Section 45L Tax Credit Saves Real Estate Construction Firm Over $350,000
November 6, 2023
Company Background
An award-winning residential real estate home builder with projects in Georgia and South Carolina was able to take advantage of the Section 45L Energy Efficient Home Credit (Section 45L) to save more than $350,000. The Company, which was founded in 2004, builds unique residential homes focusing on resource conservation. The Company has five operating locations and 19 employees. Since it was founded, the Company has built more than 4,500 homes generating $7.1 million in revenue.
Situation
Due to its strong reputation in the real estate and construction industry, the Company reached out to Cherry Bekaert for assistance with claiming tax credits. There are a variety of tax credits and incentives that can benefit builders by reducing the cost of construction through financial incentives to invest in energy-efficient or other environmentally friendly features. By providing tax incentives and credits, homes can be more affordable for buyers.
Guidance
After meeting with Cherry Bekaert’s Energy Tax Credits & Incentives team, it was determined that Section 45L would apply. Cherry Bekaert was able to guide the company through the entire assessment and application process.
Recently expanded under the Inflation Reduction Act of 2022 (IRA), Section 45L allows eligible contractors for newly built energy-efficient homes acquired for use as a personal residence to apply for the credit if the home is certified to provide a level of heating and cooling energy consumption that is at least 50% below that of a particular reference home. The energy-saving requirements are to conform to certain Energy Star national program requirements, and the zero-energy ready home program of the Department of Energy. There is a $5,000 maximum for this credit per home or apartment unit, and it is available through 2032. The bonus credit is five times the base amount, which is $1,000 for dwelling units that are part of a building eligible to participate, if the project meets prevailing wage and apprenticeship requirements.
Cherry Bekaert performed the following activities:
- Requested the data required to conduct the study, including a rent roll and the complete architectural and engineering drawings
- Identified the eligible projects
- Provided an initial estimate of the credit benefits and cost benefit analysis
- Oversaw and coordinated the tax credit modeling and inspections that were performed by a qualified engineer Cherry Bekaert had in house or subcontracted
- Prepared the final report and completed the required tax returns after the calculations were complete