CHANGING LEGAL LANDSCAPE


Q&A on IIJA: How Contractors Can Leverage Federal Infrastructure Funding for Maximum Benefit


BY MICHELLE AKERMAN AND STUART EISLER, HANSON BRIDGETT LLP T


he 2021 Infrastructure Investment and Jobs Act (the “Infrastructure Act” or “the Act”) authorized


roughly $550 billion for federally-owned projects and approved state or local proj- ects receiving federal funding. Te Act earmarked funds for bridges,


roads, transit, railway, energy, and other infrastructure projects. The Inflation Reduction Act of 2022 (IRA) authorized approximately $700 billion in spending on a broad range of programs, including hundreds of billions for drought resiliency in western states, energy security and climate change. Together, this legislation authorizes


hundreds of billions for domestic infra- structure and energy projects; however, these funds come with strings attached, and a number of loopholes and exceptions throughout. Tis article presents critical questions and answers from five of Hanson Bridgett LLP’s leading attorneys on the effects of this legislation and how to leverage the funding and benefits in the most effective and profitable manner possible.


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CALIFORNIA CONSTRUCTOR MAY/JUNE 2023


TAX COMPONENT Q: How does the IRA allow taxpayers to monetize clean energy credits out- side traditional financing structures starting in 2023? A: Nancy Dollar: Te IRA allows tax- payers to sell all or a portion of eligible tax credits directly to an unrelated party. Eligible tax credits include the invest- ment tax credit under Internal Revenue Code (IRC) Section 48, the production tax credit under IRC Section 45, the al- ternative fuel credit under Section 30C, the carbon capture credit under section 45Q, the zero-emissions nuclear power production credit under Section 45U, the clean hydrogen production credit under section 45V, the advanced manufacturing production credit under Section 45X, the clean electricity production credit under Section 45Y, the qualifying advanced energy project credit under Section 48C, and the clean energy investment credit under Section 48E. Te new transferability regime estab-


lishes a market-based system for project owners to privately exchange credits for


cash at a discount. Proceeds from the sale of tax credits are not subject to federal income tax. Te seller retains ownership of the assets and continues to claim de- preciation after the sale of credits. In addition, under the “direct pay”


option, credits related to carbon capture, clean hydrogen, or manufacturing of components for renewable generation facilities are refundable for both taxable and tax-exempt entities. Other credits for renewable generation are refundable to tax-exempt entities only.


Q: What clean energy tax credit bonuses are now available under the IRA? A: Nancy Dollar: The IRA created a two-tiered system based on compliance with new wage and apprenticeship re- quirements. If a project meets the require- ments, the “base” credit amount can be increased by a factor of five. Additional bonuses are available for projects located in specified areas or that meet domestic content thresholds for U.S.-sourced steel, iron, and manufactured products.


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