Overview
The Treasury Department (Treasury) and the Internal Revenue Service (IRS) are seeking comments as they begin work to implement the Inflation Reduction Act's energy tax incentives that were signed into law in August. On October 5, Treasury and the IRS released six notices to start off a 30-day comment period requesting public comments related to the different aspects of the energy tax provisions in the legislation. Comments are due to Treasury and the IRS on November 4.
All six of the notices request comments on defining the terms, timing, qualifying technologies, and application of several of the provisions. Comments are also requested on the guidelines or standards to be used for the verification of several of these new credits, as well as for preventing fraud, duplication, or improper payments.
- Notice 2022-46 requests comments relating to the modified section 30D Clean Vehicle Credit and the new section 25E Previously Owned Clean Vehicles Credit, including comments relating to the new critical minerals and battery components requirements for qualifying clean vehicles in section 30D(e)(1) and (e)(2).
- Notice 2022-47 requests comments relating to the new section 45X Advanced Manufacturing Production Credit and the reallocation for the section 48C Advanced Energy Credit, including comments regarding the definition of eligible components in section 45X and comments related to the selection criteria for section 48C. Notice 2022-47 does not request comments on the prohibition on taxpayers claiming both section 45X and section 48C and if the prohibition applies to the previous section 48C allocations.
- Notice 2022-48 requests comments relating to the commercial and residential energy efficiency credits in section 25C, section 25D, section 45L, and section 179D.
- Notice 2022-49 requests comments relating to the production and investment tax credits in section 45, section 45U, section 45Y, section 48, and section 48E, which includes requests for comments relating to the new standalone energy storage credit and the standards for determining the greenhouse gas emission reductions related to claiming the technology-neutral tax credits.
- Notice 2022-50 requests comments relating to the new direct payment election in section 6417 and the transferability election in section 6418. Comments are requested on the timing and manner for making either election as well as issues relating to the elections made by S corporations and partnerships.
- Notice 2022-51 requests comments on the new prevailing wage, apprenticeship, domestic content, and energy community requirements that will allow taxpayers to claim an increased bonus credit or deduction. For each of these requirements, comments are requested on the documentation, reporting, and compliance requirements. For the prevailing wage requirements, comments are requested on whether guidance is needed on how the existing Department of Labor's Davis-Bacon prevailing wage laws apply to these energy tax credits. For the apprenticeship requirements, comments are requested on the good faith exception in section 45(b)(8)(D)(ii). For the domestic content requirements, comments are requested on how Treasury and IRS should apply the existing Buy America requirements to these credits.
Notably, this round of notices did not include a request for comments on the new section 45V hydrogen production credit or section 45Q carbon capture credits. Further guidance is also expected for these credits as well.
The prevailing wage and apprenticeship requirements apply to projects that begin construction after a date that is 60 days after Treasury and the IRS publish guidance implementing the prevailing wage and apprenticeship requirements. Projects that begin construction before then can claim the bonus rates available even if they do not satisfy the requirements. The notices made clear that they did not constitute guidance for purposes of triggering this requirement and that Treasury and the IRS will explicitly identify when they have published guidance for this purpose.
White House Advisor John Podesta, who is leading the implementation of the Inflation Reduction Act, stated in a press briefing that they are "moving fast on implementation" and there will be "multiple opportunities for stakeholder engagement in the weeks and months ahead." We anticipate that Treasury and the IRS may issue a combination of guidance types, including interim guidance (for example, notices), proposed and then final regulations, as well as forms and instructions.
