Are you hearing about the billions of dollars available from the Inflation Reduction Act and wondering how you can benefit from it? Or, are you frustrated with a high utility bill? Do you need a new vehicle or two – or to upgrade your manufacturing plant or HVAC system? Are you concerned your community might be severely damaged by a hurricane, tornado, or other extreme weather event? Are your investors or employees asking you to reduce your use of fossil fuels?
You might be able to address those challenges and save money doing so by leveraging the Inflation Reduction Act (IRA). This Act was passed by the previous Congress under Speaker Nancy Pelosi and signed by President Biden, along with the Infrastructure Investment and Jobs Act (IIJA) and the CHIPS & Science Act. The IIJA is massively upgrading the U.S. infrastructure, and CHIPS is bringing manufacturing jobs back to the U.S. and protecting our supply chains.
“Almost everybody is eligible for some type of tax credit within the law,” the Inflation Reduction Act
Over 60 pieces of regulatory guidance on how to use IRA tax credits and incentives have been issued so far, with more being released on an ongoing basis. How to benefit from them is, well, complicated.
To find out exactly how consumers, business leaders and community, local and state officials can leverage these financial incentives, I had an in-depth discussion with Rachel McCleery, Senior Advisor in the Treasury Department, who works with the Inflation Reduction Act Program Office. Her job is to help consumers and business leaders understand how to maximize the IRA provisions for their homes, lives and businesses. “The beauty of the IRA is that it is so wide sweeping that almost everybody is eligible for some type of tax credit within the law,” McCleery emphasized on Electric Ladies Podcast.
“We like to break (the tax credits) down by industries and audiences,” McCleery explained. “On the industry side, we have energy efficiency, energy generation, manufacturing, vehicles, fuels, and carbon capture. Now, overlaying all of those are a handful of crosscutting bonuses and requirements that can greatly affect – in many cases increase – the amount of the underlying tax credit within those industry-driven tax credits.” In addition to the industry side, the incentives are also organized by audience, which includes consumers, labor, small businesses, and tax-exempt organizations.
Here are six keys to accessing the IRA tax credits and incentives from Treasury’s Rachel McCleery:
1. Go to treasury.gov/ira, the primary resource hub for taxpayers to access tailored information on how to access IRA incentives and tax credits.
2. Follow the links on that page relevant to your role and needs: “That (link)’s going to take you to a landing page that provides an overview summary of how Treasury is involved with the IRA, and halfway down, you’ll find that taxpayer resource hub, “ McCleery said. “You click on that (link to the hub) and then it actually takes you to a separate landing page. And the first dropdown item you see is an option to choose what kind of taxpayer you are. ‘I am a small business, I am a tax-exempt entity, I am a consumer.’ And then from there, it directs you to a page of the tax credits that are most applicable to you.”
3. If you’re looking for incentives for domestic manufacturing and clean energy projects, and/or to reduce your carbon emissions, for example: For these, businesses might check out 48C, Qualifying Advanced Energy Project Credit, among the Investment Tax Credits (ITC). The ITCs may be familiar to business taxpayers because they are popular, but the IRA expanded them, she said. The Advanced Manufacturing Production Credit is another one she mentioned.
4. If you’re a tax-exempt entity or similar, you can still use the IRA: Tax-exempt entities and those traditionally not able to access tax credits can use the IRA credits via what’s called “Elective Pay.” But, Elective Pay is not only for tax-exempt entities. “Interim numbers show that 900 entities have registered for one of these three programs with more than 45,000 total projects and facilities. And we’re seeing that 98 of the facilities and projects are pursuing transferability of the registered entities. About 50% are applicable entities using Elective Pay and half are considered taxable entities,” McCleery said.
5. Businesses in disadvantaged communities can explore tailored incentives, including the Low-Income Communities Bonus Credit (48e), McCleery pointed out. There’s also the Justice40 initiative that helps these communities, which she said is administered with the Energy Department.
6. Using IRA tax credits to offset the costs of an electric vehicle: McCleery said over 13,000 dealers have completed the required registration to be able to offer the advanced payment of $7,500 off the electric vehicle at the time of sale. She also said that, “There have been over 100,000 transactions between customers and dealers where the customer is deciding that they want to opt for that upfront tax credit.” That adds up, explaining that, “The IRS estimates that they have issued over $580 million in advance payments to dealers.” She praised the National Auto Dealers Association (NADA) for being very helpful with reaching dealers about these.
More guidance and rules are being issued regularly, for both consumers and businesses. Treasury suggests that consumers and business leaders seek guidance from trade organizations and professional advisors, including accountants, tax advisors and/or tax attorneys about their unique circumstances.
Listen to the full interview with Rachel McCleery of Treasury on Electric Ladies Podcast here.
