New Green Energy Tax Credits Available to For-Profit, Tax-Exempt, Governmental

Are you planning for or undertaking any construction or renovation of your facilities? Are you considering purchasing electric vehicles, such as snow blowers, lawn mowers, or other commercial vehicles? If so, there may be opportunities to access tax credits or direct payments for those projects.

The Inflation Reduction Act (IRA) included many green energy tax credits and, for the first time, extended those to tax-exempt organizations and other non-taxpaying entities in the form of direct payments. Details are emerging on how health care, nonprofits or others can go about claiming those payments, though more information will be forthcoming later this fall.

Regardless of whether you are for-profit or not-for-profit, you can take advantage of these credits. You’ll want to read our recent article for background information and register for CLA’s complimentary webinar on August 16 with the full run-down. In the interim, here’s your quick preview.

Inflation Reduction Act

The IRA created dozens of new green energy tax credits while expanding existing ones. Many of these credits can be further enhanced if certain requirements are met, thereby increasing an organization’s credit rate by five times or more in some cases. For example, projects that use prevailing wage rates, projects located in an energy community or low-income community, or projects that use materials that are made domestically may be eligible for increases to the tax credits of up to 30% or even more.

For the first time, many of these tax credits also provide for what is termed direct payments that are made in place of reduced tax liability. Direct pay is largely limited to the following entities that do not pay federal tax (with a few exceptions):

• Any organization exempt from federal income tax,
• Any state or political subdivision thereof,
• The Tennessee Valley Authority,
• An Indian tribal government,
• Any Alaska Native Corporation, or
• Any corporation operating on a cooperative basis engaged in furnishing electric energy to persons in rural areas.

The tax credits where direct pay is an option include:

• Section 30C — Alternative fuel vehicle refueling property credit
• Section 45 — Electricity produced from certain renewable resources, etc.
• Section 45Q — Credit for carbon oxide sequestration
• Section 45U — Zero-emission nuclear power production credit
• Section 45V — Credit for production of clean hydrogen
• Section 45W — Credit for qualified commercial clean vehicles
• Section 45X — Advanced manufacturing production credit
• Section 45Y — Clean electricity production credit
• Section 45Z — Clean fuel production credit
• Section 48 — Energy credit
• Section 48C — Advanced energy project credit
• Section 48E — Clean electricity investment credit

For entities not eligible for direct pay, there is another option — a potential to monetize the credits by transferring them to an entity with greater tax liability. This is called “transferability” and allows companies the option of buying and selling certain credits.

Next Steps

There are many details related to the IRA tax credits and how to claim them, including a pre-filing registration requirement, which we’ll cover in our Aug. 16 webinar. Register for our complimentary webinar today. You don’t want to let this opportunity pass you by.

Additional Resources

• Summary of IRA clean energy tax provisions
• CLA’s energy incentives team
• CLA’s sustainability and ESG team