Hello, I’m Mike Ballard with Ascent Multifamily Accounting. I’m here to talk to you a little bit about energy tax credits. This is something that many multifamily developers forget to follow through on, or maybe they’re unaware of. A simple reason why is because they are too busy developing. An opportunity is, this will help improve the profitability of your development, especially if you’re going to sell them in the first few years.

One of the things you need to consider is today’s codes are so much better than the codes with which the Section 45L Energy Tax Credit is compared against. Therefore, almost all new properties being developed today, almost anywhere in the country, do qualify for this energy tax credit without having to make any modifications to your property.

Let me share with you one example. We had a client in Henderson, NV that was about to sell a 248-unit property that they had recently built in 2015.

The process is two phases:

  1. We ask them to pre-qualify the property. At no charge to the client, we did an assessment based on the plans and the specs that the client provided to us. We determined that at least 75% of their units would qualify for this Section 45L energy tax credit, which looks at basically the energy efficiency, the heating and cooling units, the window energy efficiency, the building environment-the building wrap. We also look at the orientation of the building on the property. So as we looked this property we again identified that more than 75% of the units would qualify.
  2. We did a field survey with our SEER certified engineers, and we able to determine that 100% of the units on this property actually qualified.

And as a result, they were able to get a $496,000 tax credit. On of the things to be aware of is that this is not a tax deduction, but a dollar for dollar tax credit. So they obviously had a gain on their property when they sold it, and they basically took $496,000 off their tax bill, dollar for dollar, based on this Section 45L tax credit.

If you’d like more information on this, don’t hesitate to give us a call. Ask us some tough questions, give us the opportunity to do a free prequalification. Thank you very much.