Frequently Asked Questions

Section 45L Questions

Yes, substantial renovations that bring a home up to the energy efficiency levels required can qualify, provided all other eligibility criteria are met.

No, there is no limit to the number of eligible units for which the credit can be claimed, as long as energy efficiency requirements are met.

Documentation typically includes detailed construction specifications, energy efficiency reports, certification from a qualified third-party rater, and the IRS Form 8908 used to claim the credit.

A HERS Rater (Home Energy Rating System Rater) is a professional trained and certified to evaluate the energy efficiency of residential homes. HERS Raters conduct inspections and testing to determine a home’s energy performance, which results in a HERS Index Score—a widely used standard for measuring a home’s energy efficiency. They play a crucial role in the certification process for various energy efficiency programs and tax credits, including the 45L tax credit.

If units within a development are sold or leased over two different tax years, the 45L tax credit can be claimed in the tax year each unit is sold or leased, provided it qualifies and meets the energy efficiency requirements. Each unit’s eligibility for the tax credit is assessed independently based on its sale or lease date, ensuring that tax benefits are appropriately timed and claimed.

Both ENERGY STAR and Zero Energy Ready Homes are certifications that denote high levels of energy efficiency, but they focus on different aspects and standards.

ENERGY STAR certification requires homes to be at least 10% more energy efficient than homes built to the 2009 International Energy Conservation Code (IECC) and include additional energy-saving features that typically make them 20-30% more efficient than standard homes.

Zero Energy Ready Homes, on the other hand, must meet more stringent requirements set by the Department of Energy. These homes are so energy efficient that all or most annual energy consumption can be offset with renewable energy, making them effectively “zero energy” if solar panels or other renewable energy sources are installed. This certification implies a higher standard of energy savings and typically includes requirements that exceed those of ENERGY STAR.

The prevailing wage requirement refers to a set of legal standards that mandate paying workers at least the prevailing wage rate for their job classification in the area where the work is performed. This rate is usually determined by the wage paid to the majority of workers, laborers, and mechanics within a particular area. Visit the DOL’s website, specifically the Wage and Hour Division, which administers the Davis-Bacon Act and related acts.

ERC Questions

This is a refundable tax credit claimed by qualified employers on an amended IRS Form 941 (941-X), an “Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund” form for the given quarter(s) that the organization qualifies for.

Businesses are allowed to claim both now if the business qualifies for the ERC! The Consolidated Appropriations Act amended the original CARES Act ERC to permit businesses that received Paycheck Protection Program (PPP) to receive an ERC.

Yes. There are two methodologies for qualifying

  • Meeting the decline in gross receipt test.
  • If your business experienced a full or partial suspension of business operations due to government orders enacted during the Pandemic.
  • Began carrying on any trade or business after February 15, 2020

Yes, a business can still be eligible even if it was not shut down. A business must meet one of the two tests (Gross Receipts or Operational Impact) for qualification. If the business can only qualify through the operational impact test, that does not mean that the business had to be shut down. The business only needed to experience a “partial shutdown” to gain qualification for the ERC. Partial shutdowns can include capacity limitations, productivity drops, and/or supplier issues.

The intention of the ERC is to reward businesses that could retain employees during a very difficult time frame. Additionally, Congress included the second test into legislation to allow for companies that did experience impact from government mandates to claim the ERC.

There is still a potential that your business has had a financial impact and will qualify in 2021! Furthermore, using the operational impact test, you can claim the ERC if a more than nominal portion of your business was partially or fully suspended due to government orders.

This government incentive is a refundable tax credit. Unlike the R&D tax credit, you do not need a tax liability to claim the credit. At this point, every dollar that your business is entitled to will be refunded in the form of a check from the U.S. Treasury.

The ERC is available to non-profits such as churches, schools, daycares, and philanthropic entities. Many non-profits experienced hardships due to government mandates and shutdowns that make these employers eligible for the ERC.

WOTC Questions

The WOTC is a federal program that provides tax incentives to employers who hire and invest in individuals who have traditionally faced barriers to employment. These individuals may include veterans, SNAP (food stamp) recipients, TANF recipients, ex-felons, and other disadvantaged groups.

To qualify for the WOTC, an individual must be a member of a targeted group and be hired by an eligible employer. The targeted groups include veterans, SNAP recipients, TANF recipients, ex-felons, and other disadvantaged groups. The employer must also obtain certification verifying the new hire’s membership in the targeted group.

The amount of the WOTC that an employer can claim depends on the targeted group of the new hire and the number of hours worked. The credit can be claimed for a period of up to two years from the date of hire. The maximum credit amounts for each targeted group range from $1,200 to $9,600.

To claim the WOTC, an employer must first obtain certification that the new hire is a member of a targeted group. The certification process varies depending on the targeted group and the state in which the employee works. Once the required certification is secured, the employer can complete Form 5884, Work Opportunity Credit, and attach it to their tax return or payroll tax return, as applicable.

Yes, a consulting firm can help a business navigate the certification and application process for the WOTC, saving time and effort while maximizing the financial benefits of the program. The consulting firm can provide guidance and assistance with the certification process, complete Form 5884, and provide ongoing support and guidance to ensure that the business is able to claim the credit effectively.

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