Learn more about opportunities for-profit businesses, non-profit entities, and public entities, such as schools and local government, to take advantage of IRA tax credits and funding.
Learn more about Direct Pay, how to calculate your eligible credits, and options to finance your energy efficiency or renewable energy project.
FinancingLearn more about upcoming federal grants through the Inflation Reduction Act and where to go to search for additional opportunities.
Grant OpportunitiesLearn how to calculate your eligible tax credits and qualifying criteria.
Calculate Your Credits
Less than 1 MW(ac)
The IRA will provide 30% funding for solar installations of less than 1 MW(ac) on commercial facilities, with no maximum allowance. The 30% credit also applies to battery storage and interconnection charges.
Refer to Department of Energy summary for more information on the Investment Tax Credit for solar energy projects.
More about transitioning your organization to renewable energy is here.
Farmers and other rural landowners may want to explore AgriSolar, where a PV array co-exists with farming operations.
1 MW or Larger Solar
In order to receive the full 30% credit, systems that are 1MW or larger have additional requirements around Prevailing Wage and Apprenticeship. Refer to the US Department of Labor FAQs for more information on prevailing wage and apprenticeship.
Entities can claim tax credits for larger solar arrays by a) the Investment Tax Credit (which is the provision described above that also applies to smaller systems) or b) accessing the Production Tax Credit, where payment is based on energy generated. The IRA updates both of these provisions, increasing the credits, accommodating more renewable energy technologies and adding prevailing wage and apprenticeship requirements.
Refer to IRS guidance for more information on both the Production Tax Credit and the Investment Tax Credit for large renewable energy projects.
More about transitioning your organization to renewable energy is here.
Farmers and other rural landowners may want to explore AgriSolar, where a PV array co-exists with farming operations.
With the Investment Tax Credit entities can receive a 30% credit for geothermal installations if a) the system size is under 1 MW(ac) or, b) if it is over 1 MW(ac) and the prevailing wage and apprenticeship requirements are met. See additional FAQs from the US Department of Labor on prevailing wage and on apprenticeship requirements.
Refer to IRS guidance for more information on both the Production Tax Credit and the Investment Tax Credit for more details.
In situations where a facility is adding both solar and geothermal, the combined system must be under 1 MW(ac) or meet the prevailing wage requirements.
Example
Forest Edge Elementary in the Oregon Area School District has a 646 kW (dc)/500 kW(ac) solar array, a geothermal system with a capacity of about 800 kW and a 125 kW battery. So total capacity is 500+800+125=1,425 kW or 1.4 MW(ac). Under the IRA, that facility would exceed the 1 MW(ac) cap so, to get the full 30% credit, a team building that facility today would need to meet the prevailing wage and apprenticeship requirements.
The IRA expanded the types of renewable energy systems included in the Production Tax Credit and the Investment Tax Credit.
Refer to IRS guidance for more information on both the Production Tax Credit and the Investment Tax Credit for large renewable energy projects.
The IRA expanded and enhanced an existing energy efficiency tax deduction, Energy Efficient Commercial Buildings Deduction (179D).
Under the IRA the incentives of $0.63 to $1.88 per square foot is modified to be $0.50 - $1.00 on a sliding scale based on savings achieved, with incentives increasing to $2.50 to $5.00 per square foot when the project meets prevailing wage and apprenticeship requirements.
The tax deduction applies to both new construction and retrofits.
Increasing energy efficiency 25% over the baseline will garner a $2.50/square foot tax deduction provided that prevailing wage and apprenticeship requirements are met. A 50% reduction would garner the $5.00/square foot tax deduction.
This credit does not qualify for Direct Pay. Instead local governments and nonprofits can assign the credit to the project designer.
More Information
The IRA updates and expands a tax credit for builders of new energy efficient residential housing called the New Energy Efficient Homes Credit (45L).
For single-family homes, builders are eligible for:
For multi-family homes, builder/developers are eligible for:
Also see additional guidance from both the EPA for Energy Star Homes tax credits and the DOE for the Net Zero Energy Ready Homes credits.
The IRA includes separate provisions for clean fuel tax credits for consumers and businesses.
The clean vehicle credit is a tax credit for businesses and available as Direct Pay for nonprofits and other tax exempt entities.
