What have we learned? Inflation Reduction Act impact on higher education institutions

The Inflation Reduction Act of 2022 (IRA or Act) includes a wide range of tax credits designed to facilitate a transition to cleaner energy production and encourage the use of clean vehicles to reduce greenhouse gas emissions through the use of alternative fuels and energy-efficient technologies. While many of these credits have previously only been available to for-profit entities, the Act created an opportunity for tax-exempt organizations to receive cash payments from the government when making investments in projects promoting clean energy and energy efficiency. Since the passage of the IRA, many tax-exempt organizations, including colleges and universities, have been reviewing their potential investment in qualifying energy projects. This article will focus on what we have learned since the IRA was signed into law.

Ways the IRA benefits institutions

Institutions with a comprehensive plan will be better positioned to maximize these energy tax credits. From a high-level perspective, the following questions can assist in determining whether the IRA may benefit your tax-exempt organization:

• Are you considering a new construction project or renovations where you may be changing the use, consumption, energy efficiency or storage of energy?
• Does your campus have deferred maintenance projects being contemplated?
• Does your institution have an environmental, social and governance (ESG) strategy driving future capital investments?
• Are you planning or currently executing a project to enhance heat or carbon capture, utilize wind, solar or hydro power, or harness biogas to make heat, electricity, or a transportation fuel?

IRA-eligible projects

Now is when institutions should be looking at deferred maintenance and other capital projects to determine whether the projects contain qualifying properties that may be eligible for the credit or could possibly be adjusted or modified to maximize the benefit. We have seen significant opportunities with solar projects, whether they are rooftop solar panels or larger ground solar projects. Organizations investing in electric vehicles, electric vehicle charging stations or upgrading their energy systems, whether combined heat and power or other power generation, are also seeing opportunities. Replacing windows in buildings may also qualify for an energy credit.