Multi-Family Tax Alert: New Federal Stimulus Policy Includes 2 Year Extension of Energy Efficiency Tax Credits for Apartments
As a developer of multi-family residential property, you may be eligible for a fairly new Federal tax credit aimed at homebuilders and developers of apartments and condominiums. The Tax Relief and Job Creation Act of 2010 that was passed in December by President Obama has extended these tax credits for 2 more years and made them retroactive to any project completed since 2007. Further, for the 2010 Tax Year, these credits can be used against your AMT (Alternative Minimum Tax). If you want to take advantage of these tax credits for a project completed in 2010, you may want to consider extending your tax return.
Under Internal Revenue Code §45L, you are eligible for a $2,000 Federal tax credit for each energy efficient dwelling unit that you construct. So a 75-unit apartment complex would be eligible for up to $150,000 in tax credits.
Qualifying for these tax credits is easier than you may think! You do not need to have a “green” building or some kind of designation such as Energy Star or LEED. The criteria defined in the US Tax Code compares your building to outdated 2004 energy standards that most state codes today already significantly exceed. For example, a KBKG client constructed a 98 unit apartment building in 2007 that was designed to just barely pass the California energy code. Even though they built to minimum standards, they still qualified for $196,000 of tax credits!
These tax credits are part of the government’s economic stimulus policy to increase energy efficiency by 20% in America’s buildings by 2020. In addition to these Federal credits, there are numerous states that offer additional tax credits that KBKG can identify for you.
On buildings completed in prior years, there is still an opportunity to retroactively claim any missed tax credits if you amend your return before the three year Federal statute of limitations. This means that for any building constructed in 2007, your window to amend is quickly closing.
KBKG helped us qualify for significantly more tax credits than we would have received. When our initial energy analysis was performed, most of our units did not qualify but were very close. KBKG’s energy consultants worked with our development team and made very cost effective recommendations to increase energy efficiency. After we implemented those suggestions, they found that the majority of our units now qualify, and the benefits are substantial.
Judit Vass, CPA
Senior Development Controller
Continental Real Estate Companies
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The process for obtaining these credits requires a detailed energy analysis that must be certified by a qualified third party like KBKG. Call us for a free assessment of your project at 877.525.4462 x150.
