On October, 5, 2022, the U.S. Department of Treasury (Treasury) and Internal Revenue Service (IRS) published six Notices requesting public comments by November 4, 2022 on certain of the clean energy tax incentives included in the Inflation Reduction Act of 2022 (IRA). However, the IRS and Treasury will consider written comments received after November 4 that do not delay the relevant guidance. Input from industry stakeholders is important to help inform next steps for the IRS and Treasury and shape how these clean energy tax incentives are accessed in practice.
The Notices seek input on specific questions, as well as general comments, on key aspects of the amendments made to existing tax credits and the new tax provisions enacted by the IRA with respect to energy generation incentives [Notice 2022-49], credit monetization [Notice 2022-50], credit enhancements [Notice 2022-51], clean vehicle incentives [Notice 2022-46], manufacturing credits [Notice 2022-47], and incentives for energy efficiency in homes and buildings [Notice 2022-48]. The Notices also permit the public to submit questions about any of the energy tax provisions in the IRA, even if such provision is not identified in one of the Notices or is an existing provision not changed by the IRA.
The request for public comments suggests that Treasury and the IRS are committed to moving expeditiously to issue Treasury Regulations and other guidance. This is good news for the industry because many aspects of the new tax incentives cannot be implemented without Treasury Regulations or other guidance detailing procedural or other requirements. Further, developers, investors and other market participants need clarifications and expanded guidance on a variety of aspects of the tax provisions to, inter alia, evaluate new opportunities, create new transaction structures and optimize development of new projects and technologies.
The specific questions in the Notices presumably highlight the areas where the IRS and Treasury intend to issue Treasury Regulations or other guidance and identify where they anticipate potential confusion or ambiguity. Accordingly, it is useful to review the specific questions to know what guidance to anticipate and, more importantly, to identify questions that the IRS and Treasury have not considered for which guidance is needed. To that end, the charts below summarize some of the key questions about which input is requested.1
Direct Pay and Credit Transfers (Notice 2022-50)
Public comments may be filed electronically or by mail to the address provided in the relevant Notice.
The Notices do not specifically ask for comments about several important tax credits which were added or significantly changed by the IRA, including the new Clean Hydrogen Production credit under Section 45V and the Carbon Capture and Sequestration credit under Section 45Q. Some market participants consider these two credits to be among the most significant clean energy tax changes made by the IRA. Public comments can be made about the Section 45V credit or the Section 45Q credit, or any of the other clean energy tax credits not specifically identified. However, we wonder whether the IRS may issue additional Notices in the future, which would identify specific questions about these two credits and others, such as the new Clean Commercial Vehicle credit under Section 45W and the Alternative Fuel Refueling Property credit under Section 30C.
We will continue to provide updates concerning the energy tax changes to the Code made by the IRA.
1Note that the tables do not include all of the clean energy tax provisions addressed in the Notices and specifically does not include any tax incentives for energy efficiency in residential buildings.