Tag: Clean Energy Tax Incentives

The Post-Election Energy Landscape for CRE

Posted on by Abigail Grenadier
Green foreground with buildings in background

The 2024 election results signal a return to energy policies supported by President-elect Trump and a shift from Biden era climate programs. For the commercial real estate (CRE) industry, these changes present opportunities to emphasize the “business case” for high performance, energy efficient buildings.

Anticipated Energy Policy Shifts

  • De-Regulation: Former Congressman Lee Zeldin (R-NY), the pick to lead the EPA, remarked on “the opportunity to roll back regulations” on power plant emissions, abolish fees on oil and gas development, and lift rules that drive automakers to manufacture electric vehicles. (The Washington Post, Nov. 19)
  • Climate Disclosures: The SEC will likely withdraw its controversial rule for public companies to report climate-related financial risks in 10-K forms. (Bloomberg, Nov. 7) Companies may still need to report and disclose emissions under state laws like those in California (if they survive litigation).
  • Clean Energy Tax Incentives: The incoming administration has vowed to dismantle the Inflation Reduction Act (IRA) that provides credits and deductions for solar projects, battery storage, EV charging stations, and energy efficient buildings. However, many clean energy projects benefit Red States and House Speaker Mike Johnson (R-LA) said he intends to use “a scalpel not a sledgehammer” in reviewing the IRA in light of Republican support. (POLITICO, Sept 18).
  • City, State Grants: Federal funding will likely be eliminated to support city and state efforts to enact building performance standards (BPS). (Roundtable Weekly, Sept 6) Localities may continue to adopt these laws imposing energy use and emissions limits on buildings even without federal support, and The Roundtable will continue to urge policymakers to follow our 20-Point Guide for fair and reasonable BPS laws.
  • Grid Reliability: Given the increased demands on the electric grid from AI, bipartisan bills to streamline the federal permitting process to approve interstate transmission lines – carrying electricity produced in rural areas and delivering it to cities long distances away – could finally become a priority. (Roundtable Weekly, Oct. 25)

The “Business Case” for Energy Efficiency

Department of Energy building in Washington, DC
  • By emphasizing the economic benefits of energy efficient buildings, the industry can remain resilient and forward-looking amid “policy volatility” arising from the power changes in Washington.
  • Energy efficient buildings improve our economy. They create jobs for American workers, enhance U.S. energy independence, help make the power grid more reliable, and attract overseas investments to our shores.
  • Non-regulatory, voluntary federal guidelines – developed and enhanced with The Roundtable’s support – help real estate companies make the case for energy efficiency.

They also include our collaboration with the Department of Energy and other agencies through the Better Climate Challenge, the national Zero Emissions Building definition, the Buy Clean initiative, and programs that highlight the environmental benefits of commercial-to-residential property conversions.

Treasury and IRS Propose Detailed Rules for Expanded EV Charger Tax Credit

Posted on by Abigail Grenadier

This week, the Treasury Department and IRS released proposed rules for the expanded investment tax credit (Section 30C) for electric vehicle (EV) chargers installed in low-income and rural areas. The credit, enhanced by the Inflation Reduction Act (IRA), is poised to encourage private-sector investment in EV charging infrastructure. (PolitcoPro, Sept. 18)

Proposal Details

  • The proposed rules should help accelerate the buildout of a reliable and convenient charging network.  In 2021, President Biden set forth an ambitious plan for a nationwide network of public and private EV charging stations. 
  • The 30C credit covers as much as 30% of qualifying costs, up to $100,000 per charger for businesses and $1,000 for individuals. (Bloomberg, Sept. 19)
  • In particular, the rules related to qualifying census tracts should encourage the construction of charging stations at industrial properties, commercial parks, warehouses and logistics facilities, and port-adjacent properties that are unpopulated themselves but in the vicinity of denser, population centers.
  • Treasury’s proposed rule broadly defines “low-income” and “rural” areas, making nearly two-thirds of the U.S. population eligible for the credit. (AP, Sept. 18)
  • In addition, one significant change that the IRA made to section 30C, is that the credit applies per charging port, not per location, boosting savings for developers by reducing the cost of building multiple ports at one station.
  • The Roundtable submitted comments in Dec. 2022 to Treasury and IRS on the Section 30C tax credit, urging the IRS to issue guidance to clarify the components of EV charging property that qualify for the credit, the geographic areas that are 30C-eligible, and depreciation matters. (Roundtable Weekly, Dec. 2022)
  • The new proposed rules reflect feedback from The Roundtable on many of the key issues raised, including important clarifications on component eligibility.
  • While White House advisor John Podesta emphasized that the rule will help expand EV access across all communities, Sen. Joe Manchin (I-W.Va.) criticized the broad definition of “non-urban,” claiming it overlooks rural areas. (The Hill, Sept. 18)

