On the last day of November, USGBC hosted a webinar about Green Buildings, Labor, and the Inflation Reduction Act. This webinar aimed to help the audience understand the labor requirements for building projects when applying for a grant or funding under the Infection Reduction Act.

Who were there?

Moderator: Harley Stokes, Senior Policy Advisor, BlueGreen Alliance
Speaker:

Ben Evans: Federal Legislative Director, USGBC
John Dorety: Senior Advisor. IUPAT
Teresa Acuna: Senior Policy Advisor, U.S. Department of Labor
Manny Lamarre: Senior Advisor, U.S. Department of Labor
Joseph Sweeney: Policy Advisor, U.S. Department of Labor
Katie Harris: Legislative Director, BlueGreen Alliance

What does Green Building have to do with the Inflation Reduction Act?

There is a projected $365 billion investment in climate, energy, and environmental-related projects. Building projects will receive $14.1 billion in grants or funding under this Inflation Reduction Act.

How can we see IRA's impact on our built environment?

The IRA funding programs will reflect in many ways, such as the incentive for onsite renewables, rebates for efficiency upgrades to new and existing commercial properties, and grants for climate mitigation, etc. The funding programs also provide tax-related benefits for qualified projects, such as tax deductions and tax credits.

IRA Sec. 13303: Sec.179 Tax Deduction for Energy Efficient Commercial Buildings expanded the tax deduction for commercial building efficiency improvements.

The Act increases the deduction from $1.8 per square foot to a sliding scale of $2.50 to $5.00 per square foot for qualified projects.
Create a more accessible pathway for buildings demonstrating 25%-50% EUI (energy use intensity) improvements.
Applicants should refer to ASHRAE 90.1 2007 when the projects were in service in 2023-2026; for the project set after 2027, the applicant should use ASHRAE 90.1 2019.

The original text regarding the described terms

a sliding scale of $2.50 to $5.00: "(A) in general- in the case of any property which satisfies the requirements of subparagraph B, paragraph 2 shall be applied by substituting $2.50 for $0.5, $0.10 for $0.02. and $5.00 for $1.00."
buildings demonstrating 25%-50% EUI: "(2) Modification of efficiency standard-Section 179D (c)(1)(D) is amended by striking "50 percent" and inserting "25 percent".
Applicants should refer to ASHRAE 90.1 2007: "(3) Reference Standard-Section 179D(c)(2) is amended by striking "the most recent" and inserting the following "the more recent of-- (A) Standard 90.1-2007 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America, or (B) the most recent."

IRA Sec. 13304: Sec. 45L homebuilder tax credit will also expand their applications and make it accessible to all multifamily projects rather than restricted to buildings with three stories or less.

This provision offers credit at $2500/$5000 per unit for qualified projects.

IRA also made this credit available for the Low-Income Housing tax credit (LIHTC) without reducing the LIHTC's basis, which makes it more attractive for a privately developed affordable housing project.

IRA Sec. 13702: Sec. 48 Clean Electricity Investment Tax Credit will expand to other clean energy investments

The clean energy covers more apllications such as rooftops, solar geothermal, CHP (combined heat and power), and storage that extends for at least ten years.

Under this tax credit provision, a prevailing wage and the registered apprenticeship requirements must be met to receive the credit of 30% of the investment; if such requirement is not fulfilled within the project, the credit drops to 6% of the investment. However, this labor standard is not required for projects smaller than 1 million Watts.

What is the Prevailing Wage?

The term prevailing wage is originally from the Davis-Bacon Act. Legislated by the United States Federal Law in 1931, the Act established the requirement for paying prevailing wages on federally funded public works for its laborers and mechanics.

The prevailing wage is typically determined based on geographic location, construction type, and labor classification.

What is a Registered Apprenticeship?

Register apprenticeship is an industry-wide career pathway where employers can develop future workforce. Through the apprenticeship, the individuals can obtain paid work experience with a mentor and receive progressive wage increases, classroom instruction, and nationally recognized credentials.

What is the High Road training partnership?

