The Investment Tax Credit Now Includes Dynamic Glass. What Does This Mean For Building Owners?

The U.S. continues to make strides toward a cleaner energy future as 24 states and Washington, D.C., set goals for cutting down on greenhouse gas emissions within the next 27 years. Building owners will play a large role in bringing this goal to fruition since buildings are responsible for 33% of global greenhouse gas emissions.

One way building owners can cut back on their carbon footprint is by installing smart windows. Also known as dynamic glass, smart windows automatically tint and clear windows through an electrical charge, to control both light and heat. Jordan Doria, global marketing director for smart window manufacturer SageGlass, said that in addition to preserving outdoor views by eliminating the need for shades and blinds, switching to dynamic glass can reduce a building’s embodied carbon.

"Dynamic glass eliminates the need for interior glare control solutions, such as blinds, as well as exterior shading devices such as fins, louvers or overhangs which can have significant embodied carbon," Doria said. "In addition to embodied carbon impacts, smart windows can reduce operational carbon associated with energy use by 10-20%."

Despite the long-term benefits and savings, the upfront installation cost has hindered some building owners from adopting smart windows. In August, as part of the Inflation Reduction Act, the federal government added a new tax credit for dynamic glass to the existing Investment Tax Credit section of the Internal Revenue Code.

The credit will cover 30% to 50% of the costs associated with installing dynamic glass. While the base value of the credit is 30%, some projects may be eligible for one or two 10% bonus credits. At the 30% level, dynamic glass nears cost parity with conventional window systems. At the 50% level, it can be less expensive.

The credit applies for systems placed in service after Jan. 1, 2023, and commencing construction before Jan. 1, 2025.

The Inflation Reduction Act also expanded the Investment Tax Credit to create direct pay mechanisms for federally tax-exempt entities, allowing them to receive a rebate from the Treasury Department in the same amount as the credit. Additionally, those subject to federal income tax, but without a tax appetite, may elect to transfer all or a portion of the credit to another taxpayer.

SageGlass said the tax credit would cover the entire window system including the glass itself, the system controls, framing and installation costs.

In addition to contributing to the U.S.’ clean energy goals, incorporating dynamic glass can help CRE building owners meet the demands of today’s tenants. Many office tenants are looking for spaces that exhibit a commitment to making sustainable building choices and offer an abundance of natural light. Having more natural light in the workplace has been shown to help enhance quality of sleep, lift moods and improve attentiveness.

"Dynamic glass not only helps building owners differentiate their properties from the rest, but also provides tenants with enhanced comfort that can increase productivity," Doria said. "There are a multitude of benefits."

He said that to make the most out of these tax credits, CRE building owners need to understand the full breadth of the advantages that dynamic glass can provide. 

"In recent years, the smart window industry has made significant technology and aesthetic improvements," Doria said. "The last major issue was upfront cost. With the ITC addressing this, the conversation has shifted from 'Why use smart windows?' to 'Why not use smart windows?'”

This article was produced in collaboration between SageGlass and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].