IRA
As global demand for data-intensive services continues to rise, data centers are rapidly multiplying to meet the needs of cloud computing, AI, streaming, and e-commerce. In this evolving digital landscape, it’s increasingly becoming crucial to create an app for your business to engage customers and streamline operations. According to the U.S. Department of Energy, data centers already consume about 2% of the nation’s electricity-a figure expected to grow significantly over the next decade. This surge presents a critical challenge and a compelling opportunity for the tax credit industry. Energy Demand Meets Sustainability Mandates While data centers are foundational to the modern economy, they are also energy-intensive and carbon-heavy. Stakeholders-from hyperscale operators to colocation providers-are under increasing pressure to reduce emissions and invest in clean energy infrastructure. As a result, tax credit programs tied to renewable energy and energy efficiency have become crucial to data center development strategies. The Inflation Reduction Act (IRA) expanded and extended several energy-related tax credits that directly benefit the data center sector, including the Investment Tax Credit (ITC), the Production Tax Credit (PTC), and the Section 179D deduction for energy-efficient commercial buildings. By leveraging these credits, data center operators can offset the cost of deploying solar, wind and battery storage technologies while reducing operational expenses. Tax Equity: A Critical Financing Tool Tax equity financing plays a pivotal role in enabling data centers to access the capital needed to pursue sustainability upgrades. Through tax equity partnerships, developers can monetize credits that would otherwise go unused-freeing up cash flow and accelerating the deployment of low-carbon solutions. This is particularly relevant as more operators pursue on-site renewables, green microgrids and next-generation energy management systems. For example, a hyperscale facility that installs solar plus storage could benefit from the ITC, while also qualifying for the 45X Advanced Manufacturing Credit if…
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Building a More Resilient, Sustainable Future Through Strategic Investment In today’s interconnected world, energy is the foundation of economic growth and social development. From powering industries to enabling everyday life, the demand for reliable, sustainable energy continues to rise. While the upfront costs may be significant, the long-term benefits—spanning economic, environmental and social impact—are substantial. Driving Economic Growth Through Energy Development Energy infrastructure investment is a powerful driver of economic growth. Large-scale energy projects—whether in renewables like wind and solar, or traditional energy sources—create jobs across engineering, construction, operations and project management. These projects stimulate local economies, increase demand for goods and services, and generate tax revenue that helps communities thrive. Opportunities for Developers and Investors in Energy Infrastructure For institutional investors, energy infrastructure can offer stability and long-term returns. Once capital is deployed, operating and maintenance costs are relatively low, producing steady cash flow. Many renewable energy projects are backed by long-term contracts, such as power purchase agreements, which provide predictable income. These investments also offer portfolio diversification and are often supported by government incentives, including tax credits and rebates. For developers, energy infrastructure presents significant opportunities for growth and leadership. Demand for clean energy is increasing worldwide, and supportive policies—including subsidies, streamlined permitting and access to tax equity financing—enable faster project deployment. With revenue often secured through long-term agreements, developers can minimize financial risk while pursuing innovation. Enhancing Energy Security and Grid Resilience Modern energy infrastructure plays a key role in strengthening grid resilience and energy security. Distributed energy systems, especially when integrated with storage solutions, are helping to modernize aging grids. These systems make energy delivery more adaptive to climate risk and reduce dependence on fossil fuels. The result is lower emissions, improved reliability and increased energy independence. Accelerating Innovation Across the Energy Sector Perhaps the…
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Tax credits remain one of the most powerful financial tools for incentivizing investment in key areas such as renewable energy, historic preservation, and clean manufacturing. More than just financial incentives, they play a crucial role in accelerating clean energy adoption, revitalizing communities, and supporting domestic industries. The Inflation Reduction Act (IRA) has transformed the tax credit landscape, providing long-term stability and introducing new mechanisms such as credit transferability and direct pay. Currently, the market continues to experience significant growth, fueled by increased demand for clean energy projects and historic building revitalization. The IRA has strengthened the Investment Tax Credit (ITC) and Production Tax Credit (PTC), while also implementing technology-neutral tax credits, such as the Clean Electricity Production Tax Credit (45Y) and the Clean Energy Investment Tax Credit (48E), which became effective in 2025. These developments have attracted a broader range of investors, including new corporate buyers looking to offset their tax liabilities. Additionally, the transferability market has matured, allowing tax credits to be sold for cash, reducing reliance on traditional tax equity financing and enabling more participants to benefit. The final regulations released by the IRS in 2024 have provided clear guidance on credit transfer procedures, pre-registration requirements, and compliance considerations, leading to a rapidly expanding tax credit marketplace. What Does the Future Hold for the Tax Credit Market? The future of the tax credit market continues to be shaped by regulatory developments, economic conditions, and policy shifts. Several key factors are influencing its trajectory: Implementation of IRA Tax Provisions: With the IRS finalizing regulations for direct pay and credit transfers, investors now have clear pathways to efficiently utilize tax credits. Energy storage projects, previously ineligible, now qualify for the ITC, opening new opportunities for financing. Political and Legislative Risks: While the IRA has provided long-term certainty, future budget negotiations,…
