Manchin’s BBB Redux-tion Act – The Inflation Reduction Act of 2022

Last night, after weeks of negotiations, Senators Manchin and Schumer reached a deal on an energy and healthcare bill titled the Inflation Reduction Act of 2022 (the “Act”).  The Act includes extensive provisions relating to a range of green energy tax incentives.  While these provisions largely track the corresponding provisions in the previously released Build Back Better Act, a preliminary review of the Act suggests that there are a number of material differences. 

A more detailed analysis of the Act will follow, but key provisions include:

• Extension of the solar investment tax credit (“ITC”) and renewable electricity production tax credit (“PTC”) for projects that begin construction before January 1, 2025.
• Reduced ITC and PTC for projects that fail to satisfy prevailing wage and apprenticeship requirements; but deemed satisfaction of such requirements for projects that begin construction prior to the date that is 60 days before Treasury issues guidance related to these provisions.
• Bonus ITC and PTC for projects that satisfy certain domestic content requirements.
• ITC expanded to standalone storage and certain interconnection property.
• Direct pay option for certain tax-exempt entities.
• Option for taxable entities to transfer the ITC and PTC to unrelated parties.
• 3-year carryback period for the PTC (but only for projects that are placed in service after December 31, 2022) and the ITC.
• A 15% minimum tax on corporate taxpayers with adjusted financial statement income in excess of $1 billion; however, the ITC and PTC may be applied to reduce the minimum tax but not below 25% of the taxpayer’s net income tax in excess of $25,000.