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Impacts of Inflation Reduction Act on Climate Change

Updated: Jun 1, 2023

Summary

  • Signed by President Biden on August 16, 2022, the Inflation Reduction ACT (IRA) is the most significant climate legislation in United States history. It utilizes tax and non-tax measures aimed at accelerating the U.S.’ climate change mitigation and adaptation efforts.

  • Significant growth opportunities to emerge across wide range of climate change-areas, including renewable energy, low-carbon hydrogen, and electric vehicles.

  • Cumulative investment associated with the bill is estimated to be in the trillions.1

  • Overview of the Revenue Raised & Investments

    • Revenue - $737B Total

      • $222B – 15% corporate minimum tax

      • $265B – Prescription drug pricing reform

      • $124B – Enhanced IRS tax enforcement

      • $ 74B – 1% stock buyback fee

      • $ 52B – Loss Limitation extension

    • Investments - $437B

      • $369B – Energy security & climate change

      • $ 64B – Affordable Care Act extension

      • $ 4B – Western drought resiliency

    • Anticipated Deficit Reduction - $300B9

  • Anticipated Green House Gas Emission Reduction:

    • Energy Innovation Policy and Technology LLC® modeling finds the IRA’s $370 billion in climate and clean energy investments could help cut U.S. greenhouse gas (GHG) emissions up to 43% below 2005 levels by 2030.

    • Combined with state action and forthcoming federal regulations, the IRA puts the U.S. within reach of its Paris Agreement commitment to cut emissions 50% to 52% by 2030.10

    • IRA’s power sector provisions will drive about two thirds of its GHG emissions reductions, expanding 2030 wind and solar capacity by 2 to 2.5 times pre-IRA projections.10

  • Expected to spur installation of 155 gigawatts of additional solar and wind energy capacity in the U.S. by 2030, according to analysis by research firm Rystad Energy. That is a 35% boost for utility-scale solar PV compared to baseline growth projections, as well as a 50% boost for onshore wind.2

  • Undo a 10-year moratorium on offshore wind leasing established by President Trump.8


Graph of Greenhouse Gas Emissions

3 Big Goals3

  • Reduce the amount of CO2 emitted into the atmosphere

  • Try and make the shift to renewables less disruptive and create jobs

  • Attempt to make US center of global renewable energy industry


Allocation of the $370B in Direct Investments Regarding Climate3

  • Drive down cost of renewables projects - $128B

  • Manufacturing tax credits - $37B

  • Nuclear power plants - $30B

  • Advanced bio fuels / thermal / nuclear

  • Home upgrades (appliances) - $22B

  • Support for home owners to make buildings more efficient - $14B

  • Electric Vehicle Tax Credits (US manufacturing restrictions) - $12B

  • Specific smaller dollar items

  • Reduction in carbon impact of forest fires

  • Reduction in carbon impact of airplanes

  • Conversion of buses & garbage trucks to electric

  • Recapture of emissions by existing power plants

  • Electrification of postal fleet

  • Reconnection of communities separated by federal highway system

  • Sequestration of carbon by farm equipment

  • Port infrastructure

  • Creation of low carbon building materials

  • Funding for additional transmission lines

  • EV charging stations

  • Grants for Native American tribes to invest in clean energy

  • Debt forgiveness- coops shutting down high emission emitting plants

  • Grants & interest loans to community & universities for energy innovations3

  • Expansion of loan programs converting fossil fuel plants to nuclear or renewable

  • Loans that could also bring the potential to breathe life into futuristic technologies that banks might find too risky to lend to or into projects that are just short of the money they need to get going7


Business Incentives and Tax Credits3

  • Incentives to deploy lower-carbon and carbon-free energy sources.

  • Tax credits - energy production & investments in wind, solar, and geothermal energies.

  • Tax credits for investment in battery storage and biogas.

  • Tax credits for investments in nuclear energy, hydrogen energy coming from clean sources, biofuels, and technology that captures carbon from fossil fuel power plants.

  • Bonuses for companies based on worker pay and the manufacture of steel, iron, and other components in the U.S.


Carrots to Fossil Fuel Businesses (deemed necessary for passage by senate)

  • Opening of leases in Alaska and Gulf

  • Coupling of granting of renewables development on Federal lands with offering of leases to oil & gas company lease on other federal lands3


Sticks3

  • Methane reduction via hefty fines

  • Superfund tax reinstated

  • Increase in payments by oil and gas companies for extraction on federal lands

  • Cost in holding a lease and not developing it


Some Detail on Sticks

  • Clean Air Act and the EPA were recently weakened by the Supreme Court. The IRA, by design, strengthens the government’s ability to wield a stick.

