RENEWABLE ENERGY TAX CREDITS

The Inflation Reduction Act of 2022 (“IRA”) made possible groundbreaking new ways for taxpayers to finance renewable energy development and reduce their tax liabilities. It allows for the transferability by sale of federal income tax credits generated by specific renewable energy tax credit programs, including investment tax credits for solar, wind, geothermal, and others, as well as production tax credits for electricity from renewable sources, hydrogen fuel, and renewable energy components produced and sold in the U.S. Project owners can now sell energy credits to taxpayers without complex ownership arrangements. 

Additionally, the IRA now permits tax-exempt organizations, rural electric cooperatives, and governmental entities, including tribal entities, among others, to benefit from renewable energy project developments through a new direct payment option that provides for cash refunds to such entities in lieu of tax credits. The ability to either transfer by sale or apply for a cash refund with respect to tax credits generated by specific renewable energy projects is transforming the energy landscape. 

Only tax credits derived from specified renewable energy projects can be sold or refunded in lieu of sale. These include:

• the alternative fuel vehicle refueling property credit (IRC 30C)
• renewable electricity production credit (IRC 45)
• carbon oxide sequestration credit (IRC 45Q)
• zero-emission nuclear power production credit (IRC 45U)
• clean hydrogen production credit (IRC 45V)
• advanced manufacturing production credit (IRC 45X)
• renewable energy investment credit (e.g., solar, wind, geothermal, etc.) (IRC 48)
• the qualifying advanced energy project credit (IRC 48C).

Our tax credits team helps clients make the best use of energy tax credit transfers by navigating the options available. We represent buyers, sellers, and broker-dealers in tax credit transactions, assisting with deal structure, compliance with regulations for buying and selling, financing, and other aspects of the transaction. We have assisted taxpayers in understanding and applying for qualifying advanced energy project credits, broker-dealers in connection with their marketing platforms, as well as sellers and buyers in the sale of investment and production tax credits.  

The U.S. Department of the Treasury issued guidance on the transfer of tax credits derived from investments in renewable energy projects. Read an overview here.

R&D Tax Credits

The U.S. Research and Development (R&D) credit is a tax incentive intended to encourage innovation and technological advancement, providing a financial benefit for those investments. We advise clients on the process of obtaining these credits against their federal income tax for qualified R&D expenditures.

Clean and Natural Gas Credits

Our team advises on the use of renewable natural gas tax credits as well as clean fuel production credits.

Empowerment Zone Employment Credit

The Empowerment Zone Employment Credit is a tax incentive aimed at encouraging businesses to hire and retain employees in designated empowerment zones, which are economically distressed areas. This credit provides financial incentives to employers to stimulate job creation and economic development in these zones, and our attorneys can assist with determining eligibility.