Electric co-ops in the USA can access direct-pay tax credits to deploy innovative energy projects after the Treasury amended its income tax regulations.
Published on 3 March, the Treasury’s final rule is applicable to “any corporation operating on a co-operative basis that is engaged in furnishing electric energy to persons in rural areas”.
The National Rural Electric Co-operative Association (NRECA) welcomed the move, which will allow co-ops to benefit from both federal grants and loans and direct-pay credits.
“For the first time ever, electric co-ops are able to directly take advantage of the energy tax credits that were afforded to for-profit companies for years,” said NRECA legislative affairs director Paul Gutierre in an article on the apex’s website.
NRECA estimates that the direct-pay tax credits will reduce the cost of co-ops’ projects by at least 30%.
“In general, you can stack the tax credits on top of the grants without being penalised,” added Gutierrez.
However, co-ops will have to ensure the grant money received combined with the tax credit does not exceed the total cost of the project to avoid the tax credit amount being reduced.
The Internal Revenue Service (IRS) has created a portal co-ops can use for pre-file registration for direct-pay tax credits for eligible projects.
“As with any new programme, there will be a little bit of a learning curve,” Gutierrez said. “But I think these tax credits will help spur co-op investment in energy technologies.
“A lot of co-ops are already looking at a variety of new energy generation and energy storage projects. They want to use these credits to help offset the costs. And these credits really cover a wide variety of fuel sources, including nuclear plants and carbon capture in addition to the renewables and storage.”
