• Energy tax credits like §45W and §30C face 2025/2026 phaseouts, placing urgency on electric vehicle (EV) and charging station timelines for businesses planning capital expenditures.

• Many mid-market companies haven’t aligned project timelines with placed-in-service deadlines, risking partial or lost clean energy credits.

• Wage rules, documentation, and foreign-sourcing bans can disqualify credits — early compliance checks help preserve full tax benefit.

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For many businesses, the Inflation Reduction Act (IRA) was a green light to pursue electric vehicles, charging infrastructure, and other sustainable projects — backed by strong federal tax incentives. But in 2025, the rules have changed. And companies that haven’t adapted to new deadlines and eligibility requirements may leave valuable credits behind.

Tax provisions like §45W and §30C — which offer up to $7,500/$40,000 per EV and $100,000 per charging port — remain available. But with stricter placed-in-service timelines, prevailing wage requirements, and supply chain sourcing restrictions now in effect, the process has grown more complex.

At MGO, we’ve seen a growing sense of urgency among tax leaders and CFOs looking to retain the full value of these incentives. The common thread? It’s not enough to start building — you need to verify that your timeline, documentation, and sourcing all meet current standards.

What’s Changing — and Why It Matters

Businesses investing in clean energy may qualify for:

• §45W Commercial Clean Vehicle Credit: Up to $7,500 per eligible EV under 14,000 pounds (cars, vans, trucks, etc.) and up to $40,000 per eligible EV over 14,000 pounds (school buses, semi-trucks, etc.)

• §30C Alternative Fuel Infrastructure Credit: Up to $100,000 per qualified charging port

• § 48 (Pre-2025) Investment Tax Credit for Energy Property/§ 48E Clean Electricity Investment Tax Credit: 6% of qualified investment increased to 30% if a taxpayer meets prevailing wage and apprenticeship requirements or exceptions. Eligible to be transferred to an unrelated taxpayer.

But, beginning in 2025, these credits are affected by key IRS updates. Most notably:

• Credits are tied more strictly to placed-in-service deadlines

• For EVs, the deadline to place in service is September 30, 2025

• For charging ports, the deadline to place in service is June 30, 2026

• For wind and solar, allowed to be placed in service in four calendar years if construction occurs prior to June 30, 2026; if not, then deadline is December 31, 2027

• Bonus credits now require detailed compliance with wage and apprenticeship standards

• The foreign entity of concern rule may limit credit access based on component sourcing, particularly for EV batteries

In short, technical compliance now carries real financial consequences. Projects that would have qualified two years ago may fall short today — even if the investment itself hasn’t changed.

Where CFOs Stand on Readiness

During a recent MGO webinar, we asked mid-market tax leaders how ready they felt for the upcoming shift. Their responses reflected a common trend:

• 40% said they were not prepared

• 30% were somewhat prepared

• Only 5% were fully prepared

• 25% said it was not applicable to their business

This signals a significant planning gap. Despite rising investment in electric fleets and infrastructure, many companies haven’t realigned their tax strategy to fit the changing requirements. Without that alignment, even well-intentioned efforts can lose value.

Key Areas Where Companies Face Risk

Several issues have emerged as common barriers to full credit access:

• Project delays that affect placed-in-service eligibility

• Inconsistent wage documentation that disrupts bonus credit calculations

• Foreign-sourced components that invalidate certain credits

• Disconnection between tax and operations, leading to missed planning windows

As these rules evolve, companies that aren’t regularly reviewing their compliance posture may struggle to capture the full benefits — or may face clawbacks if later audited.

Planning Priorities for 2025

To prepare for the upcoming changes and protect your tax position, MGO recommends focusing on four core actions:

1. Check Placed-in-Service Schedules 

Review your project timelines to confirm that EVs, chargers, or facilities will be operational before IRS deadlines. Delays — even short ones — can affect eligibility. 

2. Coordinate with Tax Early

Bring your tax team into capital expenditure planning discussions to evaluate credit exposure and prioritize projects with the most favorable timelines and tax treatment.

3. Review Wage and Sourcing Documentation

Work closely with contractors and procurement teams to track wage compliance and verify sourcing for battery or component parts.

4. Run Credit Risk Scenarios 

Model potential loss of credits based on current projections, and adjust project sequencing or vendors accordingly to maintain incentive value.

How MGO Supports Clean Energy Credit Planning

MGO works with businesses across industries to evaluate, strengthen, and align your approach to energy tax incentives. Our teams help assess eligibility, document compliance, and provide the analysis you need to make informed decisions — especially as 2025/2026 deadlines draw closer.

If your organization is investing in EVs, charging stations, or energy property, now is the time to revisit how those projects connect to your tax strategy. Reach out to our Tax Credits and Incentives team today for support.

The post Clean Energy Tax Credits: 2025 Deadlines and Strategy appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The IRS’s revised Form 6765 maintains the business component detail (Section G), offers exemptions for smaller taxpayers, and refines R&D credit examinations to reduce improper claims while easing burdens on compliant taxpayers.

• The IRS is intensifying audits and increasing documentation requirements for research credit claims, aiming to improve compliance and information accuracy.

• The Inflation Reduction Act introduces or modifies multiple energy-related credits (such as 45X, 45L, 48E, 45Y, 45Z, and 179D) with new monetization methods (direct pay and credit transfers) and bonus incentives, while the New Markets Tax Credit allocation has been doubled for 2025.

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Credit for Increasing Research Activities: Proposed Changes to Form 6765

The IRS announced the release of a revised draft of Form 6765, Credit for Increasing Research Activities, on June 21, 2024, that reflects feedback from external stakeholders. This follows the IRS’s efforts to tighten documentation requirements for claiming the research credit. In September 2023, the IRS previewed proposed changes to Form 6765, adding new sections for detailed business component information and reordering existing fields. These changes aimed to improve information consistency and quality for tax administration but were criticized as overly burdensome.

The updated draft retains Section E from the previous version but requires additional taxpayer information. The “Business Component Detail” section, now Section G, is optional for Qualified Small Business (QSB) taxpayers and those with total qualified research expenditures (QREs) of $1.5 million or less and gross receipts of $50 million or less. Additionally, the IRS reduced the number of business components to be reported in Section G, requiring 80% of total QREs in descending order by amount, capped at 50 business components. Special instructions will be provided for taxpayers using the ASC 730 directive. The revised Section G will be optional for all filers for tax year 2024 to allow taxpayers time to transition to the new format. As outlined by the IRS, Section G will be effective for tax year 2025.

