Incentives for Manufacturing in the Inflation Reduction Act
By Stan Babicz, Principal, Federal Tax Strategies
The Inflation Reduction Act (IRA) targets $370 billion in investments to help consumers lower energy costs and accelerate private investment in technology, manufacturing, and innovation. The goal is to reduce greenhouse gas emissions by 40% below 2005 levels by 2030.
Who in manufacturing is eligible, and what are the benefits?
Light manufacturing (e.g., simple assembly, packaging, etc.) is not directly targeted by IRA incentives. However, others in more complex manufacturing sectors may have some opportunities under the IRA. Examples include:
- Incentives that could be attractive from a green energy perspective, for those who are planning to expand their manufacturing footprint.
- Production tax credits for domestic manufacturing of products and components for solar and wind energy, inverters, battery components, and critical minerals.
- Bonus credits for projects in economically distressed communities, as well as projects that pay a prevailing wage and hire apprentices (subject to strict requirements).
Furthermore, there are some incentives tangential to manufacturing that could also be applicable. For example:
- Sec. 45 – Renewable Electricity Production Tax Credit. This credit is based off of energy produced, in the form of closed loop biomass, solar, wind, etc.
- Sec. 48 – Energy Investment Tax Credit. This credit is (generally) 30% of labor and equipment to install energy production equipment such as geothermal, solar, wind, and battery.
- Sec. 30D – New Qualified Plug-In Electric Drive Motor Vehicle Credit. This credit requires final assembly in North America.
- Sec. 45W – Credit for Qualified Commercial Clean Vehicles. This credit applies to commercial vehicles with GVWR of less than 14,000 pounds, and to mobile machinery with a battery capacity exceeding 15 kilowatt hours.
- Sec. 30C – Alternative Fuel Vehicle Refueling Property Credit. This credit has a significant limitation that the property must be placed in eligible Census tracts.
As is typical with complex legislation, the technical rules and exclusions for these credits are extensive, and additional regulatory guidance is anticipated. Need assistance with exploring opportunities? CLA can help with that.
Jennifer Clement is an executive sales and marketing leader specializing in value creation for the C-suite. In her current role at CLA, Jennifer collaborates on strategy with executives of global manufacturing and distribution companies to accelerate results. Previously Jennifer served as a Global Business Acceleration Leader for Complete Manufacturing and Distribution (CMD). During her time with CMD, Jennifer lived and worked in Asia from 2015-2019. Prior to CMD, she spent 10 years in senior care technology. Jennifer started her career at Johnson Controls (JCI) and spent nine years in leadership roles; followed by five years at Rockwell Automation (ROK) leading c-suite strategy and marketing operations.
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