For qualified commercial clean vehicles, the credit equals the lesser of:
The maximum credit is $7,500 for qualified vehicles with gross vehicle weight ratings (GVWRs) of under 14,000 pounds and $40,000 for all other vehicles. The credit applies to road vehicles as well as mobile machinery, as defined in § 4053(8) of the Code.
Learn more about the EV credit under lease arrangements.
See also FAQs for the Commercial Clean Vehicle Credit
Businesses that install EV chargers and station equipment at their property can qualify for a tax credit of up to 6% of the cost of charging equipment, up to a maximum credit of $100,000 per unit. Projects completed before December 31, 2022 will still be subject to the prior $30,000 cap.
To qualify, the equipment must be placed in a low-income community or a non-urban area. Low-income communities include population census tracts where the poverty rate is at least 20% or is a metropolitan or non-meetropolitan area census tract where the median family income is less than 80% of the state medium family income level.
Nonprofits that do not pay taxes can receive payments directly from the US Treasury for some of their clean energy projects. This is called Direct Pay and it is new so the forms are still being finalized but, essentially, an entity will be able to fill out a Treasury form (e.g, size and cost of solar installation, or about the purchase of an electric vehicle) and have the incentive paid directly back to them.
For example:
Direct Pay does not apply to all of the tax credits under the IRA but it does apply to important credits including the renewable energy credits and the clean fuel vehicles.
Notably, Direct Pay is not authorized for the Energy Efficient Commercial Buildings Deduction. In that instance tax-exempt entities are permitted to allocate the tax deduction to the designer.
As the Direct Pay forms are finalized we will update with additional links.
Direct Pay is not a grant with ongoing reporting requirements. It is a one-time transaction where entities will be able to claim federal support for their projects. As such, it is going to be especially helpful for smaller communities or nonprofits to use.
PACE, Property Assessed Clean Energy, is an innovative way for property owners to finance energy efficiency, water conservation, renewable energy and other related projects.
Essentially PACE is a lien against your property assessment. Dane County is one of about 50 counties in Wisconsin where businesses and nonprofits have access to this financing mechanism. (Homeowners are not eligible for PACE financing in Wisconsin, although there are green mortgage products that offer similar benefits.)
A key benefit of PACE is that the financing can be set up so that your repayments are smaller than your energy savings—so that you realize bottom line savings even while you pay for the project installation.
The IRA is going to make projects more affordable for businesses and nonprofits in our area. If the upfront capital is still a barrier for you, PACE is a great solution.
Focus on Energy is Wisconsin’s statewide energy efficiency and renewable energy program. Focus has been helping residents and businesses pursue clean energy solutions since 2001 and has assisted hundreds of entities across Dane County on thousands of energy efficiency and renewable energy projects. If you are interested in how your business can leverage the IRA to save money you should connect with Focus on Energy to be certain you are maximizing your ability to qualify for all available incentives from Focus on Energy in addition to IRA incentives.
Solar, geothermal, and battery storage projects are potentially subject to additional requirements and eligible for bonus tax credits depending on the project size (more or less than 1MW) and location. Learn more about how to calculate Investment Tax Credits and the difference between Investment and Production Tax Credits.
And another visual, from Inside Climate News
Forest Edge Elementary School is the first Net Zero School in Wisconsin. Completed in 2020, it features geothermal, solar arrays, and battery storage. Below illustrates the tax credits for which the project would be eligible if the project were to move forward after the Inflation Reduction Act were passed.
Heating, cooling, and other energy efficient upgrades do not have bonus credits or other qualifying requirements so the tax credits are the percentage of the total cost, up to the allowable threshold.
Tax-exempt entities are required to deduct tax-exempt financing from their eligible subtotal if applying for Direct Pay; see example above.
Below are several sources to search for additional federal and state grant opportunities, and learn more about grants targeting underserved communities:
Email us with questions about how your business or organization may be able to benefit from the Inflation Reduction Act.
Information provided above is meant as an overview of eligible tax credits; all information given should be utilized in conjunction with a tax professional. It does not constitute professional tax advice or other professional financial guidance and may change based on additional guidance from the Treasury Department.
