Talking ESG: Accounting for IRA tax credits

In today’s episode, sustainability and financial reporting intersect. We discuss accounting for green incentives that arise from the Inflation Reduction Act (IRA). The IRA, signed into law in August 2022, provides climate and clean energy tax credits. 

With many types of credits available in the IRA, companies have raised questions about the financial accounting implications of the credits given the unique features that these credits have compared to past federal incentives. This week, Heather Horn is joined by Pat Durbin, a Deputy Chief Accountant in PwC’s National Office, and Jillian Pearce, a partner in our utilities practice, both of whom have closely followed accounting for the credits, to discuss what to look out for in accounting for IRA tax credits.

In this episode, you’ll hear discussion of:

• 2:38 - The background, including the breadth, scope, and structure of available IRA credits
• 7:45 - The different pathways to realization of tax credits
• 11:45 - How companies should allocate consideration paid for IRA credits
• 17:07 - The difference between renewable energy credits (RECs) and IRA credits
• 24:32 - Accounting for tax credits by analogy to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance
• 43:16 - Accounting for tax credits using under the ASC 740, Income Taxes, model
• 56:44 - Tax credit disclosure and control considerations

Looking for more information on accounting for IRA energy incentives? Check out our latest publication on IRA credits. Additionally, check out our podcast episode on renewable energy credits for more information.

Pat Durbin is a Deputy Chief Accountant in PwC’s National Office. He has over 30 years of experience consulting with our clients and engagement teams on complex accounting matters, including issues related to revenue, compensation, income taxes, and inventory under both US GAAP and IFRS.

Jillian Pearce is a partner in PwC's National Office, providing advice on financial instruments and other technical accounting issues to power and utilities clients. She was a Professional Accounting Fellow in the Office of the Chief Accountant at the SEC, and has over 15 years of auditing experience.

Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series. With over 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to us_podcast@pwc.com.

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