  • It does this in two ways:

  • IRA confirms that carbon dioxide is a type of air pollution covered by the Clean Air Act, as initially reported by The New York Times earlier this week. This buttresses the EPA’s underlying legal authority to regulate climate pollution.

  • Will also allow the EPA to pass much stricter rules than it could have previously.

  • IRA’s many carrot-like policies would functionally lower limitations on the EPA even more by skewing the cost-benefit analysis in the agency’s favor.4

Some Details on Anticipated CO2 Emission Prevention Projections3

  • $1B fewer tons emitted per year by 2030

  • Transportation - $280M tons/year

  • Cleaner Power Generation - $360M tons/year

  • Cleaner Industry - $130M tons/year

  • Cleaner Buildings - $70M tons/year

  • Methane & other greenhouse gases produced by cars - $70M tons/year

  • Carbon sequestration & Agricultural & Forest - 80M tons/year

  • Projected additional $500M tons/year by 2035

Tax Credits5

  • Extension and expansion of clean energy tax credits described as “a game changer”. Stable, long-term policy will unlock clean energy for utilities and developers, accelerating renewable energy and battery storage deployment.5

  • Clean Energy Tax Credits Could Double Deployment

    • Energy tax credits arguably the most impactful federal climate policies.

    • IRA revamps the tax credit structure via four core design elements:

      • First, it provides business certainty by extending credits at their full value for at least ten years, giving investors, manufacturers, utilities, and developers enough time to plan and build new manufacturing facilities and projects into the 2030s. The credit value will only start to decline after we’ve slashed power sector emissions 75% from today’s levels. Breaks Congress’ tradition of letting credits periodically expire or renewing them at the last minute, which drove boom-bust cycles.

Policy uncertainty has created wind energy boom and bust cycles. Users are free to copy, distribute, ... [+] ENERGY INNOVATION, USING DATA FROM THE U.S. DEPARTMENT OF ENERGY

  • Second, expands federal tax credits’ scope and flexibility, allowing any new zero-emissions technology to qualify for either investment or production credits. For example, solar projects can qualify for the production tax credit (PTC), which will become preferable as upfront capital costs fall further. Energy storage technologies are now also eligible for investment tax credits (ITC). A new PTC for existing nuclear power should keep most U.S. nuclear plants online, empowering new renewables to displace fossil fuels instead of zero-carbon electricity.

  • Third, supports workers and domestic manufacturing by tying clean energy credit value to human impacts.

  • Fourth, uses government funds more efficiently, benefitting a greater pool of project developers. Developers typically need to leverage the tax appetite of larger financial institutions to monetize tax credits—a complex process that siphons a third of the credits’ value at taxpayer and customer expense. The IRA makes tax credits “transferrable,” allowing developers to sell credits directly to anyone with tax liability, circumventing waste and making each federal dollar go much further. It also offers cash grants to tax-exempt entities like municipal utilities and rural electric cooperatives, further simplifying the process.

  • The IRA’s tax credit framework will chip away at utilities’ entrenched preference for building and operating fossil fuel power plants despite worsening economics.

Utilities are subject to a counterproductive tax law requiring them to spread the ITC over an asset’s life rather than claim the full value upfront. As a result, utilities often couldn’t bid below private solar developers free from this constraint.


The IRA puts utilities on a more level playing field. They can now choose the PTC for solar, which pays out over ten years for utilities and developers alike. They can also sell credits to capture their value without engaging in tax equity deals. This will help utilities profit from developing renewables, which may begin preferring them over less capital-intensive fossil fuel plants.5


More Tax Credit Details (Additional details on tax credits from National Law Review can be found in Addendum A)

  • Production Tax Credit (PTC) extension and expansion: The IRA extends the PTC, which is currently being phased out under existing policy, and it returns the credit to a full $30 per megawatt hour (MWh) for qualifying renewable sources. Included are wind power, biomass power, geothermal power, and certain hydropower projects that start construction by December 31, 2024. Starting in 2025, the PTC becomes technology-neutral for net-zero power sources and remains at its full $30/MWh rate until phaseout begins in 2032, or when emissions fall by 75% from 2022 levels.