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The future of clean energy is diverse, innovative and rapidly evolving. As we move toward a more sustainable future, the transition to renewable energy is no longer limited to just a few technologies. Instead, the focus is on embracing various solutions to reduce emissions and incentivize investment in more climate-friendly technologies. This new era of clean energy innovation is being fueled by groundbreaking technologies and forward-thinking policies – where Sections 48E and 45Y play a crucial role. These technology-neutral tax credits are designed to encourage the development of a broad range of clean energy solutions, from solar and wind to emerging technologies like hydrogen and nuclear power. These credits are helping to unlock new opportunities for developers and innovators, and we’ll explore how 48E and 45Y are reshaping the clean energy landscape. 48E: Clean Energy Investment Tax Credit (ITC) Tech-Neutral: It applies to a variety of energy technologies such as solar, wind, battery energy storage systems, geothermal energy, carbon capture utilization (CCU) and more. Focus on Investment: Offers a percentage of the project’s investment cost as a tax credit. Typically, the credit can be up to 30% of the investment, depending on the type of technology and project. Encourages Energy Storage and Emerging Tech: The credit makes it easier for businesses to invest in emerging, scalable energy solutions that may not yet be fully mainstream. 45Y: Clean Electricity Production Tax Credit (PTC) Tech-Neutral: Broadens the scope of the PTC to include a range of technologies that meet specific criteria such as solar, wind, geothermal, nuclear and hydrogen. Focus on Production: Instead of offering a one-time credit based on the investment, 45Y provides a per-kilowatt-hour (kWh) or per-unit of energy credit for the actual production of clean energy over time. Long-Term Incentive: The credits typically last for several years, providing…
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Published October 9, 2024 – As the 2024 election approaches, a new president and Congress are set to take office in January, which means legislative action could reinvent the U.S. tax landscape. The presidential election races are underway; however, for the House and Senate, the race is increasingly important as it determines the direction of tax legislation. What is the Inflation Reduction Act and How will the Election Affect This Law? In 2022, President Biden signed the Inflation Reduction Act (IRA) into law. One year after the IRA was passed, the clean energy and climate provisions created more than 170,000 renewable energy jobs, companies announced over $110 billion in renewable energy manufacturing investments, and we are hitting our goals to reduce greenhouse gas emissions by 1 billion tons in 2030. This is beneficial for developers as it encourages them to focus on sustainability and clean energy projects in a cost-effective way. Now, for tax equity investors, this industry growth and the bonus’ from the IRA is a great increase in tax equity investment opportunities for them across the country. How will the new election affect the IRA? The United States will go to the polls in November to decide who will become the next president, and this election year can significantly impact the IRA in a few ways: Funding and Implementation: Depending on the election’s outcomes, the next president’s administration may seek to modify, expand or even scale back certain aspects of the IRA. Decisions can be made to fully implement and expand the IRA or repeal and alter provisions. Implementation and Expansion of the IRA: Depending on the winning party, this can lead to two different outcomes: The first outcome can be full implementation, which prioritizes fully implementing the IRA and enhancing its provisions. There may be efforts to potentially…
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Published May 28, 2024 – The Inflation Reduction Act (IRA) has brought significant changes to the landscape of renewable energy, including the introduction of transferable tax credits. Transferable tax credits have become a popular financial tool that allows businesses to reduce tax liabilities by investing in the growing market of renewable energy. As the transferable market continues to grow, it is imperative to stay informed and execute careful planning and due diligence. To prepare for a transferable tax credit transaction, a due diligence checklist needs to be put into place. Establishing a checklist not only provides a list of standard deliverables, but it allows stakeholders to focus on strategy, structure and deal execution. Foss & Company’s Partner & Managing Director, Bryen Alperin, was able to collaborate with Norton Rose Fulbright’s Partner, David Burton, Aon’s Global Co-Ceo of M&A and Transaction Solutions, Gary Blitz, and Winthrop & Weinstine Associate, Amber Peterson to publish a due diligence checklist sample stemming around the transfer of tax credits. This expert team developed a due diligence checklist that will show how the scope can vary depending on the complexity and type of credit transfer. To explore the potential of transferable tax credits, investors and developers need a trusted and innovative partner. Partnering with Foss & Company will offer innovative solutions that empower developers and investors to maximize the value of tax credits while driving positive impact in communities across the nation. Reach out to our team today to learn how our commitment ensures your projects not only succeed financially but leave a lasting legacy. To dive into the transferable tax credit due diligence checklist, download our white paper today!
