Inflation Reduction Act Resource Center
The Inflation Reduction Act of 2022 (IRA) includes the largest energy incentive effort in U.S. history. It builds on the energy initiatives included in 2009’s American Reinvestment Recovery Act, creating an environment where many energy-related projects become significantly more attractive to more types of entities than in the past.
The IRA includes more than 70 investment, production and excise credits designed to facilitate the transition to cleaner energy production, promote advanced manufacturing, encourage the adoption of clean vehicles (CVs) and reduce greenhouse gas emissions through the use of alternative fuels and energy efficient technologies. Additionally, significant enhancements have been made to the U.S. Department of Agriculture (USDA) and Department of Energy (DOE) loan programs.
To maximize any Inflation Reduction Act tax credits, entities will have to prioritize existing and future projects, adjusting the timetable, location and production processes, if possible.
The Inflation Reduction Act includes four broad areas of credits. Many of these credits start with a base amount and can be increased by a factor of five if a project pays prevailing wages and employs apprentices. More details are found in the overview. Baker Tilly advisors are available to help address your project’s specific needs and requirements.
The Act provides for a direct offset to federal tax liability in the form of a tax credit. These credits represent a financial offset for an organization’s qualified construction or production costs, making the economics of many projects work better than they would have without the credits. Most credits are good through 2032, the longest U.S. “energy policy” time frame ever.
Three ways credits bring value to projects:
Essentially, the IRA Act is enabling all entities to utilize this legislation regardless of tax status.
*passive activity rules can apply
There are many types of funding opportunities under the IRA. The below provides an overview of the existing and new tax credits. Qualifying Energy Property projects has a broad definition and can include but is not limited to the following project types:
Existing credits with enhanced features are available in the following areas:
New credits are available for the following:
Baker Tilly can help manufacturers interested in applying for Section 48C Advanced Energy Credit. Our 48C specialists mapped out the application steps in our portal so you can involve your team in the process, all in one place, from the pre-application through the completion of construction.