Energy Investment Tax Credits
Highlights
The Inflation Reduction Act (IRA) created opportunities for nonprofits and governmental entities to monetize clean energy credits through cash refunds beginning in 2023.
A multitude of energy investment and production credits can qualify for tax refunds.
Although guidance is still needed to implement the program, tax-exempt organizations should evaluate these opportunities now.
Signed in August 2022, the IRA contains new tax incentives for clean energy investment and production, including for tax-exempt organizations. This is an unprecedented opportunity to monetize federal tax credits in the form of cash refunds.
While guidance is still needed from the IRS and Treasury to fully implement the program, tax-exempts should assess these benefits now as a potential means to supplement their clean energy efforts.
The credits eligible for refund are:
- Section 30C — Alternative fuel vehicle refueling property credit
- Section 45 — Electricity produced from certain renewable resources, etc.
- Section 45Q — Credit for carbon oxide sequestration
- Section 45U — Zero-emission nuclear power production credit
- Section 45V — Credit for production of clean hydrogen
- Section 45W — Credit for qualified commercial clean vehicles
- Section 45X — Advanced manufacturing production credit
- Section 45Y — Clean electricity production credit
- Section 45Z — Clean fuel production credit
- Section 48 — Energy credit
- Section 48C — Advanced energy project credit
- Section 48E — Clean electricity investment credit
Each credit above contains its own rules regarding qualification and quantifying the benefit. Also, several of the credits are only available once the qualifying assets are placed in service, and that can require technical analysis. Therefore, tax-exempts must evaluate the specifics of each credit.
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