The Impact of the Inflation Reduction Act on the Energy Investment Tax Credit and Certain Other Energy Tax Provisions
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Act”), which includes a number of tax provisions related to green energy. Below is a brief summary of the Act pertaining to the energy investment tax credit (ITC) of Internal Revenue Code (IRC) Section 48 and certain other energy tax provisions, with the following link to our more detailed article highlighting the impact of the Act on the ITC. Prior Law With Respect to Energy ITC: Until somewhat recently, taxpayers could obtain a 30% ITC for purchasing and placing in service qualifying energy property, especially a solar power system, with that percentage being gradually phased out with reductions commencing for energy property for which construction began in the year 2020. Main Revisions to Energy ITC – New Base Credit Percentage of 6%: Under the Act, the base energy percentage for qualifying energy property placed in service after December 31, 2021 is reduced to 6% unless new prevailing wage requirements and apprenticeship requirements are met. Taxpayers will qualify for a 30% ITC (instead of the base 6% credit) if they meet the new prevailing wage requirements and the apprenticeship requirements. The Prevailing Wage and Apprenticeship Requirements: The prevailing wage requirements require that any laborers and mechanics employed by the taxpayer...