Buildings as Infrastructure:
Analyzing the Inflation Reduction Act
In August, President Biden signed into law the Inflation Reduction Act, the product of months of negotiations between Congress and the White House.
The bill includes nearly $370 billion in funding for clean energy and climate initiatives, provisions its backers say will reduce emissions by 40 percent compared with 2005 levels by 2030.
Below is a summary from BuildingAction about what the plan includes for buildings.
Click on the icons to learn what the Inflation Reduction Act has to say about the main issues in sustainable building.
Click on the icons to learn what the plan has to say about the main issues in sustainable building.
The IRA restores and increases tax incentives for green buildings, including:
25C Nonbusiness Energy Property Credit (Sec. 13301)
IRA extends the Nonbusiness Energy Property Credit from December 31, 2021 to December 31, 2032. It permits annual tax credits equal to 30 percent of the amount paid for qualified energy efficiency improvements and residential energy property expenditures, generally up a total $1,200 annual limitation. The provision also adds a tax credit (limited to $150) for home energy audits conducted by certified home energy auditors that provide the most significant and cost-effective energy efficiency improvements provided the taxpayer meets certain substantiation requirements.
25D Residential Clean Energy Credit (Sec. 13302)
IRA extends the tax credit under Section 25D to December 31, 2034, to provide federal income tax credits for investments in residential clean energy (e.g., solar, wind, fuel cell). The credit rate is applied to the cost of such property at the rate of 30 percent for property placed in service between 2022 to 2032, 26 percent in 2033 and 22 percent in 2034. The new provision would eliminate the tax credit for biomass fuel property and replace it with a credit for certain battery storage technology with a capacity of no less than three-kilowatt hours.
179D Energy Efficient Commercial Buildings Deduction (Sec. 13303)
IRA raises the tax deduction under Section 179D for commercial building construction from $1.80 per square foot to up to $2.50-$5.00 per square foot based on extent of energy efficiency and provided certain wage and apprenticeships requirements are satisfied. The IRA expands eligibility for the deduction by decreasing the minimum efficiency requirement from 50 percent to 25 percent. Further, it creates an alternative deduction for energy-efficient improvements and renovations of existing properties, allowing for a similar $2.50-5.00 per square foot credit for retrofitting buildings five years or older with energy-efficient technology. Application of the new and increased deductions applies to dwelling units acquired after December 31, 2022, and the overall extension of the credit applies to dwelling units acquired after December 31, 2021. Additionally, the IRA permits tax exempt organizations to participate in the program by allocating the section 179D deduction for the installation of an energy-efficient commercial building on land owned by a tax-exempt entity to the “person primarily responsible for designing the property,” as opposed to the owner for both new construction and retrofitted buildings.
45L New Energy Efficient Home Credit (Sec. 13304)
IRA extends the energy-efficient home credit in Section 45L through December 31, 2032. It increases the credit amounts for single-family dwelling units that meet the proper Energy Star Single-Family New Homes National Program Requirements or most recent Energy Star Manufactured Home National program requirements to $2,500. Such units that are also certified zero energy homes would receive a $5,000 credit. Moreover, multi-family dwelling units that meet the applicable Energy Star Multifamily New Construction National Program Requirements can receive a $500 credit. If such a multi-family unit is a certified zero energy home, may receive a $1,000 credit. If residences that are part of an eligible building meet certain prevailing wage requirement a bonus credit amount is available at $2,500 for eligible residences and $5,000 for those certified as zero energy.
Extension and Modification of Energy ITC (Sec. 13102)
IRA extends the energy investment tax credit for facilities that begin construction before January 1, 2035. It also makes available a six percent base rate and 30 percent bonus rate for certain geothermal heat pump properties, with the base rate and bonus rate reducing depending on the year construction begins (beginning in 2034).
Extension and Modification of PTC Electricity Produced from Certain Renewable Resources (Sec. 13101)
IRA extends the production tax credit (PTC) for facilities that being construction before January 1, 2025. In addition to the existing eligible technologies of wind, biomass, municipal solid waste, geothermal, hydropower and marine and hydrokinetic energy, this section revives the PTC for solar facilities and extends the PTC for geothermal facilities. Facilities placed in service after December 31, 2021 are eligible to receive full value credits under this section. Facilities may receive a base credit rate of 0.3 cents per kilowatt hour or a bonus credit rate of 1.5 cents per kilowatt hour, so long as they fulfill prevailing wage and apprenticeship requirements. The credit remains subject to an inflation adjustment and the bonus rate would be 2.6 cents per kilowatt hour in 2022. Facilities that satisfy domestic content requirements will receive an increased rate of 10 percent. The credit rate may also be increased by an additional ten percent for qualified facilities in an energy community.