What’s Next

  • With the tax policy debate at the forefront in Washington, House Speaker Mike Johnson made remarks this week regarding the future of the IRA. He pledged to cut “wasteful” spending while preserving some clean energy tax incentives. He emphasized using a “scalpel” rather than eliminating all provisions, acknowledging that certain credits benefit economic growth.
  • In August, 18 Republicans wrote to Speaker Johnson expressing concern that “[p]rematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that is already ongoing.”  (The Hill, Sept. 18)
  • Treasury will accept public comments on the proposed regulations through Nov. 18.

The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) are reviewing the proposed rulemaking in its entirety and may provide additional written comments to the regulators. 

Federal Initiatives on Buildings, Climate Gaining Momentum Ahead of 2024 Elections

Posted on by Abigail Grenadier
The White House

The Biden-Harris administration is accelerating actions at the intersection of climate and real estate policy in the lead-up to November’s elections to implement its signature clean energy legislation passed during its first years in office. RER’s Sustainability Policy Advisory Committee (SPAC) remains engaged with policymakers on a variety of initiatives coalescing in 2024 that include the following:

Climate-Related Financial Risk

  • The U.S. Securities and Exchange Commission (SEC) is expected to issue a final rule this spring for registered companies to disclose financial risks from climate change.(RER fact sheet and Roundtable Weekly, March 10, 2023).
  • Scope 3 “indirect” emissions from sources in a company’s supply chain are controversial elements of the anticipated SEC rule. RER’s 2022 comments urged the Commission to drop its “back door mandate” for Scope 3 disclosures. (Roundtable Weekly, June 10, 2022)
  • Litigation against the SEC’s imminent rule is widely expected. A recent lawsuit filed by industry groups against a California disclosure package passed last summer (modeled after the SEC’s proposal) signals similar claims that the federal government might face in court. (Wall Street Journal, Jan. 30 and RER fact sheet)

Voluntary Frameworks

EPA's NextGen Building Label
  • NextGen certification may serve as an “intermediate step” for buildings that strive for a voluntary Zero Emissions Building (“ZEB”) definition coming from the U.S. Energy Department. Recent comments from RER and Nareit maintain that the federal ZEB definition can lend consistency to the confusing state-local regulatory patchwork of building performance standards. (Roundtable Weekly, Feb 2.)
  • EPA is acting on requests to update Portfolio Manager, CRE’s standard tool to measure metrics for building efficiency and emissions. Portfolio Manager upgrades announced at last month’s SPAC meeting will help real estate companies strive for NextGen or ZEB status. (Coalition letter, Sept. 14, 2023)
  • This spring, the influential GHG Protocol—an international framework heavily relied upon by the SEC, EPA, DOE, and institutional investors—will undertake its first revisions since 2015 to its guidance for companies to account for emissions from electricity use. RER will participate in the upcoming Scope 2 guidance public comment process.

Tax Incentives

Ben Myers, left, and Tony Malkin, right -- SPAC leadership
Roundtable Sustainability Policy Advisory Committee Chair Tony Malkin, right, and
Vice Chair Ben Myers
  • The Internal Revenue Service (IRS) has issued dozens of proposed rules and notices to implement clean energy tax incentives available to real estate and other sectors since Congress passed the Inflation Reduction Act (IRA) in 2022. (RER fact sheet)
  • The IRS is expected to release final rules before November on topics such as the ability of REITs to transfer certain tax credits, proposed rules on non-urban census tracts eligible for EV charging station credits, and the 179D deduction for building retrofits.
  • RER has submitted comments on these and other topics in response to initial IRS notices and will continue to provide feedback as opportunities arise. (RER letters Oct. 30 and July 28, 2023;  Nov. 4 and Dec. 2, 2022)

The Roundtable’s SPAC—led by Chair Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust) and Vice Chair Ben Myers (Senior Vice President of Sustainability, BXP)—will press forward with RER’s climate and energy priorities for the remainder of the current administration and into the next.

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White House Holds Property Conversions Briefing for Roundtable Members

Posted on by Abigail Grenadier

Last week, the White House hosted a virtual briefing for Roundtable members to discuss federal loan and guarantee programs at the federal departments of Energy, Housing, Transportation and the General Services Administration that may assist with financing commercial-to-residential conversion projects.

