We know the new Inflation Reduction Act (IRA) is dense and confusing - we've got you covered! Here's a list of questions we've received from members of America Is All In. More information is coming out each week on IRA so this page will be updated regularly.
Still have questions that aren't listed here? Email them to [email protected].
When do Inflation Reduction Act (IRA) provisions kick in?
Some existing tax credits are available now like the investment tax credit for solar, geothermal, energy storage, and microgrid controllers (25D) and the tax credit for electric vehicles (30D). New requirements will kick in for these two programs in 2023.
Most provisions will activate in 2023. Here are some examples:
- January 1, 2023: New Energy Efficient Home Tax Credit (45L), Commercial Buildings Energy Efficiency Tax Deduction (179D), Residential Energy Efficiency Tax Credit (25C), the Clean Commercial Vehicles Tax Credit (45W), and the Alternative Fuel Vehicle Refueling Property Tax Credit (30C).
- February 12, 2023: GHG Reduction Funds will start flowing from the EPA.
Where can I find the application for grants and rebates?
It will depend on which agency runs the rebate or grant program. In some cases, your state energy office will share program information because the Inflation Reduction Act distributes funding directly to them. In other cases, federal agencies like the EPA will run the funding distribution. More details to come but stay in touch with us for further notice!
Could a new governmental change at the federal level alter the 10-year timeline or stipulations of these credits?
While repealing the Inflation Reduction Act is unlikely, there are ways to mute its potential impacts. There is likely to be significant oversight into the unprecedented levels of funding, creating political risk that could have ramifications for future climate policy.
Are commercial tenants eligible for any of IRA's provisions such as the EV Charger tax credit or 179D Commercial Building Tax Deduction?
You may need to coordinate with the property's owners to take full advantage of benefits. For the EV Charger Tax Credit, the Alternative Fuel Vehicle Refueling Property Tax Credit, you also need to either be in a low-income area where the poverty level is at least 20% or in a metropolitan area where the median income is less than 80% of the state medium.
How will direct pay work?
For certain IRA provisions, there is a direct pay provision which allows tax-exempt entities, such as non-profits to receive a tax credit in the form of a direct payment from the federal government. For example, if tax-exempt entities install geothermal heat pumps for their heating and cooling needs, they can receive a direct payment of up to 30% of the total installation costs. The process for applying for and receiving direct pay is yet to be clarified by the Treasury.
Which tax credits allow for direct pay for tax exempt entities?
- 30C Alternative Fuel Vehicle Refueling Property Credit
- 45 Renewable Electricity Production Tax Credit
- 45Q Carbon Oxide Sequestration Credit
- 45U Zero-Emissions Nuclear Power Production Credit
- 45V Clean Hydrogen Production Credit (available for the first 5 years, not limited to non-profits)
- 45W Qualified Commercial Clean Vehicles Credit
- 45X Advanced Manufacturing Production Credit
- 45Y Electricity Production Credit
- 45Z Clean Fuel Production Credit
- 48 Energy Investment Tax Credit
- 48C Qualifying Advanced Energy Project Credit
- 48E Clean Electricity Investment Credit
Can I claim multiple tax credits?
Yes, you can claim multiple tax credits, or "stack" credits, on top of one another to maximize your tax benefits from your clean energy investments. You can also stack tax incentives with a rebate program. However, you cannot take advantage of both rebates, the home electrification rebate, and the home efficiency rebate for the same project. You should be able to take advantage of both rebates if you use them for different projects. More guidance will be administered soon on stacking incentives.
What commercial buildings qualify for 179D, the Commercial Buildings Energy Efficiency Tax Deduction?
This tax deduction applies to new commercial construction and renovated existing buildings. A qualifying commercial building can be tax-exempt, energy efficient buildings such as schools, hospitals, churches, charitable organizations, and government buildings. Tax exempt entities do not qualify for the 179D deduction themselves but the deduction can be passed on to the primary designers of the properties to see an overall lower cost of the project.
Can you provide some examples of what the Commercial Buildings Energy Efficiency Tax Deduction would support?
There are tons of possibilities! Pretty much any project that improves the efficiency of the buildings. The more you increase efficiency, the higher deduction you can get. Examples of projects to improve efficiency include: replacing furnaces with heat pumps, switching gas stoves to induction stoves, improving building insulation, replacing light bulbs with LED lights, and more.
Are energy efficiency audits and consulting included in any of these programs?
There is the 25C tax credit focused on energy in residential buildings. The Energy Efficient Home Improvement Credit provides residential property owners up to $150 for a home energy audit to assess savings opportunities with their buildings.
Will my electrical upgrade or home construction happening now in 2022 qualify for IRA provisions?
It depends. Tax credits that are marked "2023" are going to be available on January 1, 2023. Rebates and grants marked as "2023" do not have a firm availability date because each state will have a different rollout timeline. There are tax credits you can claim now, like the clean electricity ITC, but the additional IRA reinforcements will activate in 2023.
When will the buildings rebate programs be disbursed?
The IRA created two rebate programs, one offering up to $8k (home electrification rebates) and the other up to $14k (home efficiency rebates). The electrification rebates are designed to be offered at the point of sale -- meaning upfront savings for consumers. These programs will be administered by your state so the program will be designed at the state level in the next two years (hopefully sooner!). Look out for guidance from your state.
What qualifies as mobile machinery for the 45W Commercial EV tax credit?
