How is no one talking about 45L tax credit on multifamily?
I keep running into CPA’s and folks all marketing the 45L tax credit as easy money for multifamily projects. From what I have seen on my own projects, several years worth, this credit is practically impossible without substantial systems, i.e. geothermal etc. Just got a report from a client on a past project completed by someone else showing all units in the whole building meeting in a climate zone 4 with R15 walls, and 8.2/15 heat pumps. This same info on the identical project type they had us run isn’t even close to meeting this. I know I can get a report to say whatever you want it to say, but am I missing something, or are people just gaming the system?
GBA Detail Library
A collection of one thousand construction details organized by climate and house part
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This scheme looks suspicious, and I would not trust it right away.
I have no experience with this program, but a quick review says that you need an energy auditor to compare the built units to units built to the 2006 International Energy Conservation Code. I'm taking that to mean that you need a HERS rating of 50% or less when comparing the built unit to the 2006 modeled unit. There are also some specific construction features required to qualify.
A 50% or better HERS rating is not super difficult to get, but it's not trivial either. I haven't actually researched it, but the energy codes have gotten so much tighter in the last few cycles that it's possible you hit 50% just by meeting the 2021 IECC requirements. Maybe just a few tweaks would get you there. That would make the credit nearly a slam-dunk for areas with aggressive code adoption and enforcement and very hard to achieve and still be cost competitive in no-code sort of areas.
And, there are going to be some significant costs associated with getting the credit, from energy auditors, accountants, etc. I wouldn't expect the credit to help at all with a new single family home, except possibly for production built cookie-cutter home. But for larger multifamily projects, the credit could be substantial. FWIW, I don't see that it's been extended past 2021, though I might be missing that. You can reach back 3 years if you think you have project that qualify.
I have never heard about this tax credit before. I will ask someone more professional in the law questions to find out more.
Usually, when I need financial or juridical advice, I go to Mortgage Advice Lincoln (https://lincolnmoneyman.com). They have got the best specialists in the town and are always aware of what is going on in the market. Sometimes it is better to trust professionals than get into some trouble.
In this case, I think that the reports just do not include all the data and the general picture is slightly different. People do that to engage more customers in the business, and those customers realize there is something wrong when it’s too late.