The Novogradac Renewable Energy Working Group (RE Working Group) had an eventful fall following the enactment of the Inflation Reduction Act (IRA) of 2022, the budget reconciliation bill signed into law in August that included $369 billion in clean and renewable energy provisions, $270 billion of which are in the form of tax incentives. The RE Working Group, reactivated as a result of the comprehensive clean and renewable energy provisions contained in IRA, quickly expanded its ranks to ensure a well-rounded take on industry needs as it responded to the U.S. Department of the Treasury’s (Treasury’s) release of numerous notices requesting public comment concerning energy provisions of the IRA.

Treasury released Oct. 5 six Request for Information (RFI) notices covering a range of topics–including energy generation incentives, credit enhancements, incentives for homes/buildings, consumer vehicle credits, manufacturing credits and credit monetization. Treasury followed up with another release of RFI notices Nov. 3 that asked for comments related to commercial clean vehicles and alternative fuel vehicle refueling property, the credit for carbon capture and clean hydrogen and clean fuel production. Release of these notices, guidance and regulations released to date, as well as forthcoming releases from Treasury and the Internal Revenue Service (IRS), will keep the RE Working Group busy well into 2023.

The industry welcomes this increased attention on the numerous climate and clean energy incentives included in IRA.  In addition to renewable energy tax credits (RETCs) such as the production tax credit (PTC) and investment tax credit (ITC), there are a number of other tax incentives that require more industry analysis and guidance from Treasury (e.g., transferability of credits, direct pay program, credit adders for domestic content, low-income communities, etc.). Novogradac stands ready to provide the analysis and information needed to provide clarity on these incentives in an effort to help propel the industry forward.  

RE Working Group had Eventful End of 2022

With the passage of the IRA, the RE Working Group, whose main objective is to provide a platform where members across different sectors of the clean and renewable energy community can collaborate on building a consensus around the emerging issues on IRA implementation and related matters, reacted quickly. Five comment letters were submitted by the RE Working Group in response to the two sets of notices released by the Treasury. Novogradac’s Low-Income Housing Tax Credit Working Group (LIHTC Working Group) also submitted a comment letter regarding incentives for homes and buildings.

The comment letters submitted by the RE Working Group included requests for guidance, responses to questions and recommendations regarding the various notices. The first four comment letters detailed below were submitted Nov. 4; the response to Notice 2022-56 was submitted Dec. 3.

In response to Notice 2022-48, Request for Comments on Incentive Provisions for Improving the Energy Efficiency of Residential and Commercial Buildings, the working group asked that:

• additional guidance be provided, and in some cases fast-tracked, in regards to Energy Efficient Home Improvement Credit (§ 25C);
• definitions and guidance be provided around both Residential Clean Energy Credit (§ 25D) and New Energy Efficient Home Credit (§ 45L); and
• for Energy Efficient Commercial Buildings Deduction (§ 179D), in addition to a request for additional guidance, the working group discussed the criteria that should be used when calculating energy use intensity.  

The main focus of the RE Working Group’s response to Notice 2022-49, Request for Comments on Certain Energy Generation Incentives, was the special programs for certain facilities placed in service in connection with low-income communities (§§ 48(e) and 48E(h)). Contained in these sections is the allocation of the 1.8 gigawatt DC environmental justice solar and wind (EJSW) capacity limitation. The RE Working Group’s recommendations included how best to establish a program to make allocation awards, ways to make the application procedures and application process accessible to taxpayers, as well as referencing existing programs, procedures and mechanisms Treasury and IRS can consult as they implement the EJSW allocation.   

The RE Working Group’s comment letter in response to Notice 2022-50, Request for Comments on Payment of Elective Payment of Applicable Credits and Transfer of Certain Credits included, among other asks, numerous requests for examples from Treasury and IRS that would clarify the provisions and requests around the Transfer of Certain Credits (§ 6418).

