IRS Notice 2023-65 Provides Guidance on the §45L Tax Credit

On September 27, 2023, the IRS released guidance on §45L New Energy Efficient Home Credit (§45L Credit) through Notice 2023-65. The guidance provided in this notice addresses: (i) the person that is eligible for the credit, (ii) determining the applicable amount of the credit, (iii) energy saving requirements, (iv) certification requirements, and (v) substantiation requirements.

The §45L Credit, which encourages energy efficient residential construction, has been heavily revised with the Inflation Reduction Act of 2022. The modified §45L Credit applies to homes leased or sold beginning in 2023 and is summarized below:

  • Changed the standard to qualify homes, which now requires meeting Energy Star or Zero Energy Ready Home (ZERH) requirements;
  • Increased the credit for single family homes and manufactured to $2,500 for Energy Star or $5,000 for ZERH;
  • Removed the three story or less height limitations on multifamily projects; and
  • Modified the §45 L Credit amount for multifamily, such that the credit is $500 for Energy Star or $1,000 for ZERH per residence, or if prevailing wage requirements are met, $2,500 for Energy Star or $5,000 for ZERH.

NOTICE 2023-65
Some highlights of Notice 2023-65 include:

  • For a constructed home, the eligible contractor is the person that built and owned the home and had a basis in it during its construction. For a manufactured home, the eligible contractor is the person that produced and owned the home and had a basis in it during its production.
  • To substantiate the §45L credit, the contractor must retain in its tax records, at a minimum, the home’s Energy Star or ZERH certification, including its date; and records sufficient to establish:
    1. the address of the qualified home and its location in the United States;
    2. the taxpayer’s status as an eligible contractor;
    3. the acquisition of the home from the taxpayer for use as a residence, including the name of the person who acquired it; and
    4. if applicable, proof that the prevailing wage requirements were met.
  • For multifamily homebuilders seeking to claim the higher $2,500 or $5,000 credit, the taxpayer must ensure that any laborers and mechanics employed by the taxpayer, any contractor, or subcontractor in the construction of any qualified residence are paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which the qualified residence is located
  • The procedure for manufactured home builders to claim the credit when sold to a dealer.

Our §45L Credit team includes a dozen HERS raters as well as Rated Field Inspectors, Certified Public Accountants, and tax attorneys who can help homebuilders claim the §45L credit. Do you qualify? Request a proposal or contact us at 833-436-9666.