  • Investment Tax Credit (ITC) extension: The bill brings the ITC, which is also being phased out, back to a full 30% credit. Qualifying technologies include solar power, fuel cell properties, and waste-to-energy facilities. The ITC will become technology-neutral for net-zero power sources and remain at 30% for qualifying projects, with the same phaseout conditions as the PTC. Importantly, developers can obtain bonus credit by using domestic materials and by building projects in certain low-income or former fossil fuel communities. Together, bonuses can bring the ITC to more than 50%.

  • Direct payment election option. As part of the PTC and ITC, tax-exempt entities, state and local governments, the Tennessee Valley Authority, Indian tribal governments, Alaska Native Corporations, and electric cooperatives can elect direct payments instead of tax credits. The solar and wind power industries are major proponents of direct pay because it eliminates the need to work with tax equity investors and allows developers to access the credits directly.

  • Standalone energy storage investment tax credit: The overhauled 30% ITC will be available for new standalone energy storage systems over 5 kilowatt hours (kWh). The tax credit will also remain available for energy storage systems that are co-located with solar power projects.

  • Low-carbon hydrogen production tax credit: The Clean Hydrogen Production Tax Credit is a new 10-year credit of up to $3 per kilogram (kg) of clean hydrogen, starting from the date the qualifying production facility begins operations. The full clean hydrogen production tax credit will be available for hydrogen that has a lifetime emissions rate of less than .045kg of CO2 equivalent per kg. Hydrogen produced with emissions greater than .045kg through 4kg will be eligible for partial credits. Clean hydrogen producers can also elect direct payment instead of tax credits.

  • EV tax credit extension and expansion: The IRA extends the $7,500 federal tax credit on new EVs and creates a tax credit for used EVs for 30% of the vehicle’s value, up to $4,000. Importantly, these credits no longer cap the number of vehicles sold per manufacturer, so vehicles from manufacturers who used all their credits from the previous scheme are eligible, including Tesla and GM. However, the extension includes customer income and vehicle price limitations and stringent domestic materials and manufacturing requirements. The government plans to release full guidelines by year-end.

  • Tax incentives for energy efficiency improvements. The bill creates tax credits and rebates for consumers to improve energy efficiency in their homes through the adoption of technologies like heat pumps, rooftop solar systems, and efficient HVAC and water heater systems.

  • The Advanced Manufacturing Production Credit: Set to run through 2032, the Advanced Manufacturing Production Credit is an incentive for producers of cleantech components such as thin film and crystalline photovoltaic (PV) cells, PV wafers, solar modules, battery cells, battery modules, inverters, torque tubes, and wind power components.

  • Research & Development (R&D) grants: The bill includes additional grants and funding to boost domestic cleantech research and manufacturing. This includes roughly $300 million in appropriations for competitive grant programs for the R&D and production of sustainable aviation fuels such as hydrogen. It also includes $2 billion in conversion grants for EV production, including hydrogen fuel cell EVs.1


Items in IRA Not Specifically Related to Climate

· 15% corporate alternative minimum tax

· 1% excise tax on stock buyback

· Expected to raise $737 billion, require total investments of $437 billion, and result in a deficit reduction of more than $300 billion.

· Allows Medicare to negotiate lower prescription drug prices

· Extends the expanded Affordable Care Act program for three years


Overall Impact

The IRA isn’t like an EPA regulation that will modestly bend the curve of U.S. emissions. Instead, it catapults the country into a whole new landscape where the economics of every other climate action are different.4


Footnotes


Seeking Alpha Aug. 16, 2022 10:23 PM ET


2https://www.canarymedia.com/articles/clean-energy/chart-how-much-will-solar-and-wind-grow-under-the-new-climate-law



4Robinson Meyer is a staff writer at The Atlantic and the author of the newsletter The Weekly Planet. 8/24/22


5Forbes: Energy Innovation: Policy and Technology Aug 23, 2022,07:15am EDT


6 Solar Energy Industries Association https://www.seia.org/sites/default/files/2022-08/Inflation%20Reduction%20Act%20Summary%20PDF%20FINAL.pdf Summary document with ITC information


7New York Times. August 12, 2022



9https://www.investopedia.com/inflation-reduction-act-of-2022-6362263


10 https://energyinnovation.org/wp-content/uploads/2022/08/Modeling-the-Inflation-Reduction-Act-with-the-US-Energy-Policy-Simulator_August.pdf




Addendum A

Details on Tax Credits from National Law Review


Extension and Modification of the Investment Tax Credit

  • Extension of the Credit. The Act extends the investment tax credit under section 48 of the Code (the ITC) at the 30 percent rate for energy property for which construction begins before 2025 (other than geothermal property, for which construction must begin before 2035). This extension generally applies to the same categories of energy property for which the ITC was available before the Act, including solar, wind, geothermal, and fuel cell property, and is available for energy property that is placed in service during or after 2022. The extension also applies to the newly-creditable properties and assets described below.

