U.S. Treasury Disclosures Clean Energy Grant Payments to Non-Taxpayers

June 14 (Reuters) – U.S. Treasury officials on Wednesday outlined rules for how nonprofits, tribes and governments can benefit from grants provided in President Joe Biden’s new climate change bill, expanding incentives beyond just large corporations.

The Inflation Reduction Act (IRA) offers billions of dollars in tax breaks to accelerate the decarbonization of the U.S. economy. To encourage project development, the law also allows tax-exempt entities to receive direct payments instead of tax credits and allows project owners to sell credits to third parties.

Treasury Department guidance issued Wednesday allows nonprofits, tribes, local governments and other tax-exempt entities to receive 12 IRA tax benefits in the form of cash payments, in a benefit called optional or direct compensation.

John Podesta, White House senior adviser on clean energy, called the mechanism “a game-changer.”

“Direct payments will make it easier for local governments to electrify their vehicle fleets, retrofit and install solar panels on the roofs of schools and city buildings, and much more,” Podesta said on a call with reporters.

The IRA includes a 30% credit for renewable energy facilities such as solar and wind farms, as well as credits for clean vehicles and fuels, hydrogen, carbon capture and storage, and clean energy equipment manufacturing.

The law also allows companies to sell all or part of any of the 11 clean energy tax credits to a third party. This provision, known as “portability”, will help non-high-tax project developers gain easier and cheaper access to capital.

Senior administration officials have said the ability to transfer loans will attract more capital from the private sector.

Companies can also choose direct compensation, but only for advanced manufacturing, carbon capture and storage and clean hydrogen credits, Treasury said.

Wednesday’s announcement is the latest in a series of recommendations from the Treasury Department on how companies can benefit from the landmark climate bill.

(Reporting by Nichola Groom; Editing by Sonali Paul)