Impact and Stories

The Inflation Reduction Act's investments are bearing fruit by creating good-paying jobs, strengthening our energy security, tackling climate change, and improving services the IRS provides to taxpayers. As a part of President Biden's broader Investing in America agenda, Treasury will continue to collect and share data, analysis, and stories about how the IRA is aiding American families and workers, driving investment toward underserved communities as well as to new technologies and markets, and ensuring economic fairness. Read more about the IRA's impacts across its major themes below.

Creating Jobs and Spurring Investment

The IRA has unleashed an investment and manufacturing boom in the United States unlike anything seen in decades. These investments are generating long-term economic growth for the whole country and creating jobs in underserved communities. According to the Rhodium Group’s and MIT's Climate Investment Monitor, companies have announced more than $242 billion in new investments to build the clean energy economy. This includes investments in industries like electric vehicles, batteries and energy storage, clean energy manufacturing, clean power generation, carbon management, and many others, according to data tracked by Rhodium Group and MIT Clean Investment Monitor.

Announced IRA Investments by Technology.Bar chart displaying $242 billion in total announced IRA investments broken out by 7 different technologies. Solar, Energy Storage, Battery Manufacturing, Hydrogen, Wind, Carbon Management, and Other.
Source: Rhodium Group/Clean Investment Monitor (CIM)

Investment is Leading to Jobs

Dollars are flowing to these industries at all levels, including manufacturing, transportation, and sales.

These investments are generating long-term economic growth for the whole country and creating jobs in underserved communities.

These investments have already created more than 211,350 jobs as of September 2023, and are projected to support approximately 1.5 million jobs over the coming decade according to estimates by outside groups.

How It Works & New Features for Clean Energy Tax Incentives

The newly created or expanded tax incentives created by the Inflation Reduction Act primarily work by reducing the costs of building qualifying energy projects and equipment or by incentivizing the production of energy or manufactured goods. For each incentive, there are eligibility requirements for taxpayers and qualification criteria for the energy project or type of production in question. But in general, an eligible taxpayer who installs qualifying equipment or generates or manufactures a qualifying product and meets any criteria for materials and production methods, may receive the base tax credits.

The law creates several new features that will attract greater levels of investment and steer it toward quality projects and jobs in communities in need. To ensure that investment reaches underserved communities, reinvests in energy communities, and includes good-paying wages for workers, the IRA also created new bonus credits that increase the value of many clean energy incentives.

And, so that state, local, and tribal governments and tax-exempt entities like rural electric cooperatives and many others may access the tax incentives for the first time, the law creates “elective pay” (also called “direct pay”). Most of the entities eligible for direct pay would not normally owe federal income tax. However, by filing a return and using direct pay, these entities can receive tax-free cash payments from the IRS for the clean energy tax credits they earned, so long as all requirements are met, including a pre-filing registration requirement.

Find out more about clean energy tax incentives, eligibility, bonus credits, and new mechanisms like transferability and direct pay in the Informational Resources section.

Investments in Underserved and Energy Communities

Clean energy bonus credits are already spurring an economic revitalization in communities that have historically been left behind or underserved.

  • The Low-Income Communities Bonus Credit (§ 48(e)) provides up to a 20-percentage point boost to the Investment Tax Credit for qualified solar or wind facilities in low-income communities, on Indian land, as part of affordable housing developments, and benefitting low-income households.
  • The Energy Community Bonus Credit provides additional incentives for qualified investments in energy communities, or communities with closed coal mines, coal power plants, or brownfield sites, or where fossil fuel employment has significantly contributed to local economies.

Place-based analysis by Treasury demonstrates that planned investment activity in underserved communities is growing.

Strengthening Energy Security and Affordability

Energy costs pose significant challenges for American families. For lower income and middle-class families, including those living paycheck to paycheck, energy—electricity, heating fuel, and gasoline—can account for a large share of their monthly budgets. Reliance on gas and oil for heating can be expensive and energy insecure as well. When prices spike due to geopolitical events, consumers are on the hook to pay, but shifting to clean energy can shield families better from global events and make them more energy independent.

Many of the IRA's incentives reduce energy costs and price volatility, such as consumer tax credits for energy efficient equipment and electric vehicles that can aid American families. Treasury’s new Taxpayer Resource Hub features a cost calculator that can estimate energy bill cost savings from equipment upgrades.

Other incentives support manufacturers by boosting investment in factories across the U.S. that produce solar panels, batteries, electric vehicles, carbon capture equipment, and many more clean energy technologies. It’s now cheaper than in the past to produce clean energy and manufacture clean energy products here in the United States. Because of that, production will increase and costs will drop over time, making clean energy more affordable for consumers at home and globally.

Climate Impact

The IRA’s investments in cleaner energy sources, their delivery, and their use will translate to lower greenhouse gas emissions and reduced impact on the climate. The law makes the largest investment in reducing carbon pollution in U.S. history. It is a pro-growth climate policy that helps lower consumer costs and boosts American economic growth and leadership in innovation while simultaneously moving our country towards meeting our climate goals.

