The Inflation Reduction Act (IRA) drastically changed the 45L Energy Efficient Home Credit (Section 45L) and the Section 179D Energy Efficient Commercial Buildings Deduction (Section 179D) quantities and requirements, thus allowing more opportunities for home builders and multi-family developers constructing energy-efficient homes to earn money back. As a result of the major changes in the Section 45L tax credit, there are new qualifications that businesses must meet to benefit from the energy tax opportunities.

In this episode of the Real Estate and Construction Podcast, Mark Cooter, Real Estate, Construction & Hospitality Industry Practice Leader, and Ron Wainwright, Energy Tax Credits & Incentives Leader, discuss how the real estate and construction industry can best utilize the Section 45L tax credit.

This conversation includes:

• Background on Section 45L
• Advantages from Section 45L for real estate and construction companies
• Requirements to qualify
• Examples of successfully utilizing Section 45L

Related Guidance

• Take Advantage of New Section 45L Tax Credit Opportunities Under IRA
• What the Inflation Reduction Act Means for the 45L Energy Efficient Home Credit
• Understanding the Expanded Benefits of Energy Tax Incentives Under 179D and 45L
• How the Real Estate and Construction Industry Benefits from the Inflation Reduction Act of 2022

On January 29, 2023, new requirements for prevailing wage and apprenticeship, as outlined in the Inflation Reduction Act of 2022 (IRA), went into effect. These requirements aim to create good paying jobs in the clean energy space by offering enhanced tax credits to participating taxpayers.

The IRA is critical in providing good paying jobs through offering enhanced tax benefits for a range of clean energy and green energy projects to taxpayers. The Davis-Bacon Act ensures prevailing wages are paid to workers on such projects and that registered apprentices are utilized, in accordance with the IRA.

By pairing climate investment with creating good paying jobs, the IRA’s unparalleled investments to fight the climate crisis will help improve job quality in clean energy industries and incentivize the expansion of related workforce training pathways.

Taxpayers that wish to take advantage of enhanced clean energy tax benefits must establish that all laborers and mechanics are paid the applicable prevailing wage, including fringe benefits, for all hours performing construction, and in some cases alteration or repair, on the site of a qualified facility.

Mark Cooter, Real Estate & Construction Leader, welcomes Ron Wainwright, Tax Credits & Incentives Advisory Partner, on Cherry Bekaert’s Real Estate and Construction podcast to learn more about prevailing wage and apprenticeship requirements.

On this podcast the team will unpack the background of the IRA and answer the following questions:

• What is a prevailing wage and how do you comply with it?
• How do the prevailing wage and apprenticeship requirements impact real estate and construction firms?
• When do prevailing wages need to be paid to qualify?
• To what types of facilities do prevailing wage and apprenticeship requirements apply?

The Inflation Reduction Act (IRA) was signed into law in August 2022 and creates huge tax credit incentive savings for real estate and construction groups that prioritize clean energy. One tax provision of the IRA was the 45L Energy Efficient Home Credit.

Mark Cooter, Cherry Bekaert’s Real Estate and Construction Practice Leader, invites Ron Wainwright, Strategic Tax Partner and Leader of the Firm’s Energy Tax Credits & Incentives Practice within the Tax Credits and Incentives Advisory group, and Bill Harbeson, a manager at Cherry Bekaert, will discuss how 45L has changed with the IRA and how.

The Podcast Covers:

• What is 45L?
• What is changing with 45L in 2023?
• How do 179D, Cost Segregation, and 45L interact?
• How can Cherry Bekaert help before construction begins?

Related Thought Leadership:

• How the Real Estate and Construction Industry Benefits from the Inflation Reduction Act of 2022
• Inflation Reduction Act of 2022: Key Income Tax Provisions
• Inflation Reduction Act of 2022: Details & Tax Changes

The recently passed Inflation Reduction Act (“IRA”) on the 179D deduction is incredibly important and lucrative new legislation for the Real Estate and Construction industry. The 179D is a tax deduction to incentivize builders and building designers to create energy-efficient commercial buildings. The IRA increased the maximum tax deduction from $1.80 per square foot to $5.00 per square foot.

