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September 29, 2022 Update: The Inflation Reduction Act of 2022, including the changes to the Section 179D tax deduction for energy efficient commercial construction listed below, was signed into law on August 16. NACUBO will continue to provide updates on provisions that affect higher education as information becomes available. Until October 31, the IRS is accepting comments on a proposed Form 7205 that will standardize the procedures for claiming the deduction.  

On July 27, Senate Majority Leader Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WV) announced that they had reached an agreement to include H.R. 5376, the Inflation Reduction Act of 2022 to the FY22 budget reconciliation bill.

The measure would expand the Section 179D tax deduction for energy efficient commercial construction to include nonprofit organizations, including private colleges and universities. It also would fund the IRS and improve taxpayer compliance, and it would impose a 15 percent corporate minimum tax. It would invest $80 billion over the next 10 years on tax enforcement and compliance, and it would raise $450 billion to fund deficit reduction, clean energy, and climate investments.

Why This Legislation is Important for Business Officers

The 179D deduction, enacted as a temporary provision in 2005 and made permanent in December 2020, encourages resource-efficient construction and retrofits. 179D has helped businesses and government organizations save money while increasing efficiency by providing a deduction of up to $1.80 per square foot.

Per the amended legislative text, 179D should function for nonprofits including colleges and universities in essentially the same way that it does for public entities. Unlike the changes to 179D proposed in the Build Back Better Act, which would have expired after 10 years, these changes would be permanent.

Through an allocation provision, the person primarily responsible for designing the property would be treated as the taxpayer, and the nonprofit would negotiate how the credit will be assigned. The legislation calls on the secretary of the Treasury to promulgate clarifying rules.

Increased Value and Other Changes

The proposed expansion of 179D to nonprofits is one of several changes aimed at making the deduction more accessible and valuable. The Inflation Reduction Act of 2022 would make the following changes to the deduction:
  • Raises the maximum deduction value from $1.80 per square foot to $5, and includes prevailing wage and apprenticeship requirements in order to qualify for the maximum deduction
  • Decreases the minimum efficiency requirement to qualify for a portion of the deduction
  • Removes the "partial allowance" for resource efficiency in one of three distinct areas: HVAC, lighting, and building envelope

While the changes would come with new labor and prevailing wage requirements, they represent a significant achievement for the 179D community and for NACUBO. An interview in the Winter 2022 edition of Accounting & Tax Quarterly shed more light on advocacy around the deduction, with an account from an institution that has used the deduction.

What Happens Next

The legislative text is being reviewed by the Senate parliamentarian to ensure compliance with the Byrd Rule. Senate leadership has indicated that the package should be debated on the Senate floor next week, but that is highly unlikely given the length of time required to complete the Byrd Rule process. If the Senate takes up the legislation this week, Democrats may fall short of the 50 votes necessary to pass due to the Senate's tight margins and COVID-19-related absences.

If the Senate completes action on the bill, it is doubtful that the House will return from recess to consider the bill. This pushes the timeline for final passage to when Congress returns after Labor Day. NACUBO will follow and report further developments.


Ashley Jackson

Director, Government Affairs



Neil Gavigan

Policy and Advocacy Manager


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