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Can local governments receive cash back from the federal government for investing in clean energy?

Yes and additional guidance is coming.

Under the Inflation Reduction Act of 2022  local governments may receive direct payment of tax credits as cash subsidies to fund clean energy-related assets. Three sections of the Inflation Reduction Act grant federal support for some assets contributing to solar fields, geothermal heating, and clean fuel for commercial vehicles. More credits may be available depending on many factors including certain specifications or locations; e.g. projects conducted in low-income or rural areas.

These tax credits are available for projects that go into effect after December 31, 2022. For projects after this date, a local government must pay for the eligible clean air asset, begin service, and then file a tax return claiming a refund for the amount of the tax credit.

To receive the maximum credits available, look to the Inflation Reduction Act and associated federal rules regarding the specific projects and the applied for level of tax credit (the higher the percentage, the more requirements). Currently, further guidance is still necessary to establish other specifications local governments must follow to make refund elections, how eligibility will be shown, the process for getting cash back, etc. Both the Treasury Department and the Internal Revenue Service have indicated that more guidance is forthcoming.

A special ‘Thank You’ to the innovators at Negaunee Township who highlighted this opportunity and shared their own legwork on how local governments in Michigan can benefit when investing in solar energy.

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