34. The Inflation Reduction Act: How Community Banks Can Continue to Profit From Impactful Solar Investment
The Inflation Reduction Act (IRA) is a monumental piece of legislation meant to curb inflation, provide key funding for clean energy investment, and implement measures to advance environmental justice and build climate resilience at the community level. Signed into law by President Joe Biden on August 16th, it earmarks $369 billion for energy and climate change spending and is the largest investment in climate action the nation has ever made. It provides 10 years of stable and predictable policy to accelerate and de-risk investment in a more equitable clean energy future.
What does the IRA mean for the Solar Tax Credit and Community Banks?
With the IRA now law, the Investment Tax Credit (ITC) is now a 30% credit based on the total cost of a solar project or pool of projects. The 30% tax credit is now in effect for all projects that have been operational since the start of 2022 through the end of 2033. In addition, there are additional adders tied to solar that benefits low-income communities or projects developed with U.S. made products. It should also be mentioned that all tax credits received from a solar investment are realized within the same year the investment is made once the solar project becomes operational. For example, if you invested in a solar project in 2023, the tax benefits received (Tax Credits/Depreciation) are realized in the year 2023. In addition, the tax benefits can be carried back three years to cover tax liability or carried forward for 20 years to reduce future tax liability. In its essence, the IRA can help community bank investors significantly reduce tax liability, increase net income, and impactfully invest in a better clean energy future for all of our communities.
How can Sunwealth help?
The investment thesis of Sunwealth is to democratize the benefits of solar for all. We put capital to work in diverse communities and projects in 16 states that generate strong, replicable, and consistent returns for our investors. With over $300 million worth of community-based projects in our pipeline through 2023, we can help you put capital to work in truly impactful solar projects that will help increase profits for your institution, reduce carbon emissions, and provide significant energy savings to communities who need them most.
Get in touch to learn more about partnering with Sunwealth.
Darreck Mitchell is Director of Capital Markets at Sunwealth. He has over a decade of experience in financial services, sales management, and asset management distribution. When he’s not helping investors put their money to work, he can be found spending time with his wife and two young daughters.