On September 27, 2023, the IRS issued Notice 2023-65 providing additional guidance on the 45L tax credit.
The new guidance included answers to the following questions:
- Who is eligible to take the credit?
- The person who owned the home/unit (had basis) during construction or production (manufactured home)
- How does one determine the amount of the credit?
- By the type of certification acquired
- Whether or not the prevailing wage requirements have been met (multifamily only)
- What are the savings requirements?
- Refer to Energy Star® and Zero Energy Ready Home (ZERH) program requirements directly
- What are the certification requirements?
- Refer to Energy Star and ZERH program requirements directly
- How does one substantiate the requirements?
- Retain in tax records (at minimum)
- Certification records (Energy Star or ZERH)
- Address of the home/unit
- Prevailing wage documentation (if applicable)
- Status of eligibility as a contractor
- Information of the acquisition of the home from the taxpayer (or lease information)
- Retain in tax records (at minimum)
The key takeaway of this notice was firming up the requirement that beginning in 2023, only properties that are Energy Star or ZERH program certified will qualify for the credit. There will no longer be a separate modeling process.
The nature of Energy Star and ZERH certification requires early planning during the development stage of the property. Let’s plan ahead and have a conversation about this specialized tax credit well before construction begins.
If your client is a residential builder, please reach out to a professional at Forvis Mazars for assistance in obtaining certifications needed to qualify for the 45L tax credit.