Inflation Reduction Act Opportunities

NextGen closely monitors government actions that affect our clients. The recently-passed Inflation Reduction Act of 2022 presents many opportunities for you and your business to apply for tax credits, grants, and funding. Below is a list of some of the new federally-funded programs that go into effect December 31, 2022.

Extension of Renewable Electricity Production Tax Credit (Section 45)

• Extends the existing production tax credit for applicable renewable energy sources. This tech-specific PTC ends in 2024 and is replaced by the new tech-neutral Clean Electricity PTC (45Y) which begins in 2025.
• Revives the PTC for solar facilities which ended in 2006 and extends to 2024.
• Extends the date of construction for geothermal, wind, closed- and open-loop biomass, landfill gas, municipal solid waste, hydropower, and marine and hydrokinetic facilities to 2024.
• Maintains a credit amount of 1.5 cents per kWh.
• Increases hydropower, municipal solid waste, and marine and hydrokinetic credit to full value (was previously halved).

New Clean Electricity Investment Tax Credit (48E)

This newly established, tech-neutral ITC (48E) replaces the above Energy ITC once it phases out at the end of 2024. 48E is an emissions-based incentive that is neutral and flexible between clean electricity technologies. 

• Creates an ITC credit of 30% of the investment in the year the facility is placed in service.
• Clean electricity projects smaller than 5 MW can include the costs of interconnection under the ITC.
• The Treasury Department is directed to publish emission rates for similar technologies each year for taxpayers to use for purposes of determining their eligibility.
• Credits are set to phase out the later of 2032 or when emission targets are achieved (i.e., the electric power sector emits 75% less carbon than 2022 levels). Facilities will be able to claim a credit at 100% value in the first year, then 75%, then 50%, and then 0%.

Carbon Capture and Sequestration Tax Credit (45Q)13,14,15,16,17,18
Enhances the tax credit for carbon capture and direct air capture (DAC).

• Extends the deadline for construction to January 1, 2033 and increases the credit amount:
  • From $50 to $85 per ton for CCUS for industrial facilities and power plants for saline geologic formations.
  • From $35 to $60 per ton for utilization of captured CO2 and its precursor carbon monoxide to produce low and zero-carbon fuels, chemicals, building materials and other products, or for enhanced oil recovery (EOR).
  • From $50 to $180 per ton for DAC stored in saline geologic formations and from $35 to $130 per ton for utilization or EOR.

Grants for Energy Efficiency Contractor Training

• $200 million through 2031 for DOE to provide state energy offices with grants for the training of contractors to carry out energy efficiency upgrades, including those in the above residential energy efficiency incentives.

Environmental and Climate Justice Block Grants

• $2.8 million to the EPA for grants and $200 million for technical assistance.
• 3-year grants are available for projects related to climate change and air pollution, including air pollution monitoring, extreme heat risk mitigation, resiliency and adaptation, indoor pollution reduction, and community engagement.
• Tribes, local governments, and universities in partnership with community-based non-governmental organizations (NGOs) are eligible, as well as individual or groups of community-based NGOs.

Neighborhood Access and Equity Grants

• $3 billion, with $1.1 billion set aside for disadvantaged communities, to the FHA for grants to improve transportation access and mitigate negative safety or environmental impacts in underserved communities.
• Grants may be used for improvements to reduce air pollution and GHG emissions, manage stormwater run-off, address urban heat islands, and to monitor air quality, transportation      related GHG emissions and pollution, and gaps in tree canopy coverage.
• State, local, territory, and Tribal government entities are eligible.
• Federal cost share of a project in a disadvantaged or underserved community may be up to 100%.

Energy Credit for Solar and Wind in Low-Income Communities

• Creates a 40% investment tax credit for solar or wind projects located in a low-income community or on Tribal land and 20% for facilities part of low-income residential housing or low-income economic benefit projects.

Rural Energy for America Program (REAP)

Provides financial assistance for adoption of clean energy technologies in rural communities.

