New State and Federal Laws Create Opportunities for Renewable Energy in Illinois
A little more than a year has passed since the Climate and Equitable Jobs Act became law in Illinois, and the state can now benefit from additional clean energy resources under the federal Inflation Reduction Act.
The Climate and Equitable Jobs Act (“CEJA”) became law in September 2021, setting in motion Illinois’ transition to 100 percent clean energy by 2050. The legislation provided a prodigious increase of more than $350 million annually to fund renewable energy projects and committed $180 million in annual funding for equity-based transition programs supporting communities that will lose significant sources of employment as coal or gas-fired plants are shuttered.
The federal Inflation Reduction Act (IRA) was signed into law in August 2022, providing tax incentives up to $369 billion for new solar, wind, geothermal, biomass, energy storage, and other projects. The extension of the federal tax credits should reassure renewable project developers, contractors, and investors as well as create a new marketplace for the transfer or sale of tax credits.
Electric Vehicle Rebates - State and Federal
CEJA made rebates available to Illinois residents who purchase all-electric vehicles (EVs) from Illinois-licensed dealers. A $4,000 rebate is available for the purchase of an all-electric vehicle (not motorcycles) until July 1, 2026, when the rebate will decrease to $2,000. The EV purchase rebate will decrease, again, in 2028 to $1,000.. Rebates are subject to available funding and the current round of applications will be accepted by the Illinois Environmental Protection Agency (IEPA) until January 30, 2023. The rebate application and more information can be found on the IEPA website (https://www2.illinois.gov/epa/topics/ceja/Pages/Electric-Vehicle-Rebates.aspx).
The federal Inflation Reduction Act extended the light-duty EV tax credit (as much as $7,500 per vehicle) through December 2032. Pre-owned EVs will also be eligible for federal tax credits under the IRA, up to the lesser of $4,000 or 30% of the sales price.
Grants for Electric Vehicle Charging Stations
Under the new legislation, we should see a million electric vehicles on Illinois roads by 2030. Accordingly, there is a considerable need for EV charging station infrastructure. The IEPA is developing rules for a Charging Infrastructure Grant Program created by CEJA. Funding for charging station installation and maintenance costs will be available to public organizations and private companies.
Federal Investment and Production Tax Credits for Developers and Investors
The Inflation Reduction Act extends both the Production Tax Credit (PTC) and the Investment Tax Credit (ITC). The PTC, which originally expired in 2005 for solar, has been extended and also includes wind, biomass, geothermal, and landfill gas projects.
The ITC has been extended through December 31, 2025, for solar, wind, geothermal, biogas, microgrid and other projects for which construction will have started prior to December 31, 2025. Taxpayers can also claim the ITC for carbon capture and sequestration, clean hydrogen, and biofuel, as well as stand-alone energy storage projects and interconnection costs under the new law.
The IRA authorizes the sale or transfer of tax credits. Developers can now transfer (sell) Production Tax Credits and Investment Tax Credits to a third party for cash. The purchased credits can be carried forward, but cannot be resold or transferred a second time.
CEJA established equity-based transition programs for affected workers and impacted communities – the Displaced Energy Worker Bill of Rights and the Clean Jobs Workforce Network Program – to provide job training and career services across the state. Annual funding should be about $180 million. Similarly, the Inflation Reduction Act has wage and apprenticeship requirements for developers seeking to claim credits or enhanced credits under the Investment Tax Credit or Production Tax Credit. The IRA requires union labor or prevailing wages during the construction stage and for the first five years of operation for ITC, and the first ten years of operation for the PTC.
Developers may also qualify for enhanced ITC for projects sited in an “energy community,” which includes brownfield sites, areas that have or once had significant employment based on oil, gas, or coal, or a census tract with a coal mine or coal-fired electric generation plant that closed on or after December 31, 1999.
Recent Treasury Guidance
The U.S. Treasury Department on November 30, 2022, published guidance on, among other things, the prevailing wage and apprenticeship requirements including record keeping for projects begun on or after January 30, 2023.
To satisfies the apprenticeship requirements, the taxpayer must: (1) satisfy the Apprenticeship Labor Hour Requirements, subject to any applicable Apprenticeship Ratio Requirements; (2) satisfy the Apprenticeship Participation Requirements; and (3) comply with the general recordkeeping requirements, including maintaining books of account or records for contractors or subcontractors in sufficient form to establish that the Apprenticeship Labor Hour and the Apprenticeship Participation Requirements have been satisfied.
A Good Faith Effort Exception may be permitted where a taxpayer made a good faith effort in requesting qualified apprentices from a registered apprenticeship program in accordance with usual and customary business practices for registered apprenticeship programs in a particular industry. The taxpayer must maintain sufficient books and records showing the taxpayer requested qualified apprentices from a registered apprenticeship program and the program denied or failed to respond to such request.
The Climate and Equitable Jobs Act set in motion Illinois’ transition to 100 percent clean energy by 2050. More than a year in, the momentum continues to build, fueled by incentives and tax credits under the federal Inflation Reduction Act. Developers, contractors, and investors should be aware of the state and federal incentives, and benefit from the certainty of extended timelines and a new marketplace for tax credits that will create new opportunities for project construction, financing and acquisitions.