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 subject to a cap equal to 25% of the taxpayer’s net income tax in excess of $25,000.