Lower income multifamily home construction projects implementing clean energy measures are now in line for a bonus tax credit, according to a new ruling announced by the Internal Revenue Service.
In its final rules and procedure guidance, the IRS is saying that a base tax credit equal to 6% of a project’s cost is available to home builders. The credit applies to homes implementing solar and wind technologies, but also includes the use of geothermal and the creation of biogas properties.
According to a joint statement released by both the IRS and Department of Treasury, the goal of the bonus tax credit initiative is to “Increase clean energy facilities in low-income communities, encourage new market participants, and benefit individuals and communities that have experienced adverse health or environmental effects or lacked economic opportunities.”
The tax credit of 6% in some instances could be increased to 10% if the projects in question arelocated on Tribal lands or in qualifying areas with documented high poverty rates.
The rate could go to an even higher 20% if the project takes place in a “qualified low-income residential building,” which may include already existing Section 42 Low Income Housing Tax Credit projects.
In a statement, Wally Adeyemo, Treasury Deputy Secretary, said the new tax credit will have the effect of increasing investment in “underserved communities to ensure they benefit from lower energy costs and reduced pollution and health hazards.”
The Low Income Communities Bonus Credit program has been a long time coming, and was included as a part of the Inflation Reduction Act, which was approved by Congress in the summer of 2022.
The credit program, notes The Hill publication, is part of a larger effort on the part of the Biden administration to “boost renewables such as solar and wind in a bid to meet its ambitious emissions reductions targets.”
By Garry Boulard
