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3 Key Insights to Unlocking Energy Tax Credits for Your State or Local Government

By David G. Bullock, CPA and Danielle Bradley, MBA

State and local governments have new opportunities to benefit from energy tax credits thanks to recent legislative changes. These credits can provide your government with significant financial returns for investments in renewable energy projects.  

The following key takeaways are from a recent webinar on this topic. You can also watch the full recording of this webinar below. 

1. Understanding Elective Pay and Eligibility 

Elective pay allows government entities, traditionally ineligible for tax credits, to receive refunds. This shift, introduced by the Inflation Reduction Act, opens the door for substantial financial incentives. For example, a Northern California city recently secured over $6 million in credits on a $28 million project.  

To take advantage of these opportunities, your government must navigate the elective pay process — including pre-filing registration and understanding critical timelines. 

2. Diverse Credit Opportunities 

Energy tax credits are not limited to one type of project. They encompass a wide range of investments, including: 

  • Energy Property: Investments in renewable energy equipment. 
  • Energy Production: Generating electricity from renewable sources. 
  • Commercial Clean Vehicles: Purchasing new commercial clean vehicles
  • Electric Vehicle Recharging: Installing recharging or refueling equipment. 

Each category has specific criteria and potential return rates, which can vary significantly based on factors like project location and adherence to prevailing wage requirements. 

3. Critical Timelines and Application Processes 

Timely action is crucial for maximizing these credits. For the 2023 tax year, pre-filing registration must be completed by July 15, 2024, to meet the IRS's review period recommendations. Additionally, applications for the Low-Income Community Bonus Credit Program, which can increase credits by up to 20%, are due by June 27, 2024.  

Properly tracking and documenting project costs is essential for accurate credit computation and successful filing. 

Maximizing Energy Tax Credits for Your Government 

Your state or local government stands to gain significantly from energy tax credits by understanding and navigating the elective pay process, exploring diverse credit opportunities, and adhering to critical timelines. Engaging with tax professionals can help you maximize potential refunds and enhance your renewable energy investments. 

For more detailed information on how your government can take advantage of energy tax credits, watch the webinar video on this page or reach out to our Tax Credits and Incentive team today

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