Examination Environment

Currently, the IRS receives a significant number of returns claiming the research credit, which requires substantial examination resources from both taxpayers and the IRS. To determine effective tax administration for this issue, the IRS aims to clarify the requirements for claiming the research credit by considering all feedback received from stakeholders before finalizing any changes to Form 6765.

In response to ongoing concerns of improper claims of the research credit, the IRS has intensified its focus on reviewing these claims for nonconformities, including conducting more audits. Navigating the complexities of the research credit can be challenging, especially with the increased scrutiny, recent case law, and the newly implemented IRS compliance measures in place.

It is important for taxpayers to accurately determine eligibility, validate and properly record contemporaneous documentation to support research credit claims, and defend against examinations. Taxpayers should determine compliance with IRS regulations and proper eligibility for the research credit.

Tax Credit Monetization

The signing of the Inflation Reduction Act (IRA) on August 16, 2022, marked the largest-ever U.S. investment committed to combat climate change, allocating significant funds to energy security and clean energy programs over the next 10 years, including provisions incentivizing the manufacturing of clean energy equipment and the development of renewable energy generation.

Overall, the act modifies many of the current energy-related tax credits and introduces significant new credits and structures intended to facilitate long-term investment in the renewables industry. Capital investments in renewable energy or energy storage; manufacturing of solar, wind, and battery components; and the production and sale or use of renewable energy are activities that could benefit from the over 20 new or expanded IRA tax credits. The IRA also introduced new ways to monetize tax credits and additional bonus credit amounts for projects that meet prevailing wage and apprenticeship, energy community, and domestic content requirements.

45X — Advanced Manufacturing Production Tax Credit

The 45X advanced manufacturing production credit continues to be a valuable production tax credit meant to encourage the production and sale of energy components in the U.S., specifically related to solar, wind, batteries, and critical mineral components. To be eligible for the credit, components must be produced in the U.S. or U.S. possessions and be sold by the manufacturer to unrelated parties. The Department of Energy has released a full list of eligible components as defined in the IRA, with specific credit amounts that vary according to the component.

Manufacturers can also monetize 45X credits through a direct payment from the IRS for the first five years under Internal Revenue Code Section 6417. They may also transfer a portion or all the credit to another taxpayer through the direct transfer system Section 6418 election. The 45X credit is a statutory credit with no limit on the amount of funding available; however, the credit will begin to phase out beginning in 2030 and will be completely phased out after 2033. Manufacturers cannot claim 45X credits for any facility that has claimed a 48C credit.

45L Tax Credits for Zero Energy Ready Homes

Section 45L of the Internal Revenue Code offers tax credits for contractors building or significantly reconstructing energy-efficient homes. Eligible homes must meet ENERGY STAR or DOE Zero Energy Ready Home (ZERH) standards. The tax credit has two tiers: $5,000 for single-family or manufactured homes certified to ZERH standards, and $1,000 for multifamily units, increasing to $5,000 if prevailing wage requirements are met. This credit applies to qualifying homes acquired between 2023 and 2032, encouraging contractors to prioritize sustainable construction while benefiting from significant tax savings.

48E and 45Y Clean Electricity Investment and Production Credits

For energy property and qualified facilities placed in service after December 31, 2024, Sections 48E and 45Y will replace the longstanding investment tax credit and production tax credit under Sections 48 and 45. The new provisions adopt a technology-neutral approach, whereby qualification for the credits will generally not be based on specific technologies identified in the IRC, but rather on the ability to generate electricity without greenhouse gas emissions. This represents a significant departure from historical practices and is expected to expand the range of technologies eligible for tax credits. Other relevant provisions of the IRA, such as bonus credit additions and monetization options, will still apply to the new Sections 48E and 45Y.

45Z Clean Fuel Production Credit

The clean fuel production credit under Section 45Z will become effective for transportation fuel produced at a qualified facility after December 31, 2024. On May 31, 2024, the IRS issued Notice 2024-49, providing guidance on the necessary registration requirements to claim the credit. Fuel that meets additional criteria to qualify as sustainable aviation fuel (SAF) will be eligible for an increased credit amount. As in the case of other renewable credits, the emissions rate is crucial for purposes of the 45Z credit, because the emissions factor for the fuel will directly impact the credit amount. Additionally, prevailing wage and apprenticeship rules will apply to Section 45Z qualified facilities, with certain exceptions.

Section 179D

The Section 179D tax deduction rewards businesses for energy-efficient building upgrades, such as improved lighting, HVAC, and roofing. Starting in 2023, deductions range from $0.50 to $5.00 per square foot, depending on energy savings and whether prevailing wage and apprenticeship requirements are met. Projects meeting a 50% energy reduction and these requirements qualify for the maximum $5.00 deduction. Lower energy savings (25%-50%) or unmet requirements qualify for reduced rates.

Building owners, designers, and REITs can benefit by meeting energy standards like ASHRAE 90.1, reducing costs while boosting efficiency.

With the passage of Section 6418 as part of the IRA, certain renewable energy tax credits can now be transferred by companies that generate eligible credits to any qualified buyer seeking to purchase tax credits. Through credit transfers, taxpayers have the option to sell all or a portion of their credits in exchange for cash as part of their overall renewable energy goals if they are not able to fully utilize the benefit. Companies with a high amount of taxable income and therefore a larger appetite for tax credits are able to purchase these credits at a discount, with the sale proceeds improving the economics of clean energy development.

The market rate for the sale of credits will be highly dependent on the type of credit being transferred, as well as the substantiation and documentation related to the seller’s eligibility for the credit taken and any bonus credit amounts claimed. The current rate seen in the market for transferring credits is around $0.93 to $0.96 per $1 of credit, but these amounts are subject to change based on specific fact patterns for each individual transaction and the overall market trend.

Taxpayers considering buying or selling tax credits that are transferable under the IRA should be looking ahead and forecasting their potential tax liability and resulting appetite for buying and selling credits. These credits can be transferred and utilized against estimated quarterly payments as soon as transfer agreements are finalized. This expedited reduction in cash outlay for the buyer and monetization of credits for the seller is a consideration that should be taken into account for taxpayers that are interested in entering the market of transferring credits.

Bonus Credits

The Inflation Reduction Act not only introduced new and expanded credits for the investment in and production of renewable energy and its related components but also included provisions for bonus credit amounts subject to specific requirements.

The prevailing wage and apprenticeship (PWA) requirement is a 5x multiplier for certain credits that can bring the credit rate from 6% up to 30% by paying prevailing wages to all labor related to the construction, installation, alteration, and repair of eligible property. Additionally, taxpayers must determine that a specific percentage of these labor hours is performed by qualified apprentices.

