Treasury teams up with agencies to pitch clean energy investments

The Treasury Department teamed up Tuesday with the Environmental Protection Agency, the Department of Energy and the U.S. Dept. of Agriculture to showcase several Inflation Reduction Act programs targeted at rural municipalities and non-profit entities, also highlighting clarifications on direct-pay rules that may incentivize some projects to use taxable municipal bonds for clean energy projects.

"Tax-exempt and government entities that do not owe federal income taxes for the first time really are going to be able to get the value of these credits," said Matt Doyle, senior advisor, Treasury. "These entities can get cash payments from the IRS for clean energy tax credits, as long as they meet all these requirements, including a requirement to go through a pre-filing registration."  

Turning tax credits into cash comes with a cost as the act states that if a project is financed 100% with tax-exempt debt, the direct pay amount to the municipality will be reduced by the lesser of 15% or the portion of the qualifying project that has been financed with tax-exempt debt. 

APPA

Earlier this month, the IRS issued clarification on the rules which was interpreted as good news by rural electric co-ops and the public power industry who are now crunching the tax credit numbers. 

"We will continue to finance projects with bonds," said John Godfrey, senior government relations director, American Public Power Association. "They may finance these projects with taxable bonds. The distinction would be that effectively, a project financed with tax-exempt bonds gets a 15% haircut on the credit." 

The far-ranging webinar encompassed an overview of the USDA's Powering Affordable Clean Energy program which is funded with $1 billion and includes rural and non-rural municipalities where at least 50% of the population live in a communities with a population of 20,000 or fewer.

The EPA touted it's Solar for All, a $7 billion competitive program that's looking to award sixty grants to states, territories, tribal governments and municipal governments serving low income or disadvantaged communities. The focus for the grants is centered on rooftop solar arrays and storage.  

The $7 billion is part of the $27 billion Greenhouse Gas Reduction Fund flowing through the EPA.  The agency is hoping the efforts will lure in some private investment. "Twenty-seven billion is a little bit of a lot of money," said Nicole Steele, senior advisor, EPA. "This is meant to be seeding a lot of leverage for that private sector capital and really helping unlock some of that investment that has been waiting on the sidelines." 

The changes to the direct-pay system will also come into play in larger metropolitan areas. Per a statement from the League of Cities, "through the direct payment provision in the Inflation Reduction Act, local governments have many incentives to invest in clean energy, whether that be through an installation of a clean energy system or purchasing qualifying commercial vehicles. This legislation holds much potential for municipalities across the nation to take advantage of at the start of the next tax year."