The Tax Code Change Unleashing $25B in Clean Energy Investment | Canary Media

The Inflation Reduction Act’s transferability provision is expanding opportunities to turn the value of clean energy tax credits into real-world projects.

Tax credits are the driving force behind the Inflation Reduction Act’s unprecedented investment in clean energy. But there’s a catch to relying on tax credits: The amount of money a company can receive from them is limited to what it pays in taxes each year.

In recent decades, a workaround that helps firms monetize a greater amount of tax credits — and therefore build more solar, wind, storage, and other clean energy projects — has blossomed. Known as the tax equity market, it’s now a roughly $20 billion per year financial sector in which banks and other large financial institutions partner with clean energy developers and use their tax credits to reduce their massive tax burdens.

But even this approach has its limitations. That’s why the climate law sought to revolutionize how clean energy developers and other companies earning tax credits can monetize them by introducing a concept called transferability — and so far, it looks to be a runaway success…

Read the full story at Canary Media: https://www.canarymedia.com/articles/policy-regulation/the-tax-code-change-unleashing-25b-in-clean-energy-investment