A pickup truck drives on the road as wind turbines generate electricity outside of Medicine Bow, Wyoming, on August 14, 2022. -According to the U.S. Department of Energy website, about 19.5 percent of Wyoming’s grid electricity comes from wind power capacity under construction.
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Federal agencies on Wednesday paved the way for state, municipal and local governments and other nonprofit entities to join the private sector in receiving lucrative tax credits included in the Biden administration’s landmark climate bill.
The U.S. Treasury Department and the Internal Revenue Service on Wednesday issued guidance on what tax-exempt entities need to do to qualify for the credit, the provisions contained in the Lower Inflation Act, President Joe Biden signed into law in August.
In the 10 months since the passage of the IRA, private sector companies announced more than $107 billion in new clean energy investments, John PodestaSenior Advisor to the President on Clean Energy Innovation and Implementation, said on a call with reporters Tuesday.
By convention, states, territories, tribes, local governments, and nonprofits are not eligible for the tax credit because they have no profits from which to deduct the value of the tax credit.
The IRA changed that.
“The biggest tool of the Inflation-Reducing Act is the tax credit, which provides unprecedented 10-year policy certainty for the clean energy industry,” Podesta said.
“For the first time, tax-exempt entities will be able to receive payments equal to the full value of tax credits for building qualified clean energy projects,” Podesta said. “This transforms our ability to spread the benefits of clean energy to every community in America.”
WASHINGTON, DC, UNITED STATES – SEPTEMBER 13: President Joe Biden speaks during the celebration of the Inflation Reduction Act on September 13, 2022 on the South Lawn of the White House in Washington, DC.
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For example, the new guidelines will enable schools to purchase electric buses, help schools retrofit and install rooftop solar on building roofs, and help rural energy cooperatives invest in renewable energy.
“It will help non-profit hospitals, houses of worship, non-profit and charitable organizations and do more to reduce their own energy use and save money so they can spend more on their mission,” Podesta said. explain.
The Treasury Department and the IRS have also issued guidance on the specific application of another strange-sounding but very important part of the IRA, known as “transferability.”
In some cases, for-profit corporations do not pay enough taxes to take full advantage of the tax credits they would otherwise be eligible for. Transferability allows these companies to sell their tax credits to third parties for their full cash value.
Taken together, the two guidelines will grease the flywheel of climate technology investment, which is already being spurred by inflation-reducing bills.
They “will dramatically speed up deployment, bring many governments and nonprofits to the negotiating table for the first time, and make it easier for businesses at the forefront of clean energy to benefit from credit,” Wally AdeyemoDeputy Finance Minister told reporters on Tuesday.
“Thanks to these credits, projects and manufacturing plants will be built faster and at a lower cost, and more communities will benefit from the growth of the clean energy economy,” Adeyemo told reporters.
Among other things, the new IRA rules will help more than 900 rural electric cooperatives provide electricity to 32 million Americans in some of the most remote areas of the country, Adeyemo said.
In one example, these changes will help the Baltimore chapter city of refugea faith-based nonprofit serving the community, where nearly 40 percent of residents live below the federal poverty level, pays for its own solar and storage systems.
“The new direct payment option means the City of Refuge will own the project themselves and the full value of the solar tax credits will be paid directly to them,” said Groundswell CEO Michelle Moorea nonprofit organization that builds community strength in Washington, DC, Maryland, Illinois, Georgia, and upstate New York.
“The resulting long-term savings on electric bills means more money for the city of sanctuary to support the health, food, housing and job training programs they provide to their Baltimore neighbors,” Moore told reporters on a conference call Tuesday.
It marks the first time tax-exempt entities have been able to take advantage of such tax provisions, so senior administration officials said they could not quantify exactly how much investment it would require.
