Does Your Business Qualify for Tax Credits Under the Inflation Reduction Act?

Inflation Reduction Act's Individual, Small-Business Credits

The recently enacted Inflation Reduction Act of 2022 (PL 117-169) (the “Act”) contains several new environment-related tax credits that are of interest to individuals and small businesses. The Act also extends and modifies some preexisting credits.

Extension, Increase, and Modification of Nonbusiness Energy Property Credit

Before the enactment of the Act, you were allowed a personal credit for specified nonbusiness energy property expenditures. The credit applied only to property placed in service before January 1, 2022. Now you may take the credit for energy-efficient property placed in service before January 1, 2033.

Increased credit. The Act increases the credit for a tax year to an amount equal to 30% of the sum of (a) the amount paid or incurred by you for qualified energy efficiency improvements installed during that year, and (b) the amount of the residential energy property expenditures paid or incurred by you during that year. The credit is further increased for amounts spent for a home energy audit. The amount of the increase due to a home energy audit can't exceed $150.

Annual limitation in lieu of lifetime limitation. The Act also repeals the lifetime credit limitation, and instead limits the allowable credit to $1,200 per taxpayer per year. In addition, there are annual limits of $600 for credits with respect to residential energy property expenditures, windows, and skylights, and $250 for any exterior door ($500 total for all exterior doors). Notwithstanding these limitations, a $2,000 annual limit applies with respect to amounts paid or incurred for specified heat pumps, heat pump water heaters, and biomass stoves and boilers.

Extension and Modification of Residential Clean-Energy Credit

Before the enactment of the Act, you were allowed a personal tax credit, known as the residential energy efficient property (REEP) credit, for solar electric, solar hot water, fuel cell, small wind energy, geothermal heat pump, and biomass fuel property installed in homes in years before 2024.

The Act makes the credit available for property installed in years before 2035. The Act also makes the credit available for qualified battery storage technology expenditures.

Extension, Increase, and Modification of New Energy Efficient Home Credit

Before the enactment of the Act a New Energy Efficient Home Credit (NEEHC) was available to eligible contractors for qualified new energy efficient homes acquired by a homeowner before Jan. 1, 2022. A home had to satisfy specified energy saving requirements to qualify for the credit. The credit was either $1,000 or $2,000, depending on which energy efficiency requirements the home satisfied.

The Act makes the credit available for qualified new energy efficient homes acquired before January 1, 2033. The amount of the credit is increased, and can be $500, $1,000, $2,500, or $5,000, depending on which energy efficiency requirements the home satisfies and whether the construction of the home meets prevailing wage requirements.

New Clean-Vehicle Credit

Before the enactment of the Act, you could claim a credit for each new qualified plug-in electric drive motor vehicle (NQPEDMV) placed in service during the tax year.

The Act, among other things, retitles the NQPEDMV credit as the Clean Vehicle Credit and eliminates the limitation on the number of vehicles eligible for the credit. Also, final assembly of the vehicle must take place in North America.

No credit is allowed if the lesser of your modified adjusted gross income for the year of purchase or the preceding year exceeds $300,000 for a joint return or surviving spouse, $225,000 for a head of household, or $150,000 for others. In addition, no credit is allowed if the manufacturer's suggested retail price for the vehicle is more than $55,000 ($80,000 for pickups, vans, or SUVs).

Finally, the way the credit is calculated is changing. The rules are complicated, but they place more emphasis on where the battery components (and critical minerals used in the battery) are sourced.

Credit for Previously Owned Clean Vehicles

A qualified buyer who acquires and places in service a previously owned clean vehicle after 2022 is allowed an income tax credit equal to the lesser of $4,000 or 30% of the vehicle's sale price. No credit is allowed if the lesser of your modified adjusted gross income for the year of purchase or the preceding year exceeds $150,000 for a joint return or surviving spouse, $112,500 for a head of household, or $75,000 for others. In addition, the maximum price per vehicle is $25,000.

New Credit for Qualified Commercial Clean Vehicles

There is a new qualified commercial clean-vehicle credit for qualified vehicles acquired and placed in service after December 31, 2022.

The credit per vehicle is the lesser of: 1) 15% of the vehicle's basis (30% for vehicles not powered by a gasoline or diesel engine) or 2) the "incremental cost" of the vehicle over the cost of a comparable vehicle powered solely by a gasoline or diesel engine. The maximum credit per vehicle is $7,500 for vehicles with gross vehicle weight ratings of less than 14,000 pounds, or $40,000 for heavier vehicles.

