Maximizing Tax Credits: How a Residential Developer Saved $1.2 Million with Section 45L

For a $150M+ residential developer, sustainability wasn’t just an ideal – it was a driving force behind their business strategy. However, when it came to claiming federal tax credits for their energy-efficient homes, they discovered that navigating the process would require expert guidance. That’s where Frazier & Deeter stepped in, transforming a complex process into a strategic advantage. 

Navigating the Complexities of Section 45L

The developer’s goal was clear: maximize the benefits of the federal Section 45L tax credit, which offers up to $5,000 per home for energy-efficient construction; however, several hurdles stood in their way: 

  1. Identifying Eligible Homes: With homes at various stages of construction, determining which properties met the Department of Energy’s (DOE) rigorous energy performance standards proved to be a daunting task. 
  2. Upgrading to Compliance: Achieving eligibility required upgrades to HVAC systems, lighting and insulation. The client needed guidance to meet strict criteria under programs such as Energy Star New Homes and the DOE’s Zero Energy Ready Homes (ZERH). 
  3. Understanding the Credit’s Scope: The client was unaware of the full extent of the 45L credit or the intricate documentation and compliance processes it required, such as pre-drywall inspections conducted by certified professionals. 

Simplifying the Path to Savings

When the developer partnered with Frazier & Deeter, they gained more than just a team of tax experts; they gained a roadmap to success. 

  1. Comprehensive Project Analysis: Our team began by conducting a detailed review of the developer’s construction plans. Through energy efficiency assessments, we identified homes eligible for the Section 45L tax credit and pinpointed opportunities for improvements.
  2. Integrating Energy-Saving Upgrades: We worked closely with the developer’s construction team to integrate necessary energy-saving upgrades. From recommending enhancements to HVAC systems to facilitating energy audits and certifications, we ensured their projects aligned with DOE standards. 
  3. Streamlining Compliance: To minimize delays and reduce risk, Frazier & Deeter streamlined the documentation process. We organized and prepared all required paperwork, including pre-drywall inspections and energy audits, making it easier for the developer to apply for and secure the tax credits.

Financial Wins and Sustainable Growth

The results of this collaboration were transformative: 

  • $1.2 Million in Tax Credits Secured: The substantial financial boost improved cash flow, enabling the developer to reinvest in additional energy-efficient projects. 
  • Strengthened Market Position: By embracing energy efficiency, the developer attracted eco-conscious buyers and solidified their reputation as a leader in sustainable construction. 
  • Future-Ready Operations: With processes now in place, the developer is better positioned to capitalize on future incentives, ensuring long-term financial stability and growth. 

Looking Ahead

This partnership not only delivered immediate tax savings but also showcased how strategic tax planning can be a powerful tool for businesses. By aligning financial strategy with environmental responsibility, the developer maximized savings while fostering long-term growth and a positive impact. 

Are you ready to maximize tax credits for your energy-efficient projects? Contact us today to see how we can help.

Contributors

Tommy Zavieh, Partner

Sheila Anderson, Partner

Allen Tobin, Principal

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