Who knew when I started Green Econome in 2009 that my previous 30 years in accounting and finance would help building owners understand the opportunities provided by tax benefits in the Inflation Reduction Act (IRA), signed into law by President Biden in late 2022?

This significant package is heavily focused on how commercial real estate owners can invest in their properties to reduce operating costs and emissions by taking advantage of tax deductions and credits. Providing cash flow to owners, some of these benefits can be transferred to others, and non-profits can receive cash tax payments to help pay for these projects.

Let’s break down one of my favorites: Section 179D

This is a tax deduction. For those still learning about financing, a tax deduction is a reduction to the property’s income before tax liabilities are calculated. So, any of these deductions should be considered against the owner’s tax rate.

Section 179D has been around for many years and there is an opportunity to take the original deduction for 2020, 2021, and 2022. The new version, I call “IRA Section 179D” is effective with projects going into service after 1/1/2023.

When I started to research this deduction to help our clients increase their cash flow for these projects, it wasn’t clear that there were two specific periods to be considered for this deduction. The initial period is effective from 1/1/2023 – 12/31/2026. Beginning 1/1/2027, we have a new version (which is not as beneficial).

How is 179D calculated for your new construction or large retrofit project?

It all starts with an energy model. What is this? Well, it is a virtual design of your building. For the initial period, the energy model is a design of the property with the mechanical standards established by ASHRAE 90.1 2007. Note 2007! If you have a building that you are retrofitting in California to Title 24 2022, you are already way more efficient. LEED certification requires buildings to meet ASHRAE 90.1 2010 standards, so again, 2007 is much less efficient.

Next, the energy model is designed to the current material and efficiency standards the building is being built to or retrofit. The driver for this deduction is the “efficiency gain,” which is the difference between the energy used at the ASHRAE 901. 2007 standard vs. the current building code standard. For those projects requiring prevailing rates, the deduction is 5 times higher, which means it can be very significant.

The calculation is the sq. footage of the property multiplied by the corresponding rate based on the efficiency gain. This value is then multiplied by the owner’s tax rate... and there you have it: the anticipated tax deduction! The larger the property, the higher the deduction, but I believe smaller buildings may benefit based on the level of improvements planned.

Efficiency projects built together, pay together

When claiming the 179D tax deduction, it is most beneficial to have completed all the projects together in the same year. Green Econome is a woman-owned, full-service energy and water efficiency project construction and consulting company with over 20 years of combined experience. We can help explain these complex tax benefits and match you with a 179D specialist. Furthermore, we can recommend solutions that will increase the NOI of your property and increase market value. Get the ball rolling and reach out to Green Econome’s founder and CEO, Marika Erdely.



I love a good federal tax credit since it is a reduction of the tax liability of the owner. Essentially, this is pure cash flow to the owner of the property. What could be better? I have two favorites improved by the Inflation Reduction Act (IRA): the Federal Solar Investment Tax Credits (ITC) for Solar and Battery Storage, and a new 45L for residential construction and major renovations.

Federal Investment Tax Credits (ITC) for Solar and Battery Storage

While there is a suite of tax credits under the ITC for residential, businesses, and manufacturers, Let’s focus on the ITC for businesses. The investment tax credit (ITC) is a federal tax credit that reduces the federal income tax liability for a percentage of the cost of a solar or storage system that is installed during the tax year. Before the passage of the Inflation Reduction Act, this incentive was 26%, but with the help of the IRA, it is back up to 30% of the project cost until 2033. (U.S. Department of Energy).

There are two bonus tax credits at 10% a pop if they are attainable.

  • Energy Community Bonus: An energy community is an area identified as a brownfield site and/or locations experiencing high unemployment and fossil fuel investment. Looking at the DOE Energy Community map, most of Los Angeles County is currently designated as an energy community. Unfortunately, this is a temporary map and we in the industry aren’t exactly sure when the map is to be reset and areas may drop off.
  • Domestic Content Bonus: This bonus requires a percentage (starting at 40%) of project materials (by cost) to be produced in the U.S. It is difficult to attain the second additional 10% solar tax credit. I’m told businesses are hard at work on this, making domestic materials readily available. Hooray for U.S. manufacturing!

