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Tax incentives that assist clean energy projects deployed by the real estate sector are crucial to reducing the built environment’s carbon footprint and achieving national climate goals.
The Inflation Reduction Act of 2022 (IRA) was signed into law by President Biden on August 16, 2022. The $790 billion legislation — the largest federal clean energy investment in U.S. history — includes nearly $370 billion in climate spending that affects “clean energy” incentives important to commercial real estate.
The Roundtable has encouraged Congress for years to make clean energy tax incentives more usable for building owners, managers, and financiers — and more impactful to help meet national GHG reduction goals.
Landmark legislation enacted in 2022 — the Inflation Reduction Act (IRA) — is the most sweeping action by Congress to date to tackle the climate crisis. Its overhaul of the federal tax code provides more opportunities for the commercial real estate industry to help meet national climate goals. The Roundtable has produced Fact Sheets on the law’s ramifications for commercial real estate — see the Background and Resources areas below.
Federal agencies — particularly, the Treasury and Energy Departments, and the Environmental Protection Agency — must implement this bedrock law in a manner that accelerates public-private partnerships (P3s) in efficiency retrofits, building electrification, on-site renewable energy generation, EV charging installations, and an electric grid that increasingly relies on renewable energy sources.
The Roundtable will continue advocating for meaningful tax incentives that encourage clean energy projects of all sorts, thereby creating well-paying jobs in the construction, design, and energy sectors; boosting equipment manufacturing; enhancing our country’s energy independence; and reducing the built environment’s carbon footprint.
Under the Inflation Reduction Act (IRA), entities (such as REITs) that historically might not have been able to take advantage of tax credits now have the option to monetize and transfer some of these incentives to non-related companies such as contractors, service providers, and even tenants.
The IRA also allows opportunities to super-charge tax incentives and increase their benefits if a project is connected to low-income housing, located in economically distressed areas, uses materials made in the U.S., or pays prevailing wages to laborers and mechanics.
Roundtable IRA Fact Sheets:
The U.S. Environmental Protection Agency’s ENERGY STAR for Certification for Buildings program is a proven platform for building owners and managers to “label” their assets as top energy efficiency performers in the marketplace.
Investors, tenants, and employees seek buildings and workplaces with ENERGY STAR ratings because they signal well-managed, profitable assets with reduced carbon footprints.
To complement its “whole building” rating program, in 2018, the EPA issued its first labels to recognize commercial tenants for high-performance design and construction of leased spaces.
The behavior, space design, and equipment choices of tenants can account for more than 50% of energy consumed in commercial buildings—beyond the owner’s ability to control. Expanding EPA’s ENERGY STAR program to add tenant-based recognition is thus a key objective to achieve better efficiency, lower energy use, and a reduced carbon footprint attributable to U.S. real estate.
