Direct Pay Credits. For tax years after 12/31/22, and before 1/1/33, tax-exempt entities, state and local governments, and Indian tribal governments may elect to treat certain tax credits as refundable payments of tax. Such entities are eligible to receive a direct payment for any amount paid in excess of their tax liability (these entities may have zero Federal tax liability) under various sections of the tax code, including: 30C – alternative fuel refueling property; 45 – renewable electricity production credit; 45Q – zero-emission nuclear power production credit; 45V – clean hydrogen production credit; 45X – advanced manufacturing production credit; 45Y – clean electricity production credit; 45Z – clean fuel production credit; 48 – energy investment tax credit; 48C – qualifying advanced energy production credit; 48E – clean electricity investment credit; and, for certain tax-exempt entities, 45W – qualified commercial vehicles. For further details, see: www.bakerlaw.com/inflation-reduction-act-clean-energy-tax-credits Also: “How Local Governments Can Use Direct Pay on Clean Energy Projects” 12/22/22. www.nlc.org This article points out how, for city leaders, Direct Pay is an option for funding city-owned clean energy projects that will make these projects more affordable for local governments and will level the playing field between local governments and the private sector, which has traditionally benefitted from tax credits. “Tax Incentives Municipalities Can Use to Further Their Energy Goals” 2/14/23. www.vlct.org See also: Production Tax Credits.
