The BlueGreen Alliance Responds to the U.S. Internal Revenue Service’s Request for Comments on Elective Payments of Applicable Credits and Transfer of Certain Clean Energy Tax Credits Included in the Inflation Reduction Act
On behalf of the BlueGreen Alliance (BGA), a coalition of the nation’s largest labor unions and environmental organizations, we thank the Secretary and the Internal Revenue Service for soliciting input on the Inﬂation Reduction Act, with speciﬁc regard to the clean energy tax credits under your administration. These credits, properly implemented, and their associated beneﬁts will catalyze equitable growth of the clean energy economy. However, Section 6417 of the Internal Revenue Code (IRC) leaves some ambiguity about the breadth of public entities that could qualify as “applicable entities” for direct payments.
The IRC bars investment tax credits on projects owned by tax-exempt and government entities in sections 50(b)(3) and (4)(A). The Inflation Reduction Act turned off these sections to allow tax-exempt and state and local government entities to qualify for direct payments for tax credits on projects they own. The problem is that the phrasing in the IRA left unclear whether the restrictions have been turned off for “instrumentalities” of state and local governments. Public school systems, state universities, community colleges, and certain public power utilities are “instrumentalities” rather than state and local government entities directly.
Public schools, state colleges, public universities, public hospitals, and public power utilities are very interested in reducing carbon emissions through the utilization of clean energy tax credits. Further, many state universities and other instrumentalities produce their own power and could benefit greatly from the investment or production tax credits. It is critical to ensure these entities can benefit from direct-pay subsidies in the Inflation Reduction Act.
See the full comments.