Increase in Qualified Small Business Payroll Tax Credit for Increasing Research Activities

Under pre-Inflation Reduction Act law, a "qualified small business" (QSB) with qualifying research expenses could elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit against the employer's share of Social Security tax.

Due to concerns that some small businesses may not have a large enough income tax liability to take advantage of the research credit, for tax years beginning after December 31, 2022, QSBs may apply an additional $250,000 in qualifying research expenses as a payroll tax credit against the employer share of Medicare. The credit can't exceed the tax imposed for any calendar quarter, with unused amounts of the credit carried forward.

Extension of Incentives for Biodiesel, Renewable Diesel and Alternative Fuels

Under pre-Act law, you could claim a credit for sales and use of biodiesel and renewable diesel that you use in your trade or business or sold at retail and placed in the fuel tank of the buyer for such use and sales on or before December 31, 2022. Now you are permitted to claim a credit for sales and use of biodiesel and renewable diesel fuel, biodiesel fuel mixtures, alternative fuel, and alternative fuel mixtures on or before December 31, 2024.

You're also now allowed to claim a refund of excise tax for use of 1) biodiesel fuel mixtures for a purpose other than for which they were sold or for resale of such mixtures on or before December 31, 2024, and 2) alternative fuel as that used in a motor vehicle or motorboat or as aviation fuel, for a purpose other than for which they were sold or for resale of such alternative fuel mixtures on or before December 31, 2024.

Specific IRS guidance and details are still under development, but the wide variety of credit extensions and enhancements merit consideration for eligible taxpayers beginning in 2023.

If you would like to discuss or have questions about taking advantage of these new and modified tax credits, or other federal, state, or local tax law matters, please contact any attorney at Freeman Lovell that you know, or the authors of this Client Alert noted below.

Jeffrey C. Rambach, 312.929.4425, jeffrey.rambach@freeemanlovell.com

Peter G. Ness, 603.234.1142, peter.ness@freemanlovell.com

Disclaimer: This alert is provided for information purposes. It does not contain legal advice or create an attorney-client relationship and is not intended or written to be used and may not be used by any person for the purpose of avoiding penalties that may be imposed under federal or state tax laws. The information and explanations stated in this alert are based on initial consideration of the law after its enactment and may be subject to different interpretation of the law and its meaning and effect in the future.

RIFs and Furloughs, the Federal Way

By Adrienne Langmo • September 30, 2025
As the federal fiscal year draws to a close, thousands of federal employees face an unsettling possibility if a continuing resolution is not passed: not just another shutdown and temporary furlough, but permanent layoffs through Reduction in Force (RIF) notices. This week, the Office of Management and Budget (OMB) instructed federal agencies to consider issuing RIF notices to employees (if certain conditions are met) rather than the usual temporary Furlough notices issued during shutdowns. This is a big shift. But it does not mean layoffs are guaranteed. If they occur, federal employees are protected by a robust set of legal rights. There’s still a process before a RIF can be properly issued, complete with notice rights, retention rights, appeal rights and such other rights that the OMB does not purport to usurp. That said, we understand that the anxiety of this uncertain moment is real. Here are some tips to best prepare for the unknown, come the end of the federal fiscal year: Download Your eOPF, ASAP o Your electronic Official Personnel Folder may become inaccessible during a shutdown. Download it now to preserve your employment records. Download Your last 3 Performance Appraisals, ASAP o Include mid-year reviews and commentary. These documents may affect retention rights in a RIF. Also save records of other awards, commendations, and other notable performance records. Save Key Communications o Save emails, memos, or notices from HR or supervisors about your employment status or shutdown protocols. Ask Questions o Supervisors, HR, and union reps are navigating this too. Don’t hesitate to ask questions. If you receive a RIF notice or suspect you were subject to procedural violations, don’t hesitate to reach out to us for our advice. We are here to help. Shutdowns may be political. Your livelihood is personal. Let us help you safeguard it. -Adrienne Langmo, Partner