High Road Training partnership is a workforce training program. This training program aims to increase access to high-road jobs for underserved populations. It also creates a foreseeable career pathway for job growth. The Department of Labor has identified 2,465 High Road training programs nationwide. They provide the workforce with occupational skills and industry-relevant knowledge to invest in American projects. They use evidence-backed training models and partner with employers, industry consortia, and worker organizations.

Their approach to workforce development includes community outreach, stakeholder engagement, pre-apprenticeship articulation, contract development and education, and continuous career case management.

What's the best practice for labor and community outreach?

First, we need to identify "who" is the community and gather information for them to receive the feedback. Secondly, the union and union's aid must be placed within the community. We need to learn their labor history to understand their dynamics. Third, we need to identify the high-road workforce and reach out to the training partners. Then, we need to identify the stakeholders once the community is mapped and begin the engagement process. Lastly, we have to form a good bonding relationship between the project labor and the local community to reach a collective perspective.

Final Q and A

Are manufacturing plants considered buildings? Are there any incentives, such as for insulating piping, to reduce energy consumption?

(Answered by Ben Evans): Manufacturing plants can qualify. Generally, the 179D deduction for energy efficiency improvements in commercial buildings is for buildings within the scope of ASHRAE 90.1 (Energy Standard for Buildings Except Low-Rise Residential Buildings). Therefore, manufacturing plants are eligible. However, the qualified investments under the law are limited to envelope improvements. Insulating piping, installing energy-efficient lighting, or retrofitting HVAC would be considered interior and mechanical improvements.

*p.s.The most recent ASHRAE 901.-2022 covers more than just buildings-"Energy Standard for Sites and Buildings Except Low Rise Residential Buildings"

For the Section 48 ITCs, are you aware of any best practice examples of project sponsors being able to sell those credits upfront to access their value as part of the construction budget (or bridge capital)?

(Answered by Ben Evans): I am not aware of the best practice. However, there are several marketplaces where entities can take advantage of the new transferability provision that allows the credits to be essentially sold.

Is there an online national directory for finding these "Registered Apprenticeships" programs?

(Answered by John Doherty): You can check our website, www.iupat.org, or visit NABTU's official directory.

Do IRA's labor standards apply to any of the existing small-scale residential buildings? Are the tax credits predominantly for new construction or large multifamily projects?

(Answered by Ben Evans): The labor standard is predominantly for larger buildings and multifamily projects. For example, the tax credit under Sec 45L for energy-efficient homes requires the prevailing wage provisions to be met. Also, the ITC (investment tax credits) for clean electricity investments only requires the labor provisions to be met to receive the full credit if the project is bigger than 1 million watts.

*p.s.That is probably because the prevailing wage requirement is primarily for buildings eligible to participate in Energy Star Multifamily New Construction Program" -- IRA sec 13304. Extension, Increase, and Modifications of new energy-efficient home credit.

You can view the Inflation Reduction Act of 2022 here.

Of notes:

What does the LEED guideline have to do with the Inflation Reduction Act?

It primarily lies on the version of ASHRAE standards the project refers to. For example, if the project is designed and registered according to the LEED v3 version, the building performance method can use ASHRAE 90.1-2007 Appendix G. If the project uses the current LEED standard, which has evolved to version 4.1 a couple of years ago, the registered projects must comply with ASHRAE 90.1-2016. As USGBC discusses the perimeter of LEED v5, version 5 will likely use AHRAE 2019 as their complied standard.

What is CHP?

CHP stands for combined heat and power. It is the concurrent generation of electricity and thermal energy. Compared to the conventional energy sources, CHP has several advantages, such as:

CHP can operate independently without overly relying on the electric grid.
CHP is more efficient. It can provide the same energy services and use only one-third less fuel than required in a conventional setting.
CHP has lower emissions. Since this mechanism burns less fuel than the conventional setting, the system produces fewer greenhouse gas emissions. (for example the CO2, NOx and SO2)

What is Form 7205?

Form 7205 is a new form used to claim the deduction for energy-efficient commercial buildings placed adequately in service before January 1, 2023.

Individual and business entities that qualify to claim such deduction during the tax year must file form 7205. This form can only be claimed by the building owner or the designer of energy-efficient commercial property.

Who is BlueGreen Alliance?

BlueGreen Alliance is an organization with a mission to unite labor unions and environmental organizations to solve today's environmental challenges.