Inflation Reduction Act (IRA)

Overview

Federal energy policy is making many new incentives available for local governments, tax-exempt organizations, and private businesses to assist with financing and constructing clean energy-related assets. The Inflation Reduction Act (IRA), enacted in 2022, expanded the set of clean energy-related asset categories that are now being directly subsidized by the federal government via tax credits and direct payments.

Importantly, local governments and tax-exempt organizations are not taxpayers and normally do not benefit from tax credits, but the IRA authorizes direct payments in lieu of credits as cash subsidies to local governments and tax-exempt organizations to encourage the implementation of clean energy-related assets. Now, counties, townships, municipalities, and school districts can build long-term energy-producing assets like solar fields, install geothermal heating, or invest in clean fuel buses for their vehicle fleets, all with federal support. Certain energy-efficient commercial buildings can be constructed or retrofitted more cheaply using newly expanded IRA-authorized deductions, which local governments and tax-exempt organizations can allocate over to their design professionals.

This article provides an overview of the key incentives available under the IRA for local governments and tax-exempt organizations investing in clean energy-related assets. For additional information related to this federal stimulus package and how it directly affects specific industries, contact one or more of the individuals below and review the Bricker Graydon Inflation Reduction Act Legal Services brochure.