These projects also benefit from Federal MACRS Bonus Depreciation and State Depreciation (which is, again, a tax deduction—reducing the income of the property for tax purposes).

By the Numbers: Cash Flow for Solar and Battery Storage Projects

Let’s examine some examples of tax savings when installing a solar PV system or an energy storage system. Many people aren’t aware of just how much these tax incentives can help to cover the cost of the project. The numbers speak for themselves.

Energy Storage System (90kW/220kWh)

Gross System Cost  $ 318,244.00
IRA ITC (30% + 10% Energy Community)  $ (127,298.00) -40%
SCE SGIP Rebate Program to Owner  $ (55,750.00) -18%
Federal MACRS Bonus Depreciation  $ (53,465.00) -17%
State (CA) MACRS Depreciation  $ (31,824.00) -10%
Net Project Cost to Owner  $ 49,907.00 -84%
Estimated Electricity Savings (Year 1)  $ 20,939.00  
Estimated Total Net Savings (15 Years)  $ 260,574.00
Payback Period 3.1 Years

Solar PV System (29.4 kW-DC)

Gross System Cost  $ 110,344.00
IRA ITC (30% + 10% Energy Community)  $ (44,137.00) -40%
Federal MACRS Bonus Depreciation  $ (27,807.00) -25%
State (CA) MACRS Depreciation  $ (8,828.00) -8%
Net Project Cost to Owner  $ 29,572.00 -73%
Estimated Annual Electricity Savings (Year 1)  $ 9,700.00
Estimated Total Net Savings (25 Years)  $ 419,117.00
Payback Period  3.8 Years

Tax Benefits Can Cover Over 80% of the Project Cost

The tables above illustrate how HUGE these tax incentives are. In just over 3 years, the entire cost of the energy storage system will have paid itself back. The battery can offset peak kW demand costs in high Time-of-Use (TOU) rates. Looking at the numbers, these energy efficiency projects are a no-brainer.

Green Econome Project Consulting, Construction & Incentive Management Services Have You Covered

Green Econome is here to guide you through the decision-making process and provide you with maximum energy and tax savings! We are a woman-owned, full-service energy and water efficiency construction and consulting company with over 20 years of combined experience. If you have a building for which you are considering solar and battery storage and would like a no-obligation quote, please contact CEO, Marika Erdely.


What is the 45L Tax Credit?

The Inflation Reduction Act amended Section 45L, a tax credit to incentivize the new development or major renovation of energy-efficient residential properties for lease or sale. The new Section 45L provisions include two tiers of credits for eligible buildings and units certified to applicable ENERGY STAR® residential and U.S. Department of Energy Zero Energy Ready Home (ZERH) program requirements. The updated Section 45L is extended to qualified residential properties acquired from January 1, 2023, through December 31, 2032. The tax credit's value per dwelling unit varies, reaching a maximum of $5,000, based on factors including the home type, number of stories, and compliance with energy efficiency requirements.

This residential construction tax credit is fantastic if you are already constructing or retrofitting at high efficiency and want to recognize your residential project as ENERGY STAR® or ZERH certified right off the bat.

Qualifying for the Section 45L Tax Credit

Here are the basic eligibility requirements for homes acquired and/or completed after December 31, 2022, and located in the U.S., wanting to claim Section 45L (as found on the Department of Energy and IRS websites). It is important to note that there are differences in terms for single-family vs. multi-family homes. Please contact Green Econome for detailed information. This is a basic outline:

Single Family Homes

  1. Certified under the applicable ENERGY STAR Single-Family New Homes (National} Program Requirements.
  2. Certified under the most recent ENERGY STAR Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), or
  3. Certified under the most recent ENERGY STAR Manufactured Home National program requirements as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.

