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A pickup truck drives on the road as wind turbines generate electricity outside Medicine Bow, Wyoming on Aug. 14, 2022. -According to the U.S. Department of Energy website, approximately 19.5 percent of Wyoming’s electric grid power comes from wind with auxiliary capacity Under construction.
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Federal agencies on Wednesday cleared the way for state, city, local and other nonprofit entities to join the private sector in accessing the lucrative tax breaks included in the Biden administration’s landmark climate law.
The US Treasury and Internal Revenue Service on Wednesday issued guidance on what tax-exempt entities need to do to access credits that are included in the Inflation Reduction Act, Which President Joe Biden signed into law in August.
In the 10 months since the IRA was passed, private sector companies have announced more than $107 billion in new clean energy investments, John PodestaSenior Adviser to the President for Clean Energy Innovation and Implementation said on a call with reporters Tuesday.
Traditionally, states, territories, tribes, local governments, and nonprofit organizations have not been eligible for tax credits, because they do not generate profits that deduct the tax credit.
The IRA changed that.
“The biggest tools of the inflationary law are tax credits, which provide an unprecedented 10 years of political certainty to the clean energy sector,” Podesta said.
“For the first time, tax-exempt entities will be able to receive a payment equal to the full value of the tax credit for building eligible clean energy projects,” Podesta said. “This is a game changer for our ability to spread the benefits of clean energy to every community in America.”
WASHINGTON DC, USA – SEPTEMBER 13: President Joe Biden speaks on the South Lawn of the White House in Washington, D.C. during the Inflation Reduction Act celebration on September 13, 2022.
Anadolu Agency | Anadolu Agency | Getty Images
For example, the new directives will enable schools to purchase electric buses, help schools modernize them and add rooftop solar energy to their rooftops, and help rural energy cooperatives invest in renewable energy.
“It will help nonprofit hospitals, places of worship, nonprofit and philanthropic organizations, and more reduce their energy use and save money so they can spend more on their mission,” Podesta said.
The Treasury Department and the IRS have also issued guidance on the specific application of another seemingly wonky but very important piece of an IRA—the so-called “portability.”
In some cases, for-profit companies do not pay enough of a tax bill to take full advantage of the tax credit they may qualify for. Transferability allows these companies to sell their tax credit to a third party in order to access its full cash value.
Combined, the two pieces of guidance will grease the wheel of investment in climate technology already spurred on by the Inflation Reduction Act.
They will “significantly accelerate deployment, bring many governments and nonprofit organizations to the negotiating table for the first time, and make it easier for companies on the clean energy frontier to benefit from credits,” Wali AdeyoDeputy Secretary of the Treasury told reporters on Tuesday.
“Projects and factories will be built more quickly and affordably because of these loans, and more communities will benefit from the growth of the clean energy economy,” Adeyou told reporters.
Among other things, the new IRA rules will help more than 900 rural electric cooperatives that provide power to 32 million Americans in some of the most remote areas of the United States, Ademo said.
The changes, in one example, will help the Baltimore chapter of City of RefugeInc., a faith-based nonprofit serving neighborhoods where nearly 40% of the population lives below the federal poverty level, pays for its own solar power and energy storage system.
“The new direct payment option means that City Refugee will own this project themselves, and the full value of the solar tax credit will be paid directly to them,” he said. Michelle Moore, CEO, Groundswellis a nonprofit organization that builds community power in Washington, D.C., Maryland, Illinois, Georgia, and New York State.
“The resulting long-term electric bill savings mean that the City of Refugees will get more money for the Mission to support the health, food, housing, and job training programs they offer to their neighbors in Baltimore,” Moore told reporters on Tuesday’s call.
This is the first time that tax-exempt entities have been able to take advantage of these types of tax provisions, so senior administration officials said they couldn’t say exactly how much investment that would entail.
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