The IRS and the Treasury Department issued final regulations on the PWA requirements in June 2024, and projects starting in 2025 and after will be unable to utilize the beginning of construction exemption. Other common credit additions available for taxpayers meeting energy community and domestic content requirements provide a 10% addition to the base rate of the credit. Taxpayer documentation will be required to substantiate the claim of these bonus credit amounts and will need to be presented to a buyer in the event that these credits are transferred under Section 6418.

Taxpayers that have current or proposed investments or activities for which they plan to utilize the PWA multiplier should be formulating a documentation strategy and procedure. In the event of an IRS audit or transfer of these credits, taxpayers will be required to substantiate the wages paid to laborers, as well as the number of hours performed by registered apprentices. Depending on the size and amount of labor involved in qualified investments or production, documentation for PWA purposes, as well as for the domestic content requirements, will likely be a highly burdensome task if not planned for at the outset of a project.

New Markets Tax Credit (NMTC)

The federal NMTC program was established in 2000 to subsidize capital investments in eligible low-income census tracts. The subsidy provides upfront cash in the form of NMTC-subsidized loans at below-market interest rates (3%-3.5%). The loan principal is generally forgiven after a seven-year term, resulting in a permanent cash benefit. Funding for these subsidized loans is highly competitive and expected to be depleted quickly.

The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund recently announced that, for 2025 only, it will double its annual allocation of NMTC funds. Taxpayers across multiple industries may be good candidates for the NMTC.

Applying for the NMTC program involves several steps that help determine the funding is allocated to projects that will have a meaningful impact on low-income communities. Applicants for the credit are evaluated based on the community impact derived from the investments (such as job creation, community services provided, etc.).

In a program as highly competitive as the NMTC, applying early can make the difference between securing a portion of the limited funds available or missing out on funding opportunities. Early applicants are often better positioned to take advantage of available opportunities, and additional benefits may be possible for those who act swiftly.

Taxpayers with ongoing or planned capital investments for later in 2024 or 2025 that are eligible to receive NMTC financing should begin reaching out to CDEs. Early outreach provides QALICBs a strong advantage in securing this financing due to the competitive nature and limited funds of the program.

How MGO Can Help

The changes introduced by the Inflation Reduction Act and the revised guidance for R&D credits offer significant opportunities for taxpayers across various industries. However, navigating these updates can be challenging for those who aren’t adequately prepared. Begin your efforts now by reassessing eligibility, refining documentation procedures, training key personnel, and ensuring you have enough time to address potential compliance hurdles. By proactively engaging with these new requirements, you can minimize disruptions and maintain clarity, accuracy, and compliance in your tax strategies.

If you have questions about how these changes may affect your organization or need assistance enhancing your credits, contact MGO to connect with our experienced professionals. We’re here to help you navigate these evolving regulations and seize the full benefits of available tax incentives.

The post Proposed Form 6765 Updates, Expanded IRA Energy Incentives, and Other Key Tax Credit Developments appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The Treasury and IRS released proposed corporate alternative minimum tax (CAMT) regulations, finalized procedural rules for the 1% stock repurchase excise tax, and provided penalty waivers for certain CAMT underpayments.

• Recent rulings clarify how related-party advances, share surrenders, and S corporation transactions are treated, particularly affecting debt/equity characterization.

• An IRS private letter ruling confirms that contractual arrangements granting beneficial ownership of a professional corporation’s stock can trigger consolidation, underscoring economic substance over legal title.

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During 2024, the U.S. Department of the Treasury and the IRS issued important tax guidance for U.S. corporations — including long-awaited proposed regulations on the corporate alternative minimum tax and final procedural regulations on the stock repurchase excise tax.

Corporate Alternative Minimum Tax Guidance Includes Detailed Proposed Regulations

The Inflation Reduction Act of 2022 (IRA) created a new corporate alternative minimum tax (CAMT) for taxable years beginning after December 31, 2022. Since being signed into law, the U.S. Department of the Treasury and the Internal Revenue Service have released multiple pieces of guidance culminating in proposed regulations.

Taxpayers may generally rely on the notices above from their publication date to the publication of the proposed regulations discussed below.

In the above-mentioned guidance, the Service released Form 4626, Alternative Minimum Tax—Corporations and accompanying instructions for corporate taxpayers to report their applicable corporation calculations and CAMT liability. In addition, Schedule K to Form 1120, U.S. Corporation Income Tax Return, was modified to add Line 29 relating to CAMT.

Proposed Regulations

The proposed regulations conform to many aspects of the prior notices but expand on the interim guidance in noteworthy ways, some of which are described below. The length and detail of the proposed regulations highlight the technical complexity of administering and complying with the CAMT regime.

Effective Dates

The proposed regulations are prospective in nature. In general, the proposed regulations apply to tax years and transfers ending or occurring, respectively, after September 13, 2024 (i.e., the date the proposed regulations were published in the Federal Register). However, certain aspects of the proposed regulations have different effective dates tied to the date the final regulations are published in the Federal Register, or to the period between September 13, 2024, and the date the final regulations are published in the Federal Register.

Taxpayers may rely on the proposed regulations, subject to a consistency requirement.

Safe Harbor

Notice 2023-7 contained a safe harbor that allowed a taxpayer to use a simplified method with fewer adjustments to calculate its AFSI for purposes of determining its applicable corporation status, which dictates whether the corporation is subject to the CAMT regime. The safe harbor reduced the threshold AFSI needed to be an applicable corporation from $1 billion to $500 million (and from $100 million to $50 million for the U.S.-specific prong of the foreign-parented multinational group test). The original safe harbor was only available for the first taxable year beginning after December 31, 2022.

The proposed regulations contain a slightly modified version of the $500 million (or $50 million) safe harbor that is available for years not covered by the original safe harbor.

Other Noteworthy Areas

The following are key areas in which the proposed regulations provide new or more detailed guidance:

• Calculating a corporate partner’s distributive share of partnership AFSI

• Creating deemed foreign-parented multinational groups when there is a non-corporate parent

• Addressing purchase accounting and other AFSI impacts resulting from M&A transactions

• Adjusting AFSI for financial statement loss carryforwards

• Allowing corporations to cease being applicable corporations

• Providing relief for bankruptcy or insolvency transactions

Penalty Waiver: Notice 2024-66

In addition to the proposed regulations, the Service issued Notice 2024-66, which provides a waiver for additional taxes imposed on a corporation that fails to make estimated tax payments related to its CAMT liability for tax years beginning after December 31, 2023, and before January 1, 2025.

As with the previous waivers, this waiver only covers taxes imposed under Section 6655 and does not waive additional taxes for underpayments under other Code Sections, such as Section 6651, which imposes additional tax for payments not made by the due date of the corporation’s return (without extension).

