When the Inflation Reduction Act (IRA) was signed in August 2022, it was the largest climate change legislation ever enacted, providing $369 billion in tax incentives and grant and loan programs. “The nice thing about the IRA is it allows nonprofit hospitals to benefit even though they don’t pay taxes,” says Kara Brooks, MS, LEED AP BD+C, senior associate director of sustainability for the American Society for Health Care Engineering (ASHE).
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Anne Levin-Nussbaum, a member of the Mintz law firm’s practices for tax and for energy and sustainability practices, says, “The IRA allows a nonprofit to elect direct pay, [a tax refund (i.e., cash) equal to the value of the tax credit] for many energy tax credits, which gives nonprofit hospitals the ability to benefit from tax incentives even though they do not owe taxes — something they could not do previously.”
For-profit hospitals can monetize tax credits without tax equity financing by selling these credits for cash, which isn’t taxed as income and doesn’t monetize depreciation. Levin-Nussbaum believes this is a huge game-changer because such financing was often too complex for hospitals to pursue. “The ability to transfer tax credits really opens up the hospital market for solar and other clean-energy generation. It’s almost like earning subsidies for installing such systems,” she says.
Other incentives include energy storage and charging stations. The IRA reinstated and increased the tax credit for charging stations in public garages up to $100,000 per station.
“Bond financing can finance some of these major investments at a lower cost once interest rates come back down,” says Brent Henry, a member of Mintz’s health law practice. With the IRA, properties financed with tax-exempt bonds no longer lose 100% of the tax credit.
“There’s going to be criteria around how to get that money … and a lot of this is still in the works,” says Brooks. ASHE plans to provide more IRA information to its members once the dust settles. In the meantime, the federal government has released “Building a Clean Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate Action,” which provides an overview of the IRA and details its tax incentives, investment programs and criteria for eligibility. It is free and available online at whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook.