The Inflation Reduction Act (IRA) of 2022 brought many changes to the §179D Energy Efficient Commercial Building Tax Deduction.  Provisions taking effect 1/1/2023 will impact the maximum potential deduction, the minimum efficiency threshold required to qualify, and much more.   

The IRA will also change the applicable ASHRAE reference standard used for comparison purposes.  

  • Under the Consolidated Appropriations Act (CAA) of 2021, the reference standard to be used was the most recent ASHRAE standard published in the 2 years before the property was placed-in-service.   
  • Under the IRA, the reference standard was changed to the most recent ASHRAE standard published in the 4 years before the property was placed-in-service.  

On 12/23/22 the IRS provided further clarification on reference standards with the release of Announcement 2023-01.   

The Announcement states that ASHRAE 90.1-2007 is the reference standard to be used for projects placed-in-service through 12/31/2026, and the much stricter ASHRAE 90.1-2019 standards will only be applied to projects placed-in-service on or after 1/1/2027.   

This is welcome news, as it gives owners and developers more time to prepare for the more severe 90.1-2019.   

Additionally, if construction was begun before 1/1/2023, Reference Standard 90.1-2007 may be applied even if the property is not placed-in-service until 2027 or beyond.