IRA Clean Energy Tax Credits for Michigan and Ohio Real Estate Developers

The Inflation Reduction Act of 2022 created the largest clean energy incentive package in American history — and a significant portion of it flows directly to real estate developers through investment tax credits, production tax credits, and energy efficiency deductions. For commercial and multifamily developers in Michigan and Ohio, these credits are not peripheral incentives. On projects with solar, battery storage, EV charging, or high-efficiency building systems, IRA credits can exceed $1 million per project and stack cleanly on top of historic, brownfield, and state incentives.

The challenge is that the IRA created multiple overlapping credit structures with different qualification rules, wage requirements, and bonus stacking mechanics. Understanding which credits apply to your project — and in what order — is the difference between capturing the full benefit and leaving most of it unclaimed.

Section 48E: The Clean Electricity Investment Tax Credit

Section 48E is the technology-neutral successor to the Investment Tax Credit for clean energy. It applies to any zero-emission electricity generating facility placed in service after 2025. For real estate developers, this primarily means solar panels, battery storage systems, and fuel cells installed on commercial or multifamily properties. The base credit is 6% of eligible project costs. Meeting prevailing wage and registered apprenticeship requirements — which are required for most projects above 1 megawatt — increases the credit to 30%. Two additional bonus credits can further increase the rate: a 10% domestic content bonus (if equipment is manufactured in the US) and a 10% energy community bonus (if the project is in a census tract that previously had significant fossil fuel employment or a brownfield site). Combined, a project meeting all four criteria earns a 50% investment tax credit on clean energy equipment costs. Michigan and Ohio have significant energy community census tracts, particularly in former manufacturing corridors.

Section 45L: New Energy Efficient Home Credit for Multifamily

Section 45L was substantially expanded by the IRA to cover multifamily buildings, making it directly relevant to apartment developers in Michigan and Ohio. The credit applies to new residential units that meet ENERGY STAR or Zero Energy Ready standards. For multifamily buildings, the credit is $500 per unit under ENERGY STAR certification and $1,000 per unit for Zero Energy Ready — or $2,500 and $5,000 per unit respectively if prevailing wage requirements are met. On a 100-unit affordable housing project meeting prevailing wage and Zero Energy Ready standards, Section 45L generates $500,000 in federal tax credits with no cap on project size. This credit stacks directly with LIHTC (Low Income Housing Tax Credit) and is additive to MSHDA and Ohio HFA affordable housing programs.

Section 179D: Commercial Buildings Energy Efficiency Deduction

Section 179D provides a tax deduction of up to $5 per square foot for commercial buildings — including multifamily buildings over four stories — that achieve significant energy savings compared to the ASHRAE 90.1 baseline. The deduction applies to lighting, HVAC, and building envelope improvements. At $5 per square foot, a 50,000 square foot mixed-use building generates a $250,000 deduction. While a deduction is less valuable than a dollar-for-dollar credit, 179D is available on both new construction and retrofits of existing buildings, making it accessible to a wider range of projects than construction-only credits. Government-owned buildings can transfer the deduction to the architect or engineer who designed the energy efficiency improvements — a relevant mechanic for developers working on public-private partnership projects.

Prevailing Wage: The Requirement That Unlocks the Full Credit

Almost every significant IRA credit requires paying prevailing wages to workers on the project to access the full rate. For Section 48E, the base credit of 6% increases to 30% only with prevailing wage compliance. The prevailing wage is determined by the Department of Labor and varies by trade and county across Michigan and Ohio. Developers must document prevailing wage compliance throughout construction and maintain payroll records for audit. Projects that do not track prevailing wage from the start cannot retroactively cure the deficiency. Build payroll compliance tracking into your construction contracts before groundbreaking — the difference between 6% and 30% is too large to risk on an administrative oversight.

Stacking IRA Credits with Michigan and Ohio State Incentives

IRA credits do not reduce or conflict with Michigan or Ohio state incentive programs. A Michigan multifamily developer building in a brownfield energy community can simultaneously claim Section 48E at 50% for solar and battery storage, Section 45L at $5,000 per unit for energy efficiency, a 179D deduction for the building envelope, Michigan Brownfield TIF for site remediation costs, MSHDA LIHTC for affordable units, and Michigan HOME program gap financing. Each of these programs has independent qualification requirements and compliance periods, but none of them carve out or reduce another. The total incentive value on a well-structured project can approach 80 to 100 cents per dollar of eligible cost across all programs combined.