The Inflation Reduction Act (IRA) and Commercial Properties

The Inflation Reduction Act (IRA) of 2022 was signed into law by President Biden on August 16, 2022. This truly historic law includes $369 billion of federal climate-related funding. It is designed to reduce the nation’s carbon footprint by 40 percent of 2005 levels by 2030.

There are many things we know about the IRA and other implementation details that are being developed. Multiple federal and state agencies have yet to issue regulations, guidance, or distribute grants to determine how to move these historic amounts of dollars. Much of the IRA funding is in the form of tax incentives (credits, rebates, and direct pay) which are essentially guaranteed and will not run out based on demand.

The Philadelphia Energy Authority and the Philadelphia Office of Sustainability are working together to ensure that Philadelphia is best positioned to maximize opportunities from the IRA. We believe it is reasonable to target $5 billion in funding for Philadelphia in the form of formula and competitive grants, rebates and tax credits (institutional and consumer). This level of investment will generate approximately 50,000 clean energy jobs. Of this $5 billion, we anticipate that the majority of this funding will come to Philadelphia in the form of tax credits and payments.

Four Primary Provisions of IRA Relevant to Commercial Property Owners

  1. 179D tax deduction for energy efficiency improvements to existing and new commercial buildings
  2. 45L tax credit  for energy efficiency in residential buildings – multifamily and single family
  3. Section 48 Investment Tax Credit (ITC) for renewable energy including solar, combined heat and power (CHP), and energy storage
  4. 30c tax credit for installation Electrical Vehicle (EV) charging stations (only applies to buildings in low income and rural areas)

They are broken out below by Energy Efficiency, Renewables/Solar and EV charging

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