Mark Cooter, Cherry Bekaert’s Real Estate and Construction Practice Leader, invites Ron Wainwright, Strategic Tax Partner and Leader of the Firm’s Energy Practice within the Tax Credits and Incentives Advisory group, and Bill Harbeson, a manager at Cherry Bekaert, to discuss the impacts of this legislation as well as how to qualify and what to look for in a 179D provider to take advantage of this beneficial tax deduction.

The Podcast Covers:

• Introduction to 179D
• New Updates to 179D with the Inflation Reduction Act of 2022
• How to Qualify for 179D
• What does a taxpayer need to look for in a 179D provider?

Subscribe today for further information from Cherry Bekaert on the different benefits and tax credits the real estate and construction companies can qualify for and receive.

Join Jason Hoard, Tax Partner, as he moderates a panel of Cherry Bekaert professionals on the opportunities and pitfalls in OZ structuring. The panel will discuss a variety of topics including how an OZ investment will fit into your overall investment plan, the implications of withdrawing from a Qualified OZ fund, uncovering opportunities with debt including basis issues, and the benefits of carried interest.

Listen to the other podcasts in our OZ Fund Series:

• Part 1 – Opportunity Zone Overview
• Part 2 – Opportunity Zone Impact on Real Estate
• Part 3 – Operating a Qualified Opportunity Zone Business ("QOZB")
• Part 4 – Meeting the Tests for a Qualified Opportunity Zone Business ("QOZB")
• Part 5 – Optimizing Alternative Capital Sources

Join Ron Wainwright, Partner and Leader of the Firm’s Credits & Accounting Methods practice, and Peter Byford, NMTC Program Senior Manager with Tax Advantage Group by Cherry Bekaert, for a discussion on capital formation. They will analyze the traditional OZ capital stack, highlight the potential synergy with New Market Tax Credits and other additional credits, and examine the implications of social impact investing.

Listen to the other podcasts in our OZ Fund Series:

• Part 1 – Opportunity Zone Overview
• Part 2 – Opportunity Zone Impact on Real Estate
• Part 3 – Operating a Qualified Opportunity Zone Business ("QOZB")
• Part 4 – Meeting the Tests for a Qualified Opportunity Zone Business ("QOZB")
• Part 6 – Panel Discussion: Opportunities & Pitfalls in Your Opportunity Zone ("OZ") Structuring

Join Michael Elliot, Tax Director, and Russ Nash, former Tax Senior Manager, for a deep dive on the five basic tests required for a business to qualify as a QOZB:

1. A trade or business for which substantially all (70 percent) of its tangible property (owned or leased) is QOZB property
2. At least 50 percent of the business’s total gross income must be derived from the active conduct of a business in the QOZ
3. A substantial portion (40 percent) of the business’s intangible property is used in the active conduct of the QOZB
4. Non-qualified financial property must be less than 5 percent of the average of the aggregate unadjusted basis of the business’s property
5. “Sin” businesses are prohibited

Listen to the other podcasts in our OZ Fund Series:

• Part 1 – Opportunity Zone Overview
• Part 2 – Opportunity Zone Impact on Real Estate
• Part 3 – Operating a Qualified Opportunity Zone Business ("QOZB")
• Part 5 – Optimizing Alternative Capital Sources
• Part 6 – Panel Discussion: Opportunities & Pitfalls in Your Opportunity Zone ("OZ") Structuring

Join Daniel Metzel, Tax Partner, and Greg Davis, Tax Partner, for an overview of the requirements of establishing and operating a Qualified Opportunity Zone Business ("QOZB"). They will break down the intent of the final regulations, the pros, and cons of a one tier versus a two-tier structure, and the applicable testing restrictions.

Listen to the other podcasts in our OZ Fund Series:

• Part 1 – Opportunity Zone Overview
• Part 2 – Opportunity Zone Impact on Real Estate
• Part 4 – Meeting the Tests for a Qualified Opportunity Zone Business ("QOZB")
• Part 5 – Optimizing Alternative Capital Sources
• Part 6 – Panel Discussion: Opportunities & Pitfalls in Your Opportunity Zone ("OZ") Structuring