Initial assessment of the Inflation Reduction Act of 2022 and Geothermal and other renewable/alternative energy systems.

  • -  The new ITC rules are written to attempt to drive trade union participation, higher wages and apprenticeship in clean tech industries.

  • -  Commercial Section 48 Investment Tax Credit changes

o Large wind, CHP & Solar PV will pivot to their own new rules at the end of 2024, but Geothermal Heat Pumps are

exempted and will continue to receive the basic 30%+ ITC Credit..
o The base commercial ITC rate is 6% but bumps up to the ITC bonus rate of 30%. Two ways to get to the 30% bonus

level:

  •   Projects with < 1MW equivalent

  •   -or- >1MW must use ‘prevailing wage’ and ‘apprenticeship’

  •   There is another 10% bonus (so up to 40%) if a certain threshold of your product is manufactured and

    sourced here in the USA.

  •   There is another 10% bonus bump up if you are installing in an “energy community” which is (a) a former

    brownfield site, or (b) a census tract (or adjacent to a census tract) where there was a former mining, oil &

    gas exploration, or a coal mine, or, a coal-fired power plant has closed.

  •   Credits are transferable to another taxpayer for cash payments.

  •   Non-profits and government entities can get a direct check from the Federal Govt equal to the ITC.

  •   Thermal energy storage and battery storage have been added as eligible for the ITC.

    - Residential Energy Efficient Property Credit (Section 25D) now at 30% and now includes geothermal heat pumps, solar panels, fuel cells, biomass stoves, small wind turbine, solar themal and home battery arrays. Energy Efficient Home Credits are also now available.

- The Commercial Section 179D “deduction” is increased from $1.80 per sq foot to $5.00 per sq foot. This deduction can be taken in addition to the ITC.

8/23/22 This is not meant to be legal or tax advice. Please consult with your legal and tax advisor.