Article
An Inflation Reduction Act overview for tax-exempt organizations, governments
Sept. 7, 2022 · Authored by Steve Talbot
Tax-exempt organizations and state, local, and Tribal governments may now be allowed to receive a payment in lieu of certain tax credits, under the Inflation Reduction Act of 2022, which was signed into law by President Joe Biden on Aug. 16, 2022.
This new provision, which goes into effect for taxable years beginning after 2022, also applies to Alaska Native Corporations, cooperatives that provide electricity to rural areas, and the Tennessee Valley Authority.
Additional guidance will be issued on how entities will apply for and receive the payments in lieu of credits.
Clean energy tax credits
One of the applicable credits is the Internal Revenue Code (IRC) Section 45W qualified commercial clean vehicles tax credit, which provides a credit of up to $7,500 for a vehicle weighing less than 14,000 pounds and up to $40,000 for a vehicle 14,000 pounds or larger.
Qualified vehicles would generally be electric vehicles and fuel-cell vehicles. The requirement that a qualified commercial clean vehicle be depreciable property doesn’t apply to vehicles owned by tax-exempt organizations.
Another applicable credit is the Section 48 investment tax credit, which allows a credit for certain investments in renewable energy property such as solar, fuel cells, wind energy, waste energy recovery, and microturbines. The amount of the credit is a percentage of the organization’s basis in the property.
Learn more about applicable credits in An overview of clean energy tax legislation in the Inflation Reduction Act.
Additional credits
- Section 45 production tax credit
- Section 45Q carbon capture and sequestration tax credit
- NEW: Section 45U zero-emission nuclear production tax credit
- NEW: Section 45V clean hydrogen production tax credit
- NEW: Section 45X advanced manufacturing production tax credit
Related sections
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.