Unlocking the Power of the Inflation Reduction Act with Jeremy Kalin

March 20, 2024
The Inflation Reduction Act (IRA) will be turning two this summer, but questions remain around how best to take advantage of this monumental piece of legislation. What projects qualify for the Energy Investment Tax Credit and the various tax bonuses? Which Minnesota business can take advantage of these tax credits? How do transfers work? Last month, Jeremy Kalin of CEEM-member Avisen Legal shared his wisdom with CEEM members through a virtual presentation and Q&A session to dive into the IRA.

Who is Jeremy Kalin?

Growing up in a family with small business owners, Jeremy saw firsthand how businesses of all kinds could help solve world challenges. He took this understanding to his previous professional roles as he served in the Minnesota House of Representatives, chaired a White House task force on clean energy and climate policy and investment under the Obama Administration and served as CEO of a clean energy financing business which he founded. Today, Jeremy leads Avisen Legal’s Impact Counsel practice and he also makes pottery on the side!

Lowering costs by 30 percent

Day to day, Jeremy spends the majority of his time working with developers, investors, lenders, government officers and other partners, explaining how the IRA impacts on the ground projects. This includes conversations about the current opportunities and challenges with the IRA’s Investment Tax Credits and how “direct pay” works in practice.

“I’ve read about 17,400 pages of guidance in the last 18-months from the IRS.”

For the presentation with CEEM members, Jeremy focused a lot of time on how specifically 48 – Energy Investment Tax Credit relates to the different clean energy projects within Minnesota. For example, geothermal, microgrids and waste energy recovery projects all fall within the Energy Investment Tax Credit. This allows most clean energy projects, regardless of its for-profit or non-profit status, to qualify for a 30 percent credit, which reduces the cost of these projects significantly. Lower costs makes projects more feasible for many organizations, which in turn creates a more inviting environment for those looking to develop and implement clean energy projects in the state.

Tack on a Bonus Credit

A Trane employee programs a control panel. A Trane employee programs a control panel.

Beyond the 30 percent, there are opportunities for businesses to utilize bonus credits. These bonus credits are in addition to the 30 percent reduction, so project leads have the potential to reduce their project costs by close to 50 percent. Financially, the reduced cost makes clean energy projects more appealing than some alternatives. However, there are positive social incentives as well that make the bonus credits even more noteworthy. For instance, clean energy projects within low income communities may receive up to an additional 10 percent tax credit. This means that project leads have extra motivation to develop clean energy projects in low income communities, which consequently improve climate resilience in these areas.

It’s important to note that the low income tax credit bonus is one of the few categories with a financial cap. However, that doesn’t mean that the bonus isn’t undersubscribed or unattainable. For instance, Jeremy explained that “tribal lands 10 percent adder was undersubscribed and is still taking applications for the 2023 application year.”

Another significant bonus credit option is for projects that heavily incorporate United States manufactured materials and products into their projects. For instance a project that uses 100 percent US-made steel and iron, may be eligible to receive an additional 10 percent tax credit. Again, this is in addition to the 30 percent reduction from the Energy Investment Tax Credit. Just like how the low income bonus credit elevates underrepresented neighborhoods, utilizing US-made products has social benefits. Prioritizing domestic materials contributes to workforce development, including within Minnesota. In 2022 alone, clean energy businesses in Minnesota added more than 1,900 workers, according to CEEM’s Clean Jobs Midwest Report. Between the Energy Investment Tax Credit and the various bonus credits available, clean energy projects across Minnesota have the opportunity to benefit from the IRA, including cost reductions, resilience in low income communities and workforce development.

A note on transferability

All Energy installs solar panels near Stillwater All Energy installs solar panels near Stillwater

While tax credits and credit bonuses certainly make the IRA noteworthy, something called transferability adds another layer of opportunity and challenge. Transferability monetizes specific tax credits so a clean energy project lead may earn money by selling project components to others. While on the surface, this mechanism seems to make clean energy projects accessible to anyone, it’s important to note that the transferee faces the same compliance as if they were the original owner of the clean energy project. Thus, not everyone can benefit from transferability in the same way that the Energy Investment Tax Credit feels accessible. The transferability stipulation has limits. As Jeremy said, “it’s not a runaway train with an absolute blank check.” Whichever organization or business that gets the transfer needs to be qualified to be a project owner. That said, having a transferability option does create another avenue for businesses to access IRA benefits without implementing a project themselves.

The IRA is an ongoing conversation

The Inflation Reduction Act touches so many aspects of the clean energy economy and some may feel overwhelmed by the nuances. Jeremy covered a lot of ground during the presentation portion of February’s event and he focused on the high level topics rather than examining individual projects.

“There are a boatload of credits and tons and tons of details.”

In the second part of the event, CEEM members, who develop and implement clean energy projects, asked Jeremy some great questions. For instance, one member asked for more details about what qualifies as US-manufactured for the 10 percent tax bonus. While it’s a very intricate tax bonus, there is some clear IRS guidance that makes the bonus more understandable. As an example, Jeremy mentioned that “adhesives are to be included and must be made in the United States.” The Q&A portion of the event gave CEEM members an opportunity to ask Jeremy questions related to their own work on the ground. These projects support the transition to a clean energy economy in Minnesota.

Resources

Everyone who works in this space understands the daunting task of staying abreast of all of the information, changes, regulations and more associated with the IRA. Here’s a short list of resources to get you started, or back on track if you’re looking for more information:

Federal government resources:

Other high-quality resources from the private sector and nonprofit space:

Looking ahead

Overall, the conversation with Jeremy revealed just some of the complexities of the historic Inflation Reduction Act, passed less than two years ago. It also showcased the opportunities for Minnesota businesses to gain financial support for their clean energy projects while simultaneously supporting local climate resilience and state job growth. CEEM will continue to educate Minnesotans and policymakers about the significant economic opportunities provided by clean, reliable and affordable energy through events like this presentation and Q&A with Jeremy Kalin.

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