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October 6, 2022

Treasury Seeks Stakeholder Input on Inflation Reduction Act Energy Tax Provisions

Advisory

President Biden signed the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169) into law on August 16, 2022 after clearing both the Senate and the House on party-line votes. The IRA includes a number of tax, energy, environment, and healthcare priorities for Democrats and is the result of months of negotiation among Democrats in Congress, prominently Sen. Joe Manchin (D-WV) and Sen. Kyrsten Sinema (D-AZ), and President Biden. Among its various provisions, the IRA provides roughly $369 billion to transition energy production to cleaner sources, increase energy efficiency, reduce carbon emissions, and support innovations in next-generation clean energy technology.

President Biden’s signing of the IRA marks only the first step in what is expected to be a long process to implement its provisions. Immediately after the IRA became law, the Treasury Department began the regulatory process of implementing the law, such as releasing public guidance on the changes to the electric vehicle (EV) tax credit under IRC Section 30D.

On October 5, Treasury announced plans to solicit public comment on how best to implement the IRA’s clean energy tax incentives. The announcement included six requests for information (RFIs) on the following topics:

  • Energy Generation Incentives, including renewable energy production and investment tax credits in IRC Sections 45, 45U, 45Y, 48, and 48E;
  • Credit Enhancements, including the prevailing wage, apprenticeship, domestic content, and energy community requirements for increased or bonus credit (or deduction) amounts under IRC Sections 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D;
  • Incentives for Energy Efficiency in Homes and Buildings, including the Energy Efficient Home Improvement Credit, Residential Clean Energy Credit, New Energy Efficient Home Credit, and Energy Efficient Commercial Building Deduction in IRC Sections 25C, 25D, 45L, and 179D;
  • Incentives for the Purchase of New and Previously Owned EVs, in IRC Sections 30D and 25E;
  • Manufacturing Credits; including the Advanced Manufacturing Production Credit under IRC Section 45X and the Qualifying Advanced Energy Project Credit under IRC Section 48C; and
  • Credit Monetization, The elective payment and transferability options provided under the IRA as IRC Section 6418.

The announcement from Treasury urges that comments be submitted “as soon as possible, ideally by November 4, 2022.” The White House Council on Environmental Quality (CEQ) also organized a briefing on October 6 to outline the process Treasury will follow in formulating guidance to implement the clean energy tax provisions. CEQ also indicated that Treasury will continue stakeholder engagement on a rolling basis and that, when Treasury issues proposed regulations on any of the IRA’s climate and clean energy tax provisions, it will solicit public comments before finalizing a rule.

Of note, energy provisions with a less pressing effective date, such as certain of the “technology neutral” incentives, e.g., IRA Section 13704, are not included in Treasury’s initial set of RFIs. Treasury is likely to undertake a rulemaking effort under those provisions next year, as the statute only requires guidance to be issued by January 1, 2025.

With Treasury releasing RFIs less than two months after the IRA being signed into law, and seeking comments within 30 days, it is clear the Biden Administration hopes to provide guidance to taxpayers as close to the effective dates of the clean energy provisions as possible. Stakeholders who participate in the comment period have a unique opportunity to shape the implementation of tax incentives that may influence the next decade or more of clean energy development by providing input to Treasury under this RFI process.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.