The Inflation Reduction Act of 2022 (IRA ’22) is generally considered to be ‘Build Back Better Light’ (note: we briefly covered the President’s ‘Build Back Better’ proposal in 2021 Year-End Tax-planning Tips for Business Owners here on the SWC blog.). Many of its provisions are clearly intended to offset the costs of transitioning to green energy for consumers, as explained in Part 1 and Part 2 of this four-part series.

However, the IRA ’22 also contains several provisions that apply specifically to businesses and corporations — some of which provide similar incentives for adopting green energy alternatives and others which clearly target businesses and corporations to increase tax revenue — presumably to help cover the cost of this Act.

In this, Part 3 of our series, we get down to business as we highlight what business owners and corporate leaders need to know about the IRA ’22.

Green Energy Tax Incentives: Extended and Revised

Many of the energy credits available to businesses before the enactment of the Inflation Reduction Act of 2022 have been extended and revised by the Act. Below are highlights of some of the changes made to existing business energy credits and incentives:

• Revises the Internal Revenue Code (IRC) §179D Energy Efficient Commercial Buildings deduction as follows:
  • The deduction is increased for taxpayers who meet specified prevailing wage and apprenticeship requirements (see below) and decreased for taxpayers who do not. (For additional information on prevailing wages, visit the U.S. Department of Labor’s prevailing wages webpage.)
  • Allows additional increases for achieving specified energy savings targets.
  • Replaces the lifetime cap on the deduction with a three-year cap.
  • Updates the efficiency standards that must be met.
  • Allows tax-exempt entities, including governmental agencies, to allocate the deduction to the designer of the building or the qualified retrofit plan.
• Modifies the Renewable Electricity Production Credit in the following ways: Continue reading…