Kevin Pearson Quoted on Need for IRS Guidance to Implement IRA

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In a recent article, tax partner Kevin Pearson provided Utility Dive with his insights on clarifications the Treasury Department will need to provide regarding requirements of the new Inflation Reduction Act (IRA) in order to provide clean energy project investors with certainty that they will qualify for the IRA’s new and extended tax credits, grants, and programs.

The article indicates that the IRA’s expansion of tax credits, including the investment tax credit (ITC) and production tax credit (PTC), as well as funding for rebates and research, could lessen by as much as 10% projected U.S. emissions reductions through 2030 and more than double by the same year the share of 40% of U.S. electric generation estimated to have been from clean energy for 2021.

Increases to the base values of the ITC and PTC offered by the IRA for projects that meet any or all of several criteria could result in the tax credits accounting for a significant percentage of a new project’s cost. However, developers are currently starting projects in good faith while still waiting on final rules from the IRS, according to Pearson and others. “Almost every new concept in the IRA has at least one provision requiring IRS guidance,” he said.

As to one of the criteria that, if met, will increase the ITC or PTC—use of domestic content in energy projects—Pearson notes that structural materials made from steel or iron must be “100% U.S.-made,” and for 2023, 40% of manufactured product content must be “U.S.-made”, rising to 55% by 2032. Additional guidance is required to determine how to apply these rules to specific factual scenarios.

You can read the full article here.

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