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Renewable Electricity Production and Investment Tax Credits
The IRA also establishes two tax credits for solar and wind projects undertaken by covered entities, which include tax-exempt entities. Entities may only choose one of these tax credits, so it would be beneficial to assess which tax credit would be more favorable for it under the circumstances. For tax-exempt entities, these tax credits are taken as a cash payment under Section 6417.
The Renewable Electricity Production Tax Credit provides a credit in the amount of $0.03 multiplied by the kilowatt hour of electricity produced from qualifying solar and wind facilities placed in service after December 31, 2021. Construction on such solar and wind facilities must begin before January 1, 2025. A qualifying solar and wind facility is one with a maximum net output of less than 1 megawatt that was constructed to meet certain prevailing wage and apprenticeship requirements and maintained during the applicable taxable year meeting certain prevailing wage and other requirements.
The Renewable Electricity Investment Tax Credit provides a credit for qualifying solar and wind facilities placed in service after December 31, 2021. Construction on such solar and wind facilities must begin before January 1, 2025. The credit is 30% of the cost of a solar or wind facility, provided that certain prevailing wage and apprenticeship requirements are met in the construction of the facility, and certain prevailing wage and other requirements are met in the alteration or repair of the facility for the first 5 years it is in service.
We recommend that tax-exempt entities confirm that their contracts for the construction and maintenance of these solar and wind facilities include any applicable prevailing wage and/or apprenticeship requirements so they can take advantage of these tax credits.