By Monte Hilleman – Vice President of Environmental Resiliency, Compliance & Investment

Sustainable Investment Group (SIG)

As the 2024 tax season approaches, understanding the implications of the Inflation Reduction Act (IRA) is crucial for businesses in commercial real estate. This guide aims to help you identify the opportunities presented by the IRA, ensuring you are informed and prepared for your tax professionals’ questions and your first IRA filing.

Understanding IRA Tax Benefits:

The IRA introduces a range of tax benefits aimed at encouraging sustainable practices in construction and development. From tax credits for energy-efficient upgrades to incentives for renewable energy integration, these benefits are designed not only to support your business’s bottom line but also to advance our collective goal towards a more sustainable future as we decarbonize the built environment.

Key Steps for Securing IRA Incentives:

1. Review Your 2023 Projects: Start by reviewing all your construction development activities in 2023, from simple equipment swaps, to minor and major retrofits, to whole building or portfolio-wide decarbonization projects. Identify any projects that incorporated energy-efficient technologies or renewable energy sources. Work with your finance and/or accounting department, tax professionals, and qualified consultants to understand the potential impacts of IRA incentives on other existing or planned tax strategies.
2. Understand Eligibility Criteria: Familiarize yourself with the specific eligibility criteria for each type of tax benefit. In order to monetize the IRA’s provisions numerous green design, size/scale, geographic and socio-demographic factors, technology, energy performance, carbon emissions, certifications and other standards need to be met and documented . For a more in-depth understanding, start with the official IRS website or the U.S. Department of Energy’s page on the IRA (URL).
3. Gather Information & Documentation: Collect all relevant information and documents, such as receipts, invoices, and certifications, that prove your investment in sustainable practices. Key information and documents may include:
   • Document start dates, completion dates and ‘placed in service’ dates.
   • Fully executed contracts and financing documents;
   • Contractor payment applications with a detailed schedule of values to allow various portions of building systems to be documented as eligible “energy property” or other requirements under the IRA and proof of payment for said payment applications;
   • Weekly Certified Payroll Reports (federal form WH-347): to document Prevailing Wages were paid on the project to justify the ‘5x bonus’ for the IRA Section 48 Investment Tax Credit. Confirm compliance via internal or 3^rd party confirmation;
   • Similarly for compliance with the ‘5x Bonus’ Apprenticeship requirements, documentation of apprentice labor hours in compliance with IRA, or the documentation required to document the ‘Good Faith Effort’ exception, and;
   • Cost segregation, cost allocation, or other financial and engineering analysis and reports supporting the eligible basis for IRA tax credits, deductions, grants and loans
4. Create a Plan for Compliance: Develop a strategic approach to ensure all aspects of your projects align with IRA requirements. Outline roles, responsibilities and scopes of work for various team members, establish compliance goals, develop a roadmap for achieving them, and regularly monitor and adjust your strategies to maintain alignment with IRA standards.

Maximizing Your Benefits:

To truly capitalize on the IRA’s tax benefits, consult with sustainability experts who can provide insights into optimizing your projects for maximum incentives. Remember, the goal is not just to secure immediate financial rewards but to integrate sustainable practices into the core of your business strategy and drive green value creation.

The 2024 tax season presents a unique opportunity for businesses in commercial real estate to benefit from their commitment to sustainability. By understanding and effectively navigating IRA tax benefits, you can not only enhance your financial returns but also contribute significantly to environmental sustainability.

If you’re looking to make the most of IRA tax benefits for your business, connect with SIG’s expert, Monte Hilleman, for personalized guidance. Monte’s expertise in green financing and the IRA can help ensure your business is well-positioned to capture these incentives. Reach out to Monte here.

Monte Hilleman, an expert in sustainable urban development and leader of the Climate Investment Solutions department at Sustainable Investment Group (SIG), has a rich background in financing decarbonization efforts and sustainable redevelopment. Educated in Urban Infrastructure and Ecology at the University of Minnesota, he is also a licensed MN Commercial Real Estate Broker and a noted lecturer. His career spans two decades, including a significant tenure at the Saint Paul Port Authority and accolades like Brownfield Renewal Magazine’s Person of the Year. Hilleman’s work focuses on green financing, Net Zero Energy projects, and revitalizing urban cores, showcasing his commitment to sustainable growth and innovation. Reach out to Monte here.

MN Commercial Real Estate Broker

Minneapolis, MN

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