The U.S. Department of Treasury and Internal Revenue Service issued guidance on accessing clean energy tax credits included in the Inflation Reduction Act (IRA). The IRA’s “elective pay” provisions allow townships, for the first time, to be able to receive a payment equal to the full value of tax credits for building qualifying clean energy projects. Townships can also transfer certain tax credits through a process known as “transferability” to other parties.
Tax credits eligible for direct payment or transferability include projects that generate clean electricity through solar, wind, and battery storage projects; installing electric vehicle (EV) charging infrastructure; and purchasing clean vehicles for vehicle fleets. Please note, the tax credit for commercial EVs is up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for vehicles over 14,000 pounds. Only certain vehicles are eligible for the credit, as there are manufacturing and final assembly requirements.
Townships can refer to the National Association of Towns and Township’s Guidance to Accessing Clean Energy Credits for additional information, as well as the IRS’s Frequently Asked Questions document or the White House fact sheet on direct pay.