The Inflation Reduction Act (P.L. 117-169) of 2022 is a landmark United States federal law enacted by the 117th US Congress effective August 16, 2022. It aims to:

  • Curb inflation by reducing the deficit to fight inflation
  • Lower prescription drug prices and extend the expanded Affordable Care Act program to 2025
  • Invest in domestic energy production and manufacturing while promoting clean energy

Most of the outlays in the Act are devoted to incentives for green energy with a large share being in the form of tax credits for green energy. In some cases, the credits are extensions and expansions of current credits like:

  • Residential energy property
  • Energy-efficient homes & commercial buildings
  • Alternative fuel refueling property
  • Renewable electricity
  • Energy Investment
  • Carbon dioxide sequestration
  • Incentives for alternative energy
  • The extension (up to 2032), modification, and expansion of the clean vehicle credit (includes both plug-in electric & fuel cell vehicles) subject to certain requirements

New credits such as those for:

  • Energy produced from zero-emission nuclear power facility
  • Sustainable aviation fuel
  • Production of clean hydrogen

Increase in the amount of research credit for certain qualified small businesses are allowed to claim against payroll taxes from $250K to $500K.

The Act is paid for through the:

  • Implementation of a 15% corporate alternative minimum tax effective after 2022 on the corporation’s adjusted financial statement income for the tax year, reduced by a corporate AMT foreign tax credit for only corporations with an average annual adjusted financial statement income of more than $1 billion for the three prior tax years. This threshold is reduced to $100 million in the case of certain foreign-parented corporations.
  • Budget increases for the IRS to improve enforcement with the intention of closing the tax gap. The Treasury Secretary issued a directive for the implementation of new programs in such a way as not to increase examinations of taxpayers making less than $400K.
  • 1% excise tax on stock repurchases after 2022, defined as redemptions, or transactions determined to be economically similar to redemptions, by domestic corporations whose stock trades on an established securities market.
  • Extension of the excess business loss limitations as it applies to Noncorporate Taxpayers from Jan 1, 2027, to Jan 1, 2029.
  • Changes to Medicare rules

If you have any questions regarding the green energy tax credits and if you qualify, please reach out to us for a consultation.