A Missed Opportunity to Decarbonize Municipal & Nonprofit Buildings: Section 179D Tax Deduction

Two years into the Inflation Reduction Act (IRA), the several tax credits that are eligible for “elective pay” are starting to catalyze investment in renewable energy, electric vehicles, and EV charging by nontaxable entities like local governments and nonprofit organizations. Slower to develop is a robust, cohesive response by nontaxable entities to the main tax […] Two years into the Inflation Reduction Act (IRA), the several tax credits that are eligible for “elective pay” are starting to catalyze investment in renewable energy, electric vehicles, and EV charging by nontaxable entities like local governments and nonprofit organizations. Slower to develop is a robust, cohesive response by nontaxable entities to the main tax tool for energy retrofits of their buildings – offices, schools, hospitals, and even multifamily housing – the Section 179D tax deduction. This means that while local governments and community groups are hard at work seeking to maximize federal investment for clean energy and clean transportation, they are less aptly positioned to reduce building energy use, a primary driver of greenhouse gas pollution in many cities. The discrepancy in tax incentive uptake can largely be explained by the difference between tax credits and tax deductions. A tax credit is a