The proposed CAMT regulations are substantial in detail, technical complexity, and length, and include guidance on many areas applicable to M&A transactions. For example, the proposed regulations address certain effects of M&A transactions on the calculation of AFSI. The proposed regulations also significantly increase the scope of the definition of a foreign-parented multinational group to include some common investment structures. Taxpayers should carefully review the potential impact of the proposed regulations when engaging in M&A transactions and restructurings.

IRS, Treasury Issue Final Procedural Regulations on Stock Repurchase Excise Tax

Under the new corporate excise tax, a 1% corporate-level tax is imposed on net stock repurchases occurring after December 31, 2022. The excise tax applies to “covered corporations,” which are generally publicly traded domestic corporations, with certain foreign-owned domestic structures being included as well.

The excise tax was enacted as part of the Inflation Reduction Act of 2022, and the Service provided interim guidance in the form of Notice 2023-2 in December 2022. In April 2024, Treasury released proposed regulations incorporating the operating rules set forth in the notice, proposing additional guidance on foreign stock acquisitions, and responding to feedback received with respect to the notice. Separately but on the same day, Treasury also released proposed procedural regulations that articulate how to report and pay the excise tax.

Specifically for the procedural regulations, the Department of the Treasury and the IRS released final regulations on June 28, 2024. The final regulations largely adopt the proposed regulations. For taxable years ending on or before June 28, 2024, stock repurchase excise tax returns were required to be filed by October 31, 2024 (the due date for Form 720 for the third quarter of calendar year 2024). If a covered corporation has more than one taxable year ending after December 31, 2022, and on or before June 28, 2024, it should file a single Form 720 with a separate Form 7208 attached for each year.

Consistent with the proposed regulations, future stock repurchase excise tax returns must be filed by the due date of Form 720 for the first full calendar quarter after the end of the taxable year of the covered corporation. For example, a covered corporation with a tax year ending on December 31, 2024, must file its return by April 30, 2025 (the due date for a first-quarter Form 720).

Taxpayers should be aware that in certain leveraged transactions — those involving third-party debt — there may be ambiguity in the application of the excise tax depending on the nature of the funding and the obligors on the facility. Any transactions involving exchanges of public company stock should consider these rules and their impact on structuring.

Tax Court Rules for Taxpayer on Related-Party Advances

In Estate of Thomas H. Fry v. Commissioner of Internal Revenue, TC Memo 2024-8 (2024), the Tax Court held Section 385(c), which generally binds a taxpayer to its initial characterization of an investment as either debt or equity, did not apply to cash advances where no formal instruments had been issued. This case may have implications for corporations with undocumented related party advances.

Determining Debt or Equity Treatment for Tax Purposes

Determining whether an interest in a corporation is debt or equity is a fact-intensive inquiry. Courts have traditionally applied multi-factor tests that look at the intent and relationship of the parties, the financial condition of the corporation, and each party’s legal and economic rights. As these factors are weighted in each case, and the form or name of the instrument is not necessarily determinative of its treatment, taxpayers face uncertainty as to whether the IRS will agree with their chosen characterization.

In addition, Section 385(c) binds taxpayers to their characterization of an interest in a corporation once a position is taken. The IRS, on the other hand, is not bound by the taxpayer’s characterization and has the ability to reclassify an instrument from debt to equity, and vice versa. As a result, taxpayers should perform a detailed assessment to determine the correct treatment before reporting a position on a return. In practice, however, this does not always occur, and later discovery that an instrument’s treatment may be questionable often results in taxpayers’ performing this assessment after the fact, thereby potentially triggering the application of the Section 385(c) rules.

Estate of Fry v. Commissioner

Mr. Fry was the sole shareholder of two S corporations, Crown and CR Maintenance. CR Maintenance encountered financial difficulties, and Crown provided financial assistance that allowed CR Maintenance to continue operations. In particular, Crown transferred money directly to CR Maintenance and paid bills on CR Maintenance’s behalf. The amounts were accounted for as loans on both parties’ general ledgers and tax returns but were not otherwise documented. CR Maintenance did not claim interest deductions and Crown did not report interest income related to the amounts.

In a dispute concerning Mr. Fry’s basis in his CR Maintenance stock, Mr. Fry argued that these transactions should not be considered debt but, instead, should be treated as constructive equity contributions and distributions. The Service disagreed with Mr. Fry, asserting that Section 385(c) precluded him from recharacterizing the transactions as equity contributions.

Tax Court Holdings

In its memorandum opinion, the Tax Court held that Section 385(c) did not apply in this case because there was “no formal issuance of any instrument evidencing the creation of an interest in stock or equity.” In addition, the Tax Court suggested that Section 385 might not apply to S corporations based on the exclusion of S corporations from the regulations promulgated under Section 385(a) in 2016.

The court further held that the transfers and payments more likely than not failed to constitute debt based on an analysis using traditional debt-equity factors. The court then determined that the transfers and payments primarily benefited Mr. Fry and, as a result, held they should be considered deemed distributions to Mr. Fry and subsequent contributions to CR Maintenance.

Estate of Fry appears to limit the application of Section 385(c) where no formal notes or stock instruments are issued. However, the broader implications of the ruling and its reasoning are unclear. In non-precedential guidance, the Service has inconsistently applied Section 385(c) in circumstances where the issuer reports an instrument on its tax return differently from the label given to the legal documents.

The Service has also indicated that Section 385(c)(1) precludes a taxpayer from arguing that undocumented cash transfers were equity transactions when the transfers were reported as loans on the taxpayer’s books, records, and tax return balance sheets. In Estate of Fry, however, the Tax Court appears to shed some light on what actions constitute a characterization for purposes of Section 385(c). In particular, where there has been no formal issuance of an instrument that purports to be either debt or equity, the application of Section 385(c) may be precluded.

Estate of Fry may support the proposition that related party advances are not characterized as either debt or equity for purposes of Section 385(c) unless there has been a formal issuance of an instrument that purports to be either debt or equity, even if the taxpayer has reported the transaction as debt or equity on its books, records, or tax return balance sheets. However, taxpayers are reminded that memorandum opinions are not binding on the Tax Court, although they can be used as persuasive authority.

Taxpayers should exercise caution in attempting to rely on Estate of Fry, particularly in cases that involve distinguishable fact patterns (for example, if one party to the cash transfer accrues or deducts interest on the advance), due to the lack of reasoning in support of the Tax Court’s holding regarding Section 385(c) and the limited precedential value inherent in a memorandum opinion.

