The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have announced the final rules on key provisions within the Inflation Reduction Act (IRA) that will provide more access to clean energy tax credits for state, local and tribal governments; tax-exempt entities; U.S. territories; rural entities; and more.
These expanded tax credits, which are part of the Biden-Harris Administration’s Investing in America agenda, are expected to help build out more projects quicker and cheaper while creating jobs and lowering energy costs for families.
The IRA has introduced two new credit delivery mechanisms: elective pay (also referred to as direct pay) and transferability, which enable more governments, organizations, and businesses to fully benefit from the tax credits in a way they had not been able to in the past.
Previously, businesses and organizations that did not have sufficient tax liability were unable to fully realize tax credits; now, they will be able to transfer all or a portion of any 11 clean energy credits to a third-party in exchange for tax-free immediate funds.
“Thanks to President Biden’s Inflation Reduction Act, local governments, nonprofits, and other non-taxable entities can now claim clean energy tax credits for the first time,” said John Podesta, Senior Advisor to the President for International Climate Policy, in a statement. “Today’s final rule provides additional clarity for organizations so they can take full advantage of this game-changing opportunity to expand clean energy all across America.”
The Treasury also issued a separate Notice of Proposed Rulemaking (NPRM) to provide clarity to applicable entities that co-own clean energy projects and are interested in utilizing the elective pay option.
Find out more details about the Treasury and IRS’ final rules here.