Tax alert

IRS issues notices to request comments on energy-related incentives

Oct 06, 2022
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Executive Summary

Treasury on Oct. 5 issued six notices to request comments from the public on necessary guidance with respect to energy-related incentives. The comment submissions will be used to shape upcoming guidance to be issued.

The notices confirm that several new requirements created by the Inflation Reduction Act are not yet imposed on projects that may give rise to energy-related incentives. Specifically, the 60-day rule for the application of prevailing wage and apprenticeship requirements has not been effectuated. Also, the proposed guidance for critical mineral and battery components of electric vehicles has not yet been issued. These requirements are not yet imposed on electric vehicles eligible for the clean vehicle credit.

Additional guidance from the IRS has been released

The Treasury Department on Oct. 5, 2022, issued six notices requesting public comments on upcoming guidance with respect to energy-related incentives. The following topics are covered in the notices:

  • Notice 2022-46: Clean vehicles
  • Notice 2022-47: Energy security tax credits for manufacturing
  • Notice 2022-48: Incentive provisions for improving the energy efficiency of residential and commercial buildings
  • Notice 2022-49: Energy generation incentives
  • Notice 2022-50: Elective payment of applicable credits and transfer of certain credits
  • Notice 2022-51: Prevailing wage, apprenticeship, domestic content and energy communities requirements

While the notices welcome general commentary from the public, they also pose pointed questions to stakeholders to determine whether guidance is necessary for specific matters within each of the six topics. Comments are requested by Friday, Nov. 4, 2022. Each notice contains detailed instructions for submitting electronic and hard-copy comments.

The Inflation Reduction Act created a regime in which many energy-related incentives contain a base rate and bonus rate. The bonus rates for these credits are generally available if the new prevailing wage and apprenticeship requirements are met. 

Until guidance is issued on these two requirements, the Act deems these requirements to be met if construction of applicable facilities begins before the date that is 60 days after such guidance is issued. Notice 2022-51, a portion of which covers the prevailing wage and apprenticeship requirements, explicitly states that this 60-day period (the so-called 60-day rule) has not yet begun. 

The Act modified the calculation of the clean vehicle credit (IRC 30D) by tying the dollar value of the credit to the vehicle’s ability to satisfy new critical mineral and battery component requirements. These requirements apply to vehicles placed in service after Dec. 31, 2022, and after proposed guidance on these requirements is issued by the Treasury Department. Notice 2022-46 provides that proposed guidance on the critical mineral and battery component requirements has not yet been issued (i.e., Notice 2022-46 does not trigger these requirements).

Washington National Tax observations 

The specific questions posed by the Treasury Department in these notices offer a glimpse into the forthcoming guidance that is anticipated by many taxpayers and tax practitioners. The comment period offers an opportunity for submissions to help guide the rule-making process in a way that adds clarity to the many new and modified concepts created by the Inflation Reduction Act. Affected stakeholders are encouraged to send comments by Nov. 4, 2022.

Treasury has indicated it is working with the public to accelerate the process for issuing guidance to benefit taxpayers as soon as possible. It has indicated that over the coming weeks, several initial stakeholder roundtables with industry, labor unions, climate and environmental justice advocates, and others will be convened so that Treasury can hear directly from a wide range of voices. The Administration has indicated that Treasury plans to prioritize areas of the law where Congress set deadlines as early as next year, as well as the wage and apprenticeship requirements. 

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