Senate Democrats on Wednesday night released the draft text of the Inflation Reduction Act of 2022 (the Act). The Act includes a number of provisions related to renewable energy tax incentives.
The Act would reinstate the full investment tax credit (ITC) rate of 30% and the production tax credit (PTC) rate of 1.5 cents per kWh (subject to inflationary adjustments) for projects on which construction begins before January 1, 2025.
Additionally, the Act would adopt new provisions that would, in effect, extend the ITC and PTC at their full credit rates for projects placed in service in 2025 or later and on which construction begins before 2033. Projects would only be eligible for these credits if the greenhouse gas emissions rate for such projects is not greater than zero.
Following are several notable features of the Act:
Senate Democrats intend to vote on the Act through the budget reconciliation process, which would permit the legislation to pass with a bare majority vote in the Senate. If there is no Republican support for the Act, all 50 Democrats in the Senate would need to vote for the measure, and Vice President Kamala Harris would be required to cast the tiebreaking vote. Majority Leader Chuck Schumer intends to hold a Senate vote during the first week of August and, if the Act passes the Senate, the bill would then go to the House. President Biden has indicated that he supports the Act, but it remains to be seen whether the Act will garner sufficient support in the Senate and House. Additionally, because the Act will be subject to the budget reconciliation process, it will be subject to what is known as the “Byrd Bath.” Basically, the Byrd Bath requires that provisions in a reconciliation bill not be “extraneous.” This means that the provisions must have a budgetary effect that is more than “merely incidental.” In the end, whether a provision is “merely incidental” is decided by the Senate’s Parliamentarian who has considerable discretion in making the determination. If the Parliamentarian concludes that a provision violates the Byrd Bath rules, the provision will be taken out. It is not clear if all of the provisions in the Act will survive the Byrd Bath.
Foley will continue to monitor these developments, including any changes to the draft Act, as this legislation progresses through Congress.