IRS Rules Stock Contributions Will Not Result in Deemed Dividends or Application of Gift Tax

A shareholder may, for valid business reasons (e.g., to improve the marketability of an investment), voluntarily surrender shares to the capital of a corporation, which raises questions of how the surrender impacts the other shareholders in the corporation. In PLR 202406002, the IRS ruled that a proposed voluntary surrender of shares to the capital of a corporation will not create deemed dividend income for the noncontributing shareholders and will not result in a taxable gift to the noncontributing shareholders.

In the proposed transaction, an executive of the company and a series of trusts established by that executive will contribute a proportionate amount of their common shares to the company for no consideration. The contribution of the shares may occur in one or more installments. The company has in place a share repurchase program, but neither the executive nor the trusts have participated in the program. The share repurchase program and the proposed contribution each have separate independent business purposes.

Income Tax Rulings

Citing Commissioner v. Fink, 483 U.S. 89 (1987), the Service ruled in PLR 202406002 that the executive and the trusts will not recognize gain or loss as a result of the contribution and that the basis in the shares contributed will be preserved in the basis of the executive’s and the trusts’ respective retained shares. In addition, the Service ruled that the contribution will be a contribution to the capital of the company and, therefore, will not be taxable to the company under Internal Revenue Code (IRC) Section 118(a).

The Service also indicated that the noncontributing shareholders will not recognize income as a result of the contribution and specifically provided that the contribution will not be treated as a distribution of property to the noncontributing shareholders.

The ruling is subject to many key representations, including that:

1. There is no belief that any purchase pursuant to the share repurchase program will be taxed as a dividend to the participating shareholder or is a dividend within the meaning of IRC Sections 301 and 302.

2. The contribution is an isolated transaction.

3. The contribution is not part of a plan to periodically increase the proportionate share of any shareholder in the assets or earnings and profits of the company.

Nevertheless, the contribution will have the economic effect of increasing the noncontributing shareholders’ proportionate interest in the assets and earnings and profits of the company.

IRC Section 305(c) provides a broad rule that creates a deemed distribution of stock in certain transactions involving a corporation and its shareholder(s) (e.g., recapitalizations), which may be taxable under the general distribution rules of Section 301. By ruling that the contribution will not result in a deemed distribution to the noncontributing shareholders (likely because no deemed dividend results when a recapitalization is not undertaken pursuant to a plan to increase a shareholder’s proportionate interest in the assets or earnings and profits of the corporation), the IRS eliminated any potential taxation of the economic benefit conferred on the noncontributing shareholders under Section 305 or Section 301.

Gift Tax Rulings

The Service also ruled that gift tax will not apply to the increase in value bestowed on the noncontributing shareholders by the executive and the trusts as a result of the contribution, because the contribution is a transaction occurring in the ordinary course of business (i.e., it is undertaken for bona fide business reasons, it is an arm’s length transaction, and the executive and the trusts lack donative intent). The Service also recognized that the executive and the trusts are conferring an economic benefit on each other and between each of the trusts. However, the Service ruled that these are effectively value-for-value exchanges and, therefore, will not be subject to gift tax.

PLR 202406002 closes the loop started by Commissioner v. Fink and provides answers that avoid adding unintended tax consequences and complexity to a transaction that is usually undertaken for independent, nontax business reasons. In Fink, the Supreme Court denied a loss to a corporation’s dominant shareholder following the shareholder’s voluntary surrender of shares to the corporation, viewing the surrender as a contribution to capital. Instead, the Court held that the basis in the contributed shares must be added to the shares retained by the shareholder.

The Supreme Court case serves as authority for the shareholder’s gain or loss and basis consequences resulting from a stock surrender. The classification of the transaction as a contribution to the capital of a corporation supports the application of IRC Section 118(a) to prevent the transferee corporation from including any amount in its gross income.

With the issuance of PLR 202406002, taxpayers and practitioners now have an indication of the Service’s view of the other aspects of a stock surrender—namely, the treatment to the noncontributing shareholders. Taxpayers considering surrendering shares to the capital of a corporation should consult with their advisors regarding the application of PLR 202406002 to their facts.

Uncertainties Surround Treatment of S Corporation State Law Conversions

Comments submitted on behalf of the American Bar Association Section of Taxation (ABA tax section) in a letter dated July 2, 2024, suggest the IRS should supplement or expand its 2008 guidance on F reorganizations involving S corporations and qualified subchapter S subsidiaries (QSubs) to include consequences of an F reorganization accomplished by state law conversion to a limited liability company (LLC). The additional guidance is needed to address uncertainties in planning and other transactions commonly used by S corporations and their shareholders.

Summary of 2008 IRS Guidance

Rev. Rul. 2008-18 provides guidance on whether, in an F reorganization involving an S corporation, the historic Subchapter S election and employer identification number (EIN) continue for the reorganized (surviving) entity. The revenue ruling addresses two specific transactions, each of which meet the requirements of an F reorganization under Section 368(a)(1)(F):

The 2008 ruling concludes that under these two fact patterns, the historic S corporation election does not terminate but continues for the corporation that is the survivor of the reorganization (Newco). However, Newco must obtain a new EIN.

Uncertainties Surrounding S Corporation State Law Conversions

Rev. Rul. 2008-18 does not address the continuation of an S corporation election or EIN when the S corporation undergoes an F reorganization (with or without a QSub election made for the contributed corporation) through a state law “conversion” to an LLC. Whether a QSub election is necessary in a state law conversion is also unclear, since — assuming no entity classification election is made to treat the LLC as a regarded corporation — the surviving LLC would be disregarded under Treas. Reg. §301.7701-3. If a QSub election is required by the IRS, the election would not be valid if made after the corporation converts to an LLC.

In addition, any delay by the state in processing the conversion raises questions about whether the subsidiary loses its S corporation status in the reorganization transaction and, therefore, reverts to C corporation status for a period of time. If so, the corporation could be subject to built-in gains tax under Section 1374.

Comment Letter Recommendations

To address the uncertainties for S corporations surrounding F reorganizations accomplished by state law conversions, the ABA tax section in its comment letter recommends the IRS supplement or expand Rev. Rul. 2008-18 to address a third situation:

Situation 3: The shareholder of an S corporation contributes all of the S corporation stock to a newly formed corporation (Newco). The contributed corporation is converted under state law from a corporation to an LLC for which no entity classification election is made. In addition, no QSub election is made for the contributed corporation.

The comment letter concludes that this fact pattern should have the following consequences:

• The historic S corporation election would not terminate but would continue for the newly formed corporation as the survivor of the reorganization.

• The LLC (formerly the S corporation) would retain its historic EIN.

