Federal Incentives

Federal Incentives for Decarbonizing Large Buildings 

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Leveraging the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) 

The Inflation Reduction Act (IRA) is a $370 billion dollar investment in US climate action, the largest in history. It is estimated to reduce US greenhouse gas emissions by 405 by 2030 versus the 2005 baseline. Passed in 2022, the IRA, paired with the Bipartisan Infrastructure Law (BIL) and other federal policies and initiatives, offers a suite of federal incentives aimed at promoting the decarbonization of large buildings. These incentives are designed to encourage building owners to invest in energy-efficient and sustainable technologies, thereby reducing their carbon footprint and contributing to national climate goals.  

Key components relevant to large building owners include: 

Section 179D – Energy Efficient Commercial Buildings Deduction (IRA Sec. 13303): 

  • Purpose: Encourages the installation of energy-efficient systems in commercial buildings. 
  • Eligibility: Applicable to commercial building owners for both new and existing buildings and available to architects, mechanical engineers, electrical engineers, and other designers of tax-exempt buildings.  
  • Benefit:
    • Increases deduction from $1.80/square foot to sliding scale of $2.50-$5.00.
    • Projects must achieve 25%-50% better performance than applicable ASHRAE 90.1 standard (starting with ASHRAE 90.1-2007 for projects placed in service in 2023-2026, and 90.1-2019 for projects placed in service starting in 2027). 
    • Receiving full credit requires meeting prevailing wage and apprenticeship provisions. Deduction drops to $0.50-$1.00 if not met. 
    • Creates new pathway for existing building retrofits to more easily access the deduction by demonstrating 25-50% energy use intensity improvement over one year to receive sliding scale deduction of $2.50-$5.00. 
    • IRS released new Form 7205 for claiming 179D. Awaiting guidance on filing. 
    • Unlike other incentives, 179D is permanent, and adjusts annually for inflation. 
    • Creates new pathway for nonprofit entities to access deduction by allocating it to project designer (as government entities have been able to do).

Section 48 – Clean Energy Investment Tax Credit (ITC): 

  • Purpose: Supports the adoption of renewable energy systems, such as rooftop solar, geothermal, CHP and storage in commercial buildings and at the utility-scale. 
  • Eligibility: Available to owner of renewable energy project. Non-taxable entities may access this tax credit using direct pay. All other entities may use transferability. 
  • Benefit: For most projects, credit of 30% of investment if wage and apprenticeship provisions met, dropped to 6% if not met. Projects smaller than 1MW not required to meet wage and apprenticeship provisions. Credit increases by additional 10% if domestic content requirements are met and another 10% if the project is in a designated “energy community” such as a census tract with shuttered coal operations. Additional bonus credits of 10% or 20% for qualified solar and wind projects serving low-income communities. Max credit of 70% if all bonus criteria is met.
  • Direct Pay: New options for “direct pay”–also called “elective pay”–for government and nonprofit entities to use credit even without tax liability. Starting in 2024, direct pay is phased out for projects larger than 1MW that does not meet domestic content.

Section 30C – Alternative Fuel Vehicle Refueling Property Credit (IRA Sec. 13404)

  • Purpose: Expanded tax credit for EV charging systems and other alternative fuel vehicle infrastructure through 2032.
  • Eligibility: Businesses and individuals that place qualified refueling property into service during the tax year.
  • Benefit: 
    • Credit of 30% of expenses up to $100,000 per charging/fueling unit on commercial properties, including retail, office, etc. (Past cap was $30,000 per property.) 
    • Starting in 2024, eligible properties must be in defined rural or low income census tracts. See map here for eligible tracts. 
    • Must meet prevailing wage and apprenticeship program requirements or credit is reduced to 6%. 
    • Credit taken in year property placed in service (i.e. made operational) 
    • Awaiting guidance on specific charging unit investments that qualify (i.e. electrical upgrades or wiring shared across units).
  • Direct Pay: Includes “direct pay” and transfer provisions

Greenhouse Gas Reduction Fund (GGRF): 

  • Purpose: Aims to finance a wide array of projects that reduce greenhouse gas emissions, with a focus on disadvantaged communities. 
  • Benefit: Creates a new $27B “green bank” through EPA to stand up national climate financing initiative, with three funding buckets: $7B for Solar for All, which will funds states, tribal governments, municipalities, and financial nonprofits to set up low-income solar programs across the country. $6B for Clean Communities Investment Accelerator and $14B for National Clean Investment Fund to fund financial nonprofits to use a range of financial tools to support decarbonization projects in low-income and disadvantaged communities. 
  • Eligibility: Targeted at state, local, and tribal governments, as well as financial non-profit organizations. Awards will be announced in March 2024, with funding rolling out in July 2024 and financing offerings available soon after. 

