House Passes Historic Inflation Reduction Act!

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On August 12, 2022 – a little over two weeks after the legislation was announced and five days after it passed the Senate – the House passed the historic Inflation Reduction Act of 2022 (the “Act”). While the legislation still needs to be signed by President Biden to become law, it is expected that this will be a mere formality.

This Act represents one of the most sweeping pieces of climate policy legislation ever enacted in the United States, and we anticipate it will spur record setting growth of green and clean energy, drive trillions of dollars of investment into the industry, and reduce carbon emissions by 40% by 2030.

Our prior coverage of the Act, as it was originally released, can be found here. The final legislation included some important changes to revenue raisers, but, for the most part, the energy provisions remained intact.

The below is a non-exclusive list of some of the more material changes:

  • 15% Corporate AMT:
    • Revised to permit the use of accelerated depreciation to reduce adjusted financial statement income.
  • Revenue Raisers:
    • Replaced changes to the taxation of carried interests with provisions that impose a 1% tax on corporate stock buybacks.
  • Energy Tax Credits:
    • Clarified labor requirements to include persons employed by the taxpayer; and
    • Revised definition of energy community for purposes of the 10% energy community bonus.
  • Direct Pay:
    • For credits attributable to property held by a partnership, specified that a direct pay election must be made at the partnership level and may not be made at the partner level; and
    • Expanded the definition of applicable entities to include corporations operating on a cooperative basis that are engaged in furnishing electric energy to persons in rural areas.
  • Transferability:
    • Revised to require a transferor to give notice of the occurrence of a recapture event to the transferee taxpayer (and for the transferee taxpayer to give the transferor notice of the recapture amount).
  • Advanced manufacturing:
    • Relaxed requirement that sales be made to non-related persons.

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