Multi-Family Homes

  1. Certified under the most recent ENERGY STAR Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later), and
  2. Certified under the most recent ENERGY STAR Multifamily New Construction Regional Program Requirements applicable to its location. (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later).

All Eligible Dwelling Units

Must be certified as a zero-energy ready home under the Zero Energy Ready Home (ZERH) program of the Department of Energy as in effect on January 1, 2023 (or any successor program determined by the Secretary).

What are the Additional Benefits to the 45L Amended by the Inflation Reduction Act?

  • Increased credits: for homes acquired between 2023-2032.
  • Prevailing wage kicker: tax credit is higher for multifamily projects that meet the prevailing wage requirements.
  • Double the savings! 45L tax credit can also be utilized with the IRA’s Section 179D for buildings over 4 stories.

Green Econome Helps Maximize Savings on your Multifamily Projects

While Green Econome is not a tax professional, we work with vetted partners and offer incentive and financing management, as well as project construction and building certifications for multifamily properties. We are a woman-owned, full-service energy and water efficiency construction and consulting company, with over 20 years of combined experience. Tax credits can be complicated, don’t miss out on crucial savings and upgrading your building’s energy efficiency! Contact our founder and CEO Marika Erdely for a consultation.



The latest focus in sustainable commercial real estate is on “Environmental, Social, and Governance,” also known as ESG. ESG has received attention from regulators and investors, and, according to a recent report from Deloitte,  “sustainability has become a strategic imperative across industries”. Real estate professionals need to begin focusing on how ESG can impact portfolios and policy. Let's identify:

  1. What is ESG and how will it affect commercial real estate?
  2. How will the Inflation Reduction Act benefit my real estate portfolio?

Here is a simple table identifying some of the elements of ESG:

Setting the Standard: The SEC Proposed Ruling

Soon, public companies will need to report on the three ESG categories, also known as an ESG Strategy, to their investors. The SEC’s proposed Rule on Climate Disclosure gives companies a roadmap for ESG reporting and requires disclosures related to climate-related risks that could have an impact on their businesses, whether it’s their day-to-day operations or a financial impact on their real estate assets.

The SEC proposed reporting will be part of the public corporation's quarterly and annual disclosures and will detail the company’s carbon footprint and include reporting on greenhouse gas emissions from real estate and the climate-related risks to those assets. At NAREIT’s ESG conference I attended this fall, several panelists suggested that insurance companies and banking institutions will be considering climate disclosures in their financial metrics. Additionally, it was mentioned that investors from the European Union would also be looking at ESG disclosures when considering investments in the U.S. Most public companies have been focusing on their ESG strategies, and the process of gathering data for this year’s ESG disclosures is already underway.

Privately-Held Companies and Building Owners Can Benefit

What about private companies, and the private commercial real estate owners that lease to space public companies? Private owners should also focus on having an energy-efficient property and should not ignore the trend toward ESG.

The “E” in the ESG framework stands for “environmental,” which refers in part, to real estate and the efficiency of buildings. All buildings emit carbon emissions, and these emissions (in the forms of kWh and therms) can be broken down into three kinds: Scopes 1, 2, and 3.

  • Scope 1: Direct emissions that stem from sources that are owned, or controlled by the organization, such as company vehicles and the fuel they burn, process emissions from industrial activities, leaks from refrigeration, etc.
  • Scope 2: Indirect emissions that arise from the generation of purchased electricity, heating, cooling, and steam (Any utility bill creates emissions such as electricity or gas used by the building)
  • Scope 3: Other indirect emissions that are directly from the supply chain of goods and services that the public company purchases. (This is the largest scope and most complicated coming from the organization’s operations, purchasing and selling goods, such as leased assets, business travel, and employee commuting)

Initially, Scope 1 and 2 emissions will be required to be disclosed by the SEC. However, public companies will soon be mandated to report Scope 3 emissions as well.

