Green Energy Incentives and the One Big Beautiful Bill Act

Brady Bryan, Principal and National Leader of Real Property Income Tax Incentives at Ryan, recently discussed the highlights, concerns, and opportunities related to green energy incentives and how they are impacted by the One Big Beautiful Bill Act (OBBBA).

Green Energy Incentives and the One Big Beautiful Bill Act

Interviewer: Let’s first address the deduction under IRC Section 179D for Energy Efficient Commercial Buildings. Can you remind readers what this deduction is for?

Bryan: Sure, this deduction allows owners of buildings or designers of energy efficient commercial building property (EECBP) to claim a tax deduction between $0.50 to $5.00 per square foot for installing qualifying energy efficient building systems: HVAC, lighting, hot water, and building envelope.

Interviewer: How has this deduction changed under OBBBA?

Bryan: The main change to the deduction made by OBBBA is a sunset provision. For a project to qualify for the deduction, the project must begin construction on or before June 30, 2026. This is the 10th such type of legislative change of 179D in its more than 20-year history so far.

Interviewer: Who qualifies for this deduction?

Bryan: Two groups generally qualify for the deduction. The first consists of commercial building owners who install qualifying EECBP in the buildings they own.

The second group are “designers,” and this group involves the design and installation of EECBP in a building owned by a tax-exempt entity (e.g., a government building). A designer is one who is primarily responsible for the technical specifications and design of the EECBP. Designers can be anyone, including architects, engineers, and contractors.

Interviewer: What should businesses do now to take advantage of the deduction?

Bryan: To ensure the availability of the deduction, businesses should, if possible, consider accelerating or prioritizing any planned construction projects to ensure they begin construction on or before June 30, 2026. Also expect more competition at the “finish line.” Obtaining the allocation letter from the non-profit/government entity is the critical path in obtaining these incentives.

Businesses should not wait. Now is the time to consider all projects where construction is already complete in 2022 or later, or where construction may begin in 2026.

More players including general contractors, subcontractors, mechanical and electrical contractors, mechanical and electrical engineering firms, and architecture firms, in addition to energy service companies, will all be vying for these allocation letters.

Interviewer: Let’s shift the discussion to the credit for energy-efficient homes under IRC Section 45L. What were the changes made to this credit by OBBBA?

Bryan: Similar to the changes to Section 179D, the Section 45L credit is set to expire on June 30, 2026. In this case, qualifying homes must be leased or sold by June 30, 2026.

Interviewer: What should real estate developers do now to take advantage of the credit?

Bryan: Developers must act quickly to ensure they meet the expiration date. 2022 has a lower/different qualification standard and may still be available for most taxpayers. For 2023 and later, developers must have had their homes/units Energy Star Certified.

Interviewer: Thank you for your time today.

Please see the following links for on-demand access to Ryan’s OBBBA webinars:

Contact Ryan’s green energy expert below to maximize incentives, meet critical deadlines, and optimize your energy-efficient projects under OBBBA.

Contact:
Brady Bryan
Principal
Ryan
brady.bryan@ryan.com