Energy Modeling

179D Energy Modeling

Section 179D of the Federal Tax Code provides a fantastic tax deduction for energy efficiency improvements to commercial buildings.  With the recent updates in the Inflation Reduction Act, a building may qualify for a tax deduction under Section 179D for up to $2.50 to $5.00 per square foot for owners and designers.  Energetics provides energy modeling and documentation required to claim these credits.

The new rules will go into effect for buildings placed in service January 1, 2023. Here’s what’s new:

• Lower savings target:  The energy cost savings target reduced from a 50% reduction to a 25% reduction. The baseline will be the ASHRAE Reference Standard 90.1 that was in effect for (4) years prior to the in-service date of the building (ASHRAE 90.1-2019 or later).
• Simplified rules:  Removes the existing rules for partial certifications (currently $0.60 per sq. ft. for each lighting, HVAC, and building envelope)
• Higher deductions for meeting prevailing wage requirements:  For building that achieve a 25% energy cost savings, the deduction is $2.50 per SF, plus an additional $0.10 for each additional percentage of reduction, up to $5.00 per sq. ft.
• Without prevailing wage requirements:  If the prevailing wage and apprenticeship requirements are not met, the deduction starts at $0.50 per SF for a 25% energy cost savings, plus an additional $0.02 per SF, up to $1.00 per sq. ft.
• No more end date:  The 179D Deduction can be taken every three tax years (four in certain situations).
• Open to all:  Previously, only public agencies were allowed to allocate the 179D Deduction.  Now, the IRA expands allocations to all tax-exempt entities, including charitable organizations, religious institutions, private schools or colleges; private hospitals, museums, tribal governments, and other organizations falling under IRC 501(c).
• Opportunities for retrofits:  The IRA also established a new retrofit program for energy efficient building retrofits!  This requires a qualified retrofit plan, and is focused on energy use intensity rather than total annual energy and power costs. The alternative deduction cannot exceed the aggregate adjusted basis of retrofit property placed in service.

45L Tax Credit Energy Modeling

The recent updates in the Inflation Reduction Act also provides a fantastic tax credit opportunity for single family, townhomes, and multifamily projects.  Don’t miss out on this opportunity!

• Single family or Townhomes for rent certified as ENERGY STAR — $2500 per unit
• Single family or Townhomes for rent certified as ZERO ENERGY READY HOME — $5000 per unit
• Multi Family certified as ENERGY STAR — $500 or $2500 per unit 
• Multi Family certified as ZERO ENERGY READY HOME — $100 or $5000 per unit 

HUD Mortgage Insurance Premium Reductions

Both market rate and affordable multifamily projects can receive significant reductions in their Mortgage Insurance Premiums through energy efficiency and green certification.  Along with our green certification partners providing the certification administration, Energetics provides the energy modeling, energy consulting, and energy documentation required by lenders to qualify.

HUD structured the proposed annual multifamily mortgage insurance rates into four categories:

1. Market Rate Housing
2. Broadly Affordable Housing, which includes loans originated under FHA’s Section 542(C) Risk Share program or 542(B) Risk Share Program, as well as properties that have at least 90% of units covered by Section 8 Project Based Rental Assistance or Low-Income Housing Tax Credits.
3. Affordable Housing, which includes local affordability restrictions, as well as properties that have 10-90% of units covered by Section 8 Project Based Rental Assistance or Low-Income Housing Tax Credits.
4. Green and Energy Efficient Housing, which requires owners to pursue, achieve and maintain an industry-recognized standard for green building, such as Enterprise Green Communities Criteria, U.S. Green Building Council’s LEED–H, LEED–H Midrise, LEED–NC, ENERGY STAR Certification, EarthCraft House, EarthCraft Multifamily, Earth Advantage New Homes, Greenpoint Rated New Home, Greenpoint Rated Existing Home (Whole House or Whole Building label), and the National Green Building Standard (NGBS). For properties that have already achieved a green building standard and that are refinancing with this lower MIP premium, proceeds may be used to complete further efficiency upgrades, and/or to retrofit to the next-level green certification standards.

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