The Inflation Reduction Act of 2022 (IRA) will be a game changer for the energy industry. This guide focuses on those issues of particular significance to the energy industry; it is not intended to be comprehensive. Highlights include:
- Extending the ITC and PTC for projects beginning construction through 2024, and removal of the phasedown.
- Expanding the PTC to include solar.
- Expanding the ITC to include energy storage projects.
- Adopting a base/bonus rate structure for many credits under which the bonus rate requires satisfaction of prevailing wage and apprenticeship requirements.
- Adopting additional credit amounts for domestic content, energy communities, and low-income communities.
- Adding direct payment (for nontaxpayers and, in a few cases, taxpayers) and transferability (for taxpayers) in lieu of claiming nonrefundable credits.
- Extending the Section 45Q credit for carbon capture and sequestration, including a variety of rules that liberalize qualification.
- Adopting the technology-neutral clean energy ITC (CEITC) and clean energy PTC (CEPTC) for projects placed in service after 2024.
- Adopting a corporate minimum tax on “book profits,” but with rules allowing depreciation to reduce applicable AMT income and clean energy credits to reduce AMT liability.
- Adding an ITC and a PTC for clean hydrogen.
- Adding the advanced manufacturing production credit available for, among other things, components of solar, wind, and battery projects.
Further detail on the IRA is provided below. A summary chart of the provisions in the IRA can be downloaded here.