• The newly formed survivor corporation would need to obtain a new EIN.

• The LLC would be respected as a disregarded entity, eliminating the need to make a QSub election, and would not be treated as a C corporation for federal income tax purposes for any period of time during the reorganization transaction, including for purposes of taxing built-in gains under Section 1374.

Should the IRS not accept the comment letter’s suggestions to update or supplement their 2008 guidance, the ABA tax section alternatively recommends the IRS provide a streamlined procedure for curing a timely but invalid QSub election. This would be similar to Rev. Proc. 2013-30, where an election has been deemed invalid because the subsidiary did not meet the domestic corporation requirement at the time the election was made.

A QSub can provide tax planning opportunities where there is a business reason to maintain S corporation operations in a separate subsidiary. For example, since a QSub is a disregarded entity, the sale of an interest in a QSub is treated as a sale of its assets for federal income tax purposes, which provides the buyer with a step-up in the tax basis of the acquired assets. There may be other benefits as well, and F reorganizations may be used in pre-transaction planning structuring.

IRS Rules Professional Corporation Arrangement Requires Consolidation

Many states, through licensing and regulation of professions like medicine or law, restrict or prohibit business ownership by unlicensed individuals or entities. To invest in these types of businesses without violating state law, investors often must enter into contractual arrangements pursuant to which the investor acquires economic rights without changing the ownership of legal title. In PLR 202417008, the IRS ruled that a professional corporation must join an investor’s existing consolidated group as a result of legal agreements that granted the investor beneficial ownership of the professional corporation’s stock.

In the PLR, two professional corporations, PC1 and PC2 (together, the PCs), entered into agreements with a member of an existing consolidated group (Sub), either directly or indirectly through a disregarded entity of Sub, for administrative and management support services. In addition, the PCs and their respective shareholders entered into agreements with Sub (or its disregarded entity) restricting:

1. The transferability of the shares in the PCs.

2. The ability of the PCs to undertake certain corporate actions.

Citing IRC Section 1504(a) and Rev. Rul. 84-79, the IRS ruled that upon executing the above-mentioned agreements, PC1 and PC2 will join the consolidated group with respect to which Sub is a member. For a corporation (other than a common parent) to join a consolidated group, Section 1504(a) requires that members of a consolidated group directly own a certain amount of stock in the corporation.

Case law and IRS guidance (including Rev. Rul. 84-79) indicate that direct ownership for purposes of Section 1504(a) means beneficial ownership (which is generally determined based on the economic substance of the arrangement), not mere possession of legal title. The IRS found that the legal agreements between the PCs, the shareholders of the PCs, and Sub (or its disregarded entity) separated legal title (i.e., legal ownership) from the economic rights (i.e., beneficial ownership), the latter of which Sub (or its disregarded entity) obtained as result of the contractual arrangements.

The PLR is consistent with similar rulings previously issued by the IRS, all of which are predicated on state law not prohibiting beneficial ownership by non-professionals and underscore the beneficial ownership aspect of the Section 1504(a) test.

PLR 202417008 highlights the contractual arrangements involved in the transfer or acquisition of beneficial ownership, giving investors interested in participating in the economics of certain regulated businesses a view of the key legal documents and provisions the IRS evaluated in applying Section 1504(a).

How MGO Can Help Your Business Adapt to 2024 Tax Changes

With major 2024 guidance from the Treasury and IRS — including proposed CAMT regulations, finalized rules for the 1% stock repurchase excise tax, and rulings affecting S corporations, debt/equity characterization, and beneficial ownership — corporate taxpayers face new complexities. MGO’s tax professionals can help you develop CAMT strategies, navigate excise tax compliance, clarify S corporation structures, and address beneficial ownership arrangements. We provide solutions aligned with your business goals so you can stay ahead of fast-evolving tax requirements.

The post Corporate Tax Roundup: CAMT Regulations, Stock Repurchase Excise Tax, and Other Key Developments appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• President Biden has signed the Inflation Reduction Act of 2022 into law.
• This large package contains many new tax credits to incentivize taxpayers to “go green” with energy from renewable resources while simultaneously receiving financial relief.
• It also extends or adds to currently existing credits for additional tax-saving opportunities.

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On August 16, President Joe Biden signed the Inflation Reduction Act (IRA) of 2022 into law. Within the large tax reform package are numerous “green” tax credits focused on providing financial relief to taxpayers while incentivizing them to make sustainable choices and combat climate change.

These new credits are aimed at motivating taxpayers to use energy from renewable sources, prioritizing options like wind and solar. The IRA also introduces new credits and strengthens or extends existing credits that provide tax relief for purchasing new and used clean-energy vehicles and installing energy efficient heating and cooling systems. Additionally, companies that cut their methane emissions can access certain credits, while those that do not could face penalties.

The rules and regulations around claiming these green credits can be complicated. In this article, our Tax Credits and Incentives team breaks down how individuals and organizations can capitalize on these tax saving opportunities.

Swap Gas Guzzlers for an Electric Vehicle

Taxpayers that purchase a new or used “clean car” can qualify for this consumer tax credit. Vehicles considered clean are those that use a battery partly or fully manufactured in North America and built with materials extracted or processed in one of the countries currently in a free-trade agreement with the U.S.

Your income is a factor in how much you can reap in tax credits. If a taxpayer makes less than $150,000 annually (or has a combined family income below $300,000), the taxpayer can get up to $7,500 for new electric vehicles that qualify. Note the money would be applied at the point of sale, so the taxpayer’s monthly payments would be lowered (as opposed to reducing the tax bill months down the line).

Previously, the federal tax credit for electric vehicles did not include cars from manufacturers that already sold at least 200,000 models (GM, Toyota, and Tesla were excluded). This bill unravels that; instead, there is now a price threshold per vehicle. To qualify for the credit, bigger vehicles like SUVs, pickup trucks, and vans would have to cost less than $80,000 to qualify for the credits. Smaller vehicles are capped at $55,000. So, if you have your eye on a super sporty electric vehicle, you may be out of luck.

Taxpayers can also get $4,000 off a used electric vehicle if it is sold by a dealer for $25,000 or less — but only if they individually make up to $75,000 annually or $150,000 jointly. The addition of credits for used electric vehicle purchases is a win for the industry, and advocates of the bill are hopeful that this incentive will encourage an increase in electric vehicle adoption.

Modifying Your Home to be More Energy Efficient

To incentivize taxpayers to make their homes more energy efficient, the bill’s $4.28 billion High-Efficiency Electric Home Rebate Program provides rebates for low- and moderate-income households when they replace fossil-fuel boilers, furnaces, water heaters, and stoves with more efficient electric devices powered by renewable energy.

