, where the depreciable basis of an asset is the installed cost of the asset."

Hi folks, Save the date! Tuesday, April 2 at 3:00 eastern. Look for an announcement with a Zoom registration link soon. We've set up an opportunity to get all your questions answered, which we're calling "IRA Funding with a Tax Expert Part 2: Updates and  Clarifications." Jacob Goldman from Energy Tax Savers is returning for a follow-up session for our networks on the IRA tax credits and deductions available for commercial and multifamily properties. This web meeting is open to anyone you’d like to invite from your firm. Here’s the catch: everyone coming MUST watch Part 1 first. There won’t be time to review all the details Jacob covered last time AND get into all the updates that have happened since, not to mention answering your questions. There is also good news: if you didn’t already get a CEU by joining us for the live presentation of Part 1, you can now earn an AIA and GBCI CEU by watching the recording (and taking the quiz, of course). Even if you did participate in that original session with Jacob, you might want to refresh your memory by watching it again before joining for this April 2 master class...

Thanks Nadav - will be very helpful; there is a concurrent group within the AIA Large Firm Roundtable Green subcomm (think the AIA 203 Challenge) who are looking into the nuts and bolts too

Nadav - can we look forward to a recording of part 2 also being available (for those of us who have conflicts during the live event)?  Thank you for providing these sessions!

Yes Bryna, a recording will be available!

Question... how do I prove I have a CEU from attending live? (Very possible I missed an email here?) And thanks, again, BuildingGreen for organizing these sessions! 

Hi Sarah--we report those for you (for GBCI and AIA) as long as you respond to the one-question "quiz" we send to all registrants after the webinar and confirm that you attended, and we have your member # in our system. If you missed that you can always self-report. A third option: you can take the new quiz that's now available with the recorded version, and we'll report that for you as well.