New Treasury and IRS Guidelines on IRA’s Elective Pay: What Cities and Nonprofits Need to Know
Today, the U.S. Department of the Treasury and the IRS issued new proposed rules related to the Inflation Reduction Act (IRA), specifically focusing on elective pay and transferability mechanisms. These guidelines enable tax-exempt entities—including local, state, and tribal governments, nonprofits, and other income-tax-exempt organizations—to directly benefit from clean energy tax credits. This means that these organizations and their non-profit partners can now tap into new tax incentives to support energy generation and clean energy projects across the nation.
Key Aspects of Elective Pay
Under the IRA, the elective pay provision covers a range of clean energy tax credits. These include credits for acquiring clean fleet vehicles for city operations and installing solar generation systems. Other areas covered by the credits include:
Energy Generation and Carbon Capture
Clean Vehicles
Clean Energy Manufacturing
Clean Fuels
Understanding the Regulations
The newly proposed rules clarify which entities are eligible for each credit monetization mechanism. They also outline the process and timeline for claiming and receiving elective payments or transferring credits. These regulations address various concerns raised by stakeholders, including several of AFA’s local government partners, following the enactment of the IRA.
Additional Resources and Briefings
You can access the official release, FAQs, fact sheets, and other resources on CleanEnergy.gov for more detailed information on the proposed elective pay regulations. The Treasury and the White House will also hold two virtual stakeholder briefings to provide further guidance.
Public Participation
The public is invited to comment on the proposed rules for elective pay and transferability within a 60-day period ending on August 14. Additionally, the IRS has scheduled public hearings over the summer to gather more input.
The Significance of the IRA
The Inflation Reduction Act (IRA) represents the most ambitious legislative effort in U.S. history to accelerate the nation’s transition to alternative energy and a climate-friendly future. The Act is unique in its heavy reliance on tax incentives, setting it apart from recent legislation like the Bipartisan Infrastructure Law.
Strategies for Maximizing IRA Funding
To fully leverage IRA funding, communities must build networks integrating renewable energy, workforce development, and housing initiatives. California Public Relations & Advocacy has identified six essential strategies to help mobilize the interdisciplinary networks crucial for the IRA’s success. These strategies include:
Forming a Climate Projects Action Team
Developing a Climate Investment Playbook
Strengthening capacity in key organizations
Launching a marketing and outreach campaign
Creating a ClimateCommunity Corps
Innovating financial products
We are ready to support cities and nonprofits as they explore the opportunities provided by the IRA, particularly those that qualify for the elective pay mechanism. If you have any questions or need assistance, please contact us.
