The Inflation Reduction Act (IRA) is the largest climate investment in US history. Did you know it allocates 80% of its total package to fighting climate change? That’s $369 billion of long-term tax credits and funding packages to drive the price of renewable energy and infrastructure down – paving the way for a green energy transition.
To take advantage of the Inflation Reduction Act, businesses need to keep an eye on the tax credits available to them. The IRA expands and modifies credits that cover everything from building retrofits, EV procurement and energy storage, opening up billions of dollars worth of savings. There’s a lot to keep track of, so we’ve compiled a list of 4 key tax credits to be aware of.
The 179D tax deduction encourages energy efficiency in commercial buildings to building owners and tenants – letting them claim up to $5.00 per square foot of building dependent upon the energy efficiency measures/reductions put into place. Eligible energy efficiency projects include lighting, heating, cooling, ventilation, hot water systems, and building envelope improvements. It’s estimated that listed energy efficiency measures reduce energy and power costs by at least 50%.
The PTC is a preexisting US federal income tax credit for each kilowatt hour (kWh) of electricity generated by certain types of renewable or zero carbon emission projects. The IRA extended the current PTC framework for qualified facilities that begin construction prior to January 1, 2025. The PTC allows credits from .3 to 2.6 cents multiplied by the kilowatt hours of electricity produced by the taxpayer from qualified energy sources and sold by the taxpayer to an unrelated person.
The ITC is a federal income tax credit for certain types of renewable and clean energy projects including solar, geothermal and fuel cell energy. The IRA expanded what previously qualified for some or no credit to now receive full credit. Taxpayers can claim a credit for a percentage of the cost of a newly built energy property with a base credit rate of 2% or 6% of the basis of energy property and a bonus rate of up to 30%.
The Qualified Commercial Clean Vehicles tax credit is available to vehicles purchased after December 31, 2022, and before January 1, 2033. Tax credits are 15% of the vehicle’s basis (30% for EVs) or the incremental cost compared to a non-EV (max credit $7,500 for vehicles under 14,000 lbs, $40,000 for heavier).
Businesses preparing themselves to best take advantage of the incentives embedded within the Inflation Reduction Act need access to accurate energy use and emissions data. Accurate data not only drives the optimization of operational performance, ensures significant returns on investment, and allows stakeholders to track progress, but is also a tool that can be leveraged to apply for and receive funding.
NZero’s technology offers accurate carbon accounting across all three scopes, with real time access to Scope 2 emissions data. NZero’s method of carbon accounting offers client data up to 35% more accurate and empowers both private and public clients to identify and visualize emissions reduction opportunities based on detailed, accurate, granular data reporting.
We developed REP to overcome the major barriers to decarbonization progress, so businesses can conquer their compliance readiness, and put themselves on a path toward a decarbonized future.
