Markets Wired

As Prepared for Delivery

Good afternoon – thanks for joining today.  

The Inflation Reduction Act is an historic piece of legislation—the most significant investment in our economy and energy security in a generation, and the most significant investment to fight climate change in our history. 

With most of the law’s tax incentives in effect in 2023, implementation of this historic law has required an unprecedented pace of implementation for the Office of Tax Policy and our partners across Treasury and the Administration.  

These timelines kicked off an initial sprint to implement the Inflation Reduction Act’s clean energy credits. Across Phases One and Two of our implementation, Treasury and the Office of Tax Policy focused on providing initial guidance and proposed rules on most of the core clean energy provisions of the Inflation Reduction Act. The incentives in the law, and the clarity provided by the guidance published so far, are already supercharging private investment in clean energy generation and manufacturing. 

Treasury is now launching Phase Three of our implementation. We will work to build on the investments announced so far, providing long-term stability for the market and incorporating additional feedback we have gathered from stakeholders. This will include both finalizing proposed rules, after consideration of robust feedback on the proposed rules, and providing clarity and certainty on other key Inflation Reduction Act provisions, including those that we have not yet addressed.

Before detailing Phase Three, I’ll take a step back and recap some of the progress we’ve made to date.  Starting with the punchline – we have issued over 50 pieces of guidance totaling over 1,800 pages.  This guidance has provided clarity and certainty on most of the Inflation Reduction Act’s most pivotal clean energy provisions. 

We’ve come a long way.  We launched our regulatory implementation of the Inflation Reduction Act’s clean energy credits sixteen months ago with the understanding that the enormous scale and complexity of this implementation would require extensive stakeholder collaboration and consultation.  Accordingly, soon after President Biden signed the IRA, Treasury and IRS published detailed requests for public input on the new law’s many provisions that helped us identify and prioritize issues.

From there, we scoped out and delivered on an initial Phase One – focusing on the core elements needed to accelerate significant economic and climate benefits of the law.  These included proposed rules and other guidance on high-profile credits for electric vehicles, and on the novel cross-cutting bonus and credit monetization provisions in the IRA, which significantly enhance the available credit amounts and extend them to more recipients, including nonprofits, state and local governments, and other tax-exempt entities. 

As 2023 drew to a close, we completed Phase Two, which focused on boosting American manufacturing to create good-paying jobs and strengthening energy security. Both of these goals are enhancing our ability to lower costs and meet our economic and climate goals.

The law is already working as intended to drive private investment in clean energy generation and manufacturing, and it is creating jobs and economic opportunity in the process. Since passage of the law, companies have announced more than $140 billion of investment in building America’s clean energy economy across the country. 

Importantly, research from our colleagues in Treasury’s Economic Policy office shows that IRA investments are delivering more clean investment to left-behind places – communities at the forefront of fossil fuel energy production, and those that have benefited least from the economic growth of the past few decades.  Moreover, these investments are lowering everyday energy and transportation costs for consumers, who are responding by changing their purchasing preferences.  Americans bought electric vehicles in record numbers in 2023, and that momentum is expected to continue. 

With this momentum in mind, we are kicking off Phase Three. This early surge of investment has been incredible to see – and it is just the beginning of these credits’ potential. These long-term investments will last well into the 2030s, so it is critical to lay a foundation now that will set sound, workable rules, and encourage robust market development for years to come.

Thus, the core priority for Phase Three is to build on the foundational investments made to date by providing long-term stability for the market and by incorporating the helpful feedback we have gathered from stakeholders.

In the first several months of this year, we will address key issues that have arisen during the implementation process, particularly in response to our Phase One guidance. We expect to issue further guidance, including final rules, on several important provisions for which we have already proposed rules – such as the novel credit monetization provisions, elective pay and transferability.  

Last June, we issued proposed and temporary rules on the IRA’s groundbreaking “credit monetization” provisions – elective pay and transferability – and one of our priorities for 2024 is to finalize those rules. Elective pay is an important tool for catalyzing investment because, by bringing governments and nonprofits into the clean energy credit market, they act as a force multiplier for the IRA’s other credits. Transferability is a new tool that will help more businesses finance clean energy investments. We have engaged with thoughtful stakeholder feedback and are rapidly progressing towards issuance of final rules to lock in investor certainty. 

Already, over 200 entities have registered to use elective pay or transferability and submitted pre-filing registrations for more than 1,600 projects, showing IRA’s immediate impact and its great potential.

We are also very grateful for the feedback we have received following initial guidance on the various cross-cutting provisions, such as the Energy Communities and Domestic Content bonuses, and the Prevailing Wage and Apprenticeship requirements. We are grateful for all of the input we have received and we are considering how to best address this feedback in additional guidance during this next phase. 

We are also looking at what needs to be done to provide further clarity on the tax credits for clean vehicles based on feedback we have received from stakeholders. The clean vehicles provisions play an important role in extending the reach of the IRA’s credits and lowering transportation costs for everyday Americans.  

Guidance that we issued in October has enabled consumers to benefit from the 30D Clean Vehicle Credit upfront, as a down payment toward the price of their car, rather than having to wait until they file their taxes the following year.  Based on the sales reports to the IRS so far this year, more than 70% of consumers are using this upfront option. Meanwhile, our proposed rules from December – on Foreign Entities of Concern restrictions for the new clean vehicles credit – will enhance American energy security by promoting a robust domestic supply chain of key electric vehicle inputs.  

