Inflation Reduction Act Tax Credit Solutions
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Baker Tilly Capital, LLC Managing Director
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J.D., CPA, CGMA
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J.D.
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J.D.
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The IRA requirements are everchanging and only a limited number of tax credits are offered. Lean on our specialists to help your organization effectively position your project to maximize and receive eligible Inflation Reduction Act tax credits.
The Inflation Reduction Act of 2022 includes the largest energy incentive effort in U.S. history. It builds on the energy initiatives included in the American Reinvestment Recovery Act of 2009, generating opportunities for organizations across various industries to receive tax credits for implementing clean energy solutions.
The IRA includes more than 70 investment, production and excise credits designed to facilitate the transition to cleaner energy production, promote advanced manufacturing, encourage the adoption of clean vehicles (CVs) and reduce greenhouse gas emissions through the use of alternative fuels and energy efficient technologies. Additionally, significant enhancements have been made to the U.S. Department of Agriculture (USDA) and Department of Energy (DOE) loan programs.
The IRA is complicated, and guidance and compliance requirements continue to be released. Baker Tilly’s energy, tax and industry specialists can help your organization understand the complexities and how to effectively position your project to receive and maximize eligible credits.
IRA guidance is everchanging, and we'll keep you informed. Our specialists do a deep dive into proposed, final and updates to IRA regulation. Our insights and key takeaways can help your organization maximize and receive eligible credits and remain compliant.
Explore the IRA regulatory guidance and check back here for continued updates.
Proposed regulations aim to facilitate tax credits for clean hydrogen production. To receive hydrogen production tax credits, producers are required to obtain emissions values from the DOE. This move highlights the delicate balance between environmental standards and industrial growth in the hydrogen industry.
Explore how tax-exempt organizations can navigate section 6417 of the Inflation Reduction Act to maximize their benefits. The elective payment mechanism for applicable credits can affect the taxable year for non-filing entities and the treatment of grants and forgivable loans for clean energy projects.
The enactment of section 45X of the Inflation Reduction Act offers tax credits to U.S. companies manufacturing clean energy technologies with eligibility covering solar, wind, battery technology and critical minerals. Despite its benefits, navigating section 45X creates compliance challenges and risks of recapture, but Baker Tilly offers comprehensive support to maximize benefits through eligibility confirmation, strategic planning, compliance guidance and accurate credit substantiation.
The advanced manufacturing investment tax credit (section 48D) provides a direct dollar-for-dollar tax reduction in hopes of boosting U.S. manufacturing, particularly in semiconductors and renewable energy, under the Inflation Reduction Act. Eligible taxpayers can receive a government payment equal to their investment credit, offering immediate financial benefits, but compliance challenges and precise documentation are crucial to avoid penalties or credit forfeiture.
There are more than 70 available tax credits within the IRA to facilitate the clean energy transition. What is your organization eligible for? Get started with an IRA specialist.
The Inflation Reduction Act includes four broad areas of credits. Many of these credits start with a base amount and can be increased by a factor of five if a project pays prevailing wages and employs apprentices. More details are found in the overview. Baker Tilly advisors are available to help address your project’s specific needs and requirements.
The IRA provides for a direct offset to federal tax liability in the form of a tax credit. These credits represent a financial offset for an organization’s qualified construction or production costs, making the economics of many projects work better than they would have without the credits. Most credits are good through 2032, the longest U.S. “energy policy” time frame ever.
Three ways credits bring value to projects:
Essentially, the IRA Act is enabling all entities to utilize this legislation regardless of tax status.
*passive activity rules can apply
There are many types of funding opportunities under the IRA. The below provides an overview of the existing and new tax credits. Qualifying Energy Property projects has a broad definition and can include but is not limited to the following project types:
Existing credits with enhanced features are available in the following areas:
New credits are available for the following:
Baker Tilly energy and tax specialists can help your organization navigate The Inflation Reduction Act tax credits and guide you along the steps to secure the maximum eligible credits. We leverage industry specialization to help evaluate your projects that involve energy efficiency, renewable energy or other eligible components under the IRA – prior, current or future projects.