Quick take for Inflation Reduction Act 2022
The Inflation Reduction Act is a huge
legislation act passed in 2022. It includes increases in taxes (mostly
corporate related), limits to some spending (like drugs), and a lot toward
energy efficiency and renewable energy. See the overview on Wikipedia: https://en.wikipedia.org/wiki/Inflation_Reduction_Act_of_2022
Renewable Energy Incentives. The IRA has raised and extended the
30% investment tax credit to qualified renewable energy investments. There are
many limitations and additions. Look for updated blogs here and get informed
from the IRS and Treasury.
The 30% ITC for 10 Years. The 30% Investment Tax Credit was being
reduced over time. The rate had dropped to 26% but was held at 26% through the pandemic.
Now 30% is held through 2032 before phasing down. In 2033 and 2034, the ITC
rates will be 26% and 22% respectively. If no further legislation is passed the
ITC would phase out after 2034.
Certainty. These 14 years of Investment Tax
Credit provides an amazing amount of certainty to businesses and residential
customers as well as the whole solar manufacturing and installation complex.
Something for Nonprofits and Governments. Note that the ITC applies to more
than solar. It applies to qualified batteries, wind and more. One big complaint
with the Investment Tax Credit of the past is that it only applies to residents
and businesses that pay taxes. Nothing for low-income who pay no income tax,
nothing for nonprofits, nothing for government. The IRA law provides for
rebates to nonprofits and governments that install renewable energy systems. This
is a 30% rebate. The details of this aspect of the law are still being refined
as of November 2022, it would appear. So, check with your favorite tax advisor
on how to apply for the rebate before jumping into the investment.
Strategic Business Planning Company
(and SustainZine) developed a calculator and produced blogs and videos in 2020
related to solar for residential and commercial. That means that when you work
through the numbers using 26% ITC, you should come up with a much more
profitable investment. The ITC is 30% and power inflation is wicked high, maybe
4% or 5% forecasted. The residential calculator will now work for nonprofits
and governments at 30% rebate (not ITC)! This is a game changer. Without any tax incentives, a solar or wind installation is just a good thing to do, and an okay investment. Now it will be a good investment as well as (still) being a good thing to do for the future and for the planet.
Sometime soon we at SBP will revisit the
articles and calculators for the new tax laws under the IRA. For now, enjoy the
options that are provided for us all to be much more self sufficient and reduce
our energy bills.
For anyone (or nonprofit) considering
renewable energy, it is probably a good investment. For most businesses, it is
a crazy good investment, that just got a little bit better.
The US Treasury Department offers a Fact Sheet on IRA Clean
Energy Incentives: https://home.treasury.gov/system/files/136/FactSheet-Implementing-IRA-Climate-CleanEnergy-TaxIncentives.pdf
Here’s a pretty good overview of the law: https://www.mofo.com/resources/insights/220810-369bn-climate-deal-americas-path-to-climate-resilience
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