  • Newly-Creditable Projects and Assets. The Act creates a new, standalone ITC for energy storage technology, qualified biogas property, and microgrid controllers. The Act also creates an ITC for qualified interconnection property in connection with the installment of energy property that otherwise is eligible for the ITC. The new ITC applies to newly-creditable projects and assets that are placed in service during or after 2023.

  • Labor Requirements. The ITC that otherwise is available for an energy project is subject to an 80 percent reduction (for example, the 30 percent ITC would be reduced to 6 percent) unless (1) the maximum net output of the project is less than one megawatt, (2) the energy project satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement, or (3) the construction of the energy project begins before the 60th day after the Secretary of the Treasury publishes guidance with respect to these requirements.

  • Credit Enhancements. An energy project that otherwise is eligible for the ITC may claim an additional 10 percentage point credit if the project satisfies the requirements for the Domestic Content Bonus and an additional 10 percentage point credit if the project satisfies the requirements for the Energy Communities Bonus (provided, that, for each enhancement, the additional credit would be 2 percentage points if the project does not satisfy the Prevailing Wage Requirements and the Apprenticeship Requirements, or the project otherwise is not exempt from these requirements). Finally, a solar or wind facility that otherwise is eligible for the ITC may claim a 10 percentage point or 20 percentage point bonus if the facility satisfies the requirements for the Low-Income Communities Bonus. These credit enhancements would be available to energy projects that are placed in service during or after 2023.

  • Transition to the Clean Electricity Investment Credit. The expiration of the ITC under the Act is tied to the effective date of the CEIC, as defined below.

Creation of Technology-Neutral Investment Credit

  • Generally. The Act creates the technology-neutral, emissions-based clean electricity investment credit under section 48D of the Code (the CEIC) for qualified investment in qualified facilities, including qualified interconnection property, and energy storage technology that are placed in service during or after 2025. Similar to the ITC, the CEIC will be available at the 30 percent rate.

  • Scope of Credit. For purposes of the CEIC, a qualified facility is any facility used for the generation of electricity for which the anticipated greenhouse gas emissions rate is not greater than zero.

  • Phase Out. The CEIC will begin to phase out in the first calendar year after the later of (1) the calendar year in which the Secretary of the Treasury determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for 2022 and (2) 2032.

  • Labor Requirements and Credit Enhancements. Similar to the ITC, a qualified facility that otherwise is eligible for the CEIC will be (1) subject to an 80 percent reduction unless it satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement and (2) eligible for the Domestic Content Bonus, the Energy Communities Bonus, and the Low-Income Communities Bonus.

  • Exclusivity. The CEIC will not be allowed with respect to any facility for which the ITC, Section 45Q Credit, PTC, or CEPC is allowed.

Extension and Modification of the Production Tax Credit

  • Extension of the Credit. The Act extends the production tax credit under section 45 of the Code (thePTC) at a rate of 1.5 cents per kWh (as adjusted for inflation, currently 2.6 cents per kWh) for qualified facilities, including wind, biomass, landfill gas, and hydropower facilities, for which construction begins before 2025. The PTC continues to be available for electricity produced by the taxpayer and sold to unrelated parties in each of the ten years beginning in the year the qualified facility is placed in service. The extension is available for qualified facilities that are placed in service during or after 2022.

  • Revived PTC for Solar. The Act revives the solar PTC, available at the full rate described above, for qualified facilities that begin construction before 2025. The previous solar PTC expired in 2006.

  • Elimination of 50 Percent Reduction for Water Technologies. The Act eliminates the 50 percent reduction in the applicable PTC rate for qualified hydropower facilities and marine and hydrokinetic renewable energy facilities. The 50 percent reduction continues to be applicable to, among other qualified facilities, open-loop biomass facilities, and landfill gas facilities.

  • Labor Requirements. The PTC that otherwise is available for a qualified facility is subject to an 80 percent reduction (for example, the PTC rate of 2.6 cents per kWh would be reduced to 0.52 cents per kWh) unless (1) the maximum net output of the project is less than one megawatt, (2) the qualified facility satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement, or (3) the construction of the qualified facility begins before the 60th day after the Secretary of the Treasury publishes guidance with respect to these requirements.

