The Inflation Reduction Act (IRA), signed into law on Aug. 16, includes several important provisions that will impact CPAs and their clients, including Medicare benefit expansions and a 15% corporate minimum tax. However, if pressed to summarize the overall theme of the bill in two words or less, those words would be “clean energy”. From the high level, the IRA addresses renewable energy through a host of tax incentives that, while lacking some detail and immediate effectivity, you should be prepared to address with your clients who will undoubtedly be interested and looking for guidance. Luckily, the accounting profession is accustomed to weathering the winds of change, and tax policy.
Despite many provisions within the IRA not being fully developed, Deb Rood, consulting director of risk control for CNA, an underwriter for the AICPA Professional Liability Insurance program, recently explained the importance of CPAs gaining familiarity with the bill to Accounting Today. “Almost two-thirds of professional liability claims are for failure to properly advise clients or for providing incorrect advice," she says. "The IRA has a lot of green energy provisions, and clients will expect the CPA to tell them about the opportunities. If the CPA doesn't, a claim might arise1."
That may seem an extreme incentive, but misinformation is the last thing any financial advisor wants attached to their reputation. Further, being proactive is the best way to get ahead of the curve and create a competitive edge when it comes to realizing new savings included within, let us be frank, the ever-changing tax code. In fact, PwC may have already found two such opportunities within the IRA for asset managers. “The extension, expansion, and flexibility of the current renewable energy tax credit regime provides needed certainty for asset managers and developers with respect to the impact and availability of these credits on future deals,” reads their report, adding that the IRA also monetizes tax credits by making refunds and transfers of certain credits possible2.
What other opportunities exist and, further, without formal guidance, how does one prepare to advise clients on how to take advantage of IRA tax credits, including those with future effective dates in 2024? The first step is to gain as much familiarity with the IRA as possible, just as Rood suggests. Luckily, several overviews and summaries of the bill already exist from a multitude of reliable sources, including The CPA Journal. Once you know what the IRA’s major components include, from its electric vehicle credits to its renewable electricity production provisions, additional preparation can be done by tapping the resources of your state society. Indeed, the MICPA has been tracking the IRA and developments surrounding its tax provisions closely and is already planning ahead – just like you!
Our new course collection can help you keep up with the latest and most relevant updates on the many tax provisions included within the IRA, available now on the MICPA Store!