Demystifying FMLA

By Adrienne Langmo • September 12, 2025
If you're working for — or running — a business with under 50 employees, the Family and Medical Leave Act (FMLA) might seem like a distant federal regulation. But for eligible employees and covered employers, it’s a powerful tool for balancing work and life during major health or family events. Here's what you need to know. 🧩 The What The FMLA is a federal law that allows eligible employees to take up to 12 weeks of unpaid, job-protected leave in a 12-month period for specific family or medical reasons, including: The birth or adoption of a child Caring for a spouse, child, or parent with a serious health condition Recovering from a serious health condition themselves Certain military-related family needs The leave can be taken intermittently, in blocks, or in one long swath. During FMLA leave, employers must maintain group health benefits as if the employee were still working. When the leave ends, the employee is entitled to return to the same or an equivalent position. 👥 The Who FMLA is mandatory for employers with 50 or more employees within a 75-mile radius. So, if your business has fewer than 50 employees at a given location, you’re not legally required to offer FMLA leave —but you can choose to adopt similar policies voluntarily. Employees must also meet FMLA eligibility criteria: Worked for the employer for at least 12 months Logged at least 1,250 hours in the past year Work at a location with 50+ employees within 75 miles *State employees may have additional benefits provided under state law. Here, we’re discussing private employers and employees. 🛠️ Employer Takeaways Treating employees appropriately during their FMLA leave and upon their return can present some hurdles for employers and coworkers, particularly when an employee has been on leave for some time and, e.g., projects or programs have evolved in their absence. You don’t have to navigate these situations alone; we can provide your team with the tools and information necessary to smoothly navigate the full FMLA process and avoid any sticky FMLA retaliation or interference claims. And, even if you’re not legally bound by FMLA, offering comparable leave can be a smart move. It builds trust, boosts retention, and shows you value your team’s well-being. Consider crafting a voluntary leave policy that mirrors FMLA protections, including: Clear eligibility rules Defined leave duration Job protection guarantees Coordination with paid time off or disability benefits For small businesses, this means you have flexibility—but also responsibility to communicate policies clearly. Want to overhaul those policies or craft great messaging to your team, give us a call! We’re here to make leave policies less painful and more practical. 📣 Employee Takeaways If you work for a small Utah employer, ask about your company’s leave policies. While FMLA doesn’t require you to use your accrued leave during your FMLA leave, it allows your employer to write into its policy a requirement that you do so. Make sure you read that policy! And, even if FMLA doesn’t apply, your employer may offer benefits similar to FMLA. If you’re dealing with a serious health issue or family emergency, document your situation, give notice as early as possible, and follow internal procedures. Need help understanding those procedures or your rights as an employee? We got your back! ⚖️ Final Thoughts FMLA is more than a legal acronym—it’s a lifeline for employees facing life’s biggest challenges. For Utah employers, understanding the law and choosing to offer similar protections can set your business apart. Whether you're an HR manager, CEO, or a team member, knowing your rights and responsibilities helps everyone navigate leave with clarity and compassion.

Moonlighting, Side hustles, and Non-Competes

By Adrienne Langmo • September 3, 2025
So, you’ve got an employee that wants to teach a night class? Drive for a ride share? Pursue a passion project on the side? That’s great…. Right? You can ensure it’s great for both you and your employee by entering a non-compete, non-solicitation, non-disparagement, and/or non-disclosure agreement and setting clear workplace boundaries . Non-Compete Agreements can help employers do damage control when an employee wants to branch out. Non-competes alone are limited, but when properly crafted and paired with the other agreements listed above, they can provide peace of mind and protection to employers. Utah law takes a close look at these agreements when it comes to enforceability, so don’t go it alone when it comes to crafting one. Boundaries Set boundaries with your employees on the use of their time, your equipment, and your company’s other resources like client lists or IP. And pay close attention with remote or telework employees where boundaries may be squishier. Here’s some examples where lines may get blurred: Can the employee use the office printer, or their allotted printing budget for their teaching gig? What if it’s just a couple sheets of paper? What if it’s their 100-page course outline? Maybe. Do you have an equipment policy that allows employees minor personal usage of the office equipment? Does it define “minor”? Might you want to update that policy if it doesn’t provide the clarity you need? We can help! Can the employee pick up a ride share client in the company vehicle while they’re out running an errand for the company What if it’s their personal vehicle? What if the trip is along the way, no deviation? Definitely not the company vehicle for insurance purposes of carrying a random person around. But otherwise, this raises the charmingly titled legal doctrine of “frolic and detour” where it is much less messy in terms of liability (for accidents, etc.) if the employee does not engage in personal errands while on the clock, when they’re supposed to be completing your company’s business. No double dipping. No frolicking, as tempting as frolicking sounds. Can they email one of the company’s clients with a question that’ll help them move things forward on their side project? Generally, probably not, especially if you have a non-solicitation agreement in hand. But, it may depend on more details than this scenario offers. When in doubt, talk about it with your employee, get an idea of what their end game is, and give us a call if you need a sounding board. Need help handling questions like these, updating policies, or putting together a non-compete agreement? We can help!