Renewable Energy Tax Credits for Tribes

Oct 28, 2022 | Insights

The Inflation Reduction Act of 2022 includes a new provision that allows tribes to utilize renewable energy tax credits to finance and develop renewable energy projects. The provision solves a long-standing problem that tribal governments face in renewable energy development—the inability of tribal governments to benefit from tax credits when investing in renewable energy projects. As sovereign nations, tribal governments are not tax-paying entities and, as a result, could not use tax credits to lower the cost of renewable energy development.

According to section 13801 of the Act, tax-exempt entities “to monetize certain tax credits for alternative re-fueling properties, renewable electricity production, carbon oxide sequestration, zero-emission nuclear power production, clean hydrogen production, qualified commercial vehicles, advanced manufacturing production, clean electricity production, clean fuel production, energy activities under section 48 of the tax code, qualifying advanced energy projects, and clean electricity investments; and establishes special rules.”

These direct payments will only apply to projects for the tax years after 2022 and apply in limited applications. For example, tribes could fund projects using tax-exempt debt and are now eligible for production credits for solar, wind, fuel cell, geothermal, and biogas projects. Tribes could also be entitled to monetize tax credits for carbon capture projects, zero-emission nuclear energy projects, eligible clean and electric vehicles, clean hydrogen production, alternative clean fuel production, and net zero technologies.

The U.S. Treasury Department will provide more specific guidance in the coming months.

Patterson Earnhart Real Bird & Wilson LLP represents American Indian tribes, tribal entities, and individual Indians across the United States. Our mission is to support and advance the sovereignty, self-sufficiency, and self-governance of our tribal clients. To learn more about how we can assist your Tribe, contact our Colorado office at (303) 926-5292.