Dynamic Glass and the Inflation Reduction Act – All You Need to Know

In not-so-recent news for the glazing industry, the U.S. Senate Democrats released a summary in 2022, which outlined the “Inflation Reduction Act of 2022.” The purpose of this act is to establish a significant initial contribution towards reducing the deficit in order to combat inflation. 

It aims to channel resources into manufacturing and domestic energy production while also targeting a substantial reduction in carbon emissions, aiming for a decrease of approximately 40% by the year 2030.

The Inflation Reduction Act, with its budget of $739 billion, encompasses a range of measures, such as consumer rebates, tax credits, and incentives directed at both American households and businesses.

In our case, we’re looking at an amendment to the Internal Revenue Code Section 48 – Energy Investment Tax Credit (ITC), which introduced a 30% energy tax credit for electrochromic glass (dynamic glass), within the framework of the Internal Revenue Code of 1986. 

This amendment extends the definition of Energy Property to include dynamic glass, describing it as:

“Equipment that utilizes solar energy to illuminate the interior of a building through fiber-optic distributed sunlight or electrochromic glass, which employs electricity to modify its light transmittance properties for the purpose of heating or cooling a structure.”

What do Supporters Say?

Advocates are now providing well-documented environmental advantages, such as the fact that smart glass has the potential to reduce a building’s energy consumption for heating or cooling by approximately 20%. 

Furthermore, if numerous buildings in a given city embrace new glazing methods, it may be able to alleviate strain on the local electrical grid during periods of high demand.

Breaking Down Dynamic Glass

Dynamic glass belongs to the “smart glass” category and possesses the ability to modify its solar heat and light transmission characteristics when subjected to a low voltage. 

This technology was originally conceived in 1989 by Jon Van Dine, the founder of SageGlass. 

Clean energy advocates and dynamic glass manufacturers have both expressed their enthusiasm for the Energy Investment Tax Credit (ITC). 

In a statement released by View, Inc., the company commended Congress for taking a proactive stance and recognizing that legislation like this will pave the way for the widespread deployment of clean technology.

The Benefits of the Investment Tax Credit (ITC)

The tax credit has the potential to offset a substantial portion (30%-50%) of the expenses linked to dynamic glass, thereby bringing it closer to cost parity with conventional glazing. 

One essential aspect of this legislation is that the 30% tax credit is applicable not only to smart glass components like the glass itself, software, and control systems but also extends to the labor involved in glazing, subject to compliance with prevailing wage and apprenticeship utilization standards.

Owners now have the potential to recover 30% or more of the entire facade system’s costs. 

However, there is still a bit of uncertainty that this tax credit has yet to clarify. 

If you are eligible for this tax credit, it’s important to perform calculations based on conservative estimates while pursuing the most aggressive incentives depending on your interpretation of the law. 

According to SageGlass, bonus credits could elevate the tax incentive to as much as 50%. These bonuses encompass aspects like domestic content, not restricted solely to the curtain wall or glass but encompassing the entirety of the building. 

Putting These Tax Incentives Into Perspective

To illustrate the impact of these tax incentives, let’s imagine you’re a glazing contractor working on a building that requires curtain wall installation. 

Your initial bid for static glass stands at $100 per square foot, where the glass constitutes about 10% of the total expenses. In addition to the glass, you have costs related to framing, equipment, engineering, labor, and other materials.

Now, when it comes to dynamic glass, historically, it may have pushed the overall cost to approximately $150 per square foot. Unfortunately, this increase in cost has deterred some property owners in the past. 

However, with the 30% tax credit provided by the ITC, the upfront expense for dynamic glass approaches the cost of a Low-E window system with manual blinds. 

If the tax credit were to reach 50%, smart windows could even become more cost-effective than the alternative. Manufacturers now describe only modest increases in price rather than the substantial cost difference seen before the ITC. 

Who Is Eligible?

The ITC is applicable to dynamic glass installations placed into service on or after January 1, 2023, and for projects that commence construction prior to January 1, 2025. 

The ultimate owner of the system holds the eligibility to claim the tax credit, though they do have the option to transfer it to a third party. It’s worth noting that the team involved in the sale or installation of the glazing system does not impact credit eligibility. 

Typically, this team includes the glazing contractor responsible for framing and installation of the window system, the dynamic glass manufacturer, and the electrical contractor handling the installation and procurement of dynamic glass controls. 

It’s also worth noting that any dynamic glass product qualifies for the credit, and there are no restrictions on the number of team members involved.

Final Thoughts – The Impact of the Inflation Reduction Act

Here at Advantage Drafting, we maintain a vigilant watch over evolving regulations and emerging technologies within our industry. 

We’re constantly motivated by evolution, and our forward-thinking team is committed to staying informed about the latest trends. If you’re prepared to partner with a proactive company for your next glazing project, don’t hesitate to reach out for a complimentary quote!