In March 2023, MRSC printed Implementation Strategies for Climate Action and Sustainability Plans, Part 1. Within the first weblog, we checked out methods native governments are utilizing to implement their local weather motion plans — together with working with group companions and interesting residents via incentives and academic packages. Half 2 of this weblog sequence will deal with the funding mechanism out there to native governments for the implementation of their local weather motion and sustainability plans.
This weblog will deal with the numerous federal funding alternatives out there beneath the Inflation Reduction Act (IRA).
Inflation Discount Act (IRA)
The IRA was handed in 2022 as one in every of three main items of federal infrastructure laws spearheaded by the Biden administration, prioritizing environmental justice and deprived communities.
The IRA enhances the Bipartisan Infrastructure Law (BIL) and helps infrastructure initiatives centered on clear power and local weather resilience. The place the BIL focuses on offering infrastructure venture funding via grants, the IRA focuses on the usage of tax credit as a funding supply. The vast majority of the IRA funding is out there via tax credit, together with for people, companies, non-profits, and public entities. Funding dashboards and IRA guidebooks provide further perception into these funding mechanisms.
The general quantity the IRA gives in help to native governments is $47 billion. In broad phrases, a giant chunk of IRA cash will go towards making power cleaner and extra sustainable. The growth of tax credit is getting used as a instrument to encourage the usage of renewable electrical energy and to incentivize the manufacturing of unpolluted hydrogen and/or electric-powered automobiles, buildings, and industries. As a result of scale of the invoice, even the smaller components of the funding are significant.
5 goal areas of IRA funding out there to native governments embody Clear Power and Effectivity, Air Air pollution and Discount, Housing and Business Buildings, Agriculture, Forestry, and Rural Growth, and Workforce Growth.
Tax Credit for Native Governments
Most native governments pay little or no in taxes, so what worth is there in tax credit? To correctly distribute the funds out there via the IRA, the U.S. Division of Treasury (Treasury) and the Inside Income Service (IRS) created a novel mechanism for “elective pay distribution” that features clear power tax credit, enterprise tax credit, rebates and grants, and low-interest loans. Elective or “direct pay” permits tax-exempt authorities entities to monetize tax credit that might in any other case not be useable as a result of public entity’s tax-exempt standing.
If a neighborhood authorities locations a venture in service that might qualify for a tax credit score beneath the IRA, it should obtain direct money fee as much as the complete worth of the tax credit score. The Nationwide League of Cities has written concerning the new and expanded tax credits which can be eligible for the direct pay choice and methods to benefit from them. Direct pay gives an choice for native leaders to fund agency-owned clear power initiatives and can make initiatives extra reasonably priced for native governments.
The quantity of direct fee that an entity could possibly obtain might be elevated via bonuses. Bonuses could also be obtained by assembly prevailing wage and apprenticeship necessities, and targets associated to home content material, power communities, and low-income communities. Treasury not too long ago launched guidance on the important thing labor provisions beneath the IRA that permit for the improved clear power and local weather tax incentives.
A pre-filing registration course of have to be accomplished to benefit from the elective or direct pay provisions. The IRS has launched temporary guidance governing this course of. Along with the tax credit out there for eligible merchandise, the IRA permits for the mixture of different funding sources offering further avenues for companies to hunt funding.
Funding Search Ideas
Listed below are a couple of suggestions for native governments keen on pursuing an IRA-related grant:
- Using federal authorities funds have to be finished via www.grants.gov. Create a profile early and turn out to be conversant in the location.
- Guidebooks can enormously help in staying organized and understanding the completely different provisions set out within the IRA and the way they could be advantageous to your group.
- Join with company web sites to remain linked and obtain updates. Funding directories and dashboards present the newest data to assist the group.
- Throughout the planning levels of initiatives don’t neglect to fully learn the Discover of Funding Alternatives (NOFOs) to grasp funding packages and their particulars. This may permit a venture to be correctly designed and benefit from funding alternatives as a lot as potential. Native governments can observe open federal grant packages via the Authorities Finance Officers Affiliation’s (GFOA’s) NOFO Tracker
- Ensure you’ll be able to outline the underserved communities in your jurisdiction, together with their wants and issues, as this can help along with your funding search. The varied federal companies have completely different definitions of what qualifies as an underserved group, and the funding provided could also be restricted in its use primarily based on program necessities.
- Combine funding requests with the targets established in your Climate Action Plan.
- Search for partnership alternatives. Some packages beneath the IRA might prioritize or require native companies to associate with different public companies, nonprofits, or companies to qualify for the grant award.
- Contact the suitable funding company workers instantly. They could be a nice useful resource and are typically motivated and keen on seeing communities make the most of out there assets.
Conclusion and Further Assets
As a result of many of the IRA funding goes into monetary perks like tax credit, how a lot this helps relies on who can get these perks and the way they use them. Along with taking direct benefit of funding alternatives beneath the IRA, native governments ought to assist unfold the phrase about these incentives so enterprise homeowners, people, and different entities might benefit from the help.
Listed below are some IRA-related guidebooks from the White Home:
Listed below are federal company webpages tied to IRA funding alternatives: