Inflation Reduction Act
Please note that this is not legal advice, and we are not providing advice here. Navigating these requirements requires considerable training and experience. The following is a quick description of the Inflation Reduction Act of 2022 your company may be able to take.Let DCA assist you.
The Inflation Reduction Act (IRA)
President Biden’s Inflation Reduction Act has generated unique opportunities for design firms that lead in the development of an energy efficient design approach. Our experts review and keep up on the changes in these laws, and their requirements for compliance. This includes the guidelines assigned to various federal agencies used by the IRS.
Our goal is to obtain the best tax reduction
On August 16, 2022 President Biden sign into law H.R. 5376, more commonly referred to as the Inflation Reduction Act of 2022.
See H.R. 5376
The Inflation Reduction Act (“IRA”) directs $783 billion in spending.
See CBO.
Much of this is related to energy efficiency in production, design, and construction.
See Whitehouse Guide.
How to Proceed
Taking an EECBD deduction takes careful planning. Starting early, having clear goals, and aligning interests with competencies, gives the greatest likelihood of success
The Agencies
DCA focuses on savings related to the Inflation Reduction Act that are tax deductions, asset depreciation, or similar tax reduction methods.
The IRS uses the Inflation Reduction Act law and guidelines provided by agencies that have been assigned the responsibility over those guidelines.
- The guidelines are both new and changing.
- This is a result of differing department focuses and sub-departments focuses differing from each other.
- The two agencies directly mentioned most of the incentives we specialize in are:
- Department of Energy (DOE)
- Department of Labor (DOL)
The Internal Revenue Service
The IRS document requirements are key.
The IRS has the IRA law and the guidelines provided by the responsible agencies. here.
If the IRS questions if a tax reduction is valid they will initiate an audit. Note the guidance here.
The IRS will then go to Inflation Reduction Act law and the department in charge’s guidelines for the specific requirements of the reduction.
We at DCA continually review and keep up to date with the changes to the various government department guidelines and its effect on the Inflation Reduction Act law.
We review the impacts of any changes with our clients on their specific work scopes.
The Department of Energy (DOE)
The DOE provides one of the major guidelines and have numerous programs within the Inflation Reduction Act.
The DOE is hands-on with obtaining the greatest environmental impact for each incentive. Their guidelines contain the technical requirements for Energy Efficiency Commercial Building Design DOE 179D home here
As new additions and changes are added to the DOE guidelines, the language and compliance requirements become more confusing, counter intuitive, and in cases conflicting. This includes the requirements for a CAD model and the software tools used to evaluate this model.
This is expected to continue to change for the next few years. Making it very fluid environment to define.
In addition, there are confusing and unsettled determinations, particularly with solar power.
NREL Here.
This has led to added complexity and conflicts within the standards and software models. Conflicting requirements and differing objectives are expected to be continuing challenges for some time. Here.
Internal Revenue Service And Department of Labor
In addition to the Department of Energy the Department of Labor also sets guidelines that the tax reductions must account for.
Contact Here.
The Department of Labor (DOL)
The DOL has a different, and very specific role regarding the Inflation Reduction Act. Specifically, the greatest portion of their role revolves around Prevailing Wage and Apprenticeship programs.
Skewed Expectations and Conflicting Interests
While often underestimated as development nuance, labor compliance has proven to be major obstacle in practice.
In every code section we service, these requirements have been among the most onerous compliance demands:
Please note that this is not legal advice, and we are not providing advice here. Navigating these requirements requires considerable training and experience.
Title 26 - Internal Revenue Code - Relevant Code Sections
The Inflation Reduction Act is an aggregation of changes to key sections of the Internal Revenue Code. The code sections are highly dependent on each other to calculate tax effect.
so please, if you are not a trained professional, do not attempt to interpret these without assistance.
With that warning, please note them in their current form:
H.R.5376 – Inflation Reduction Act of 2022
26 U.S. Code § 179D – Energy Efficient Commercial Buildings Deduction (EECBD)
26 U.S. Code § 48 – Energy Credit
26 U.S. Code § 48e – Clean Electricity Investment Credit
26 U.S. Code § 45 – Electricity Produced From Certain Renewable Resources, Etc.
26 U.S. Code § 168 – Modified Accelerated Cost Recovery System (MACRS)
26 U.S. Code § 41 – Credit For Increasing Research Activities
Other Cases and Links
The Inflation Reduction Act is an aggregation of changes to key sections of the Internal Revenue Code. The code sections are highly dependent on each other to calculate tax effect, so please, if you are not a trained professional, do not attempt to interpret these without assistance.
With that warning, please note them in their current form:
FIND OUT MORE ABOUT THE IRA
HERE – Hellmuth, Obata & Kassabaum, L.P. v. Efficiency Energy, L.L.C.