Opportunities for Solar and Electric Vehicle Programs from the Inflation Reduction Act of 2022

In August of 2022, President Biden signed the Inflation Reduction Act of 2022 (the “Act”). ¹ The Act earmarks approximately $370 billion for energy and climate initiatives – the most significant investment in U.S. history. ² These initiatives directly impact areas that Cuddy & Feder Clients have a significant interest in, including solar infrastructure and electric vehicles and their charging stations. As to solar infrastructure, the Act contains a 30% tax credit toward homeowners’ installation costs for solar panels or other tools to harness renewable energy such as wind, geothermal, and biomass fuel. This credit applies through the end of 2032. ³ At the utility scale, solar projects will be able to choose between the Investment Tax Credit and the Production Tax Credit.⁴ However, they cannot choose both. The Law extends the Investment Tax Credit for solar and other qualifying renewable projects beginning construction before January 1, 2025. The base rate is at 6% and rises to 30% based on criteria, including meeting apprenticeship and prevailing wage requirements. The Act extends the Production Tax Credit for wind, solar, geothermal, biomass, and certain hydropower projects beginning construction before January 1, 2025, as well. The Law provides a rate of 2.6c/kWh credit for projects. Again, apprenticeship and prevailing wage requirements apply. ⁵ Both credits come with potential adders for meeting certain domestic content requirements, including locating in designated energy communities and/or environmental justice communities, or allocated credits for locating on qualified low-income property. For example, an additional Investment Tax Credit bonus is available for wind and solar projects of five megawatts or less that (i) receive an allocation of available capacity limitation (1.8 gigawatts during each of 2023 and 2024), and (ii) are: (a) located in low-income communities or on American Indian land (10% rate), or (b) are part of a qualified low-income residential building (20% rate).

Meanwhile, the Act expands the electric vehicle industry by including a $7,500 credit for taxpayers purchasing new electric vehicles and a $4,500 tax credit for used ones. The Act also sets aside $2 billion in grants to help convert existing auto manufacturing factories into ones that make electric vehicles and $20 billion in loans for new clean vehicle manufacturing facilities.⁶ Furthermore, the Act will extend the tax credit for charger installations until December 31, 2022. Businesses and other organizations that install electric vehicle chargers can qualify for up to a 30% tax credit, with the maximum amount capped at $100,000 for projects completed after December 31, 2032. For such projects, the Act requires that projects pay the prevailing wage for labor and meet certain apprenticeship requirements. It also limits availability of tax credits to installations completed along approved low-income and rural census tracts, and allows for bi-directional charging equipment. Homeowners who install electric vehicle chargers also qualify for a 30% tax credit, up to $1,000. ⁷ (Note that these benefits are in addition to the $7.5 billion plan to build a half-million recharging stations under the recently passed Bipartisan Infrastructure Law, of which $900 million in grants was recently released. ⁸ ) Cuddy & Feder has highly experienced attorneys in the areas of both utility-scale solar infrastructure and obtaining approvals for electric vehicle chargers, and are prepared to guide you through the municipal review process, as well as the associated financial incentives as described here.

1. A copy of the Act’s text is available at https://www.congress.gov/bill/117th-congress/house-bill/5376/text.
2. See House Passes Inflation Reduction Act, Sending Climate and Health Bill to Biden, WASHINGTON POST (August 12, 2022), https://www.washingtonpost.com/us-policy/2022/08/12/inflation-reduction-act-house-vote/.
3. See How can you cut energy costs through the Inflation Reduction Act, THE MERCURY NEWS (August 18, 2022), https://www.mercurynews.com/2022/08/18/how-you-can-cut-energy-costs-through-the-inflation-reduction-act/.
4. See Inflation Reduction Act: Solar Energy and Energy Storage Provisions Summary, SOLAR ENERGY INDUSTRIES ASSOCIATION.ORG, https://www.seia.org/sites/default/files/2022-08/Inflation%20Reduction%20Act%20Summary%20PDF%20FINAL.pdf.
5. See Summary of Key Renewable Energy Provisions in the Inflation Reduction Act of 2022 (August 18, 2022), https://www.williamsmullen.com/news/summary-key-renewable-energy-provisions-inflation-reduction-act-2022.
6. See Relief Arrives for Renewable Energy Industry – Inflation Reduction Act of 2022, THE NATIONAL LAW REVIEW (August 16, 2022), https://www.natlawreview.com/article/relief-arrives-renewable-energy-industry-inflation-reduction-act-2022.
7. See Federal Tax Credit for EV Chargers Renewed, BRITESWITCH.COM (August 17, 2022), https://briteswitch.com/news/federal-tax-credit-for-ev-chargers-renewed.php.
8. See Biden Administration Allocates $900 Million for Electric Vehicle Chargers, SMITHSONIAN MAGAZINE (September 15, 2022), https://www.smithsonianmag.com/smart-news/biden-administration-allocates-900-million-for-electric-vehicle-chargers-180980776/.