IRS: Builders of qualified new energy efficient homes may qualify for an expanded tax credit under Section 45L
Builders of qualified new energy efficient homes may qualify for an ... IRS
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IRS Provides Guidance on New Energy Efficient Home Credit
IR-2023-180, Sept. 27, 2023
WASHINGTON — The Internal Revenue Service issued Notice 2023-65PDF today which provides guidance on the new energy efficient home credit as amended by the Inflation Reduction Act (IRA).
The provision, as amended by the IRA, allows eligible contractors who construct or substantially reconstruct and rehabilitate qualified new energy efficient homes a tax credit of up to $5,000 per home. The actual amount of the credit depends on eligibility requirements such as the type of home, the home’s energy efficiency, and with respect to multifamily dwelling units, whether prevailing wage requirements are met.
Individuals or entities looking to claim the credit should consult with a tax professional to determine whether and how they can claim the credit and determine whether the credit can be used with other tax incentives or Federal incentives.
Eligibility for Eligible Contractors
To qualify, eligible contractors must construct or substantially reconstruct and rehabilitate a qualified new energy efficient home located in the United States. They also must own the home and have a basis in it during the construction, and they must sell or lease the home to a person for use as a residence.
Requirements and Credit Amounts for 2023 and After
Homes must be eligible to participate in certain Energy Star programs and meet applicable energy saving requirements based on home type.
For homes acquired in 2023 through 2032, the credit amount ranges from $500 to $5,000, depending on the certification achieved and standards met, which include:
- Energy Star program requirements
- Zero Energy Ready Home program requirements
- Prevailing wage requirements (for multifamily dwelling units only)
Energy Saving Requirements
The energy saving requirements incorporate certain Energy Star program requirements and certain Zero Energy Ready Home program requirements. For homes acquired in 2023 and after, refer to the tables on the Energy Star website for the minimum Energy Star program versions eligible under section 45L. For more information on the relevant Zero Energy Ready Home program in effect, refer to the Department of Energy DOE Zero Energy Ready Home (ZERH) Program Requirements.
Requirements and Credit Amounts Before 2023
For homes acquired before 2023, the credit amount is $1,000 or $2,000, depending on the standards met, which include:
- Certifying that the home has an annual level of heating and cooling energy consumption that is at least 50% (or 30% for certain manufactured homes) less than that of a comparable home that meets certain energy standards, with building envelope component improvements accounting for at least 1/5 (or 1/3 for certain manufactured homes) of the reduction.
- Meeting certain federal manufactured home rules
SDGs, Targets, and Indicators
-
SDG 7: Affordable and Clean Energy
- Target 7.3: By 2030, double the global rate of improvement in energy efficiency
- Indicator 7.3.1: Energy intensity measured in terms of primary energy and GDP
-
SDG 11: Sustainable Cities and Communities
- Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management
- Indicator 11.6.2: Annual mean levels of fine particulate matter (e.g. PM2.5) in cities (population weighted)
-
SDG 13: Climate Action
- Target 13.2: Integrate climate change measures into national policies, strategies, and planning
- Indicator 13.2.1: Number of countries that have integrated mitigation, adaptation, impact reduction, and early warning into primary, secondary, and tertiary curricula
Analysis
The article discusses the new energy efficient home credit provided by the Internal Revenue Service (IRS). This credit incentivizes eligible contractors to construct or substantially reconstruct and rehabilitate qualified new energy efficient homes. Based on the content of the article, the following SDGs, targets, and indicators can be identified:
1. SDG 7: Affordable and Clean Energy
The article addresses the issue of energy efficiency in homes, which is connected to SDG 7. By promoting the construction of energy efficient homes, the IRS is contributing to the goal of affordable and clean energy.
2. SDG 11: Sustainable Cities and Communities
The article mentions that the energy efficient homes must meet certain Energy Star program requirements. This is relevant to SDG 11, as it contributes to creating sustainable cities and communities by reducing the adverse environmental impact of buildings.
3. SDG 13: Climate Action
The construction of energy efficient homes aligns with SDG 13, which focuses on climate action. By improving energy efficiency, these homes contribute to reducing greenhouse gas emissions and mitigating climate change.
Based on the article’s content, the specific targets and indicators that can be identified are:
Target 7.3: By 2030, double the global rate of improvement in energy efficiency
The construction of energy efficient homes contributes to this target by improving energy efficiency in the residential sector.
Indicator 7.3.1: Energy intensity measured in terms of primary energy and GDP
This indicator can be used to measure progress towards target 7.3 by assessing the energy intensity of the residential sector and its contribution to overall energy consumption.
Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management
The construction of energy efficient homes helps reduce the adverse environmental impact of cities by improving air quality and reducing energy consumption.
Indicator 11.6.2: Annual mean levels of fine particulate matter (e.g. PM2.5) in cities (population weighted)
This indicator can be used to measure progress towards target 11.6 by assessing the levels of fine particulate matter in cities, which can be reduced through energy efficient construction.
Target 13.2: Integrate climate change measures into national policies, strategies, and planning
The provision of tax credits for energy efficient homes demonstrates the integration of climate change measures into national policies and strategies.
Indicator 13.2.1: Number of countries that have integrated mitigation, adaptation, impact reduction, and early warning into primary, secondary, and tertiary curricula
This indicator can be used to measure progress towards target 13.2 by assessing the extent to which climate change measures are integrated into educational curricula, including those related to energy efficiency in construction.
SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 7: Affordable and Clean Energy | Target 7.3: By 2030, double the global rate of improvement in energy efficiency | Indicator 7.3.1: Energy intensity measured in terms of primary energy and GDP |
| SDG 11: Sustainable Cities and Communities | Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management | Indicator 11.6.2: Annual mean levels of fine particulate matter (e.g. PM2.5) in cities (population weighted) |
| SDG 13: Climate Action | Target 13.2: Integrate climate change measures into national policies, strategies, and planning | Indicator 13.2.1: Number of countries that have integrated mitigation, adaptation, impact reduction, and early warning into primary, secondary, and tertiary curricula |
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: irs.gov
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