• $2 billion for the USDA REAP program until 2031 to provide competitive grants and loan guarantees to farmers, ranchers, and rural small businesses for renewable energy systems or energy efficiency improvements.

Greenhouse Gas Reduction Fund

Provides EPA funding for grants to state, local, regional, and Tribal programs that provide financial support to low and zero carbon technologies and can act as seed capital for regional, local, state, or Tribal green banks that provide financial support for low or zero emission projects.

• Provides $11.97 billion through 2024 to make grants for eligible financial entities or entities that would in turn provide financial or technical support.
• Provides $15 billion through 2024 to make grants for eligible entities to provide financial and technical support and support the deployment of clean energy technologies in low-income and disadvantaged communities.

Environmental Quality Incentives Program (EQIP)

• $8.45 billion for grants for practices or enhancements that directly improve soil carbon storage or decreased emissions of nitrous oxide or other GHGs, prioritizing activities that reduce enteric methane emissions.
• This includes financial and technical assistance resources for      producers and landowners to plan and install structural, vegetative, and land management practices on eligible lands to alleviate natural resource concerns.

Regional Conservation Partnership Program (RCPP)

• $4.95 billion provided for financial and technical assistance for state, multistate, or watershed-scale projects, establishing partnership opportunities that optimize federal conservation      funding for specific areas and resource concerns.

Conservation Technical Assistance (CTA)

• $1.3 billion for conservation technical assistance provided through the NRCS to ensure broader and more equitable      access to the tools and information farmers and ranchers need to carry out climate-smart practices.
  • This program provides conservation planning and implementation assistance through field staff in nearly every county in the United States and its territories.

EPA Announces $6.5 Billion in New Funding Available for Water Infrastructure Projects

June 13, 2022

The notices of funding availability include $5.5 billion for the WIFIA program and an additional $1 billion for the SWIFIA program. This round of funding will prioritize funding in four areas:

• Increasing investment in economically stressed communities.
• Making rapid progress on lead service line replacement.
• Addressing PFAS and emerging contaminants.
• Supporting one water innovation and resilience.

https://www.epa.gov/newsreleases/epa-announces-65-billion-new-funding-available-water-infrastructure-projects#:~:text=The%20notices%20of%20funding%20availability,on%20lead%20service%20line%20replacement.

Credit for Residential Clean Energy (25D)10

• Extends credit through 2034 for residential solar, wind, geothermal, and biomass fuel.
• Maintains the previous credit rate but adjusts the project dates. Applies a 30% credit for projects started between 2022 and 2032. Credit decreases to 26% projects started in 2033 and 22% for projects started in 2034.

Credit for Energy Efficiency Home Improvements (25C)11

• Extends credit for energy efficiency home improvements through 2032.
• Increases credit from 10% to 30%.
• Replaces lifetime cap on credits with a $1,200 annual credit limit, including $600 for windows and $500 for doors. Increases limit to $2,000 for heat pumps and biomass stoves. Removes eligibility on roofs.
• Expands credit to cover the cost of home energy audits up to $150 and electrical panel upgrades up to $600.

Home Energy Performance-Based Whole House Rebates (HOMES)24

• $4.3 billion through 2031 to DOE to help state energy offices implement a HOMES rebate program to provide rebates to homeowners and aggregators for whole-house energy      saving retrofits. Additional funding can be provided to low- and      moderate-income individuals, who earn less than 80% of the area median income.
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High-Efficiency Electric Home Rebate Program

• $4.3 billion through 2031 for grants from DOE to States and Tribes to implement a high-efficiency electric home rebate program.
• Provides up to $14,000 per household including $8,000 for heat pumps, $1,750 for heat pump water heaters, and $840 for electric stoves.
• Also includes rebates for improvements to electrical panels or wiring and home insulation or sealant.
• Eligible recipients must fall below 150% of the area median income.

https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics#:~:text=In%20December%202020%2C%20Congress%20passed,2024%20unless%20Congress%20renews%20it.