Some taxpayers will need to upgrade their electrical panels before they are able to install the new appliances. They can take advantage of up to $4,000 to do so. Furthermore, if they are interested in making their home generally more energy efficient, they can capitalize on a rebate of up to $1,600 given to seal and insulate their house, as well as up to $2,500 to improve their home’s wiring.

In terms of appliances, taxpayers can get up to $8,000 to install heat pumps that both heat and cool their home, plus as much as $1,750 for a heat-pump water heater. To offset the cost of a heat-pump dryer or electric stove, taxpayers can claim up to $840. It is estimated by making these changes, they can save significantly on their future energy bills.

There are several parameters for these rebates. First, the program runs through September 30, 2031 — so you do have time to implement these changes to your home. The maximum amount taxpayers can collect is $14,000, and to qualify, their household income cannot exceed $150% of the median income in the area they live. For those who do not qualify, there is a tax credit of up to $2,000 available to install heat pumps, plus up to $1,200 annually to install new windows, doors, or an induction stove.

Save When Installing Solar Panels

Lastly, taxpayers can collect a 30% tax credit for installing residential solar panels through December 31, 2034. The credit decreases to 26% if you wait until after December 31, 2032. Taxpayers can also install solar battery systems to qualify for the tax credit.

New “Green” Tax Credits

There are other ways taxpayers can take advantage of going green. Here are some of the new tax credits to capitalize on:

Doubling of R&D Tax Credits for Small Business Startups — Would potentially allow recipients to double the amount they can claim on any R&D tax credits (from $250,000 to $500,000 per year against payroll taxes).

Zero Emission Nuclear Power Production Credit — Provides a new business credit for electricity produced by a taxpayer at a qualified nuclear power facility before the date of enactment.

Sustainable Aviation Fuel Credit – Creates a new business credit for each gallon of sustainable aviation fuel sold or used as part of a qualified fuel mixture. The credit equals the number of gallons of sustainable aviation fuel in the mixture multiplied by the base amount of $1.25. There are increases available if the taxpayer meets certain greenhouse gas emissions reductions, and it applies to fuel sold or used in 2023 and 2024.

Production of Clean Hydrogen Credit — Given to producers of clean hydrogen during the ten-year period beginning on the date a qualifying facility is originally placed in service. It applies to clean hydrogen produced after 2022.

Advanced Manufacturing Production Credit — Provides a new production credit for each eligible solar energy component, wind energy component, eligible inverter, qualifying battery component, and applicable critical mineral produced by a taxpayer in the U.S. (or in U.S. possession and sold to an unrelated person). It applies to components and minerals produced and sold after 2022.

Clean Electricity Production Credit — New business credit for clean electricity facilities placed in service after 2024 (where the greenhouse gas emissions rate is not greater than zero). The credit amount equals the kilowatt hours of electricity produced and sold multiplied by the base amount of 3 cents or 1.5 cents. The credit will phase out one year after the later of 2032 or the year when annual greenhouse gas emissions from U.S. production are equal to less than 25% of the 2022 emissions rate (whichever comes first).

Clean Electricity Investment Credit — New investment credit for clean electricity property investments in energy storage technology and qualified facilities placed in service after 2024 where the greenhouse gas emissions rate is not greater than zero. It phases out after the later of 2032 or when the annual greenhouse gas emissions from U.S. electricity production are equal to or less than 25% of the 2022 emission rate (whichever comes first).

Clean Fuel Production Credit — Creates a business credit for the clean fuel a taxpayer produces at a qualifying facility and sells for qualifying purposes. The fuel must meet certain emissions standards.

Extension and Modification of “Green” Tax Credits

Several tax credits already in existence were extended and modified in the Inflation Reduction Act. They include:

Renewable Electricity Production Tax Credit (PTC) — Extends the beginning of construction deadline for certain renewable electricity production facilities through the end of 2024, as well as reduces the base amount of credit with the potential to qualify for five times that amount. It applies to facilities placed in service after 2021, and increases the credit amounts for domestic content, energy communities, and hydropower.

Energy Investment Tax (ITC) — Extends the beginning of construction deadline for some types of energy property, including qualified fuel cell property, for one year through the end of 2024. It extends the beginning of construction deadline for geothermal equipment through the end of 2034 and permits the credit for new types of energy property like energy storage technology, microgrid controller property, and qualified biogas.

Carbon Oxide Sequestration Credit — Extends and enhances carbon oxide sequestration credits for qualified industrial facilities and direct air capture facilities IF construction begins before 2033. It also lowers the minimum carbon capture requirement, and generally applies to those facilities and equipment placed in service post-2022.

Tax Credits for Biodiesel, Renewable Diesel, and Alternative Fuels — Extends these tax credits through 2024 and apply to fuel sold or used after 2021.

Second Generation Biofuel Credit — Extends tax credits to second generation biofuel through 2024 and applies to second generation biofuel production after 2021.

Nonbusiness Energy Property Credit — Extends this credit through 2023, as well as changes the credit rate to 30% for both qualified energy efficiency improvements and residential energy property expenditures. It replaces the $500 lifetime limit with a $1200 annual limit, modifies the limits for specific types of property, and modifies standards for qualified energy efficiency improvements on property placed in service after 2022.

Residential Energy Efficient Property Credit — Extends the residential energy-efficient property credit through 2034 and replaces the credit for biomass fuel property expenditures with a new credit for battery storage technology expenditures on those made after 2022.

New Energy Efficient Home Credit — Extends the business credit for contractors who manufacture or construct energy efficient homes through 2032. It applies to dwellings acquired by the contractor after 2022.

Alternative Fuel Vehicle Refueling Property Credit — Extends the tax credit through 2032 and increases the credit limit to $100,000 per item of depreciable refueling property and $1,000 per item of non-depreciable refueling property.

Advanced Energy Project Credit — Extends the competitively awarded investment tax credit for clean energy and energy efficiency manufacturing projects. It provides as much as $10 billion of new credit allocations effective in early 2023.

Increase in Energy Credit for Solar and Wind Facilities — In order to qualify, one must have a maximum net output of less than five megawatts and must be in a low-income community, on American Indian land, or part of a low-income residential building project (or low-income economic benefit project), effective in early 2023.

Reinstatement of Superfund Hazardous Substance Financing Rate — Reinstates a financing rate on crude oil and imported petroleum products at a rate of 16.4 cents per gallon through 2032.

