Here’s guidance on Inflation Reduction Act provisions that reduce costs of building green (Podcast included)
By Adam McMillen
Understanding the clean energy and climate provisions of the $740 billion Inflation Reduction Act (IRA) can be confusing. It is often difficult to not only determine which credits are applicable to a given project type, but also which technologies or building types are eligible within a given credit, and what are the exact incentive levels.
And there is plenty to wade through. The IRA includes $370 billion in clean energy and climate provisions, the largest investment ever by the federal government. It includes a multitude of tax credits, rebates, low-interest loans, and grants for the built environment, significantly expanding incentives for energy efficiency, renewable energy, storage, electric vehicles and other clean energy technologies, with additional funding for green affordable housing, federal buildings, and sustainable community investments, according to the U.S. Green Building Council.
At IMEG, we have been approached by several clients across multiple markets who are looking for guidance in identifying the IRA provisions that could apply to their projects. Based on the legislation itself as well as on reports from various industry organizations that have analyzed the legislation, at a high level the act brings four main benefits to IMEG clients:
- Adds several technologies into the federal tax credit structure that were not there before
- Makes non-profits eligible for direct pay of the incentive (effectively a grant)
- Fixes existing incentive levels at the high level
- Prioritizes, for large systems, the prevailing wage, apprenticeship hours on projects, and domestic production of materials
The credits themselves that apply to our clients are the Production Tax Credit (PTC); Investment Tax Credit (ITC) Under 1MW; ITC Over 1MW; Bonus Depreciation and Modified Accelerated Cost Recovery System (MARCS); Section 45L-New Home Construction, and Section 179D-Commercial Buildings.
To assist clients in understanding these provisions, IMEG has created a simple table listing the credits, the technologies/building types they apply to, and the incentive levels.
Of course, not every credit will apply to every client.
While final guidance on the IRA’s provisions is not expected from the federal government until January 2023, owners should waste no time familiarizing themselves with the many cost-saving opportunities the act provides to build green, save energy, and reduce carbon emissions—all of which IMEG is committed to helping our clients achieve.
Learn more by listening to this podcast:
Related reading: Low-carbon cement could be sped to market with climate law funds.