Section 45L Energy Tax Credit

Section 45L Energy Tax Credit


When Congress passed the American Taxpayer Relief Act of 2012, it extended the Section 45L tax credit, which provides eligible contractors of homes -including apartments -, with a tax credit of $2,000 per energy efficient unit. The bill extended this credit until 12/31/13.


Because of the energy efficient standards met by most apartments built in the last five years, most current apartments exceed the standards required by the program. To qualify, the complex must be:


*Located in the U.S.;

*Was substantially completed after August 8, 2005 but before the end of 2013; and

*Meet the energy saving requirements of 45L of the IRC.


The credit actually goes to the “eligible contractor,” which is the person who built the home. This person must own and have basis in the apartment complex during the construction. This does not have to be the general contractor; a developer will meet the requirement as an “eligible contractor.” It may be an individual, trust, partnership, association, company or corporation.


The apartment complex must provide self-contained dwelling units, and may be no more than three stories in height.


While the depreciable basis of the building is reduced by the amount of the credit, this substantial credit can provide a significant benefit for apartment owners – even for LIHTC properties.


If you developed a property within the timeframe outlined, I recommend contacting your accountant for advice relating to your specific situation to see if the credit may be workable for you.