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Foss & Company is comprised of a group of experienced tax credit professionals, representing a depth of knowledge within their respective fields. In this blog series, we highlight different Foss & Company team members to shine a light on the diverse and dedicated people that help make us who we are. As the Vice President of Renewable Energy Portfolio Management, Andrew is in charge of all aspects of investment performance, working with sponsors on project compliance and tax credit investors on fund management. Prior to joining Foss & Company, he created a solar investment vehicle and managed its day-to-day operations. For 12 years prior to that he worked with top-tier solar or renewable energy companies, either financing assets or developing premier asset and portfolio management talent and processes globally. He has overseen some of the largest solar and wind farms in North America, as well as solar sites in Chile, Italy, Spain, England, and Canada. His education credentials include an MBA from ESADE in Barcelona, and a BA from UC Santa Barbara. To learn more about Andrew, read our latest Spotlight blog series installment: How did you get started in the tax credit investing industry? In 2006, while working on Wall Street doing CleanTech sell side equity research, I came across an opportunity to develop a financing platform for a residential solar company in San Luis Obispo (SLO), CA. I packed up my Prius and drove from Manhattan to SLO, excited for the new opportunity to help a growing company focused on solar. We had some success developing and implementing home equity loans for solar and the team sold the first SunRun PPA deal, which was effectively a tax equity investment. From there I joined a structured finance desk with a solar developer raising tax equity in 2008. I haven’t…
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By: Dawn Lima, Vice President of Renewable Energy & Sustainable Technology, Foss & Company I recently attended the Carbon Capture, Utilization and Sequestration (CCUS) Summit in League City, TX, and the Carbon Capture Coalition’s Annual Meeting in Denver, CO. These events were very successful as well as insightful and I left feeling energized and motivated. It’s always enjoyable to be surrounded by like-minded professionals while making many new connections. I wanted to share some key takeaways from both events. Capture the CO2: CCUS Summit I was very impressed with the active participation from stakeholders across the CCUS industry. There is incredible excitement around CCUS right now, fueled in part by the passing of the Inflation Reduction Act (IRA) in 2022, but mainly due to a motivation to decarbonize our energy sector and achieve climate goals. During the CCUS Summit, we had participants join all the way from Canada, Asia, Europe and South America. The US’ carrot versus stick approach to incentivizing investments through tax credits has certainly captured the attention of other nations and companies. This is evident as we have seen an increase in investment in US-based projects to capitalize on the US tax credit incentives. What was clear during this event is that innovation and collaboration is critical to reaching our climate and net-zero goals. What Are My Thoughts? As we sat down with industry leaders, during our discussions there were some interesting questions that had come up, include: Is the CCUS industry innovating equally in both important areas? Does the 45Q tax credit incentivize both sequestration and utilization equally? Are we – as a CCUS industry – working on CCU projects as well as CCS projects? The short answer? No. In its current form, the 45Q tax credit does not incentivize CCU equally compared to enhanced oil…
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By: Bryen Alperin, Partner and Managing Director of Renewable Energy & Sustainable Technologies, Foss & Company The U.S. Treasury Department and IRS have recently announced the release of proposed regulations (REG-132569-23) for publication in the Federal Register. These regulations are set to amend the existing rules under section 48, incorporating modifications from the Inflation Reduction Act of 2022 (IRA), previous legislative changes, and various administrative guidelines. The Notice of Proposed Rulemaking (NPRM) extends over 127 pages and aims to provide both clarifications and updates concerning the energy tax credit. Initial Foss Takeaways: Key Points for Investors Uncertainty for Biogas Equipment: In a surprising outcome, the proposed rules indicate that “gas upgrading equipment necessary to concentrate the gas into the appropriate mixture for injection into a pipeline through removal of other gases such as carbon dioxide, nitrogen, or oxygen is not included in qualified biogas property”. However, it emphasizes the eligibility of costs associated with essential components of biogas projects, such as equipment for cleaning and conditioning the gas. This has caused confusion and uncertainty in the RNG industry, as many projects feature equipment that both cleans and concentrates the gas. The implication of the proposed rules is that investors will need to do a detailed review of the process flow diagrams and determine which costs are associated with equipment which cleans or conditions gas versus equipment that concentrates gas. Depending on the determination, large portions of existing RNG projects may not qualify for the ITCs they thought they would. The industry will be lobbying to have this definition changed, or further clarified. New “Placed in Service” Criteria: The NPRM proposes a new definition of “placed in service” for Section 48, replacing long-relied-on Section 46 regulations. The definition is as expected and states that projects generating tax credits are considered…
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Did you know the key to a sustainable future lies within Renewable Energy Credits (RECs), corporate savings and tax equity investments? The dynamic synergy between these three showcase how corporations can strategically leverage tax equity to not only address their tax liabilities but also advance their commitment to sustainability. What are Renewable Energy Credits? With the federal government taking strong action on climate change, corporations are analyzing their carbon footprint and realizing that investing in Renewable Energy Credit (RECs) agreements and tax equity transactions can lead to being more environmentally responsible while helping improve their bottom line. Now, not all renewable energy sources come strictly from energy systems like solar panels or wind turbines. RECs are created as long as one megawatt-hour (MWh) of electricity is generated from a renewable energy source and delivered to an electric grid. Once it’s generated, corporate customers are able to purchase RECs, therefore allowing the use of renewable energy without installing renewable energy systems. How do Tax Equity Investments Tie In? Tax equity investments help fund viable renewable energy projects by enticing investors with a combination of tax savings and cash returns. As for developers, it provides a way to get new projects off the ground. Tax credits are government subsidies for projects like renewable energy, but many developers lack the tax liability to fully use them. That’s where tax credit investments come in. Companies with large tax liabilities can invest and receive tax credits, depreciation benefits and cash flows. RECs bolster the renewable energy market and are a cost-effective, environmentally friendly and decentralized method of carbon reduction. What Role Do RECs Play in the Tax Equity Market? RECs and REC markets play a key role in driving new renewable energy deployment and projects by guaranteeing an income stream for new…
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Repost of the original article in the Novogradac Journal of Tax Credits, which can be found here. As the renewable energy market continues to grow, the popularity of transferable tax credits as a way to fund projects and reduce corporate tax liabilities is on the rise. Following the passage of the Inflation Reduction Act, provisions enabling the transfer of tax credits have become hot topics for both developers and investors. In this article, we’ll discuss several common misconceptions regarding transferable tax credit transactions. Transferable Tax Credits Overview Transferable tax credits are a valuable financial instrument that allows businesses to reduce their tax liabilities by investing in projects that generate economic, social or environmental benefits. These tax credits can be sold or transferred between taxpayers, enabling companies with little or no tax liability to monetize the credits and create a new revenue stream. As attractive as this financial tool may seem, it’s essential to understand the associated risks. Myth #1: Transferable Tax Credit Buyers Have No Risk When speaking to project developers or prospective investors, we often hear transferable tax credits compared to state certificated tax credits which have almost no risk associated with them. Unfortunately, there are some risks associated with transferable tax credit transactions and it is important for investors to understand those risks. The risks associated vary across the different types of tax credits eligible for transferability. For example, clean energy investment tax credits (ITCs) are subject to recapture risk for five years following the project being placed in service. Carbon sequestration tax credits are subject to a three-year recapture period and the triggering events for recapture are quite different. Clean energy production tax credits (PTCs) are not subject to recapture, but do face volume risks which could lead to under delivery of tax credits in some years.…
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