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September 15, 2021

Budget reconciliation bill contains many new and amended housing and energy tax credits

On September 10, 2021, the House Ways & Means Committee released the legislative text of tax proposals that would be part of the proposed Build Back Better Act (the bill). The bill, "Subtitles F, G, H, and J: Budget Reconciliation Legislative Recommendations Relating to Infrastructure Financing, Green Energy, Social Safety Net, and Prescription Drug Pricing," along with a summary of the sections, was sent for markup September 14 and 15.

The bill includes the following proposed credits related to housing and energy, which would extend and expand many current programs

Housing tax credits

New markets tax credit: The bill would make the new markets tax credit (NMTC) permanent and create a new, permanent, annual $175 million NMTC allocation for low-income communities in tribal areas. The bill would authorize an additional allocation (over the original $5 billion) of $2 billion for the 2022 round (for a total of $7 billion in 2022) and $1 billion for the 2023 round (for a total of $6 billion in 2023). The allocation would be set at $5 billion for 2024 and all years thereafter, indexed for inflation.

Historic rehabilitation tax credit: The bill would increase the tax credit for the rehabilitation of historic structures from 20% to 30% for 2020 through 2025, phased down to 26% in 2026, 23% in 2027, and 20% in 2028 and thereafter, effective for property placed in service after March 31, 2021. The bill would also increase the credit for certain small projects; modify the substantial rehabilitation requirement; eliminate the rehabilitation credit basis adjustment; and repeal the temporary limitation on personal casualty losses.

Low income housing tax credit: The bill would increase the 9% housing credit and the small state minimum by 50%, phased in over five years, and temporarily reduce the tax-exempt bond financing requirement. It would also provide a 50% basis boost for buildings with limits on rent and at least 20% of their occupied units designated for extremely low-income tenants. Other provisions include allowing states to provide up to a 30% basis boost to properties in rural areas; eliminating the qualified contract exception for buildings receiving allocations after January 1, 2022; changing the right-of-first-refusal safe harbor into an optional safe harbor; and increasing the credit for bond-financed projects designated by housing credit agency.

Neighborhood homes credit: The bill would establish a new neighborhood homes credit to encourage the rehabilitation of deteriorated homes in distressed neighborhoods.

Energy tax incentives

Production tax credit for electricity produced from certain renewable resources: The bill would extend the production tax credit (PTC) for landfill gas (municipal solid waste), trash (municipal solid waste), qualified hydropower, marine and hydrokinetic renewable energy facilities and geothermal facilities through the end of 2031. The credit would phase down to 80% of the applicable rate in 2032, and 60% of the applicable rate in 2033. For wind facilities, the PTC would increase to the full applicable credit rate through the end of 2031, phasing down to 80% in 2032 and 60% in 2033. For solar facilities, the PTC would be revived and extended through 2031, phasing down to 80% of the applicable credit rate in 2032 and 60% of the applicable credit rate in 2033. An enhanced credit would be available if certain wage and workforce requirements were met.

Investment tax credit: In most cases, the bill would extend the investment tax credit (ITC) for property for which construction begins by the end of 2032, and then phase down the credit value over two years. The base credit rate would be 6% of the basis of qualified energy property or a bonus credit rate of 30% of the basis of qualified energy property for facilities placed in service after December 31, 2021. The base credit rate would phase down to 5.2% for facilities that commence construction in 2032 and 4.4% for facilities that commence construction in 2033. The bonus credit rate (tied to wage and workforce requirements) would phase down to 26% in 2032 and 22% in 2033. The bill would also expand the ITC to include energy storage technology and linear generators.

Both PTCs and ITCs would be eligible for enhanced credits if certain domestic content requirements were met.

Energy credit for solar facilities placed in service in connection with low-income communities: The bill would create an enhanced incentive for solar facilities qualifying for the ITC when the Treasury Secretary makes an "allocation of environmental justice solar capacity limitation."

Credit for carbon oxide sequestration: The bill would extend the credit for carbon oxide sequestration facilities that begin construction before the end of 2031.

Green energy publicly traded partnerships: The bill would expand the definition of qualified income for publicly traded partnerships from certain income derived from minerals and natural resources to include income derived from green and renewable energy.

Nonbusiness energy property credit: The bill would extend the nonbusiness energy property credit to property placed in service before the end of 2031.

Investment credit for electric transmission property: The bill would provide for a tax credit for the basis of qualifying electric transmission property placed in service by the taxpayer.

Elective payment for energy property and electricity produced from certain natural resources: The bill would allow taxpayers to elect to be treated as having made a payment of tax equal to the value of the various credits (ITC under IRC Section 48, PTC under IRC Section 45, and various credits under IRC Sections 30C, 45E, 45Q, 45W, 45X, 48C, 48D and 48E) for which they would have been otherwise eligible.

Emissions tax credits

Zero emissions facility credit: The bill would allow taxpayers to claim a 30% credit for making qualified investments in their zero emissions facility.

Advanced energy manufacturing tax credit: The bill would revive the IRC Section 48C qualified advanced energy property credit, allowing Treasury to allocate an additional $2.5 billion in credits for each year from 2022 through 2031.

Zero-emission nuclear power production credit: The bill would provide a credit for the production of electricity from a qualified nuclear power facility.


The provisions in the bill would expand some of the more popular and successful tax credit programs. Companies participating in these programs would potentially be impacted in their financing, labor, project planning and supply chain, among other areas. For example, the elective payment for energy property and electricity produced from certain natural resources could change the way that wind and solar projects are financed in the United States. Similarly, the extension of the definition of qualified income for publicly traded partnerships could allow for a more diverse investor base into green-energy-generating projects.


Contact Information
For additional information concerning this Alert, please contact:
Tax Credit Investment Advisory Services
   • Michael Bernier (
   • Megan Knutson (
   • Dorian Hunt (
Americas Power & Utilities Tax Group
   • Mike Reno (
   • Brian Murphy (
   • Ginny Norton (