Last month, the Treasury and the Internal Revenue Service (IRS) released guidance on provisions in the Inflation Reduction Act (IRA) that will expand the reach of clean energy tax credits to state and local governments and their subsidiaries – including public water utilities.
The IRA created two new credit delivery mechanisms—elective pay (otherwise known as “direct pay”) and transferability—that enable tax-exempt and governmental entities, including public utilities, to take advantage of clean energy tax credits. The Inflation Reduction Act allows tax-exempt and governmental entities to receive elective payments for 12 clean energy tax credits, including the major Investment and Production Tax credits, as well as tax credits for electric vehicles and charging stations. It is likely that many water utilities already possess these mechanisms.
Interested utility staff can find more information about the proposed and temporary guidance, as well as the underlying tax credits that can be used with elective pay and transferability, on the IRS webpage. Interested utility staff can find FAQs and fact sheets that outline key information contained in the proposed guidance online as well.
AMWA will be commenting in support of the proposed guidance. In its comments, the Association will ask for clarity that all public utilities, including authorities, are explicitly considered eligible entities in the final guidance. Comments are due August 14.