Climate Pollution Reduction Grants 

  • Purpose: Supports the development and implementation of plans to reduce greenhouse gas emissions.
  • Benefit: Provides $5 billion in grants to states, local governments, tribes, and territories to develop and implement ambitious plans for reducing greenhouse gas emissions and other harmful air pollution. $250M for planning grants, with one $3M grant for each participating state to develop plans to reduce GHG, along with smaller grants to the largest 67 metropolitan areas and to tribal governments. Learn more about your state or local plans.  Balance of $4.6B for implementation grants awarded on a competitive basis. State and local governments must be part of a planning grant to be eligible for implementation grants, with applications due April 1, 2024.
  • Eligibility: State, MSA, and tribal territories are eligible.  

Key programs relevant to multifamily building owners include: 

New Energy Efficient Homes Credit (45L): 

  • Purpose: Expanded homebuilder tax credit for new home construction, including multifamily, through 2032.
  • Eligibility: Homebuilders constructing new energy-efficient homes are eligible for this credit. 
  • Benefit:
    • Increased from $2,000 per unit historically for meeting IECC reference to $2,500 for meeting ENERGY STAR and $5,000 for DOE Zero Energy Ready Homes
    • Previously limited to multifamily buildings three stories or less, updates make it accessible to all multifamily at $2,500/$5,000 per unit. 
    • Prevailing wage provisions apply to multifamily projects, which receive reduced credit of $500/$1,000 without meeting them. 
    • Credit taken by contractor in tax year home was acquired (i.e. sold or leased). 
  • Direct Pay: Does not include direct pay or transfer provisions. But the IRA made the credit available for use with Low-Income Housing Tax Credit (LIHTC) projects without reducing LIHTC basis, increasing its value for affordable housing.

Green and Resilient Retrofit Program (GRRP): 

  • Purpose: Provides funding for energy and water efficiency improvements, indoor air quality enhancements, and resilience measures in HUD-assisted multifamily properties. 
  • Benefit: Offers $1 billion in grants and up to $4B in loan authority for projects that improve energy or water efficiency, enhance indoor air quality or sustainability, implement zero-emission electricity generation, low-emission building materials or processes, energy storage, or building electrification strategies, or make properties more resilient to climate impacts. Three funding buckets:
    • Elements: Up to $750,000 per property or $40,000 per unit for specific resilience or efficiency strategies, such as installing heat pumps, with $140 million in total funding. 
    • Leading Edge: Up to $10 million per property or $60,000 per unit for completing a multifaceted renovation that earns an ambitious green building certification such as LEED Zero, with $400 million in total funding.
    • Comprehensive: Up to $20 million per property or $80,000 per unit for deep utility retrofits and climate resilience upgrades. Includes $42.5M for energy and water benchmarking activities.
  • Eligibility: Owners of HUD-assisted multifamily properties are eligible for this funding. HUD will also conduct energy and water benchmarking of HUD-assisted properties. 

Home Efficiency Rebate Program: 

  • Purpose: Encourages whole-home energy efficiency improvements. 
  • Benefit: Provides $4.3 billion in grants to State energy offices and tribal entities to develop and implement a whole-home rebate program. Available to households of any income and owners of multifamily projects. Higher cost share for households below 80% of Area Median Income (AMI). Rebates typically range from $2,000-$8,000 for individual household or multifamily unit, or potentially higher.
  • Eligibility: Available to households participating in the program developed by their state energy office or tribal entity. 

Home Electrification and Appliance Rebate Program: 

  • Purpose: Supports the electrification of homes and the use of high-efficiency electric appliances. 
  • Benefit: Allocates $4.5 billion in grants to State energy offices and tribal entities to develop and implement a high-efficiency electric home rebate program. This program offers point-of-sale electrification rebates exclusively for low and moderate-income households (below 150% of AMI), up to $14,000 per unit. low- and moderate-income households, including for owners of qualifying multifamily projects. Covers 50% of expenses for incomes 80%-150% of AMI and 100% for incomes below 80% of AMI. ncludes point of sale rebates.
  • Eligibility: Low and moderate-income households are eligible for this program. Multifamily buildings must have at least 50% of residents below 150% of AMI to be eligible for 50% cost share, and at least 50% of residents below 80% of AMI to be eligible for 100% cost share.

