Here is Mayer Brown’s Legal Update regarding some of the noteworthy proposals in the Inflation Reduction Act of 2022 that related to green energy.
Last night, after weeks of negotiations, Senators Manchin and Schumer reached a deal on an energy and healthcare bill titled the Inflation Reduction Act of 2022 (the “Act”). The Act includes extensive provisions relating to a range of green energy tax incentives. While these provisions largely track the corresponding provisions in the previously released Build Back Better Act, a preliminary review of the Act suggests that there are a number of material differences.
A more detailed analysis of the Act will follow, but key provisions include:
- Extension of the solar investment tax credit (“ITC”) and renewable electricity production tax credit (“PTC”) for projects that begin construction before January 1, 2025.
- Reduced ITC and PTC for projects that fail to satisfy prevailing wage and apprenticeship requirements; but deemed satisfaction of such requirements for projects that begin construction prior to the date that is 60 days before Treasury issues guidance related to these provisions.
- Bonus ITC and PTC for projects that satisfy certain domestic content requirements.
- ITC expanded to standalone storage and certain interconnection property.
- Direct pay option for certain tax-exempt entities.
- Option for taxable entities to transfer the ITC and PTC to unrelated parties.
- 3-year carryback period for the PTC (but only for projects that are placed in service after December 31, 2022) and the ITC.
- A 15% minimum tax on corporate taxpayers with adjusted financial statement income in excess of $1 billion; however, the ITC and PTC may be applied to reduce the minimum tax but not below 25% of the taxpayer’s net income tax in excess of $25,000.
A number of my Mayer Brown colleagues drafted this Legal Update that provides an overview of the Class VI permit application, the status of current and pending Class VI applications, and the status of state primacy for UIC programs.
On April 14, 2022, the US Internal Revenue Service (IRS) published a notice that provides the inflation-adjustment factor and reference price for the calculation of renewable electricity production tax credits (PTCs) under Internal Revenue Code (IRC) section 45 for calendar year 2022, as well as the amount of the PTC for 2022 as adjusted for inflation.
On May 5, 2022, the IRS issued corrections to this notice, revising the inflation-adjustment factor from the initially released 1.8012 to 1.7593 and reducing the PTC amounts accordingly.
With the federal government being the largest energy consumer in the United States, late last year President Biden issued the Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability to set aggressive decarbonization goals for federal agencies. This Legal Update summarizes the executive order, the three primary contracting mechanisms that federal agencies have historically used to purchase competitively priced renewable energy and the regulatory nuances they entail.
Read about new guidance from the US Department of Transportation on the allocation of $615 million in funds for electric vehicle infrastructure under the National Electric Vehicle Infrastructure Formula Program in this Legal Update authored by Chadron Edwards, Morenikeji Akinade, George Haines, Samantha Leavitt, Nick Vallorano and Alec Weingart.
Read about it in this Mayer Brown In Brief.
In November 2021, Illinois Governor JB Pritzker signed the Reimagining Electric Vehicles Act, which establishes the Reimagining Electric Vehicles in Illinois Program to incentivize the production of electric vehicles in the state. This Mayer Brown Legal Update discusses the criteria to qualify for the program and the related tax credits, exemptions and deductions.
Read about the recent changes to the proposed “Build Back Better Act” by the US House Rules Committee, including some important changes to green energy tax incentives, in this Legal Update.