Tax

Manufacturers risk losing out on several climate and energy tax credits if they don’t act fast—and will miss an opportunity to save millions.

That’s the message from Brian McGoff, president and chief operating officer of Dalrada Corporation—a manufacturing solutions provider focused on sustainability. The Biden administration and Congress have created additional financial incentives for manufacturers that embrace sustainable practices, but these incentives won’t be around forever.

The benefits: Currently, manufacturers can access a wide range of climate and energy-focused tax credits, grants and other benefits, from new programs and funds created through the Inflation Reduction Act to legacy tax credits like the 179D tax deduction—a provision that was expanded recently to offer significantly more value.

• “If you make qualified upgrades or a retrofits to your existing building or facility, the government used to give you a tax credit through 179D that was worth $1.88 per square foot times your tax rate,” said McGoff.
• “Now, it’s $5 per square foot for projects that meet the prevailing wage and apprenticeship requirements. T hat’s a direct tax credit—so if you define the project, design it, start implementation and have the proper software to demonstrate the required savings, you can apply.”
• “The lifetime cap on the maximum deduction allowed for a property was replaced with a more favorable three-year cap,” he added. “Companies are allowed to elect an alternative deduction for energy-efficient retrofits in the year the retrofitting plan is certified, to reduce the building’s energy usage intensity by at least 25%.”

How it works: The 179D commercial buildings energy-efficiency tax deduction primarily enables building owners to claim a deduction for installing qualifying systems in buildings, says McGoff.

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