Vehicles that meet the following requirements qualify for the IRA's EV credit:
- "Draws propulsion using a traction battery that has at least 4 kilowatt-hours (kWh) of capacity pre 12/31/2022 and at least 7 kWh after 12/31/2022,
- "Uses an external source of energy to recharge the battery,
- "Has a gross vehicle weight rating of up to 14,000 pounds,
- "Meets specified emission standards,
- "where final assembly of vehicular parts was done in North America."
How is the personal 30D Clean Vehicle EV tax credit set up?
Your EV tax credit set up will depend on your income level, whether you purchased a new or used EV, and the manufacturing location of different vehicle processes and components. Important note: the IRA EV tax credits now have a new requirement that an eligible vehicle has battery components assembled in North America, the final assembly occurs in North America, and the battery components do not come from “foreign entity of concern” countries. Treasury and auto manufacturers are expected to publish guidance on what vehicles are in compliance with these new requirements. Starting in 2024 you will be able to transfer the credit to the dealer to deduct the credit value from the car sale to get a discounted price but until then it'll be a regular tax credit.
What is the difference between PTC and ITC and how can I figure out which applies best to me?
The production tax credit (PTC) provides an incentive for electricity generated at $26 per MWH and is better suited for utility-scale renewable energy or large community solar projects. An ITC is better for rooftop solar, some smaller community solar and offshore wind. Both are available for solar, wind, and geothermal until 2025. In 2025 both credits become technology neutral and can be claimed for any zero-emission generation.
In addition, the ITC is available for battery storage, biogas facilities, microgrid controllers, and interconnection property less than 5 MW.
The ITC starts with the base credit starts at 30%, with add-ons to increase the credit if certain requirements are met. For both credits, there is an additional 10% if the project uses domestic content and 10% if the project is in an energy community. For the ITC there is an additional 10% if a solar or wind project is in a low-income community, and an additional 20% if a solar or wind project is part of an eligible low-income economic benefit project.
Entities must choose between the PTC and the ITC. Both credits are full value until Treasury puts out guidance on prevailing wage and apprenticeship requirements. Sixty days after guidance comes out the base credit will drop to 6% for the ITC and $5 per MWH for the PTC. If labor requirements are met by the developer, both credits will return to full value of 30% ITC and $26 PTC. IRA expands the PTC and ITC for 10 years and adds a direct pay option so that tax-exempt entities can fully take advantage.
How can the ITC (investment tax credit) be claimed for a tax-exempt NGO?
The logistics of direct pay have not been decided yet by the Treasury. As of October 21, 2022, they have an RFI (Request for Information) to collect feedback from stakeholders and will use this to develop their guidance. Stay tuned for more updates!
What does "domestic content" mean in the context of the ITC of PTC?
Both tax credits offer a 10% bonus for materials sourced in the US and the same requirement to receive direct pay after an initial phase in period. Materials are required to be a minimum percentage of steel, iron, or other manufactured products that is mined, manufactured or produced in the US. The minimum percentage is 40% until 2025, 45% in 2025, 50% in 2026, 55% after 2026. The requirement for direct pay is phased-in, so projects starting construction before Jan. 1 2024 receive full direct pay even if they don’t meet domestic content requirements and 90% if they begin construction during the calendar year of 2024.
Is the hydrogen PTC (production tax credit) geared towards green hydrogen or any hydrogen?
The hydrogen PTC is not only geared towards green hydrogen but it has certain stipulations for the emissions intensity of hydrogen production. The bill defines qualified clean hydrogen as "hydrogen produced through a process that, as compared to hydrogen produced by steam-methane reforming, achieves a percentage reduction in lifecycle greenhouse gas emissions that is not less than 40%."
The bill also (1) expands the tax credit for electricity produced from renewable resources if the electricity is used to produce clean hydrogen, (2) allows an election to treat clean hydrogen production facilities as energy property for purposes of the energy tax credit, and (3) eliminates the excise tax credit for liquefied hydrogen.
Greenhouse Gas Reduction Fund
What will the GHG Reduction Fund provide?
The GHG Reduction Fund provides $27 billion for clean energy projects through innovative financing. $15 billion out of that $27 billion is specifically reserved for environmental justice projects. The funding will go toward direct investments, or low- and zero-emission projects at the community level, and indirect investments, or seed funding to start and expand green banks.
Eligible projects for the direct investment can receive grants, or more likely, low-interest loans, and can include a wide range of projects. The funds must start flowing from EPA by February 12, 2023, so more guidance will come out soon.
How will GHG Reduction Fund provisions be distributed?
Out of the $27 billion allocated for the GHG reduction fund, $20 billion can be administered to nonprofit financial institutions while $7 billion will go to state, local, and tribal governments, or additional nonprofit financial institutions.
The funds must start flowing from EPA by February 12, 2023, so more guidance will come out soon. All funds must be distributed by the EPA by September 30 2024. However if EPA gives some or all of the $20 billion to a non-profit intermediary, the funds may continue to be re-granted indefinitely.
Who is eligible for Sustainable Aviation Fuel credit?
Airlines would receive credits between $1.25 and $1.75 per gallon for SAF purchases. To qualify, the SAF purchased would have to offer at least 50% reduction from traditional kerosene-based jet fuel.
What are IRA's funding opportunities for workforce development?
The law / Section 50123 provides $200 million in funding for state-based home energy efficiency contractor training grants where states and municipalities can help provide training and education to contractors involved with energy efficiency installations. In addition, for many of the tax credits, there are prevailing wage and apprenticeship requirements to receive higher incentives. This should spur more apprenticeship programs. The Infrastructure Investment and Jobs Act had dedicated funding for workforce development. There is $40M for Energy auditor training, $10M for building, training, and assessment centers, and $10M for career skills training.