In parallel with our efforts to address stakeholder feedback and provide follow-up guidance on key provisions, we will also continue to catalyze and scale innovative technologies. That means we will provide guidance on crucial credits, including: the 30C Alternative Fuel Vehicle Refueling Credit; the credit for Sustainable Aviation Fuel; the next round of allocations for the 48C Advanced Energy Project Credit; and the Clean Electricity Production and Investment Credits – also known as the “tech-neutral” credits – which represent the next generation of the Production Tax Credit (PTC) and Investment Tax Credit (ITC) that have been the bedrock of clean energy tax incentives for decades.

Earlier this month, we issued initial guidance on eligible locations for the 30C Alternative Fuel Vehicle Refueling Property Credit – which will help create a network of electric vehicle chargers across the country, and especially in rural and low-income areas.  To help businesses and consumers, we also worked with the Department of Energy to release a mapping tool displaying eligible locations for the credit.  We intend to release further guidance on this provision during the coming months, to provide clarity to stakeholders and thereby catalyze the development of a robust network of electric vehicle chargers.

As previously announced, we plan to provide additional guidance on the tax credit for Sustainable Aviation Fuel (SAF), which will help lower emissions from one of the most difficult-to-abate industries.  Our partners across the administration are currently working to modify DOE’s “GREET” model so that producers can use it for the tax credit, in addition to the methods approved under prior guidance.  

We will also issue a notice establishing the second round of allocations for the 48C Qualifying Advanced Energy Project Credit.  This program furthers our ongoing priority of expanding U.S. manufacturing capacity and quality jobs in clean energy, as well as increasing the resilience of secure, domestic supply chains for critical materials.  Because at least $4 billion of this credit’s $10 billion of tax credits must be allocated to coal communities, this program is critical to the IRA’s goal of promoting broad-based economic opportunity across the country.  Our first funding round last year – which was reviewed by our partners at the Department of Energy – saw immense interest.  About 850 projects sought nearly $42 billion in credits. In the coming months, IRS will make awards for the first-round credit allocation and open up a second round of capacity for allocation later this year. 

Lastly, one of the most consequential pillars of our Phase Three implementation will be initial guidance on the aforementioned “tech-neutral” credits.  The Clean Electricity Production Credit and Clean Energy Investment Credit were created by the Inflation Reduction Act to update the existing PTC and ITC for a new age and to account for emerging energy technologies.  The legacy PTC and ITC have helped to drive the explosive growth of the wind and solar industry.  Starting in 2025, the new PTC and ITC will provide incentives to eligible electricity facilities – regardless of technology – if they have a net greenhouse gas emissions rate of zero or less.  Our guidance on these credits will create a framework that allows future innovation in clean energy technologies – supporting American ingenuity, jobs, and energy security for the long haul.

This ambitious agenda represents some of our top priorities to ensure the investments in energy security and resilient supply chains continue to multiply – and those that have been announced come to full fruition. To recap: we will build on the progress made so far by incorporating additional feedback we have gathered from stakeholders on key provisions such as elective pay and transferability provisions, clean vehicles credits, and cross-cutting bonus provisions.  And we will continue to catalyze and scale innovative technologies with guidance on credits including the Sustainable Aviation Fuel credit; the next round of allocations for the 48C Advanced Energy Project Credit; and the critical Clean Electricity Production and Investment Credits.

I’ll close by reiterating some principles that hold true across all phases of our Inflation Reduction Act implementation.

First, as I’ve said many times before: In all of these efforts, we are working to ensure eligible families, nonprofits, and businesses have seamless access to these credits. The Inflation Reduction Act’s incentives will not achieve their goals unless they are accessible to those who qualify. 

This is why it is hugely consequential that the IRS recently launched Energy Credits Online, an online portal facilitating access to some of the most critical Inflation Reduction Act incentives.  Energy Credits Online has already begun facilitating access to credit monetization and the clean vehicles credits, demonstrating the critical importance of a strong and well-resourced IRS to achieve our climate and economic goals. Over 10,000 car dealers have registered with IRS Energy Credits Online, most of which are also registered to transfer clean vehicle tax credits at the time of sale. This upfront downpayment is critical to increasing electric vehicle adoption and supporting our country’s emission reduction goals. As I mentioned previously, we’ve also already seen more than 200 entities use IRS Energy Credits Online to register clean energy projects eligible for direct pay and transferability. 

In partnership with the Department of Energy, the IRS also launched applications for the Low-Income Communities Bonus credit, and the program has already awarded more than 500 megawatts of capacity.  In the coming months, we will also announce more information about the 2024 program year, prior to the opening of the second year of applications.

Building on numerous online IRS and Department of Energy resources related to the clean energy credits, Treasury also will soon launch an Inflation Reduction Act website, which consolidates user-friendly resources to help individuals, businesses and communities make the most out of credits for which they might be eligible. This is part of our broader engagement in communities across the country, sharing information through speaking engagements, webinars, and other media to spread the word that the IRA’s credits can unlock substantial new economic opportunity for communities, whether through expanded access to vital resources for local institutions like school districts, the creation of new businesses, high quality jobs, or access to capital.  We recognize the need for continued engagement and we will continue to work to drive long-term awareness and uptake of the clean energy tax credits.

Finally, I should note that the plans I’ve shared today are not exhaustive; the Treasury and IRS teams remain engaged on a number of other projects across the Inflation Reduction Act’s roughly 20 clean energy provisions, not to mention its other tax provisions.  We will circle back with additional updates later in the summer, including our plans for the remainder of the year, but expect our work in 2024 will continue to progress under these themes.

Until then, we and our partners across the Administration will be hard at work advancing the economic and climate benefits of the Inflation Reduction Act through clear, responsive, and expeditious guidance.  We will supplement these efforts by continuing to engage communities across the country. We are excited to share further progress soon.

Thank you.

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