Guidance implementing the energy tax provisions of the Inflation Reduction Act (IRA) should be simple and certain, American Public Power Association (APPA) President and CEO Joy Ditto told Treasury Secretary Janet Yellen and White House Senior Advisor John Podesta.
Ditto’s remarks came as she, other key stakeholders, and Biden Administration officials participated in an Oct. 26 roundtable on clean power generation and the IRA.
In a Statement for the Record for the event, Ditto said APPA has worked for years with other stakeholders to make federal energy investment incentives available to all market participants, and strongly supported the direct pay tax credit provisions in the IRA.
“Now, we look forward to working with the Administration and Congress to ensure that IRA reaches its full potential in implementation,” she said in the Statement for the Record.
Access to energy tax credits “will provide local jobs, under local control, to serve local communities. It also means that all electric power utilities, not just those serving 70 percent of retail customers, can participate in the clean energy transition. Enactment of the IRA was the first step toward realizing that dream. But now comes the hard part, implementing the law in a way that follows the letter of the law while meeting its policy goals,” wrote Ditto.
When it comes to IRA-related guidance, Ditto said that simplicity is critical in ensuring that transactions “are not so beleaguered with paperwork and the need for bespoke legal guidance as to become uneconomic.”
By way of example, she noted that one of APPA’s members that serves roughly 10,000 homes and businesses was quoted a $1,300 per hour rate for an attorney with tax and energy project expertise. “Our members will also have to retain counsel to navigate domestic content rules or forgo receiving direct payments altogether. They may also need and want to secure access to increased and bonus credits for meeting labor requirements or serving low income and/or energy communities.”
APPA understands that Congress had specific policy goals in mind “when it drafted each of these provisions. However, it will do no good if a project never gets off the ground,” Ditto said.
“This is particularly important in the context of domestic content rules. While meeting these requirements provides a 10 percent bonus for others, for public power utilities, rural electric cooperatives, and other tax-exempt entities, it is an existential test of whether they qualify for direct payment.”
Similarly, more than two-thirds of public power utilities have been in operation since World War II, and more than half have been in operation for a century or longer. “It is in our genetics to provide reliable and affordable power to our customers. We do not serve the community; we are the community. As a result, our members will not undertake these transactions without certainty as to the amount and timing of any tax credits that might accrue,” Ditto said.
With the goals of simplicity and certainty in mind, APPA is seeking clarity in the following areas:
- Simplicity of returns and elections for direct payment for state and local entities;
- Speed and certainty of direct payments;
- Definition of “partnership;”
- Definition of related party;
- Existing nuclear tax credit; and
- Cost allocation.
APPA also intends to submit formal comments with the Treasury Department on the implementation of the IRA this week. These comments come in response to an October 5, 2022, notice requesting comments on six areas of IRA implantation including: energy generation incentives; elective payment of energy tax credits; and labor and domestic content requirements for those credits. Treasury is expected issue further notices for additional comments throughout the remainder of the year.