Tax Incentives for Green Building and Clean Energy Repealed in New Law

The bipartisan tradition of supporting tax incentives for homegrown energy industries has come to an end, as Congress passed and President Trump signed into law a bill that repeals entire categories of tax law that have been in place for at least 20 years. The terminated incentives include many that have been driving new investment in green buildings and were just getting started since they were updated in the Inflation Reduction Act (IRA) of 2022. USGBC strongly opposed the repeals, as they will have significant effects on tax incentives for green buildings, climate, and energy.

Key Takeaways:

The Sec. 45L tax credit for new home construction, including multifamily projects, terminates on June 30, 2026, meaning that new housing must be completed and sold or leased before that deadline.
The Sec. 48E investment tax credit for clean energy projects, including wind and solar, is terminated specifically for these technologies, but not for others, and requires wind and solar projects to start construction within one year of the law's enactment or be completed and operational by Dec. 31, 2027.
Storage and other zero-emissions technologies, such as hydropower and nuclear energy, maintain eligibility for the credit through 2033, with a phasedown in 2034 and 2035.
The investment tax credit for geothermal heat pumps remains unchanged and in place through 2034.
The Sec. 30C credit for alternative vehicle fueling infrastructure, including EV charging equipment, requires projects to be placed into service by June 30, 2026.
Other electric vehicle incentives for consumers and businesses purchasing or leasing electric vehicles were even more abruptly ended on Sept. 30 of this year.
The Sec. 179D tax deduction for energy efficiency improvements to commercial buildings requires projects to begin construction by June 30, 2026.
The Secs. 25C and 25D tax credits for homeowners making energy efficiency improvements or installing renewable energy systems, such as solar or geothermal heat pumps, requires projects to be placed into service by Dec. 31, 2025.
The bill imposes complex and challenging new rules for demonstrating that a project did not receive investment or influence from "foreign entities of concern," such as China.
The incentive for investments in geothermal heat pumps used in commercial buildings, which fall under the Sec. 48(a) investment tax credit, is largely unchanged and remains in place through 2034.
Investments in energy storage systems in commercial buildings, which fall under the Sec. 48E investment tax credit, remain fully in place for projects starting construction through 2033, with a phasedown in 2034 and 2035.
The law maintained "direct pay" and transferability features that allow public and nonprofit entities, such as municipalities, churches, universities, and schools, to use the incentives for their projects even when they don't have federal tax liability and that allow businesses to transfer the incentive in exchange for cash.
For low-income communities, the law expands and extends two key tax credit programs supporting private investment in low-income housing and communities, the Low-Income Housing Tax Credit (LIHTC) and the New Markets Tax Credit (NMTC).
The LIHTC has been significantly expanded, with a 12% increase in state allocations for the 9% LIHTC and a permanent lowering of the required private activity bond financing threshold for the 4% LIHTC.
The NMTC program has been made permanent under the law.
The LIHTC is expected to support the financing of an additional 1.22 million rental homes over the next 10 years.
The NMTC program is expected to provide low-cost, flexible financing to qualifying businesses or nonprofits in low-income communities.
The law rescinds unobligated balances for a variety of grant and financing programs created under the IRA, including many that have a strong nexus with the collective work on green building and clean energy.
The rescinded funding includes:

+ $421 million to the General Services Administration (GSA) for low-carbon materials for federal buildings.

+ $227 million for GSA emerging and sustainable technologies.

+ $46 million for the GSA Federal Buildings Fund.

+ $19 million for the Greenhouse Gas Reduction Fund.

+ $226 million for environmental product declaration assistance at EPA.

+ $92 million for the Climate Pollution Reduction Grant program for local and state governments.

+ $70 million for improved labeling for low-embodied carbon construction materials.

+ $138 million for The Department of Housing and Urban Development's Green and Resilient Retrofit Program for multifamily housing.

+ $516 million for environmental and climate justice block grants at EPA.

Statistics:

20 years: length of time tax incentives have been in place.
2026: deadline for new housing to be completed and sold or leased for Sec. 45L tax credit.
2032: previous expiration date for Sec. 45L tax credit.
2027: deadline for wind and solar projects to start construction or be completed and operational.
2033: deadline for storage and other zero-emissions technologies to maintain eligibility for the credit.
2034: deadline for geothermal heat pumps to maintain eligibility for the credit.
2035: deadline for continuation of energy storage systems in commercial buildings.
1.22 million: additional rental homes expected to be financed by the LIHTC over the next 10 years.
12%: increase in state allocations for the 9% LIHTC.
4%: LIHTC credit reserved for new construction or substantial rehabilitation.
25%: required private activity bond financing threshold for the 4% LIHTC.
$421 million: amount of funding rescinded for low-carbon materials for federal buildings.
$227 million: amount of funding rescinded for GSA emerging and sustainable technologies.
$46 million: amount of funding rescinded for the GSA Federal Buildings Fund.
$19 million: amount of funding rescinded for the Greenhouse Gas Reduction Fund.
$226 million: amount of funding rescinded for environmental product declaration assistance at EPA.
$92 million: amount of funding rescinded for the Climate Pollution Reduction Grant program for local and state governments.
$70 million: amount of funding rescinded for improved labeling for low-embodied carbon construction materials.
$138 million: amount of funding rescinded for The Department of Housing and Urban Development's Green and Resilient Retrofit Program for multifamily housing.
$516 million: amount of funding rescinded for environmental and climate justice block grants at EPA.
$2.1 billion: total IRA funding for low-carbon materials for federal buildings.
$975 million: total IRA funding for GSA emerging and sustainable technologies.
$250 million: total IRA funding for the GSA Federal Buildings Fund.
$27 billion: total funding for the Greenhouse Gas Reduction Fund.
$5 billion: total IRA funding for the Climate Pollution Reduction Grant program for local and state governments.
$100 million: total IRA funding for improved labeling for low-embodied carbon construction materials.
$1 billion: total IRA funding for grants and loan authority for The Department of Housing and Urban Development's Green and Resilient Retrofit Program for multifamily housing.
$3 billion: total IRA funding for environmental and climate justice block grants at EPA.

Sources:

US Green Building Council press release.
Inflation Reduction Act (IRA) of 2022.
Congressional Budget Office (CBO) report on IRA funding.
General Services Administration (GSA) report on low-carbon materials for federal buildings.
Environmental Protection Agency (EPA) report on environmental and climate justice block grants.
Department of Housing and Urban Development (HUD) report on The Green and Resilient Retrofit Program for multifamily housing.
New Markets Tax Credit (NMTC) program report.
Low-Income Housing Tax Credit (LIHTC) program report.
Greenhouse Gas Reduction Fund report.