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Novogradac’s Renewable Energy Working Group Expects Busy 2024 Assessing Forthcoming IRA Regulations and Guidance After a Successful 2023

Published by Nat Eng and Peter Lawrence on Tuesday, January 9, 2024 - 5:54AM

During the first full year under its expanded scope, the Novogradac Renewable Energy Working Group (RE Working Group) has provided analysis and commentary on renewable energy and environmental tax incentives, particularly regarding the Inflation Reduction Act (IRA) of 2022 and related U.S. Department of the Treasury (Treasury) and U.S. Department of Energy (DOE) guidance. With the implementation of the new clean energy tax incentives and the expansion of existing clean energy tax incentives established by the IRA, the RE Working Group has reviewed proposed regulations, notices and other guidance from the Treasury, Internal Revenue Service (IRS) and DOE, submitted comment letters, attended meetings and hearings, and worked to address administrative and technical issues that arise under the clean energy tax incentives.  

An article in the December 2023 edition of the Novogradac Journal of Tax Credits discusses the RE Working Group’s 2023 efforts in detail. This post focuses on what lies ahead for the group. 

About the RE Working Group 

The RE Working Group provides expert advice on key clean energy tax incentives, especially the renewable energy investment tax credit (ITC) and production tax credit (PTC), and engages with the Treasury, IRS and DOE to advocate for needed changes and clarifications regarding their guidance. 

Effect of the IRA 

The enactment of the IRA prompted the reactivation of the RE Working Group in October 2022, and members have been advised on the legislation and guidance regarding its renewable and clean energy tax provisions. Enacted in August 2022, the IRA has led to numerous regulations and guidance released over the course of the last 15 months. The graphic below displays the implementation timeline for IRA guidance: 

Blog Graphic: Tax Implementation Timeline

A Look into 2024 for the RE Working Group

With recent and anticipated releases from the Treasury, IRS and DOE, 2024 will be busy for the RE Working Group.

The IRS released Nov. 22 proposed regulations providing new guidance on the Section 48 ITC, which hadn’t been updated for many years, well before the enactment of IRA. New proposed regulations updated the types of energy properties eligible for the Section 48 ITC, reflecting changes in the clean energy industry and technological advances over many years, as well as updates from the IRA. The RE Working Group will submit a comment letter–comments are due Jan. 22–on the proposed Section 48 guidance. The RE Working Group will then testify during the hearing on this guidance Feb. 20. 

The working group will also address the proposed regulations released Dec. 14 by Treasury for the Section 45X advanced manufacturing production credit. These regulations make clarifications to definitions as well as confirming credit amounts for various solar energy components, wind energy components, inverters, qualifying battery components, applicable critical minerals and other provisions. Novogradac will also testify at a Feb. 22 hearing regarding Section 45X. On Dec. 28, IRS released Notice 2024-9, which provides statutory exemptions to phaseout reducing elective payment amounts for applicable entities if domestic content requirements are not satisfied. Comments for this guidance are due Feb. 26.

Additionally, the RE Working Group will submit a comment letter on the Notice of Proposed Rulemaking (NPR) on the finalization of Basel III Rules. The changes proposed by the NPR would increase the large bank capital requirements for non-community development equity investments that are not publicly traded by 400%, including tax credit equity investments for renewable and clean energy. Novogradac partners  met with the Federal Reserve Dec. 7 to discuss the NPR’s implications on renewable energy investment, as well as investment in affordable housing, community development and historic preservation.

Prevailing Wage Requirements, Low-Income Communities Bonus Credit and More 

The Novogradac RE Working Group has also covered other notable recent developments in the renewable energy field. On Nov. 21, the IRS held a hearing where witnesses shared their concerns on proposed regulations on prevailing wage and apprenticeship requirements within the IRA, all of which were detailed in a recent Notes from Novogradac blog post. The working group discussed the main takeaways from this hearing and how it might affect the ITC and PTC.

Novogradac has also reviewed the applicant results for the annual 1.8-gigawatt Low-Income Communities (LIC) bonus ITC application. The IRS and the DOE reported that more than 46,000 applications were submitted requesting more than four times the total capacity available for the bonus credit for 2023. The working group advised members how they should consider changing their application to access subcategories that were in less demand. Furthermore, the 2024 LIC bonus competition will allow for additional capacity to compensate for the high demand for this bonus credit. 

In addition to the results from the LIC bonus application, the Joint Committee on Taxation (JCT) released the results of their 2023-2027 tax expenditure estimates. A recent Notes from Novogradac blog post analyzed the results of these estimates, which showed growth in predicted clean energy tax expenditures. The working group will cover what these estimates mean for how the ITC, PTC and other clean energy tax incentives are expected to expand in the next five years.

On Dec. 22, 2023, a notice of proposed rulemaking and notice of public hearing for the Section 45V clean hydrogen production tax credit was released and the pre-registration portal for Section 6417 (direct pay) and Section 6418 (transferability) was opened. The guidance for domestic content phaseout exceptions was also released on Dec. 28, 2023, and proposed regulations on the domestic content bonus are expected in early 2024. In addition, final regulations for Section 6417 and Section 6418 are expected in the first quarter of 2024. The RE Working Group will analyze these releases and provide commentary where warranted. 

There will be two opportunities for energy professionals to gather in person in 2024 to discuss the latest IRA guidance, industry trends, emerging technologies, tax credit equity pricing and financing strategies while taking part in valuable professional development and networking sessions. Novogradac will host the Novogradac 2024 Spring Renewable Energy and Environmental Tax Credits Conference May 16-17 in San Diego,  as well as the Novogradac 2024 Renewable Energy and Environmental Tax Credits Conference Nov. 7-8 in Washington, D.C. A full schedule of conferences for 2024 is available on the Novogradac website. Those wanting to immerse themselves in conversations around the IRA and the implementation of their clean energy provisions are encouraged to join the RE Working Group.

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