April 17, 2024

This paid piece is sponsored by Eide Bailly LLP.

A version of this article first appeared on EideBailly.com.

Organizations in Sioux Falls are well positioned to benefit from the enhanced energy-efficiency tax credits and deductions introduced by the Inflation Reduction Act of 2022. This legislation offers a significant opportunity for local businesses to invest in eco-friendly practices, contributing to a greener and more resilient community. We’ve outlined the key highlights of the energy incentives to help you gain a better understanding of these benefits.

Renewable Electricity Production Tax Credit, Section 45

Section 45 provides a credit per kilowatt-hour for electricity produced by specific renewable sources. The IRA introduces new rules for large energy systems over 1 megawatt, with increased credit amounts based on domestic materials and project location within an “energy community.” Direct pay option added for tax-exempt entities. Smaller projects, those under 1 megawatt, qualify if construction begins between Jan. 1, 2022, and Dec. 31, 2024. Larger projects have a construction window from Jan. 30, 2023, until Jan. 1, 2025.

New Energy-Efficient Home Credit, Section 45L

Section 45L provides a credit of up to $2,000 per unit for properties placed in service before Jan. 1, 2023, and up to $5,000 per unit for projects placed in service between Jan. 1, 2023, and Dec. 31, 2032. The IRA extends the credit at the current rate of $2,000 per unit for certain properties. Increases values for Section 179D and Section 45L through the end of 2032. Introduces additional credits for projects meeting wage, apprenticeship and ENERGY STAR/ZERH program requirements. For qualifying projects placed in service after Jan. 1, 2023, various credit amounts are applicable based on project type and requirements.

Commercial Clean Vehicle Credit, Section 45W

Starting Jan. 1, 2023, Section 45W provides a tax credit for buyers of environmentally friendly commercial vehicles. Eligible vehicles must be intended for use on public roads or mobile machinery and purchased between 2023 and 2032.

Advanced Manufacturing Production Credit, Section 45X

A Section 45X is a tax credit for U.S.-made wind, solar and battery power components, and critical minerals, applicable each year to eligible components and minerals produced and sold after Dec. 31, 2022. Components must be produced and sold in the taxpayer’s trade or business. Credit decreases gradually starting from Jan. 1, 2030.

Clean Energy Investment Tax Credit, Section 48

Section 48 is an investment tax credit for clean energy property, covering various energy technologies. The IRA modifies credit provisions for solar energy property and qualified geothermal energy property.

Qualifying Advanced Energy Project Credit, Section 48C

Initially established in 2009, this credit now allows an additional $10 billion in credits, with specific allocations for projects related to coal mine closures.

Energy-Efficient Commercial Buildings Deduction, Section 179D

A deduction for energy-efficient commercial buildings, applicable up to $1.88 per square foot. Starting in 2023, introduces a base deduction rate and a bonus deduction for projects meeting certain requirements. Applicable to projects placed in service after Jan. 1, 2023, with a three-year cap on using the deduction.

Navigating a new era of energy-conscious practices 

Tax credits and deductions exist to help you save money and promote a clean, green energy infrastructure. These incentives are available for the next 10 years and allow for proactive planning, including:

• Accounting and tax departments incorporating these incentives into their capitalization policy and fixed asset ledgers.
• Environmental, sustainability and governance officers to fund and advance their organization’s goals.
• Developers, owners, contractors and architects who include these incentives during design and construction.

By leveraging these incentives, your organization can play a pivotal role in leading Sioux Falls toward a sustainable future. Working alongside an experienced team of advisers with a proven track record in the energy-efficiency space will help you maximize these new opportunities.

Eide Bailly’s energy-efficiency specialists and business advisers are here to evaluate your eligibility and collaboratively optimize the full potential of these energy-efficient incentives.