Our Perspective on the Inflation Reduction Act’s Tax Credits

Looking ahead, it is imperative that you are ready to capitalize on these tax credits. Getting into the weeds with some of the qualifications, however, could prove challenging, and working with a professional services firm could make all the difference in ensuring you take advantage of the credits you qualify for.

At MGO, our dedicated Tax Credits and Incentives team brings more than 30 years of experience in helping you structure your expenses in a way that will help you acquire appropriate documentation, assist in calculating and claiming credits, and maximize the amount you can receive. Our full-service firm, led by experienced CPAs and attorneys, provides a holistic approach to examining your organization and determining how you can best reach your goals.

The post Your Guide to Green Tax Credits in the Inflation Reduction Act appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Increasing Internal Revenue Service (IRS) budget
• Implementing a corporate tax minimum
• Instituting and increasing tax credits focused on investing in green technologies

Notable items that were not addressed in the IRA include removing the $10,000 SALT cap and mandatory capitalization of research and development (R&D) expenses, both provisions of the Tax Cuts and Jobs Act of 2017.

The bill is over 300 pages in length with a number of wide-ranging components. In the following summary we’ll provide the key points that will be affecting taxpayers in the coming years.

Additional Funding to the IRS for Tax Enforcement

One of the most talked-about provisions involves increased funding for the IRS.

Key Details:

• Approximately $80 billion in funding over the next 10 years for tax services, operations support, business system modernization, and enforcement
  • Enforcement – $46 billion
  • Operations support – $25 billion
  • Business systems modernization – $5 billion
  • Taxpayer services – $3 billion
• An estimated $124 to $200 billion will be generated from enforcement and compliance efforts
• Enforcement is focused on taxpayers – both corporate and non-corporate – with income greater than $400,000

Extension of the Business Loss Limitation of Noncorporate Taxpayers

The IRA extends the excess business loss limitation for noncorporate taxpayers.

Key Details:

• Two year extension on IRC Sec. 461(l) until December 31, 2028
• IRC Sec. 461(l) limits noncorporate taxpayers from deducting business losses above thresholds that are annually indexed for inflation
• These limits are $540,000 for married filing jointly and $270,000 for single and married filing single for the 2022 tax year
• Suspended amounts are converted to net operating losses and may be able to be used in subsequent years

Excise Tax on Repurchases of Corporate Stock

The IRA includes a 1% excise tax on stock repurchases by domestic public companies listed on an established securities market. The tax applies to repurchases executed after December 31st, 2022.

Key Details:

• 1% excise tax on the full market value (FMV) of stock repurchased by publicly traded US corporations
• Will impact redemptions and certain acquisitions and repurchases of publicly traded foreign corporation stock
• Not an income tax for purposes of ASC 740
• Includes special rules for “applicable foreign corporations” and “surrogate foreign corporations”
• Notable exceptions:
  • Stock is contributed to employer sponsored retirement plan
  • Stock repurchase is part of a corporate reorganization
  • Total value of stock repurchased during the taxable year does not exceed $1 million
  • Repurchase by securities dealer in ordinary course of business
  • If the repurchase qualifies as a dividend
  • If the repurchase is by a regulated investment company (RIC) or a real estate investment trust (REIT)

15% Corporate Alternative Minimum Tax

The IRA reinstates the corporate alternative minimum tax (AMT) for large corporations, which had been previously eliminated by the Trump Administration’s Tax Cuts and Jobs Act.

Two key elements to note is that this revised AMT only impacts corporations with annual profits exceeding $1 billion, and includes carve-outs for certain manufacturers and subsidiaries of private equity firms.

Key Details:

• 15% tax on adjusted financial statement income (i.e., this would be a book minimum tax)
• Affects tax years beginning after December 31, 2022
• Applies to corporations with profits over $1 billion based off adjusted financial income
• For US corporations with foreign parents, it would apply to income earned in the US of $100 million or more of average annual earnings in three prior years and where the overall international financial reporting group has income of $1 billion or more
• Treatment of split offs remains uncertain. Even though these are tax-free reorganizations for tax purposes, gain is recorded for financial accounting purposes
• Joint Committee on Taxation expects that this new tax would apply to only about 150 corporate taxpayers, approximately equal to 30% of the Fortune 500

Tax Credit Additions and Modifications

A significant number of provisions add or enhance credits and incentives that pertain to domestic research and green energy initiatives. Noteworthy changes include:

Increased Small Business Payroll Tax Credits for Research Activities:

• Qualified payroll tax credit for increasing research activities raised from $250,000 to $500,000
  • First $250,000 will be applied against the FICA payroll tax liability. Second $250,000 will be applied against the employer portion of Medicare payroll tax.
  • Applies for taxable years beginning after December 31, 2022
  • Limited to tax imposed for calendar quarter with unused amounts being carried forward
• Qualifying small businesses are required to have less than $5 million in gross receipts in current year and no gross receipts prior to the 5 year period ending with the current year

Green Initiative Tax Credits and Incentives:

• Credits for purchasing new and previously-owned clean vehicles
• Extension of IRC Sec. 45L – New Energy Efficient Home Credit – extended to qualified new energy efficient homes acquired before January 1, 2033. Increase value of available credit for single-family homes to $2,500 and modified the credit available for multi-family homes.
• Extension, increase, and modifications to IRC Sec. 25C nonbusiness energy property credit
• Extension and modification of IRC Sec. 25D residential clean energy credit
• IRC Sec. 48 energy credit for businesses and investors
  • Expansion of qualifying property, extension of credit including phasedown and phaseout rules, and introduction of incentives
• Credit for producing energy from renewable sources (IRC Sec. 45)
  • Retroactive for facilities placed in service after December 31, 2021
  • Extends beginning of construction deadline to projects beginning construction before January 1, 2025 including solar energy facilities
• Increased energy credit for solar and wind facilities in certain low-income communities
• New credit for clean hydrogen production
• New credit for zero-emission nuclear power
• Extension of incentives for biodiesel, renewal diesel, and alternative fuels
• Extension of biofuel producer credit
• New income and excise tax credits allowed for sustainable aviation fuel
• Modification of IRC Sec. 179D – Energy Efficient Commercial Buildings Deductions
  • Modification of building qualifications
  • Deduction increased from $1.88 per square foot to up to $5 per qualified square foot
• Changes in depreciation for certain green energy properties

Final Thoughts

The Inflation Reduction Act should have wide-ranging impacts on taxpayers, especially large corporations and high-net-worth individuals. In the coming weeks our tax leaders will dive into the specifics of the legislation, outline immediate and long-term impacts, and provide tax-planning strategies and considerations.

The post Key Tax Highlights from the Inflation Reduction Act appeared first on MGO CPA | Tax, Audit, and Consulting Services.