Energy Star V3.1

[Cloris Sopha]

TheENERGY STAR Single Family New Homes (SFNH) program requirements apply to site-built and modular single family homes, duplexes and townhomes. Low-rise multifamily projects permitted prior to July 1, 2021, may also be certified through this program if they meet the eligibility requirements defined in the program requirements, below. For details, see the Program Requirements documents below.

To determine the applicable SFNH program requirements, including the minimum Version and Revision, see the SFNH Applicable Program Requirements, Versions, and Revisions by Location (PDF, 176 KB). For quick reference, find the minimum Version required for certification in each state on the map below.

Partners should be aware that the 45L tax credit may require a more rigorous version than the EPA requires for certification. To see the minimum eligible versions required for the tax credit, visit www.energystar.gov/45LTaxCredits.

Each home must meet certain minimum mandatory requirements, and these are verified in the field by a third-party Rater that is credentialed by an EPA-recognized Home Certification Organization (HCO). Visit the Single-Family New Construction Certification Process page to learn more.

The Inflation Reduction Act (IRA) of 2022 enhances and creates new tax incentives for buildings and energy efficiency programs with the goal of reducing carbon emissions and creating jobs and other economic activity in the U.S.

A key point to unlocking 45L tax credits is understanding the different eligibility requirements based on program versions, permit dates, and acquisition dates. ENERGY STAR and ZERH have different requirements and it is important for builders to ensure they are using the right version of the applicable program for 45L eligibility. More guidance on eligibility can be found under the IRS Credit for builders of new energy-efficient homes, and updates for future years will be provided annually in January.

The ENERGY STAR program version in effect for a qualified 45L project is based on the type of housing and acquisition date: when the home is leased or sold, not when design begins, or permits are received. Acquired or acquisition date is for the purpose of meeting the ENERGY STAR provisions of 45L, defined to include purchased or leased by a person from an eligible contractor for use as residence during the taxable year (Notice 2023-65).

Project teams should expect major design differences for Single-family v3.2 and Multifamily New Construction (MFNC) v1.2 compared to prior versions, including new provisions for meeting 2021 IECC envelope requirements for insulation and windows, heat recovery ventilation, and heat pump hot water heating. So if there is even a remote chance that a project will be delayed and sold or leased when a later version of the ENERGY STAR program becomes applicable for 45L, builders should consider designing and constructing for the latest version to ensure eligibility for the credit.

Projects certified to a later version will be automatically deemed certified to earlier versions; for example a project certified to ENERGY STAR MFNC National v1.2 is automatically deemed certified to meet MFNC National v1.1, thus qualifying for the credit whether sold or leased in 2026 or 2027.

For example, a multifamily building permitted on January 1, 2024 needs to meet Version 1 Revision 9 to be eligible for the tax credit, but a multifamily building permitted on January 1, 2025 will need to meet Multifamily Version 2 to be eligible for the tax credit. (Note that the acquisition date still applies for both programs for purposes of determining the tax year in which the tax credit can be taken.) For more information on effective dates for ZERH program versions see DOE Zero Energy Ready Home Program Requirements.

