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. 

On Wednesday, the Federal Reserve reduced interest rates by half a percentage point, marking the
first rate cut in four years. The target rate now stands at 4.75-5%, with important implications for the commercial real estate industry and broader economy. (Federal Reserve Press Release | Washington Post, Sept. 18)

Fed’s Decision           

• Fed Chair Jerome Powell emphasized that while inflation is easing, falling below 3% from a peak of 9.1% in June 2022, the labor market needs support to prevent further weakening.

• At a news conference after the meeting, Chair Powell said, “This recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation.” (WSJ, Sept. 18)

• The Summary of Economic Projections (SEP) report released this week forecasts an additional half-point rate cut by December, signaling two more quarter-point reductions in 2024.  (Axios, Sept. 18)

• Fed officials project the target rate will decrease to 3.4% by the end of 2025, indicating four quarter-point cuts over the next year.    

Impacts on CRE    

• The rate cut comes at a time when the real estate capital markets landscape remains challenging. However, this move could improve credit capacity and capital availability and help stabilize asset values.

• Prior to the rate cut, The Roundtable’s Q3 2024 Sentiment Index revealed that a majority of respondents expected improvements in the availability of both equity capital (71%) and debt capital (60%) within the next year.

• Meanwhile, 88% of respondents expressed optimism that asset values will either increase (57%) or remain stable (31%) over the same period. Stay tuned for The Roundtable’s Q4 Sentiment Index, which will provide further insights into how the rate adjustment is impacting real estate markets.

Looking Ahead

• Chair Powell added that decisions regarding further rate adjustments will be data-driven and made on a meeting-to-meeting basis.

• Roundtable President & CEO Jeffrey DeBoer commented on the impact for commercial real estate: "The Fed’s rate cuts will bring much-needed relief to the industry. Lower borrowing costs could help address the wave of maturing commercial real estate loans, reignite stalled projects and encourage new investments, helping stabilize property values as we move into a more favorable lending environment."

• A mix of lower rates and corporate decisions like Amazon’s office return could help stabilize the office sector still grappling with the post-pandemic shift toward remote work. (Business Insider, Sept. 18)

• This environment also presents multifamily investors with opportunities to refinance properties, reduce payments, improve cash flow, and capitalize on lower borrowing costs, while exploring new asset classes as valuations stabilize. (JPMorgan, Sept. 19)

The Fed has two more opportunities to adjust interest rates in 2024, with meetings scheduled for November 6-7 and December 17-18.