Assistance for Latest and Zero Building Energy Code Adoption: 

  • Purpose: Supports the adoption of updated building energy codes, including zero-energy codes. 
  • Benefit: Provides $1 billion in grants to state and local governments to adopt and implement updated building energy codes. 
  • Eligibility: State and local governments are eligible to apply for these grants to update their building energy codes. 

The Inflation Reduction Act provides a comprehensive set of incentives for large building owners to decarbonize their properties. By leveraging these federal programs, building owners can reduce their environmental impact, lower operational costs, and contribute to the broader goals of sustainability and climate resilience. 

Information on “Direct Pay” and Transfer Provision

White House Info Page, IRS Proposed Rule, and IRS Info Page

Direct pay (formally called elective pay) allows tax-exempt entities, including municipalities, schools, states, universities, nonprofits, hospitals, etc., to receive payment – or essentially a rebate – for the amount of the tax credit even if they have no tax liability. 

  • Applies to many but not all IRA tax incentives. Most relevant for buildings, applies to ITC for renewable energy, storage, microgrids, etc., and EV charging infrastructure credits. 
  • Credit is taken annually for the tax year property is placed into service (ie rooftop solar placed in service in Sept. 2023, credit taken when filing 2023 taxes in 2024.) 
  • Filers required to submit pre-filing registration delineating projects/property and receive a registration number for each project/property to include on tax returns.
  • Tax form used for direct pay may vary – typically Form 990-T for those that don’t file federal taxes. 

Transferability 

  • Entities ineligible for direct pay can now transfer, or essentially sell, credits. 
  • Reports indicate credits are selling for approximately 95 cents on the dollar.

This resource is a compilation of content from USGBC and RMI resources. For more information, please visit the US Department of Energy and IRS websites. For further information on incentives for federal buildings or individual households, please refer to USGBC’s Buildings and the IRA presentation. More information and resources are found on our resource library under Federal Incentives. 

Resource Name Description  Source 
Inflation Reduction Act: Programs and Incentives This spreadsheet was built off of the list of Inflation Reduction Act (IRA) funding programs published by the White House as a complement to its IRA GuidebookRMI  
Guide to Federal Clean Energy Incentives RMI’s collection of resources including articles, tools, and success stories to understand and maximize the benefits of IRA, the BIL, and related federal policies and incentives.RMI  
Clean Energy Tax Provisions in the Inflation Reduction Act Table providing key information about tax provisions and links to the latest announcements related to their implementation from the White House.  The White House 
White House Guidebook of Inflation Reduction Act Programs   High level program-by-program overview of the Inflation Reduction Act, including who is eligible to apply for funding and for what purposes. The White House 
White House Guidebook of Bipartisan Infrastructure Law High level overview of how much funding is available at the program level for BIL to help partners across the country know what to apply for, who to contact for help, and how to get ready to rebuild. The White House 
DOE Funding and Incentives Resource Hub  Tool to help building owners navigate and discover the many rebates, funding opportunities, and other incentives including those available through the Inflation Reduction Act and Bipartisan Infrastructure Law. Better Buildings DOE 
Federal Funding Opportunities to Support Sustainable Development Hub of resources that highlight opportunities for the real estate industry to leverage and/or access federal infrastructure funds to support sustainability, resilience, health, and real estate and economic development goals. ULI  
Leveraging Federal Funding Opportunities for Sustainable Development Article explaining how can real estate developers access and leverage this funding and play a role in shaping infrastructure decisions to drive sustainability outcomes in cities ULI  
Building Provisions in the IRA Presentation Slide presentation covering the green building and sustainable communities provisions in the Inflation Reduction Act.  USGBC/DOE  
Commercial Building Incentive Programs in IRA and other Federal Laws  Brief detailing the multiple programs and tax incentives to improve the energy efficiency of new and existing commercial and public buildings. ACEEE 
Rewiring America IRA Fact Sheets Fact sheets on specific programs, rebates, and tax credits for building owners, homeowners, manufacturers, and contractors.  Rewiring America  
FAQs about IRA Incentives FAQs relevant to building and homeowners when determining how to use IRA tax credits and incentives.  Rewiring America  
Source: RMI, USGBC