Mandated reporting means that if you have a tenant in one of your buildings that is providing products to a public company, the tenant will soon have to be reporting on their building’s emissions and activities. There will then be an effort to reduce those emissions, even if your building is not operated by a public company.

How Do You Measure Your Property’s Emissions?

As with anything new, standards and protocols are being established, along with a host of innovative technologies to harness data. As a trusted platform, Green Econome utilizes ENERGY STAR® Portfolio Manager, which gives owners data that can be used to calculate the property’s total emissions. The EPA is actively developing the platform further, to better meet the demands of GHG accounting and scope emissions reporting.

Green Econome takes a systematic approach to ESG, along with a team of advisors, we measure, identify opportunities, implement, and analyze results to ensure you are on target to achieve your environmental goals. If building certification is part of your strategy, we can fulfill those as well.

Inflation Reduction Act: Tax Strategies and Incentives for Property Owners

There’s good news! There are many financial benefits from the new Inflation Reduction Act of 2022 (IRA) to commercial property owners and developers.

Personally, I like the investment tax credit (ITC) known as the federal solar tax credit and the fact that it is now back up from 26% to 30% of the total project cost through 2033. Currently, our solar pv projects are benefiting from 58% of the project cost being covered by this tax credit and federal and state depreciation deductions.

Section 179 (a tax deduction) of the IRA provides owners with a dollar amount per square foot if the commercial or residential building meets a certain efficiency standard. Owners can earn $5 per sq. ft. for new construction or retrofitting a building, depending on its resulting energy efficiency. It is a laddered benefit ranging from $2.50 sq. ft. for a 25% reduction in energy usage up to a maximum of $5.00 sq. ft. for 50% or more.

For multifamily landlords, Section 45L (a tax credit) allows up to $5,000 per unit (single-family or apartment) if the building meets certain energy efficiency criteria.

What's In It For Commercial Real Estate?

Energy-efficient buildings will be worth more and will be more attractive for public companies concerned about emissions. Soon, everyone will be thinking about ENERGY STAR Benchmarking —a viable tool to produce data for reporting on your building’s performance.

ENERGY STAR Benchmarking is already widely used for energy and water disclosure laws across the county (and Canada). You can view IMT's national map of programs currently in place.

As an expert in reducing commercial property emissions, I anticipate a big push to move real estate into the world of ESG reporting, which goes a long way toward environmental sustainability. Once the SEC finalizes its ruling, all public companies will be required to focus on the “E” on their buildings like never before. Additionally, I believe that when companies also consider the “S” for Social and “G” for Governance, they will ultimately be better stewards of the planet.

If you need an expert to understand your building’s energy or water efficiency and emissions, please reach out to me at Marika@greeneconome.com. At Green Econome, a team of professionals is ready to help you meet your ESG requirements, save operating costs, and increase the value of your property.

Marika Erdely Headshot

Marika Erdely, MBA, LEED AP+C, Certified Energy Auditor, Fitwel Ambassador
(818) 681-5750

Marika is an expert in energy and water efficiency and is the Founder and CEO of Green Econome, an energy consulting and construction company located in Santa Monica, CA. Marika has over 30 years of professional financial experience and approaches sustainability through an economic lens.

Sunworks Solar Power: Surge of new solar projects predicted, following the passage of the Inflation Reduction Act

The energy sector, among many others, has been preparing for the transition to clean energy for a while now. While strides have been made, the roadmap has been less than straight. The passage of the Inflation Reduction Act (IRA) steadies the wheel and gives consumers clear direction. So, how do we get to cleaner energy? The following blog from our friends at Sunworks Solar Power succinctly explains what the IRA includes, and how organizations of all shapes and sizes can access new incentives and choices to achieve the highest return from solar, storage, and electrification projects.

Sunworks Solar Power (2022, September 23). Surge of new solar projects predicted, following the passage of the IRA – Sunworks. Sunworksusa. https://sunworksusa.com/surge-of-new-solar-projects-predicted-following-the-passage-of-the-ira/