Extended Green Provisions in the Inflation Reduction Act

The Inflation Reduction Act extended several Tax Code provisions related to green energy that had expired at the end of 2021 or were being phased out.

1. The Plug-in Electric Vehicle Credit, renamed the Clean Vehicle Credit, contains several new requirements effective starting in 2023 or later. One new provision starting on the enactment date, August 16, 2022, requires that the vehicle be assembled in North America. However, there is also a transition provision that a vehicle purchased or subject to a binding written contract entered into before August 16, 2022 may be treated as placed in service on August 15, 2022 even though it was actually placed in service on or after August 16, 2022.
   
2. The newly renamed Energy Efficient Home Improvement Credit has been extended through 2022, with most of the new requirements and enhancements, particularly changing a $500 lifetime credit to a $1,200 annual credit, effective for 2023 through 2032. This leaves a $500 lifetime credit available for 2022 for taxpayers who had not already used up that credit.
   
3. The newly renamed Residential Clean Energy Credit, the one for solar and wind installations, had been scheduled to phase-down to 26 percent for 2022. It has now been restored to 30 percent for 2022, with the 30 percent credit extending through 2032, after which a phase-down starts again. One additional change for 2022 and beyond is that the credit is no longer available for biomass furnaces and water heaters.
   
4. The Alternative Fuel Refueling Property Credit has been extended retroactively for 2022 and through 2032. However, it appears that, starting in 2023, the credit will be limited to property located in rural or low-income census tracts. There is some debate as to whether this limitation was intended to apply only to business installations. However, for 2022, individuals can still qualify for the $1,000 credit for an installation placed in service in 2022.
   
5. For businesses, the Energy Efficient Commercial Building Tax Deduction remains in effect for 2022, with new requirements and higher deduction limits coming into effect in 2023.
   
6. For home builders, the Credit for Energy Efficient Homes was also extended for 2022 and beyond, again with new requirements and higher potential credit limits effective for 2023 and beyond.
   
7. Several existing credits for the energy industry were also extended for 2022. These include the Biodiesel, Renewable Diesel, and Alternative Fuel Credits, the Second-Generation Biofuel Producer Credit, Production Tax Credit, Investment Tax Credit, and the Carbon Oxide Sequestration.

Please reach out to your accounting professional with any questions.

Source: © 2022 CCH Inc.