  • Credit Enhancements. A qualified facility that otherwise is eligible for the PTC may claim a 10 percent increase to the PTC rate if it satisfies the requirements for the Domestic Content Bonus and an additional 10 percent increase (applied before any increase for the Domestic Content Bonus) if the project satisfies the requirements for the Energy Communities Bonus. A qualified facility would not be eligible for the Low-Income Communities Bonus.

  • ITC Election and Exclusivity. As under prior law, taxpayers may continue to elect to claim the ITC in lieu of PTC for qualified facilities. However, a taxpayer is not permitted to claim both the ITC and PTC for a single qualified facility.

  • Transition to the Clean Electricity Production Credit. The expiration of the PTC under the Act is tied to the effective date of the CEPC, as defined below.

Creation of Technology-Neutral Production Credit

  • Generally. The Act creates the technology-neutral, emissions-based clean electricity production credit under section 45Y of the Code (the CEPC) for electricity produced at a qualified facility that is placed in service during or after 2025. Like the PTC, the CEPC will be available at a rate of 1.5 cents per kWh (to be adjusted for inflation) of electricity produced by the taxpayer and sold to unrelated parties in each of the ten years beginning in the year such facility is placed in service.

  • Scope of Credit. Like the CEIC, a qualified facility for purposes of the CEPC is any facility used for the generation of electricity for which the anticipated greenhouse gas emissions rate is not greater than zero.

  • Phase Out. Like the CEIC, the CEPC will begin to phase out in the first calendar year after the later of (1) the calendar year in which the Secretary of the Treasury determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for 2022 and (2) 2032.

  • Labor Requirements and Credit Enhancements. Similar to the PTC, a qualified facility that otherwise is eligible for the CEPC will be (1) subject to an 80 percent reduction unless it satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement and (2) eligible for the Domestic Content Bonus and the Energy Communities Bonus. A qualified facility will not be eligible for the Low-Income Communities Bonus.

  • Exclusivity. The CEPC will not be allowed with respect to any facility for which the PTC, Section 45Q Credit, ITC, or CEIC is allowed.

Extension and Modification of the Credit for Carbon Capture and Sequestration

  • Extension of the Section 45Q Credit. The Act extends the credit under section 45Q of the Code (the Section 45Q Credit) to qualified facilities for which construction begins before 2033.

  • Reduction of the Minimum Capture Threshold. The Act reduces the capture requirement under section 45Q of the Code, expanding the scope of qualified facilities to include a facility that (1) in the case of a direct air capture facility, captures not less than 1,000 metric tons of qualified carbon oxide during the taxable year, (2) in the case of an electricity generating facility, (a) captures not less than 18,750 metric tons of qualified carbon oxide during the taxable year and (b) with respect to any carbon capture equipment for the applicable electric generating unit at such facility, has a capture design capacity of not less than 75 percent of the baseline carbon oxide production of such unit, or (3) in the case of any other facility, captures not less than 12,500 metric tons of qualified carbon oxide during the taxable year.

  • Increase in the Rate of the Section 45Q Credit. The Act increases the rate of the Section 45Q Creditavailable for qualified facilities and carbon capture equipment to (1) $85 per metric ton of qualified carbon oxide captured from an industrial source and disposed of in secure geological storage, (2) $60 per metric ton of qualified carbon oxide captured from an industrial source and injected for enhanced oil or gas recovery or utilized in the manner described in section 45Q(f)(5) of the Code, (3) $180 per metric ton of qualified carbon oxide captured from a direct air capture facility and disposed of in secure geological storage, and (4) $130 per metric ton of qualified carbon oxide captured from a direct air capture facility and injected for enhanced oil or gas recovery or utilized in the manner described in section 45Q(f)(5) of the Code.

  • Labor Requirements. The Section 45Q Credit that otherwise is available for a qualified facility and carbon capture equipment is subject to an 80 percent reduction unless (1) the qualified facility or the carbon capture equipment, as the case may be, satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement or (2) construction of the carbon capture equipment begins before the 60th day after the Secretary of the Treasury publishes guidance with respect to these requirements and such equipment is installed at a qualified facility the construction of which begins before such date.

