The Inflation Reduction Act of 2022 (the “IRA”) allows firms to develop and sell clean energy tax credits. In our last update, available here, we discussed the release of the long-awaited guidance package on the new technology-neutral electricity tax credits—set to replace the production tax credit (“PTC”) and investment tax credit (“ITC”) in 2025—among other items.

On September 18, Treasury and the IRS released proposed regulations, available here, on the IRA tax credit for electric vehicle charging stations. The credit provides a 6% discount (with up to a 30% bonus) on the cost of charging stations located in eligible census tracts, which are typically low income or rural areas. The credit is capped at $100,000 for businesses and $1,000 for individuals. Additionally, Treasury and the IRS released Notice 2024-64 with updated information on eligible census tracts. Comments on these proposed regulations are due by November 18.

On October 18, Treasury and the IRS released Notice 2024-74 on the sustainable aviation fuel credit, supplementing April guidance and addressing a calculation issue on applying the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (“GREET”) model to determine whether a fuel qualifies as sustainable.

Still, other players in the clean energy industry are awaiting crucial guidance on their credits. Producers of renewable fuels, for example, have voiced concerns over the delay in the rules for the clean fuel production credit, arguing that this uncertainty is stalling investment in renewable fuel production. Hopes were high for a boom in ethanol production with the introduction of the new credit, but without clear rules on how to determine the credit, many are hesitant to invest in ethanol and other renewable fuels.

Like other IRA credits, the eligibility criteria for the clean fuel production credit is determined in reference to prescribed greenhouse gas emissions standards rather than by specifying eligible fuel types. While the new rules on the sustainable aviation fuel credit might offer some insight on the carbon emissions analysis, without clear and specific guidance, producers are left unsure about the potential value of their credits. For example, fuels produced with vegetable oils like soybeans are considered high-emission, potentially yielding a low credit value, which may cause producers to explore strategies such as adding solar panels to reduce emissions on production and boost the credit’s value.

As Treasury and the IRS continue to release new guidance and finalize proposed rules, firms and investors are eager for the clarity in additional areas needed to capitalize on the IRA’s clean energy incentives.