Inflation Reduction Act of 2022: Major Tax Changes and Incentives

The Inflation Reduction Act (IRA), signed into law on August 16, 2022, represents one of the most significant tax and energy investment bills in recent years, with far-reaching implications for both individuals and businesses. Alongside its focus on lowering prescription drug and health care costs, the Act includes major federal tax changes designed to support clean energy investment, drive climate-related tax incentives, and modify corporate tax rules.

From a business and tax planning perspective, the IRA:

• Extends and expands clean energy tax credits for renewable investments, including the Investment Tax Credit (ITC) and Production Tax Credit (PTC), often with enhanced credit amounts for projects meeting prevailing wage and apprenticeship requirements.

• Broadens the menu of energy-related credits to include credits for clean electricity production and advanced energy manufacturing investments, which may materially benefit businesses investing in low-carbon technologies.

While most of the IRA’s provisions phase in after 2022, business owners and taxpayers should evaluate opportunities to take advantage of extended credits and anticipate how the corporate AMT and excise tax rules may affect future tax planning