The Inflation Reduction Act (IRA) included more than $400 billion in tax credits and incentives to promote energy efficiency and help offset the costs of solar power systems, lighting systems, heating, cooling, and ventilation systems, hot water systems, clean vehicles” and EV charging stations. Many of these may be applicable to senior living communities. Recent guidance on these provisions includes:
- “Direct Pay” for Tax Credits (Code Section 6417). This provision allows certain tax-exempt and government organizations to monetize the tax credits by getting a cash payment directly from the IRS in the amount of applicable tax credits. The guidance addresses a wide range of matters relating to the “direct pay” concept but is generally viewed as being insufficient and too restrictive. Taxpayers may rely on the proposed regulations until final regulations are issued. While the guidance did address many of the open questions, there remains some uncertainty as to this aspect of the IRA.
- “Transferability” of Tax Credits (Code Section 6418). This provision allows taxpayers to monetize the tax credits by selling the tax credits for cash to third parties. The guidance addresses a wide range of matters relating to the “transferability” concept. Taxpayers may rely on the proposed regulations until final regulations are issued. This guidance has generally been viewed as positive and sufficient to allow taxpayers to take advantage of this aspect of the IRA.
- New Energy Efficient Home Credit (Code Section 45L). IRS guidance related to the new energy efficient home credit addresses: (1) how to calculate applicable credit (2) how to satisfy energy savings requirements and (3) documentation/certification requirements.
- Bonus Credit for Low Income Communities. Under this program, applicants investing in certain solar and wind powered electricity generation facilities may apply for bonus credits (potentially increasing the amount of tax credits by 25-67 percent). The guidance includes proposed definitions and requirements that would be applicable for the program for applications and awards for the calendar year 2023 capacity limitation, which also would inform guidance applicable for future program years.
- IRA Labor Requirements. To qualify for the optimal credit amounts, taxpayers may need to meet these labor requirements. The guidance addresses several matters including (1) to whom the prevailing wage requirements apply, (2) the statutory cure for failing to meet prevailing wage requirements, (3) the required apprenticeship levels for 2023 and 2024 or later, and (4) a provision allowing for a waiver of penalties if certain agreements are entered into with workers. The IRS has also released an FAQ covering the prevailing wage and apprenticeship requirements.