The ENERGY STAR program version in effect for a qualified 45L project is based on the type of housing and acquisition date: when the home is leased or sold, not when design begins, or permits are received. Acquired or acquisition date is for the purpose of meeting the ENERGY STAR provisions of 45L, defined to include purchased or leased by a person from an eligible contractor for use as residence during the taxable year (Notice 2023-65).\nENERGY STAR Program Versions\nUnder ENERGY STAR, the\u00a0minimum eligible version the EPA requires to certify a home may be different than the more rigorous minimum eligible version that 45L requires to qualify for the tax credit. For example, a single-family home acquired in DC on January 1, 2025, is eligible to be certified to the ENERGY STAR\u2019s Single-Family National Program Requirements Version 3.1. However, for the builder to qualify for the tax credit, the home must be certified to National Version 3.2. Variations between program versions can be substantial and need to be analyzed in the design phases of new projects.\u00a0\n\nFor tax credit eligibility under ENERGY STAR, single-family homes must meet v3.2 for homes acquired January 1, 2025 and later. Assuming a 6-month design and 6-month construction schedule, new homes should be designing to v3.2 now.\u00a0\nMultifamily units need to meet v1.2 for units acquired January 1, 2027 and later. Assuming an 18-month design and 2-year construction schedule, new projects should be designing to v1.2 now.\u00a0\n\nProject teams should expect major design differences for Single-family v3.2 and Multifamily New Construction (MFNC) v1.2 compared to prior versions, including new provisions for meeting 2021 IECC envelope requirements for insulation and windows, heat recovery ventilation, and heat pump hot water heating. So if there is even a remote chance that a project will be delayed and sold or leased when a later version of the ENERGY STAR program becomes applicable for 45L, builders should consider designing and constructing for the latest version to ensure eligibility for the credit. \nProjects certified to a later version will be automatically deemed certified to earlier versions; for example a project certified to ENERGY STAR MFNC National v1.2 is automatically deemed certified to meet MFNC National v1.1, thus qualifying for the credit whether sold or leased in 2026 or 2027.\n"}},"@type":"Question","name":"ZERH Eligibility","acceptedAnswer":"@type":"Answer","text":"The DOE ZERH program functions slightly differently. Due to a quirk in the legislative language, the applicable ZERH version that applies for purposes of the 45L tax credit is pegged to the permit date of the project\u2014not the acquisition date as with ENERGY STAR. \nFor example, a multifamily building permitted on January 1, 2024 needs to meet Version 1 Revision 9 to be eligible for the tax credit, but a multifamily building permitted on January 1, 2025 will need to meet Multifamily Version 2 to be eligible for the tax credit. (Note that the acquisition date still applies for both programs for purposes of determining the tax year in which the tax credit can be taken.) For more information on effective dates for ZERH program versions see DOE Zero Energy Ready Home Program Requirements. \n"]} The graphic above compares the minimum eligible ENERGY STAR and ZERH program versions for acquisition dates starting in 2024. The 45L tax credits are tiers of performance. You can earn the tax credit for either ENERGY STAR or ZERH, but not both combined.

An eligible contractor builds a multifamily building that meets ENERGY STAR Multifamily New Construction (MFNC). The project is expected to begin construction in 2024 and finish in 2026. With an expected completion date and anticipated acquisition date of 2026, ENERGY STAR MFNC v1.1 is the applicable version for 45L tax credit eligibility. However, to account for potential delays which could push the sale of some or all units into 2027, and to ensure that eligibility for the tax credit remains intact for the whole building, the builder decides to design to MFNC v1.2, which is the required version to be eligible for the tax credit with a 2027 acquisition date. The project meets prevailing wage requirements and is certified to MFNC v1.2. So whether the contractor leases the apartments in 2026 or 2027, or partially leases the units in 2026 and finishes in 2027, they are eligible for the 45L tax credit of $2,500 per unit to be taken on their 2026 or 2027 return, depending on when the units are leased.

In another example, an eligible contractor builds a single family home that meets ENERGY STAR Single Family New Homes (SFNH). The project is expected to begin construction in 2024 and finish in 2025. Based on a permit date of 2024, the project can apply for ENERGY STAR SFNH v3.1, however, to qualify for 45L, the contractor must apply for ENERGY STAR SFNH version 3.2. The project finishes per schedule and is certified to SFNH version 3.2. The eligible contractor sells the home and can file for the 45L tax credit of $2,500 on their 2025 return.

Additionally, while the IRS has not yet released guidance, it is widely expected that builders will be eligible to take both the 45L tax credit and the Section 179D deduction on larger multifamily projects. 179D, which provides a deduction of up to $5.00 per square foot for energy-efficient construction, is available to buildings in the scope of ASHRAE Standard 90.1, which applies to buildings four stories and higher.

This article is not intended as tax advice and should not be used for purposes of determining eligibility for tax incentives. Individuals or entities looking to claim the 45L tax credit should consult with a tax professional to determine eligibility, process, and applicability with other Federal incentives.

The main tenet of the Energy Star new homes program is to be more efficient than state and local energy codes. As energy codes become more stringent, the program must be updated to remain above code. On Jan. 1, 2025, 47 states will transition from Energy Star v3.1 to v3.2. Here are a few highlights of v3.2:

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