Written By: Kyle Rieth, Catalyst Partners
In the ever-evolving landscape of real estate and business investments, staying informed about advantageous policies is crucial for building owners looking to optimize their returns and contribute to a more sustainable future. Two such policies that have garnered significant attention are the Inflation Reduction Act (IRA) and the Investment Tax Credit (ITC). These policies, along with various sections and provisions, present a plethora of benefits for building owners, particularly those in the realm of energy-efficient and sustainable building practices. We’ll delve into the details of these policies, their associated sections, and how Catalyst Partners can play a pivotal role in helping owners navigate the requirements to achieve these benefits.
Recap of the first year of The IRA
On Friday, August 12, 2022, the House of Representatives passed a historic vote on climate, taxes, and health care to invest in domestic energy and reducing carbon emissions, countering inflation, and lowering costs of prescription drugs. The Inflation Reduction Act, designed to allocate billions in tax incentives over the next decade, has taken effect as of January 1st, 2023.
The $369 billion in climate provisions trigger a decade of federal tax investments to transform markets for energy efficiency, renewable energy, and other clean energy technologies that are expected to reduce greenhouse gas emissions by 40% by 2030. Achieving these rates will be a huge step towards the goal of achieving 50% reduction by 2030 to limit global warming to 1.5 degrees C. By expanding and extending on existing programs over the course of the next 10 years, economic certainty and consistent demand will be provided to clean energy markets.
What does this mean for the architects, builders, and building owners?
Billions of dollars in investments have been outlined to target renewable power generation, clean energy technologies, public building upgrades, green building improvements to affordable housing, and low embodied carbon construction materials.
The Investment Tax Credit (ITC): is a federal incentive designed to promote the adoption of renewable energy systems, such as solar panels, wind turbines, and geothermal systems. This credit provides building owners with a reduction in their federal tax liability based on their investment in qualifying renewable energy projects. Sections 179D, 45L, 25D, and 48 of the tax code further refine and extend these benefits.
– Section 179D: This provision encourages energy efficiency improvements in commercial buildings and offers deductions for the costs incurred in making energy-efficient improvements to building systems. Under 179D, building owners can claim substantial tax deductions for upgrades that result in reduced energy consumption. These improvements span lighting systems, HVAC systems, and the building envelope. With the Act in place, building owners can confidently invest in energy-saving technologies while reaping financial benefits of up to 5$ per square foot.
– Section 45L: Geared toward residential properties, Section 45L focuses on providing tax credits to developers of energy-efficient dwellings. Building owners can receive up to $5,000 per dwelling unit when constructing energy-efficient residential properties, rewarding them for environmentally conscious choices.
– Section 25D: Offers tax credits to residential property owners who install qualifying solar panels, wind turbines, and other renewable energy systems on their properties.
– Section 48: Provides incentives for commercial and utility-scale renewable energy projects, such as solar, wind, and geothermal installations.
While these policies and provisions offer incredible benefits, navigating the complex world of tax codes and energy regulations can be daunting. This is where Catalyst Partners steps in. As experts in the field of sustainable energy solutions, Catalyst Partners is dedicated to helping building owners capitalize on these incentives while ensuring compliance with the intricate requirements.
Catalyst Partners works closely with building owners, architects, engineers, and contractors to strategize and implement energy-efficient designs and systems that meet the criteria for various tax incentives. By leveraging our expertise, we help owners make informed decisions about the types of renewable energy projects to invest in, ensuring maximum returns on investment and adherence to regulatory standards.
Conclusion: A Bright Future for Building Owners
The Inflation Reduction Act and Investment Tax Credit, along with their associated sections, have opened up exciting opportunities for building owners to enhance their financial outlook while contributing to a sustainable future. As the landscape of energy efficiency and renewable technologies continues to evolve, Catalyst Partners serves as an indispensable ally, guiding owners through the intricacies of regulations and incentives. By partnering with Catalyst Partners, building owners can pave the way for a brighter, more sustainable future while reaping the benefits of prudent financial decisions.
In a world where economics and environmental responsibility are intricately intertwined, embracing these policies and seeking the guidance of Catalyst Partners can truly be a forward-looking strategy for building owners aiming to thrive in the modern business landscape.