Creation of Production Tax Credit for Hydrogen

  • Generally. The Act creates a new production tax credit for hydrogen technology under section 45V of the Code (the Hydrogen PTC), which is calculated based upon the kilograms of clean hydrogen produced by the taxpayer at a qualified clean hydrogen production facility for which construction begins before 2033.

  • Amount of Credit. The available Hydrogen PTC is equal to the product of (1) the kilograms of clean hydrogen produced during the taxable year at a qualified clean hydrogen production facility in each of the ten years beginning in the year such facility is placed in service and (2) the product of (a) $3.00 (to be adjusted for inflation) and (b) the applicable percentage (the Applicable Percentage). The Applicable Percentage is based upon the lifecycle greenhouse gas emissions rate for the process and ranges from 20 percent if the emissions rate is not greater than four kilograms CO2e per kilogram of hydrogen to 100 percent if the emissions rate is less than 0.45 kilograms of CO2e per kilogram of hydrogen.

  • Election to Claim Hydrogen ITC. A taxpayer may elect to treat qualified property that is part of a clean hydrogen production facility placed in service during or after 2023 as energy property and therefore eligible for the ITC (the Hydrogen ITC). In such an election is made, the Hydrogen ITC would be available at a rate of up to 30 percent, based on the facility’s emission rate per kilogram of hydrogen and certain other criteria. Taxpayers that elect to claim the Hydrogen ITC cannot claim the Hydrogen PTC or Section 45Q Credit with respect to the same facility.

  • Labor Requirements. The Hydrogen PTC or Hydrogen ITC that otherwise is available for a clean hydrogen production facility is subject to an 80 percent reduction unless (1) the facility satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement or (2) construction of the facility begins before the 60th day after the Secretary of the Treasury publishes guidance with respect to these requirements.

  • Credit Enhancements. Unlike the PTC, the Hydrogen PTC is not eligible for the Domestic Content Bonus or the Energy Communities Bonus. It appears that the Hydrogen ITC also is not eligible for these credit enhancements.

  • Exclusivity. The Hydrogen PTC is not allowed with respect to any qualified clean hydrogen produced at a facility which includes carbon capture equipment for which a Section 45Q Credit is allowed. By contrast, electricity from renewable resources used to produce clean hydrogen will be treated as sold to an unrelated person, and potentially eligible for the ITC or PTC, even if such electricity is used by the taxpayer, or a related person, at a qualified clean hydrogen production facility.

Expansion of the Advanced Energy Project Credit

  • Scope of the Expansion. The Act extends the advanced energy project credit under section 48C of the Code (the AEPC). Prior to the Act, the AEPC was available for qualified investments in projects that equip or expand manufacturing facilities that produce, among other things, renewable energy equipment related to solar and wind. Under the Act, the AEPC is available at the 30 percent rate and is expanded to include qualified investments in, among other things, manufacturing facilities that produce energy storage systems and components and electric grid modernization equipment.

  • Increased Allocation. The total dollar amount of the AEPC may not exceed $10 trillion (of which no more than $6 trillion may be allocated to investments which are not located in Energy Communities). To be eligible for an allocation, a taxpayer must apply for certification from the Treasury and place the project in service within 2 years of certification.

  • Labor Requirements and Credit Enhancements. The AEPC (1) is subject to an 80 percent reduction unless it satisfies the Prevailing Wage Requirement and the Apprenticeship Requirement and (2) is not eligible for any credit enhancements.

  • Exclusivity. The AEPC is not available for any investment if the ITC, CEIC, Section 45Q Credit, or Hydrogen PTC is allowed for such investment.

Creation of the Advanced Manufacturing Project Credit

  • Scope of the Credit. The Act creates the advanced manufacturing production credit under section 45X of the Code (the AMPC). The AMPC provides a credit for the production of certain eligible components, including for the production of certain components including, among other things, photovoltaic cells, photovoltaic wafers, solar-grade polysilicon, polymeric backsheets, solar modules, wind energy components, and battery cells and battery modules, in each case, that are produced by the taxpayer in the United States and sold to an unrelated person. The AMPC rate varies depending on the type of eligible component.

  • Phase Out. The AMPC will begin to phase out with respect to components sold during 2030 and will not be available for components sold after 2032.

  • Labor Requirements and Credit Enhancements. The AMPC (1) is not subject to reduction in connection with failure to satisfy the Prevailing Wage Requirement and the Apprenticeship Requirement and (2) is not eligible for any credit enhancements.


National Law Review

General Overview of the Inflation Reduction Act of 2022

Thursday, August 18, 2022


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