The Energy Efficient Home Improvement Credit (Section 25C) and Energy Efficient Commercial Buildings Deduction (Section 179D) are separate programs — this article covers the New Energy Efficient Home Credit under §45L only.
Section 45L of the Internal Revenue Code offers a per-unit tax credit to developers of energy-efficient residential construction. For buildings four stories and above, the credit sits under §45L(a)(2)(B) — the multifamily provision most Kentucky, Ohio, and Indiana developers actually use. Two qualification pathways remain active: ENERGY STAR Multifamily New Construction (version 1.2 or 3.0, depending on permit date) and DOE Zero Energy Ready Home (ZERH, version 1.0).
The dollar figures matter and the IRS is precise about them. Under the prevailing wage and apprenticeship requirements of §45L(b)(2), credits double from base to enhanced levels:
| Qualification Pathway | Base Credit | Prevailing Wage Credit |
|---|---|---|
| ENERGY STAR Multifamily (v1.2/3.0) | $2,500/unit | $5,000/unit |
| DOE Zero Energy Ready Home | $2,500/unit | $5,000/unit |
Note that the $2,500/$5,000 figures here apply to ENERGY STAR under the prevailing-wage pathway — not the $2,000 base figure cited in older summaries. The IRA-era updates align ENERGY STAR and ZERH at the same per-unit value when labor standards are met. Documentation flows through ANSI/RESNET/ICC 301, the standard that defines the energy rating methodology and sampling protocols HECS uses for HERS verification.
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Call (859) 983-7382 Get a QuoteThe Inflation Reduction Act extended §45L through the end of 2026, but the practical cutoff hits earlier for any project requiring ENERGY STAR or ZERH certification. Certification must be complete and the dwelling placed in service on or before December 31, 2026. The binding constraint is third-party verification lead time.
HECS project data from 2024 and 2025 shows certification cycles running 45–90 days once final inspections begin. Add that to typical construction closeout of 60–120 days and developers are realistically looking at a building-permit cutoff near mid-2026 to land certificates before year-end. The EPA's ENERGY STAR Multifamily New Construction program requires a Registered Quality Assurance Provider to submit the certification package — HECS holds this credential and submits directly to EPA.
Prevailing wage compliance under §45L(b)(2) requires certified payroll records for all construction labor, with at least 10% of total labor hours performed by qualified apprentices. The IRS issued Notice 2022-43 outlining these requirements, and HECS flags documentation gaps during pre-certification reviews because missing payroll is the single most common disqualifier seen on Ohio Valley projects.
Based on HECS project data, the highest-frequency disqualifiers in the Kentucky–Indiana–Ohio–Tennessee corridor are not design failures but documentation failures. Most common:
The remediation cost for these failures runs well past the certification fee when walls are already closed. HECS recommends a pre-drywall inspection on every unit in a multifamily project pursuing §45L — a service we provide throughout Kentucky, Indiana, Ohio, Tennessee, Illinois, and Missouri.
Kentucky's residential code adoption has shifted across recent cycles, and code officials verify against different baselines. The 2018 IRC formed the basis for Kentucky's residential adoption for several years, but the 2024 IECC now applies in many jurisdictions and carries stricter air-leakage targets (CFM50 thresholds under Table R402.4.5). Ohio adopted the 2019 IRC with modifications. Indiana operates under the 2018 IRC baseline. Tennessee aligns with the 2018 IRC. Illinois has adopted the 2021 IECC with local amendments. Each state treats ENERGY STAR and ZERH as above-code pathways, but the underlying energy baseline determines whether the certification pathway is even available without additional measures.
For §45L compliance specifically, the qualifying criteria live in the ENERGY STAR or ZERH program documents, not the state code. However, code officials reviewing the Certificate of Occupancy will verify state-level compliance independently — a builder cannot use §45L certification to satisfy state energy code questions if the underlying envelope and duct leakage metrics don't meet the local baseline.
HECS handles §45L certification, ENERGY STAR Multifamily submission, ZERH verification, and blower door / duct leakage testing for projects throughout Kentucky, Indiana, Ohio, Tennessee, Illinois, and Missouri. Our certification packages include the rater checklists, HERS rating, ventilation verification per ASHRAE 62.2, and prevailing-wage documentation review. For a pre-construction scope call: (859) 983-7382 or hecsusa.com/contact/.
What is the §45L prevailing wage requirement for multifamily projects?
Under §45L(b)(2), prevailing wage compliance requires all laborers and mechanics employed by contractors and subcontractors in construction, alteration, or repair to be paid wages at rates not less than those prevailing for similar work in the locality, as determined by the Department of Labor. Additionally, at least 10% of total labor hours must be performed by qualified apprentices registered with a DOL-approved program. Failure on either condition reduces the credit from $5,000/unit to $2,500/unit. HECS reviews payroll documentation as part of the §45L certification package, which we prepare for developers across Kentucky, Indiana, Ohio, Tennessee, Illinois, and Missouri.
What is the §45L certification deadline for projects in Kentucky and Ohio?
§45L certifications must be complete and dwellings placed in service on or before December 31, 2026. With HECS project data showing certification cycles of 45–90 days from final inspection, developers targeting the full $5,000/unit credit should have permits pulled by mid-2026 and construction substantially complete by Q4 2026. Registration with EPA's ENERGY STAR Multifamily program must precede construction start. Contact HECS at (859) 983-7382 to schedule a timeline review for your project.
Can a builder still claim §45L for ENERGY STAR Multifamily v1.2 after version 3.0 released?
ENERGY STAR MFNC v1.2 remains a valid qualification pathway for permits pulled before the program's official transition cutoff to v3.0. The EPA's ENERGY STAR MFNC program defines the version-eligibility window based on permit date, not certificate date. HECS verifies version eligibility during the project registration step and flags transitions before they create a documentation gap — see hecsusa.com/services/ for the full §45L certification workflow.
HECS provides §45L tax credit certification, ENERGY STAR Multifamily New Construction certification, DOE Zero Energy Ready Home verification, blower door testing, duct leakage testing, and HVAC testing and balancing for multifamily developers throughout Kentucky, Indiana, Ohio, Tennessee, Illinois, and Missouri. Our deliverable is the complete certification package — rater checklists, HERS rating, ASHRAE 62.2 ventilation verification, prevailing-wage payroll review, and EPA submission. We serve Louisville KY, Lexington KY, Cincinnati OH, Indianapolis IN, Nashville TN, St. Louis MO, Chicago IL, and Evansville IN as primary markets. To start a §45L scope conversation, call (859) 983-7382 or email [email protected]. Project intake forms and service descriptions are at hecsusa.com/contact/ and hecsusa.com/services/. For multifamily certification work in Kentucky specifically, see hecsusa.com/45l-tax-credit-louisville-ky/.
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