The lead off comment in the letter regarding Notice 2022-51, Request for Comments on Prevailing Wage, Apprenticeship, Domestic Content and Energy Communities Requirements encouraged Treasury and IRS to provide initial, temporary guidance that allowed for a comment period where industry stakeholders could bring issues with guidance to the Treasury and IRS’s attention. Final guidance starting the statutory 60-day timer for prevailing wage and apprenticeship requirements would then be delayed until that time industry concerns could be addressed. This unfortunately did not happen as Treasury released Nov. 30 the final prevailing wage and apprenticeship guidance, thus starting the 60-day clock–the requirements for obtaining bonus credits would apply to facilities, projects, property or equipment that begin construction after Jan. 28, 2023.

Notice 2022-56, Request for Comments on Section 45W Credit for Qualified Commercial Clean Vehicles and Section 30C Alternative Fuel Vehicle Refueling Property Credit provided the RE Working Group an opportunity to request guidance clarifying issues around the recapture and tax credit eligibility provisions in Section 45W, and the definition of eligible census tracts in Section 30C, among other requests.  

Though the RE Working Group submitted comments by the due dates imposed in the various notices, the Treasury has communicated they will continue to accept input on the notices released thus far. Comment letters are one of the tools employed by Treasury and the RE Working Group will continue to engage with Treasury and IRS as guidance is being developed on the various topics. In addition, the RE Working Group will stay abreast and be on the lookout for any new areas covered by future notices and guidance.

RE Working Group Priorities in 2023 and Beyond

The IRA required that the government release guidance on many of the green energy IRA provisions by the end of 2022. The input provided by commenters in response to Treasury’s notices were intended to be used by the department as it went about developing guidance implementing the IRA’s provisions. After reviewing the IRA energy provisions, the working group has initially identified six areas that will require special attention–provisions providing additional tax credit authority (domestic content, energy communities, low-income community, low-income economic benefit project, and affordable housing bonuses) transferability of credits, new eligible costs/technologies, direct pay, solar PTCs, and the global minimum tax (GMT)–and will convene meetings around these topics as guidance is released and issues are identified.

As noted above, Treasury did not heed requests for providing temporary prevailing wage and apprenticeship guidance. Now that the 60-day clock has started, there will be numerous questions as a result of this release and Novogradac renewable energy professionals are ready to assist. Ensuring that members and clients understand this guidance and what it means for current and future development will be one of the RE Working Group’s priorities in the early months of 2023.

Greatly anticipated releases from Treasury include guidance and regulations on direct pay and transferability of credits. Additionally, the Secretary of the Treasury is required to establish a program to allocate 1.8 gigawatts DC for the EJSW adder within 180 days of the passage of the IRA. The RE Working Group provided comments on the EJSW adder and will be prepared to provide additional commentary on the EJSW program when guidance is released.

On Dec. 19, the Treasury promised key guidance on clean energy tax provisions included in the IRA, before the end of the year and has delivered on that promise–on Dec. 22, the IRS released a frequently asked questions (FAQ) document sheet covering many questions and requests for additional guidance for consumers concerning energy-efficient home improvement projects and residential energy property.

Guidance released at the time of this writing also includes two releases around processes for manufacturers and sellers of clean vehicles. On Dec. 12, Treasury and IRS released Revenue Procedure 2022-42, which provides guidance to vehicle manufacturers on new IRA rules about entering into a written agreement with the IRS. This was followed by a Dec. 29 release that included, among other information, FAQs and a notice on clean vehicle tax credits.

Energy Stakeholders Must Prepare for a Busy 2023

As stakeholders await additional guidance and regulations from Treasury and IRS, Novogradac and the RE Working Group will be working to keep members, clients and the industry informed. As made evident by the record attendance at the Novogradac 2022 Renewable Energy and Environmental Tax Credits Conference last November, the energy community is eager for discourse, guidance and clarity on the various clean energy incentives contained in the IRA. Through posts such as this, as well as Tax Credit Tuesday Podcasts and webinars, and the upcoming Novogradac 2023 Spring Renewable Energy and Environmental Tax Credits Conference taking place in May, numerous opportunities exist to join the conversation.

The RE Working Group is dedicated to being a voice for a wide range of energy professionals as it focuses on renewable, clean energy and energy efficiency tax incentives. To ensure issues important to you are heard, you can inquire about joining the RE Working Group. You can also visit the Subscription Center to sign up for renewable and clean energy email alerts.