Senate Democrats on Wednesday night time launched the draft textual content of the Inflation Discount Act of 2022 (the Act). The Act contains various provisions associated to renewable power tax incentives.
The Act would reinstate the complete funding tax credit score (ITC) charge of 30% and the manufacturing tax credit score (PTC) charge of 1.5 cents per kWh (topic to inflationary changes) for tasks on which development begins earlier than January 1, 2025.
Moreover, the Act would undertake new provisions that might, in impact, lengthen the ITC and PTC at their full credit score charges for tasks positioned in service in 2025 or later and on which development begins earlier than 2033. Tasks would solely be eligible for these credit if the greenhouse fuel emissions charge for such tasks will not be higher than zero.
Following are a number of notable options of the Act:
- Extends the ITC for investments in sure forms of renewable power amenities, together with photo voltaic, fiber-optic, thermal power tasks, and different renewable power amenities (together with in any other case PTC-eligible amenities for which an ITC election is made), so long as development of such amenities begins earlier than 2025. The Act additionally would undertake a stand-alone ITC for storage amenities the development of which begins earlier than 2025, and would lengthen the ITC for sure prices related to the development of interconnection gear put in in reference to different ITC-eligible amenities.
- Renews the complete 30% credit score charge for ITC-eligible amenities that meet the prevailing wage and apprenticeship necessities described beneath, or are in any other case exempt from such necessities.
- Extends the PTC for the manufacturing of electrical energy from sure forms of renewable power amenities, together with wind, closed-loop and open-loop biomass, geothermal, landfill fuel, trash, certified hydropower, and marine and hydrokinetic amenities, so long as development of such amenities begins earlier than 2025.
- Renews the provision of the PTC for photo voltaic amenities.
- For each the PTC and ITC, adopts further necessities to qualify for the complete credit score charges. These further necessities embody (1) satisfying sure prevailing wage necessities for wages paid to staff (together with staff of contractors and subcontractors) for the development and upkeep of amenities, and (2) minimal thresholds for employment of apprentices (together with staff of contractors and subcontractors) in reference to the development and upkeep of amenities. Nonetheless, for amenities not in service previous to January 1, 2022, and on which development begins previous to the date that’s 60 days after the IRS points further steering with respect to the prevailing wage and apprenticeship necessities, the complete credit score charge nonetheless applies even when the prevailing wage and apprenticeship necessities will not be happy. The Act additionally contains an exception from the prevailing wage and apprenticeship necessities for sure small amenities.
- Adopts credit score adders for eligible PTC and ITC amenities that fulfill sure home content material necessities and/or are positioned in sure “power communities,” together with brownfield websites, communities with vital employment associated to extraction, processing, transport, or storage of coal, oil, or pure fuel, and communities positioned in census tracts with closed coal mines or retired coal-fired electrical producing items. Mixed, these adders have the potential to extend the ITC to 50% of eligible prices and improve the PTC charge by 20%.
- Adopts an ITC credit score adder for sure wind and photo voltaic amenities positioned in specified low-income communities.
- Permits sure tax-exempt entities, state and native governments, the Tennessee Valley Authority, any Indian tribal authorities, and any Alaska Native Company to obtain money funds from the federal government in lieu of the ITC, PTC, and sure different credit.
- Permits taxpayers not eligible to obtain money funds described above to promote ITCs, PTCs, and sure different credit to unrelated events.
Senate Democrats intend to vote on the Act by means of the price range reconciliation course of, which might allow the laws to move with a naked majority vote within the Senate. If there isn’t a Republican help for the Act, all 50 Democrats within the Senate would wish to vote for the measure, and Vice President Kamala Harris could be required to forged the tiebreaking vote. Majority Chief Chuck Schumer intends to carry a Senate vote throughout the first week of August and, if the Act passes the Senate, the invoice would then go to the Home. President Biden has indicated that he helps the Act, however it stays to be seen whether or not the Act will garner enough help within the Senate and Home. Moreover, as a result of the Act might be topic to the price range reconciliation course of, will probably be topic to what’s generally known as the “Byrd Tub.” Principally, the Byrd Tub requires that provisions in a reconciliation invoice not be “extraneous.” Because of this the provisions will need to have a budgetary impact that’s greater than “merely incidental.” Ultimately, whether or not a provision is “merely incidental” is set by the Senate’s Parliamentarian who has appreciable discretion in making the dedication. If the Parliamentarian concludes {that a} provision violates the Byrd Tub guidelines, the supply might be taken out. It’s not clear if all the provisions within the Act will survive the Byrd Tub.
Foley will proceed to observe these developments, together with any modifications to the draft Act, as this laws progresses by means of Congress.
