Key Building Performance Incentives in the IRA

The Inflation Reduction Act of 2022 (IRA) is described as “the most significant climate legislation in U.S. history, offering funding, programs, and incentives to accelerate the transition to a clean energy economy and will likely drive significant deployment of new clean electricity resources” (3). Effective January 1, 2023, new government incentives have the potential to drive adoption of clean energy systems in green and high performing buildings for eligible building projects across the country. Our new factsheet outlines ways in which Green Power Partners, i.e. businesses, nonprofits, educational institutions, and state, local, and tribal organizations, can take advantage of IRA incentives and provisions designed to: 

• reduce the costs of renewable energy
• lower GHG emission footprints 
• accelerate the clean energy transition.

What is in the IRA?

• Estimated $370B in climate provisions modeled to reduce GHG emissions by 40% by 2030 over 2005 baseline (4).
  • ⅔ tax incentives
  • ⅓ grant and financing programs

What types of actions are incentivized for green buildings?

• Using cleaner energy: on-site renewables, energy storage, microgrids, EV charging, and similar technologies
• Using less energy: Energy efficiency upgrades
• Using low carbon building materials: Procurement of products with Environmental Product Declarations (EPDs).

Energy Performance-based Tax Deductions

• 179D: Tax Deduction for Energy Efficient Commercial Buildings
  permanent and adjusted for inflation annually
  • Tier 1 has a lower base deduction of $0.50/ sq. ft. if buildings outperform code baseline by 25% and up to $1/ sq. ft. if annual energy savings is reduced beyond 25%.
  • Tier 2 has a higher base deduction of $2.50/ sq. ft. and up to $5.00/ sq. ft. if the building also meets the prevailing wage and apprenticeship requirements.
  • New pathway for retrofits of existing buildings.
• 179D Allocation Provision for Public Buildings
  applicable to any nonprofit or tax exempt entity
  • Building owners without tax liability can transfer the tax deduction to the primary designer of record for the building project.

On-site Renewable Energy Investment & Production Tax Credits

• • Sec. 48: Clean Electricity Investment Tax Credit was set to expire but now extended accompanied by the Production Tax Credit (PTC) of $0.0275/kWh (2023 value).

• Applicable for on-site renewable energy including: rooftop solar, storage, wind, microgrids, dynamic glass, and other technologies

• • • In 2 years, this tax credit converts to “technology neutral,” i.e. any tech that achieves low carbon power is eligible.
  • 30% of the investment is refundable, e.g. $100,000 spent towards rooftop solar receives $30,000 refunded via tax credit.
    • 10% bonus if you meet domestic content requirements
    • 10% bonus if project is located in a designated “energy community”, defined as brownfield site or former coal community
    • 10% bonus for projects located in low-income communities or on Tribal land
    • 20% bonus for projects located in low-income residential buildings or part of low-income economic benefit projects (6).

• For public/tax-exempt entities: Sec. 48 tax credit available as direct pay (US treasury issues a direct check for the value of the incentive)

GHG Reduction & Related Performance Incentives 

• • Sec 30C Alternative Fuel Vehicle Refueling Property Credit
    • Tax credit of 30% of expenses up to $100,00 per unit on commercial properties. Available as direct pay. Must meet prevailing wage and apprenticeship requirements. Restrictions apply on location.

• Grants for Building Energy Code Adoption

• • • See here for info on grants. 
    • Building Energy Code Adoption (IRA Sec. 50131) 
      • $1B for grants helping state and local governments adopt and implement building energy codes. 
      • $330M for meeting 2021 IECC or ANSI/ASHRAE/IES 90.1-2019; $670M for meeting or exceeding the zero energy provisions in the 2021 IECC or an equivalent stretch code. 
      • Overview: Technical Assistance for the Adoption of Building Energy Codes

• Grants for Cutting Edge Clean Energy Tech:

• • DOE Loan Programs Office (IRA Sec. 50141) 
  • $40B available until 2026 for loans from DOE Loan Programs Office under Section 1703 of the Energy Policy Act of 2005. Loans intended to support the commercial deployment of cutting-edge clean energy technologies.

If you have a project that can benefit from these incentives and you want to receive our fact sheet or learn more, send us a message!

Sources & Notes

1. IRA one page summary www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf
2. US Government Inflation Reduction Act Guidebook www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/
3. Summary of IRA Provisions related to renewable energy  www.epa.gov/green-power-markets/summary-inflation-reduction-act-provisions-related-renewable-energy
4. USGBC CEU course: Incentivizing Decarbonization with the Inflation Reduction Act www.usgbc.org/education/sessions/incentivizing-decarbonization-w-inflation-reduction-act-12854716
5. Priority Guidance Plan  www.irs.gov/pub/irs-utl/2022-2023-pgp-initial.pdf
6. Low-income benefit projects are those where at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of less than 200 percent of the poverty line. From Additional Guidance on Low-Income Communities Bonus Credit Program www.federalregister.gov/documents/2023/06/01/2023-11718/additional-guidance-on-low-income-communities-bonus-credit-program