(Reuters) - U.S. Treasury officials on Wednesday unveiled rules for how non-profits, tribes and governments can take advantage of subsidies in President Joe Biden's new climate change law, expanding the incentives beyond big corporations.
The Inflation Reduction Act (IRA) offers billions of dollars in tax credits to speed decarbonization of the U.S. economy. To encourage project development, the law also allows tax-exempt entities to receive a direct payment in lieu of tax credits and enables project owners to sell credits to a third party.
The Treasury Department's guidance on Wednesday allows non-profits, tribes, local governments and other tax-exempt entities to receive 12 of the IRA's tax credits as cash payments, a provision known as elective or direct pay.
John Podesta, the White House senior adviser for clean energy, called the mechanism "a game changer."
"Direct pay will make it easier for local governments to electrify their vehicle fleets, retrofit and add rooftop solar to their schools and city buildings, and so much more," Podesta said on a call with reporters.
The IRA includes a 30% credit for renewable energy facilities like 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 businesses to sell all or a portion of any of 11 clean energy tax credits to a third party. Known as "transferability," the provision will help project developers without large tax bills access capital more easily and affordably.
Senior administration officials said the ability to transfer credits will attract more private sector capital.
Businesses can also choose direct pay, but only for the advanced manufacturing, carbon capture and storage and clean hydrogen credits, Treasury said.
Wednesday's announcement is the latest in a series of advisories from Treasury on how companies can take advantage of the landmark climate law.