Property Conversions Briefing

  • In October, the administration announced a suite of federal resources—including low-interest loans—across various agencies to assist conversion projects aimed at increasing the housing supply, revitalizing urban downtowns, and cutting climate pollution. (Roundtable Weekly, Oct. 27; White House Commercial to Residential Conversions Guidebook)
  • The briefing last week provided members with a high-level overview of the administration’s conversion work and focused on the Transportation Department’s Transportation Infrastructure Finance and Innovation (TIFIA) and Railroad Rehabilitation and Improvement (RRIF) financing programs. (See FAQs)
  • White House staff also announced upcoming workshops with the Department of Transportation’s Build America Bureau to learn more about how TIFIA and RRIF financing can be used for transit-oriented development (“TOD”) that takes the form of adaptive reuse.

Upcoming Workshops – Federal Resources to Support Commercial-to-Residential Conversions

IRA Tax Incentives – 179D

  • White House staff on the property conversions briefing mentioned that green tax incentives enacted by the Inflation Reduction Act (IRA) may be layered with other federal loan, guarantee, and grant programs to support a project.  (See RER fact sheet, “Clean Energy Tax Incentives Relevant to U.S Real Estate)
  • Roundtable Senior Vice President & Counsel Duane Desiderio was quoted this week in Tax Notes on the deduction in section 179D for energy-efficient commercial buildings.
  • “The IRA’s changes to section 179D are good policy, but more changes need to be made for the deduction to reach its full potential,” said Desiderio.” (Tax Notes, Nov. 28). He explained that Congress should make 179D “transferable” by REITs and other private sector owners.

The Roundtable’s Property Conversions Working Group will continue to serve as a conduit between our members and the administration to help design impactful policies that can assist with office-to-residential conversions. Please contact Roundtable SVPs Duane Desiderio (ddesiderio@rer.org) or Ryan McCormick (rmccormick@rer.org) for more information.

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Lawmakers Extend Government Funding Into Early 2024; Outlook Uncertain for Tax Policy and Other Priorities

Posted on by Abigail Grenadier
Capitol Hill at dusk

The latest threat of a government shutdown eased this week after President Biden signed two continuing resolutions, funding some agencies until Jan. 19 and others until Feb. 2, giving Congress a chance to pass full-year appropriations bills in early 2024, and leaving the Biden administration’s $106 billion supplemental foreign aid request unresolved. (AP, Nov. 17 |Wall Street Journal | Washington Post | NBC News, Nov. 15)

Window Narrowing for Other Policy Priorities

  • Congress’ focus on the funding measures leave policymakers looking for a potential legislative vehicle that could support a separate, expensive tax package. Conversations among tax policy writers are ongoing, according to Ways and Means Ranking Member Richard Neal (D-MA). (BGov, Nov. 16)
  • Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO) are discussing a package in the $90-100 billion range that would include measures on business interest deductibility and bonus depreciation, as well as an increase in the child tax credit for low-income families. (Roundtable Weekly, June 16)

IRA Tax Incentives

Tax Notes publication
  • On the regulatory front, Roundtable Senior Vice President Ryan McCormick was quoted this week in Tax Notes on the Inflation Reduction Act’s (IRA) rules affecting clean energy credits—and the need to ensure incentives extend equitably to “mixed partnerships” that include both taxable and tax-exempt investors.
  • “Tax-exempt investors in mixed real estate partnerships include pension funds, educational endowments, private foundations, and public charities,” said McCormick, noting that these entities have invested over $900 billion in commercial real estate.
  • The Tax Notes article also addressed problems posed by IRA prevailing wage and apprenticeship rules that were the focus of an Oct. 30 Roundtable comment letter. The letter quantified the large compliance costs and recommended allowing contractors to self-certify their compliance with the wage and apprenticeship requirements. (Roundtable Weekly, Nov. 3)

The Roundtable’s Tax and Sustainability Policy Advisory Committees will remain engaged with policymakers as the IRA rules affecting CRE are finalized and implemented. These issues will be discussed during The Roundtable’s State of the Industry Meeting on January 23-24, 2024 in Washington.

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Roundtable Recommends Solutions to Ease Compliance with Labor Rules for IRA Tax Incentives

Posted on by Abigail Grenadier
Workers on sustainable energy project on rooftop of building

The Real Estate Roundtable submitted comments this week encouraging the Treasury Department to provide a compliance “safe harbor” to streamline labor-related requirements necessary to seek “bonus” tax incentives for clean energy building projects under the Inflation Reduction Act (IRA). (Roundtable comment letter, Oct. 30)

Prevailing Wage and Apprenticeship Compliance Burdens

  • The Roundtable letter notes that the IRA’s objective to support retrofits and slash carbon emissions in the built environment will be undermined if the costs of labor compliance far exceed the incentives offered by Congress.
  • The comments explain that wage and apprenticeship compliance burdens would dis-incentivize businesses and taxpayers’ to pursue the IRA’s clean energy bonuses, thereby rendering the bonus credits program illusory in many cases.
  • The letter also emphasizes that a regulatory solution to ease the IRA’s paperwork burdens would spur more clean energy projects in buildings—and encourages Treasury/IRS to conduct its own thorough cost-benefit accounting of Prevailing Wage/Registered Apprenticeship (PW/RA) Requirements before issuing a final rule.

