November 2023 Volume 5

ENERGY

20 percent.” The base rate for the credit is 6 percent, with up to a 30 percent credit rate allowed for projects meeting prevailing wage and registered apprenticeship requirements. This provision operates differently than others as businesses must first apply to qualify prior to making a claim with the IRS. The first round of applications closed on July 31, 2023, with decisions expected by the end of March 2024. Sources indicate that the Treasury Department will initiate the second round of allocations next year. (https://www.energy. gov/infrastructure/qualifying-advanced-energy-project-credit-48c program) There are other less obvious aspects of the tax code that may bring opportunities for manufacturers. Many may typically think of carbon capture and sequestration technologies as limited to energy production facilities. The Credit for Carbon Oxide Sequestration under Section 45Q allows a taxpayer to claim as a Section 45Q tax credit the equipment used to capture and sequester carbon oxide that would have been released into the atmosphere were it not for the purchase and installation of the qualifying equipment. The credit amount varies depending on when it is placed into service and the facility must store the carbon captured in “secure geological storage.” (https://www.irs.gov/forms-pubs/about-form-8933) Another possibly overlooked provision under the IRA may be Section 45W, the Credit for Qualified Commercial Clean Vehicles. Businesses can claim an unlimited number of these nonrefundable tax credits when they buy a qualified commercial clean vehicle that may qualify for a clean vehicle tax credit maximum of “$7,500 for qualified vehicles with gross vehicle weight ratings (GVWRs) of under 14,000 pounds and $40,000 for all other vehicles.” (https:// www.irs.gov/credits-deductions/commercial-clean-vehicle-credit) If your facility is located “within low-income communities or non urban census tract,” you may qualify for the alternative fuel refueling property tax credit by installing qualified vehicle refueling and recharging property. Manufacturers could potentially complement the clean vehicle credit with this, the Section 30C Alternative Fuel Vehicle Refueling Property Credit, which, subject to depreciation, “equals 6 percent with a maximum credit of $100,000 for each single item of property.” (https://www.irs.gov/credits-deductions/ alternative-fuel-vehicle-refueling-property-credit) The IRS continues to release guidance on many of the Inflation Reduction Act provisions and taxpayers should constantly work with their tax advisor to monitor changes. When I consult with manufacturing businesses about how the government impacts their operations, I strongly advise them to first identify key deadlines. Many of these tax provisions begin to phase out, some in 2029 and eliminated entirely in 2032. Businesses should work their way backward from the time these provisions start scaling down and plan any major capital investments around those dates to ensure equipment is placed into service ahead of key deadlines. The same applies for application deadlines.

Many of the tax savings opportunities I identified are for activities the business may have conducted regardless of the Inflation Reduction Act’s incentives. Companies should consider how they could benefit from the expanded and new tax provision, as despite the political disagreements over the climate law, thousands of manufacturers have a chance to save millions. As I said one year ago, it is time to have that conversation with your CPA.

Omar S. Nashashibi is a founding partner at The Franklin Partnership, LLC, a Washington-D.C. based lobbying firm representing the Forging Industry Association before the federal government. Phone: 202-715-1264 Email: omar@franklinpartnership

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