Improving Energy Efficiency or Water Efficiency or Climate Resilience of Affordable Housing (Sec. 30002)
IRA appropriates $837.5 million to HUD for direct loans and grants to fund projects that improve energy efficiency, water efficiency, indoor air quality or sustainability; projects that implement low-emission technologies, materials or processes and projects that address climate resilience. The section also appropriates $60 million for HUD to administer and oversee implementation of the program; $60 million for expenses of contracts administered by the HUD Secretary; $42.5 million for energy and water benchmarking, and the associated data analysis and evaluation, of properties eligible to receive grants or loans. Eligible recipients include owners or sponsors of low-income housing and housing for the elderly or disabled.
IRA provides nearly $9 billion for states to issue rebates to homeowners for whole-home retrofits and for efficient heat pumps, heat pump water heaters, and other electrical equipment. Most funding would be for low- and moderate-income households.
Home Energy Performance-Based, Whole-House Rebates (Sec. 50121)
IRA appropriates $4.3 million to establish a program to extend grants, up to $4,000 or 50 percent of the cost of a project, to a HOMES rebate program to provide homeowners and aggregators rebates for house energy saving retrofits. Rebate applicants must provide a plan outlining reductions in home energy use, comparisons in monthly and hourly weather normalized energy use before and after the retrofit, value savings and quality monitoring. This section encourages the HOMES rebate program to provide rebates to low- and moderate-income households.
High-Efficiency Electric Home Rebate Program (Sec. 50122)
IRA appropriates about $4.3 billion to state energy offices and $225 million to Tribal governments to assist with developing high-efficiency electric home rebate programs. Applicants must present a plan to verify income eligibility for those seeking a rebate.
Rural Energy for America Program (Sec. 22202).
IRA appropriates about $2 billion to USDA for wind, solar, hydrogen, hydropower, geothermal, biomass, and energy efficiency programs for rural farmers and small businesses under the Farm Security and Rural Investment Act of 2002.
Advanced Manufacturing Production Credit (Sec. 13502)
IRA amends the 48C Advanced Manufacturing Production Credit to expand the qualifications for and allocation of advanced energy project credits, including for the production of solar modules, wind turbines and other technologies.
Additional Funding for Electric Loans for Renewable Energy. (Sec. 22201)
IRA appropriates $1 billion to USDA for the cost of generating electricity from renewable sources for resale to rural and nonrural residents, including electricity storage projects.
Enhanced Use of Defense Production Act (Sec. 30001)
IRA provides $500 million to deploy the Defense Production Act to help build out domestic manufacturing of heat pumps and other technologies
Low Emissions Electricity Program (Sec. 60107)
IRA appropriates $17 million to the EPA for consumer-related education and partnerships focused on reducing GHG emissions from domestic electrical generation; $17 million for industry-related outreach and technical assistance on reducing GHG emissions from domestic electrical generation; $17 million for state, local and tribal government-related outreach and technical assistance on reducing GHG emissions from domestic electrical generation; $1 million for the reduction in GHG emission from domestic electricity generation and use; and $18 million for the reduction in GHG emissions from domestic electricity generation.
Tribal Electrification Program. (Sec. 80003)
IRA appropriates about $145 million to the Director of the Bureau of Indian Affairs to provide electricity to unelectrified Tribal homes using zero emissions energy systems.
Greenhouse Gas Reduction Fund (Sec. 60103)
IRA appropriates $7 billion to the Environmental Protection Agency for the establishment of a competitive grant and loan program to support the deployment and use of zero-emission technologies. Furthermore, this section also appropriates about $12 billion for competitive grants for qualified direct and indirect investments; $8 billion for competitive grants for qualified direct and indirect investments specifically in low income and disadvantaged communities; and $30 million for administrative and implementation costs associated with implementing the programs authorized via the section. Qualified projects, activities and technologies include those that reduce or avoid GHG emissions and other forms of air pollution in partnership with the private sector and those that assist communities in reducing or avoiding GHG emission and other forms of air pollution. Eligible applicants include nonprofit organizations that can provide capital for the swift deployment of low and zero-emission products, technologies and services; does not take deposits other than repayments and other revenue received from financial assistance provided via this section; if funded via charitable or public means; and invests in or finances projects alone or with other investors.
GHG Corporate Reporting. (Sec. 60111)
IRA appropriates $5 million to the EPA to support enhanced standardization and transparency regarding corporate climate action commitments and plans to reduce GHG emission; enhanced transparency regarding the progress of such commitments and plans; and enhanced transparency regarding the implementation of such commitments and plans.
