Treasury Releases Guidance on IRA Advanced Energy and Low-Income Communities Tax Credits

On May 31, the U.S. Department of the Treasury and Internal Revenue Service released additional guidance and proposed rules on the Inflation Reduction Act’s advanced energy project and Low-Income Communities Bonus Credit Program tax credits.

The ABC-opposed Inflation Reduction Act was signed into law on Aug. 16, 2022, and provides over $270 billion in tax credits for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects. Specifically, Subtitle D-Energy Security of the IRA grants developers/taxpayers a bonus tax credit five times greater than a baseline tax credit of 6% conditioned on requirements that project contractors meet prevailing wage and government-registered apprenticeship program utilization requirements outlined in the legislation and IRS guidance.

The advanced energy project credit allocation provides additional guidance regarding $10 billion in tax credits for projects including the construction of facilities for clean energy manufacturing and recycling, greenhouse gas emission reduction and critical materials processing/refining. To qualify for these tax credits, taxpayers must submit an application to the U.S. Department of Energy for approval. The guidance provides the criteria the DOE will use to determine approval for these projects.

The guidance briefly mentions that project labor agreements may be used to improve an applicant’s “Workforce and Community Engagement” criteria. While contractors are required to meet the apprenticeship and prevailing wage requirements outlined in previous guidance, PLAs are not mandated under this or any other section of the IRA.

The Low-Income Communities Bonus Credit Program provides an increase of up to 20 percentage points to investment tax credits for solar and wind energy projects in low-income communities. The proposed rules provide additional information on definitions and requirements for this program. The comment deadline is June 30.

For more information and resources on compliance with the IRA’s requirements, please visit ABC’s new website, abc.org/ira.

If you have questions that are not answered on the website or in Treasury/IRS guidance, ABC is here to help. Please email irafaqs@abc.org and ABC subject matter experts will work to answer your question or reach out to Treasury/IRA for clarification.

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