Inflation Reduction Act Super Charges Solar Energy Tax Incentives

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President Biden recently signed the Inflation Reduction Act (IRA), a major climate bill that will significantly affect the clean energy industry in the United States and Verde Solutions clients. The IRA aims to boost domestic energy security, decrease energy prices, and mitigate climate change.

The bill will invest $369 billion in climate and clean energy solutions, often in the form of tax incentives. Thus, the IRA provides businesses, non-profits, and agencies many opportunities to reduce operating expenses with renewable energy systems or energy-efficiency improvements. So this approach uses incentives rather than penalties to encourage clean energy adoption.

Let’s examine some of the provisions and significant developments to determine how your organization can benefit.

Expansion of the Commercial Solar Incentives

Solar energy projects can now take the Production Tax Credit (PTC) instead of the Investment Tax Credit (ITC). The PTC is a per kilowatt-hour (kWh) tax incentive for ten years for electricity generated by a qualifying renewable energy technology. It is $0.026 per kWh in 2022 but is adjusted yearly for inflation.

The Solar ITC has increased back to 30% for commercial solar projects, which helps lower the cost of installing a solar system. However, Treasury will announce new wage and apprenticeship standards to qualify at the 30% rate. Also, both the ITC and PTC will have adders that increase the value of the tax incentives for fulfilling specific domestic content requirements, locating in “energy communities,” or being on a qualified low-income property.

Tax-exempt Organizations Can Benefit from Solar Tax Credits

Previously, tax-exempt organizations, including many schools, governmental organizationsnon-profits, condominium associations, and medical facilities, could not directly take advantage of solar tax incentives. As a result, they often used solar power from third-party-owned solar systems or passed up valuable incentives, so this is a very exciting new development.

Now, under Section 6417, tax-exempt organizations can monetize the solar tax credits. It makes the tax credit refundable, enabling direct payment of the renewable energy credit. Another option is to transfer the tax credit to another taxpayer in exchange for a cash payment.

IRA Creates Opportunities for Businesses & Organizations to Use Renewable Energy

The IRA makes it more affordable for organizations to use solar energy to reduce operating expenses. Some state and local incentives may also apply, boosting the return on investment.

Independent energy contractors can also take advantage of the expansion of the renewable energy tax credits because now is a great time to get into the business. Verde Solutions doesn’t require previous experience for independent contractors. We offer training and a generous commission. Contact us to learn more about how you can become your own boss while helping advance the transition to clean energy.

Through at least 2025, the Inflation Reduction Act extends the Investment Tax Credit (ITC) of 30%. Solar generation projects that satisfy a new domestic content requirement will be entitled to a 10% additional ITC. Check out the latest video blog from Verde Solutions CEO Chris Gersch on his perspective on why it’s never been a better time to go solar.