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FACT SHEET: Four Ways the Inflation Reduction Act’s Tax Incentives Will Support 

Building an Equitable Clean Energy Economy 

The Inflation Reduction Act of 2022 represents the most significant legislation to combat climate 

change in our nation’s history. It will drive investment and dynamic economic growth, create 

new opportunities for workers by supporting good-paying jobs, and lower costs for American 

families as we build a clean energy economy. The Inflation Reduction Act also promotes broadbased economic opportunity, including in low-income communities, energy communities, and 

communities that have borne the brunt of pollution. 

The U.S. Department of the Treasury will be at the forefront of implementation, delivering $270 

billion in tax incentives as part of the $369 billion the Inflation Reduction Act dedicates to 

combating climate change. Treasury will engage a broad spectrum of taxpayers and stakeholders 

to inform implementation of this landmark legislation, in order to accelerate the building of a 

clean energy economy while working to ensure no community is left behind. 

At today’s Freedman’s Bank Forum, senior Treasury officials hosted a roundtable in which 

participants discussed how Treasury’s implementation of climate and clean energy tax incentives 

in the Inflation Reduction Act will help to mobilize capital for critical climate-related 

investments in low-income and under-invested communities, expand the clean energy economy 

for businesses and workers in these communities, and lower costs for working families. Building 

on that discussion, this fact sheet outlines four ways the Inflation Reduction Act’s tax incentives 

will support building an equitable clean energy economy.

Note: The following descriptions are meant to provide a high-level overview of available tax 

incentives under the Inflation Reduction Act and do not constitute tax guidance. For more 

information on these provisions, their effective dates, and associated requirements, please see 

forthcoming guidance from the Internal Revenue Service. 

First, the Inflation Reduction Act will provide targeted incentives to drive investment and 

create opportunity in communities across the country. 

As Secretary Yellen has said, the Biden Administration’s economic plan “embraces the notion 

that some of the best opportunities for growth occur when we invest in people and places that 

have been forgotten and overlooked.” The Inflation Reduction Act’s climate and clean energy 

tax incentives were designed to further this approach, and will provide bonuses for investing in 

low-income communities, as well as in communities that have historically depended on the 

energy sector for jobs and economic activity. 

The Inflation Reduction Act modifies and extends the clean energy Investment Tax Credit to 

provide a 30 percent credit for qualifying investments in wind, solar, energy storage, and other 

renewable energy projects that meet prevailing wage standards and employ a sufficient 
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proportion of qualified apprentices from registered apprenticeship programs (discussed in greater 

detail in the next section). In connection with the Investment Tax Credit, the Inflation Reduction 

Act:

• Provides an additional investment credit to be allocated to projects in low-income 

communities, up to a total of 1.8 gigawatts of capacity developed annually 

o Projects located in low-income communities or on Tribal land are eligible for a 

bonus investment tax credit of 10 percentage points 

o Projects that are part of a qualified low-income residential building project or a

qualified low-income economic benefit project are eligible for a 20 percentage 

point bonus investment tax credit

• Provides a bonus credit of up to 10 percentage points for qualifying clean energy 

investments in energy communities

The Inflation Reduction Act modifies and extends the Renewable Energy Production Tax 

Credit to provide a credit of 2.5 cents per kilowatt-hour in 2021 dollars (adjusted for inflation

annually) of electricity generated from qualified renewable energy sources where taxpayers meet

prevailing wage standards and employ a sufficient proportion of qualified apprentices from 

registered apprenticeship programs. In connection with the Production Tax Credit, the Inflation 

Reduction Act:

• Provides a bonus credit of 10 percent for qualifying clean energy production in 

energy communities

The Inflation Reduction Act provides at least $4 billion from the Advanced Energy Project 

Credit – an allocated credit of up to 30 percent for advanced energy manufacturing investments 

– to projects in areas that have seen the closure of a coal mine or retirement of a coal-fired 

electric generating unit.

Second, the Inflation Reduction Act will encourage clean energy project developers to meet 

strong labor standards, so that the benefits of building a clean energy economy are felt by the 

workers making it happen. 

According to credible third-party estimates, the Inflation Reduction Act’s climate and clean 

energy tax incentives have the potential to drive investment that will support more than one 

million jobs in energy and related manufacturing sectors over the coming decade. Reflecting the 

Biden Administration’s commitment to supporting workers, the Inflation Reduction Act provides 

taxpayers with a strong incentive to meet high labor standards as they develop projects. By 

creating incentives for paying prevailing wages and utilizing qualified apprentices from 

registered apprenticeship programs in clean energy projects, the Inflation Reduction Act will 

help expand well-paying union jobs and support proven pathways into the industry that allow 

workers to earn while they learn. 

To receive increased credit and deduction amounts under the Inflation Reduction Act, taxpayers 

will need to:
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• Pay workers the local prevailing wage, defined in accordance with Department of 

Labor standards, for work on facility construction, as well as for alterations and repairs in 

a five-to-twelve-year period, depending on the credit, after a facility is placed in service 

• Hire a sufficient proportion of workers from registered apprenticeship programs, 

including hiring these qualified apprentices for at least 10 percent of the labor hours spent 

on facility construction, alteration, or repair work (rising to 12.5 percent for facilities 

where construction begins in 2023 and 15 percent in 2024 and later years)

The prevailing wage and apprenticeship provisions will apply to: 

• the Alternative Fuel Refueling Property Credit (§30C)

• the Production Tax Credit (§45, §45Y)

• the Credit for Carbon Oxide Sequestration (§45Q)

• the Credit for Production of Clean Hydrogen (§45V)

• the Clean Fuel Production Credit (§45Z)

• the Investment Tax Credit (§48, §48E)

• the Advanced Energy Project Credit (§48C)

• the Energy Efficient Commercial Buildings Deduction (§179D)

In addition, the prevailing wage provision will apply to:

• the New Energy Efficient Home Credit (§45L)

• the Zero-Emission Nuclear Power Production Credit (§45U)

The prevailing wage and apprenticeship provisions will become operative 60 days after Treasury 

issues guidance on those provisions.

For both the Investment Tax Credit and Production Tax Credit, the Inflation Reduction Act also 

provides bonus credits for meeting domestic content requirements, which will further support 

good-paying manufacturing jobs in the clean energy supply chain.

Third, the Inflation Reduction Act will lower the costs of energy-saving property 

improvements and rooftop solar installation, saving working families and small businesses 

money on their monthly utility bills and empowering families and businesses to shield 

themselves from volatile fossil energy prices. 

Household energy costs are a significant burden for many families and small businesses across 

the country. And when events like Russia’s unprovoked and illegal invasion of Ukraine cause a 

fossil energy price spike, low- and moderate-income families are often the hardest hit. Small 

businesses likewise face pressure as volatile energy prices eat into their profits. As we expand 

the clean energy economy, a typical family will save hundreds of dollars per year on their energy 

bills, and small businesses will be able to take advantage of programs to cut their energy costs by 

improving energy efficiency in their facilities. The Inflation Reduction Act will also provide 

direct assistance to American families investing in their homes to lower their energy bills and
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shield themselves from future volatility in fossil energy prices. Specifically, the Inflation 

Reduction Act will:

• Extend and expand the Energy Efficient Home Improvement Credit, providing a total 

credit of up to $1,200 annually for installing insulation or efficient windows and doors, 

with a special credit of as much as $2,000 for electric heat pumps that provide superefficient heating and cooling, including a $150 credit for a home energy audit conducted 

by an inspector to help determine the best home improvement options

• Extend the Residential Clean Energy Credit, ensuring that households will be able to 

continue receiving a tax credit to cover up to 30 percent of the costs of installing rooftop 

solar and, starting next year, battery storage, through at least 2034

• Expand the Energy Efficient Commercial Buildings Deduction so that the level of a 

building owner’s deduction increases as the cost savings generated by energy efficiency 

investments increases, which will reward greater energy efficiency 

For more information on these tax credits as well as related rebates administered by the 

Department of Energy, please visit CleanEnergy.gov. 

Fourth, the Inflation Reduction Act allows state, local, and Tribal governments, as well as 

non-profit organizations and other tax-exempt entities, such as rural electric co-operatives, to 

receive certain tax credits as payments, expanding the range of actors that will have a direct 

incentive to invest in their communities. 

The Inflation Reduction Act recognizes that state, local and Tribal governments, as well as nonprofit organizations and other tax-exempt entities, have played and will continue to play a central 

role in making investments to build a clean energy economy. To further promote broad-based 

investment across the country, the Inflation Reduction Act allows these actors to receive certain 

tax credits as direct payments from the Internal Revenue Service, streamlining these entities’ 

access to key incentives and supporting their investments in local communities. 

State, local, and Tribal governments, as well as non-profit organizations and other tax-exempt 

entities, may elect to receive the following credits as direct payments:

• the Alternative Fuel Refueling Property Credit (§30C)

• the Production Tax Credit (§45, §45Y)

• the Credit for Carbon Oxide Sequestration (§45Q)

• the Zero-Emission Nuclear Power Production Credit (§45U)

• the Credit for Production of Clean Hydrogen (§45V)

• the Credit for Qualified Commercial Clean Vehicles (§45W, tax-exempt entities only)

• the Advanced Manufacturing Production Credit (§45X)
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• the Clean Fuel Production Credit (§45Z)

• the Investment Tax Credit (§48, §48E)

• the Advanced Energy Project Credit (§48C)