Dive Brief:
- Lawyers for Good Government launched on Monday an interactive online tool called the Clean Energy Tax Navigator to help local governments and other entities access the Inflation Reduction Act’s billions of dollars worth of “direct-pay” tax credits.
- The free-to-use navigator can help eligible organizations determine if a clean energy project is eligible for the tax credits and figure out how to maximize their return, Jillian Blanchard, L4GG’s climate change and environmental justice program director, said in a recorded demo of the tool.
- “The main request we heard from … over 25 state governors' offices, 60 different cities, school districts and nonprofits was ‘Can you please, please, please make this process of tax credits easier?’” Blanchard said.
Dive Insight:
The IRA’s direct pay, or elective pay, tax credits allow tax-exempt entities, like cities, to recover money spent on completed clean energy projects. “For the most part, the IRA has completely uncapped these credits,” Blanchard explained. Over the next decade, the climate law is expected to provide between $360 billion and $600 billion in tax credits, she said.
The private sector has been able to use such credits for decades, but they are a new perk for tax-exempt organizations such as state and local governments. That has left the public sector behind in terms of tax credit know-how, Blanchard said.
“It requires an intimate knowledge of complicated tax code and the ability to file for taxes and work with the IRS, which is something that most tax-exempt entities would, of course, have no experience doing,” she said. That’s created an “impossibly high demand” from organizations that need technical assistance, Blanchard said.
The navigator includes resources on some of the most common public sector projects eligible for elective pay, including electric vehicle purchases, EV charging infrastructure, wind, solar and geothermal. It doesn’t cover credits for carbon capture, nuclear, manufacturing, clean fuels or hydrogen.
Users of the navigator answer questions about their project; depending on their answers, they are provided with resources tailored to their needs. Working through the navigator will ideally answer all of a user’s questions about elective pay, Blanchard said. If that doesn’t happen, they can enter more questions at the end of the process, which L4GG’s in-house experts and network of pro-bono attorneys will answer.
The tool cannot calculate the exact tax credit amount a user will get on a project, or file taxes for the user, Blanchard said. But L4GG is working with a company that could potentially offer low-cost or pro-bono e-filling services connected directly to the navigator.
L4GG strategically launched the navigator in advance of Nov. 15, when many entities have their first “drop-dead” filing deadlines for 2023 projects. However, the product launch is just the first step, Blanchard said. Her organization plans to work with “trusted” nonprofits along with the U.S. Treasury Department and users to make the tool even better.
If IRA incentives are used well, Blanchard said they stand a better chance of being available regardless of who wins the upcoming presidential election.
“The more success stories, the more money we can get into the hands of states and communities across the country who are benefiting from the IRA, the harder we believe it's going to be to overturn it,” she said.