 Contractor Compliance Certifications Sought

rooftop heat pumps with solar panels in the foreground.
  • The “safe harbor” recommendation by The Roundtable would allow building owners/developers to rely on written certifications provided by their General Contractors (GCs), or any other subcontractors (subs), would confirm and fulfill all PW/RA labor requirements.
  • This streamlined approach would reduce the compliance burden and retain the fervor that IRA tax incentives could generate under the IRA. Real estate owners and developers are not the direct employers of electricians, plumbers, HVAC technicians, solar technicians, EV charging installers, or any others that construct or retrofit buildings. GCs and subs directly employ manual laborers.
  • The Roundtable also recommends regulators develop “Recordkeeping Requirements” for PW/RA compliance that reflect the reality of how laborers, mechanics, and apprentices are employed on real estate projects, who is hired by whom, and how hours worked are tracked.

Other targeted tax reforms that will help scale real estate’s transformation toward zero emissions are recommended in The Roundtable letter. These include expanding Section 48 of the Code to building electrification technologies; allowing private owner transfers to unrelated third parties under Sections 45L and 179D; and repealing a Section 179D rule that reduces a property’s basis by the amount of the claimed deduction. (Roundtable comment letter, Oct. 30)

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Path Uncertain for Pending Tax Legislation as Implementation of Energy Tax Incentives Continues

Posted on by Abigail Grenadier
U.S. Capitol at sunset

The possibility of an end-of-year tax package faces an uncertain path and timeline as House GOP policymakers consider new leadership in the wake of this week’s historic vote to remove Kevin McCarthy (R-CA) as Speaker. Another layer of unpredictability is government funding, which is scheduled to expire Nov. 17 following last week’s passage of a continuing resolution to avert a partial government shutdown.

House Measures

  • In June, the House Ways and Means Committee approved a proposed tax legislative package along party lines that includes measures on business interest deductibility and bonus depreciation. The bill stalled due to differences in the GOP caucus over a boost in the $10,000 deduction cap on state and local taxes (SALT). (Roundtable Weekly, June 16)
  • Prospects for the Ways and Means tax package, other expired provisions such as the expanded child tax credit, and pending real estate-related tax proposals may depend on whether Congressional leaders are able and willing to expand the scope of negotiations over a bill to fund the government. (Roundtable Weekly, Sept. 29)

Regulatory Implementation

Exterior of U.S. Treasury Department
  • On Oct. 17, The Roundtable’s Fall Roundtable Meeting will feature a discussion on Inflation Reduction Act (IRA) incentives impacting CRE. (See Roundtable Clean Energy Tax Incentives Fact Sheet, July 31)
  • Also last week, Treasury provided new information on the process for taxpayers to apply for bonus tax credits for solar and other renewable investments made in low-income communities or in low-income housing developments. (See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings, May 25).

For more information on energy tax incentives available to real estate under the Inflation Reduction Act, see The Roundtable’s Clean Energy Tax Incentives Fact Sheet, July 31)

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New Federal Rules Issued Regarding Real Estate Construction, Clean Energy Projects

Posted on by Trey Jackson

Housing Construction WorkerThe Biden administration issued two new rules this week impacting real estate construction and investments in clean energy projects. 

  • Davis-Bacon: The U.S. Labor Department on Tuesday issued a final rule to overhaul Davis-Bacon standards that determine prevailing wages for workers on construction projects covered by a federal contract or financially assisted by federal grants, loans, guarantees or insurance.
    • Construction association AGC issued a statement expressing “preliminary” concerns that “this rulemaking critically missed an opportunity” to inject “more accurate data” in processes to establish prevailing wage rates in local markets across the nation.
    • Laborers and mechanics constructing transportation, energy, water, toxic site clean-ups, and other infrastructure financially supported by the bipartisan Infrastructure Investment and Jobs Act (IIJA) must meet the new Davis-Bacon requirements. (IIJA project map)
    • Inflation Reduction Act (IRA) projects receiving clean energy tax incentives are not required to meet Davis-Bacon rules, but they can qualify for increased credits and deductions if workers are paid prevailing wages. (RER’s IRA fact sheets) 
    Solar installation workers

