Virginia Mercury
Summary
In August of last year, Congress unexpectedly passed the Inflation Reduction Act (IRA). While it is named the Inflation Reduction Act, in large measure, it is really a green energy bill that is focused on driving investment in renewable energy projects.
The IRA is significant for many reasons, not the least of which is that it opens up investment and development opportunities driven by tax credits for tax-exempt organizations, such as local governments, higher education institutions and hospitals, that were previously unavailable.
The IRA, which established tax incentives that may range from 30% to upwards of 50% for renewable energy projects, includes a new “direct pay” provision that allows tax-exempt entities to monetize applicable tax credits. Local governments and higher education institutions, as well as other exempt organizations, can now treat tax credits they have earned as an “overpayment of taxes” and receive a direct payment from the U.S. Treasury as a tax refund.
The IRA also expands the scope of the types of tax incentives now available, including production tax credits and investment tax credits for wind, solar, geothermal, combined heat and power and other technologies; investment tax credits for electric charging stations; production tax credits for zero-emissions nuclear power facilities; and incentives for carbon capture, clean hydrogen, and investments in certain manufacturing facilities, among other things.
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