Assistance for Latest and Zero Building Energy Code Adoption (Sec. 50131)
IRA appropriates $1 billion for grants to assist certain entities adopt building codes for residential buildings that meet or exceed the 2021 International Energy Conservation Code and commercial buildings that meet or exceed the ANSI/ASHRAE/IES standards. Additionally, grants will assist in implementing plans to achieve compliance with the aforementioned energy codes. Entities that may benefit from this grant include local governments that have the authority to adopt building codes.
Assistance for Federal Buildings (Sec. 60502)
IRA appropriates $250 million billion to the Federal Buildings Fund for the conversion of federal facilities to high-performance green buildings.
Use of Low-Carbon Materials (Sec. 60503)
IRA appropriates $2.15 billion to the Federal Buildings Fund for the acquisition and installation of low-embodied carbon materials and products for the construction of federal buildings.
General Services Administration Emerging Technologies (Sec. 60504)
IRA appropriates $975 million to the Federal Buildings Fund for emerging and sustainable technologies related to sustainability and environmental programs. (Sec. 60504).
Low-Embodied Carbon Labeling for Construction Materials (Sec. 60116)
IRA provides $100 million for the EPA to develop a program for construction materials used in transportation projects and construction materials used for federal buildings, to identify and label low-embodied carbon construction materials and products.
Climate Pollution Reduction Grants (Sec. 60114)
IRA appropriates $250 million to the Environmental Protection Agency for a grant program to cover the costs of developing a plan for the reduction of GHG air pollution and $4.75 billion for the development of a competitive grant program to implement said plans. Eligible applicants include state, municipal and tribal governments and air pollution control agencies.
Environmental and Climate Justice Block Grants (Sec. 60201)
IRA appropriates $2.8 billion to the EPA for grants for community-led air and other pollution monitoring, prevention and remediation as well as investments in low and zero-emission and resiliency technologies, related infrastructure and workforce development that helps reduce GHG emissions; that mitigate climate and health risks from urban heat islands, extreme heat, wood heater emissions and wildfire events; that support climate resilience and adaptation; that reduce indoor toxics and air pollutants; and that facilitate the engagement of disadvantaged communities. Eligible applicants include partnerships between local and tribal governments, institutions of higher education or community-based nonprofit organizations; community-based nonprofit organizations; and a partnership of community-based nonprofit organizations. Furthermore, this section appropriates $200 million to the Environmental Protection Agency to provide technical assistance.
State-Based Home Energy Efficiency Contractor Training Grants (Sec. 50123)
IRA appropriates $200 million to implement programs to train and educate contractors in the installation of home energy efficiency and electrification improvements, including projects eligible for rebates under the HOMES or high-efficiency electric home rebate programs. This section allows states to use funds to reduce the cost of training contractors, provide testing and certification of contractors, and partner with non-profit organizations to develop contracting training programs.
Environmental Product Declaration Assistance (Sec. 60112)
IRA appropriates $250 million to the Environmental Protection Agency for the development and implementation of a program to support the creation, standardization and transparency of environmental product declarations for construction materials and products. Five percent of funding appropriated will be provided to the Environmental Protection Agency to implement and oversee the funding.
Domestic Water Supply Projects (Sec. 50231)
IRA provides $550 million in grants, contracts or financial assistance for domestic water supplies in communities or households that don’t have reliable access to domestic water supplies
Funding to Address Air Pollution at Schools (Sec. 60106)
IRA appropriates $37.5 million to the EPA for grants to monitor and reduce air pollution and GHG emissions at schools in low-income and disadvantaged communities. Furthermore, this section appropriates $12.5 million to the EPA for providing technical assistance to schools in low-income and disadvantaged communities to address environmental issues, to develop school environmental quality plans and to identify and mitigate ongoing air pollution hazards.
Office of Insular Affairs Climate Change Technical Assistance (Sec. 50241)
IRA appropriates $15 million for technical assistance to the U.S. Insular Areas for climate change planning, migration, adaptation and resilience.
FEMA Building Materials Program (Sec. 70006)
IRA empowers the Administrator of the Federal Emergency Management Agency (FEMA) to assist with costs associated with low carbon materials and incentivizing low-carbon and net-zero energy projects.
Tribal Climate Resilience (Sec. 80001)
IRA appropriates $220 million to the Bureau of Indian Affairs for tribal climate resilience and adaptation programs.
Native Hawaiian Climate Resilience (Sec. 80002)
IRA appropriates about $23 million to the Senior Program Director of the Office of Native Hawaiian Relations to support climate resilience and adaptation activities that benefit the Native Hawaiian community.