  • “Bonus” Tax Credits: The Treasury Department and IRS on Thursday released final rules explaining how IRA “bonus credits” can be awarded to solar, wind, and associated storage projects in low-income communities. (The Hill, August 10)
    • Qualifying projects in census tracts eligible for new market tax credits (NMTCs) can receive a 10% solar credit boost, while those supported by low-income housing tax credits or Section 8 rental assistance can receive a 20% solar credit increase. (RER’s IRA “bonus rate” chart)
    • The “bonus” incentives – over “base” rate tax credit amounts – are competitive. Bonuses will be awarded through an application process run by the U.S. Department of Energy scheduled to open this fall.

The Roundtable submitted comments in June when the IRS proposed the “bonus credit” program. (Roundtable Weekly, June 30). It will update its summary of IRA-related agency guidance following analysis of the newly issued rule.

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Monetizing Energy Credits: Roundtable Submits Recommendations to Treasury

Posted on by Trey Jackson
U.S. Capitol

The Real Estate Roundtable submitted comments today on proposed and temporary tax regulations regarding the transferability and direct payment of clean energy credits under the Inflation Reduction Act (IRA) of 2022. (Roundtable comments, July 28)

 IRA Incentives 

  • Congress passed the IRA last August. The law significantly increases the size of existing tax incentives for energy-saving improvements to commercial real estate. Perhaps even more importantly, the legislation contained key reforms related to the transferability and direct payment of energy tax credits.

  • The reforms have made the incentives relevant to a large and previously untapped segment of real estate owners, including REITs, pension funds, and private foundations. The incentives include:

    • Tax-exempt real estate owners that invest in solar panels and other improvements can elect to receive direct payments from the Treasury in lieu of the expanded investment tax credit.
    • Taxable real estate owners, including REITs, can sell the credits to third parties for cash. 
    • The credit amount can range from 6% to 60% of the qualifying investment, depending on factors such as the size, location, domestic content, and wages paid to equipment contractors.
  • Roundtable comments submitted last year included recommendations on the IRA’s transferability provisions. On June 14, the Treasury Department and IRS issued proposed regulations to implement the provisions, as well as temporary regulations establishing a pre-filing registration process.

  • The IRS rules adopted certain Roundtable recommendations, such as the ability to divide and sell the credits from a single project to multiple transferees. Other recommendations, which would have maximized the value of the credits in mixed real estate partnerships involving taxable and tax-exempt partners, were rejected as contrary to the statute and difficult to administer.  

Energy Credits Monetization  

U.S. Treasury Building
  • Today’s letter from Real Estate Roundtable President and CEO Jeffrey DeBoer commends Treasury for providing greater clarity on its credit monetization mechanism and for laying out a rational process and timeline for property owners to claim and transfer credits or receive payments.

  • The Roundtable’s July 28 letter—developed by a joint working group of the Roundtable’s Tax and Sustainability Policy Advisory Committees (TPAC and SPAC)—also encourages Treasury to revisit the issue of mixed partnerships and asks for clarification that the credits are not “bad assets” for purposes of the 75% REIT asset test.

  • The credit monetization tools enacted in the IRA offer valuable new opportunities to access and raise capital for energy-saving improvements to commercial real estate. The deadline for comments to Treasury and the IRS is August 14, and final Treasury regulations are expected this year.  

The Roundtable’s Energy Credit Transferability Working Group will remain engaged with policymakers as the rules are finalized and implementation continues. 

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Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

Posted on by Trey Jackson
Low-income housing development in New Jersey

The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30) 

Solar, Wind Bonus Credits 

  • IRA Section 48(e) establishes a Low-Income Communities Bonus Credit Program to address climate, affordable housing, and environmental justice challenges. (Treasury news release, Feb. 13, 2023)

  • Taxpayers must apply to the IRS through a competitive process to receive any bonus credits under the Program.

  • The bonus can provide extra tax credits to help cover the costs of solar, wind, and storage facilities. See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings (May 25, 2023).

  • Taxpayers who qualify can layer an extra 10% bonus—above “base rate” credit amounts—for renewable projects in low-income communities defined in the IRA as census tracts that qualify for new markets tax credits.

  • The bonus can increase to an extra 20% for clean energy investments that are part of low-income rental housing—such as housing supported by LIHTCs or Section 8 “housing choice” vouchers. 

Roundtable Comments 

RER chart on Section 48(e)
  • Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points:

    • The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold.

    • The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenants—because owners cannot measure, track or control energy consumption in sub-metered leased units.

    • Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses.

    • The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities.  

  • Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer. 

Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022).  

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