Navigating Energy Tax Incentives: 179D, 45L, and ITC in a Changing Political Landscape

Over the past year, the Inflation Reduction Act (IRA) has fundamentally reshaped the incentives landscape for energy-efficient buildings and clean energy initiatives. At Walker Reid, we’ve helped building owners, architects, developers, and other stakeholders maximize their tax benefits and navigate new legislative updates—particularly surrounding the 179D deduction, 45L credit, and Investment Tax Credit (ITC). With a swirl of speculation about how a potential Trump administration (or a broader Republican trifecta) might impact the IRA’s clean energy tax credits, it’s worth digging into what might be on the horizon.

A Quick Recap of the IRA’s Clean Energy Tax Credits

Before diving into possible changes, let’s recall what the IRA did for three key incentives:

1. 179D Energy-Efficient Commercial Building Deduction:
   The IRA expanded and extended 179D, increasing the deduction potential for qualifying commercial buildings and making it more accessible. It also introduced bonuses for projects that meet prevailing wage and apprenticeship requirements.
2. 45L Energy-Efficient Home Credit:
   Under the IRA, 45L received a renewed focus on multifamily and single-family residential projects, with higher credit amounts for developments that meet stringent energy requirements (e.g., ENERGY STAR® or zero-energy ready homes).
3. Investment Tax Credit (ITC)
   The ITC remains a linchpin for solar, battery storage, and other qualifying renewable energy projects. The IRA revived and enhanced these credits, aiming to bolster domestic manufacturing and accelerate clean energy deployment.

All these measures were designed to incentivize energy efficiency, cut carbon emissions, and stimulate economic growth in the clean-tech sector.

Possible Shifts Under a Trump (2.0) Administration

Recent insights—from think tanks like Brookings, Hogan Lovells, Rabobank, and others—suggest that a Trump-led administration (or broader Republican control) may attempt to modify or roll back portions of the IRA. While legislative processes can be slow and complicated, it’s important to consider potential outcomes:

1. 1. Scaling Back or Eliminating Certain Provisions
      A Republican-led government could aim to reshape the budget and reduce deficits by rolling back some tax incentives. The 179D deduction and 45L credit—both widely used in the real estate sector—might be revisited to align with Republican fiscal objectives.
   2. Shifting Emphasis Away From Clean Energy
      During the previous Trump administration, there was a notable shift away from subsidizing renewables. The same stance could reemerge, potentially undermining the ITC or introducing new tariffs on solar, wind, or battery components (as noted in FacilitiesDive and Fastmarkets). This could raise project costs and slow market adoption.
   3. Reintroducing Tariffs and Regulatory Hurdles
      Solar and battery industries have thrived thanks to the IRA’s stable incentives. However, if new tariffs or tightened trade policies return, the cost-competitiveness of certain clean technologies could be affected, possibly discouraging large-scale renewable deployments

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1. State-Level Pushback or Adaptation
   Even if federal support wanes, states and municipalities committed to green goals might fill the gaps with local incentives or stricter building code requirements. For building owners, a patchwork approach could complicate compliance but still offer pathways to realize energy-efficient tax benefits.

What This Means for 179D, 45L, and the ITC

• 179D: Although this deduction enjoyed bipartisan support in previous years, any large-scale revamping of the IRA could tighten its eligibility or lower deduction values. However, 179D historically has had a track record of renewal across different administrations, reflecting widespread acknowledgment of its positive economic and environmental impacts.
• 45L: Residential energy-efficiency incentives might be reduced if lawmakers shift budget priorities. Still, with increased consumer demand for sustainable living, many developers remain motivated to build energy-efficient homes—even if the credit is less robust.
• ITC: The ITC has been a cornerstone of the solar and renewable energy movement in the U.S. Overturning the IRA’s expansion may face political headwinds, but there could be attempts to revert it to lower rates or impose new constraints.

How Walker Reid Can Help

Here at Walker Reid, we’re monitoring these legislative developments closely. Our role is not only to provide engineering-based certifications for 179D and 45L but also to keep you informed of potential changes that might affect your building projects and investment strategies. In this rapidly shifting policy environment, we aim to:

1. Advise on Proactive Planning: We stay current with potential policy shifts so you can make timely decisions that maximize tax incentives under current rules—and remain adaptable should changes occur.
2. Offer Technical Expertise: Our engineering approach ensures that your projects achieve energy efficiency levels that qualify for 179D, 45L, and the ITC (where applicable), regardless of evolving guidelines.
3. Coordinate with Your Tax Team: Tax strategies often require collaboration among multiple parties—tax advisors, building owners, and our engineering specialists. We’re committed to ensuring that our certifications align seamlessly with your broader financial and compliance objectives.

The Bottom Line

Whether the political winds shift dramatically or barely at all, energy efficiency and clean energy will continue to be a priority for many builders, developers, and investors. As we anticipate possible changes to the IRA under a Republican-led administration, remain mindful of the still-strong market demand for sustainable properties and the enduring economic benefits of high-performing buildings.
At Walker Reid, our mission doesn’t waiver. We stand ready to guide you through 179D, 45L, and ITC processes—no matter how the policy environment evolves. If you have questions or want to discuss your project’s specific needs in light of these potential changes, feel free to reach out. We’re always here to help you optimize your energy efficiency incentives and secure the best possible returns on your investments.