Investing in Manufacturing

The IRA has accelerated investment in manufacturing of clean energy technologies. Total estimated investment has increased to over $49 billion since August of 2022.

Investing in Clean Energy Manufacturing. Bar chart over time since quarter 1 2018, with each bar representing total investment in manufacturing in clean technologies within a different quarter. The height of the bars has increased significantly since Q3 2022.
Source: Rhodium Group and MIT Clean Investment Monitor

IRS Modernization

The Inflation Reduction Act is Modernizing the IRS

Building a clean energy economy and creating good-paying jobs, and new economic opportunities for all Americans requires a modern Internal Revenue Service (IRS).

Recognizing the need for a fundamental shift, Congress provided critical resources to modernize the IRS, after decades of chronic underfunding. These investments, if sustained, will drive long-term IRS improvements, in addition to providing more options for filing tax returns, reducing delays for taxpayer refunds, and making it easier to find help from trusted experts. And it will increase the revenue our country can invest in our key priorities. Put together, the IRA is a historic investment in building an economy that works for everyone.

Taxpayers can expect these ongoing modernization efforts to include:

Expanded digitization and online services

IRS is modernizing decades-old technology to drive improved customer service and protect taxpayers’ data. Thanks to the Inflation Reduction Act, the IRS digitized 80 times more returns in the 2023 filing season compared to 2022 and is on track to scan 2 million returns. Expanded digitization made possible by scanning and data extraction will help deliver drastically improved service, faster refunds, and significantly lower levels of paper returns this filing season, and in the years to come. This effort will eliminate paper backlogs and speed delivery of taxpayer refunds.

In addition, the IRS has met its targets to further improve its customer callback option, so taxpayers do not need to wait on hold during periods of high call volume. The customer callback option is now available for up to 97% of callers seeking live assistance.

80x More Documents Digitized Than 2022

Retiring outdated technology and provide real-time processing

Before the Inflation Reduction Act, the IRS was unable to reduce its aged information technology infrastructure to an acceptable level. Recent analysis from the Government Accountability Office showed that about 33 percent of the computer of software applications were considered legacy, and included computer applications ranging from 25 to 64 years in age. Modernizing these and other systems over the next five years will enable the IRS to access and process taxpayer data more quickly, improve customer service, and accelerate the delivery of new technology, culminating in a transformed system for storing tax data. 

These modernization efforts will help drive the IRS’s efforts to provide world class customer service, deliver refunds quickly, enforce tax laws with a focus among high earners and corporation, support the IRA’s clean energy investments, and ensure that all Americans receive tax credits and benefits for which they are eligible. In the first five years of the 10-year Strategic Operating Plan, the IRS will eliminate paper backlogs that have delayed taxpayer refunds by digitizing all returns when they are received. The IRS will have end-to-end digital processing for high-volume forms and returns, while maintaining paper submission options.

Direct File

The IRS is launching a limited-scope Direct File pilot in Filing Season 2024, including English and Spanish versions. The 2024 Direct File pilot allows taxpayers in participating states to file their 2023 tax returns electronically, for free, directly with the IRS. It is a mobile-friendly service that works well on a smartphone, tablet, laptop, or desktop computer. The Direct File pilot is available to eligible taxpayers residing in 12 states: Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. You can find out if you are eligible to use Direct File by visiting IRS.gov.

Expanded In-Person Service

To help more taxpayers directly, the IRS is expanding in-person service to meet taxpayers where they are, particularly those in underserved and rural communities. The IRS has opened or reopened at least 50 Taxpayer Assistance Centers since August 2022. For Filing Season 2024, the IRS will offer 8000 more hours of service at its Taxpayer Assistance Centers (TACs) through extended hours at many locations and by hosting special Saturday openings at many TACs nationwide. Click here to find a taxpayer assistance center near you.

50 Taxpayer Assistance Centers opened or reopened

New ability to respond to notices online, expanded self-service options

In the past, when taxpayers received notices, such as requests for things like document verification, they had to respond through the mail. Through the Paperless Processing Initiative, taxpayers are now able to digitally submit all correspondence and responses to notices that do not have a filing or payment action, saving them time and money. These tools will also help taxpayers verify communications from the IRS, facilitate quicker refunds, and reduce anxiety regarding preventing scams and fraud. As a result of achieving this goal, the IRS estimates more than 94% of individual taxpayers will no longer have to send mail to the IRS. Taxpayers who want to submit paper returns and correspondence may continue to do so.

The IRS will also provide the option for taxpayers to e-File 20 additional tax forms for Filing Season 2024, enabling up to 4 million additional tax documents to be digitally filed every year. This includes amendments to Forms 940, 941, 941-SS and 941(PR), which are some of the most common forms businesses file when amending returns. 

Dramatically Improved Service During Filing Season

Thanks to Inflation Reduction Act resources, the IRS consistently delivered dramatically improved service in Filing Season 2023. IRS achieved an 87% Level of Service on its main taxpayer help line. Through the end of Filing Season 2023, IRS answered 3 million more calls, cut phone wait times to three minutes from 28 minutes, served 140,000 more taxpayers in-person, digitized 80 times more returns than in 2022 through the adoption of new scanning technology, cleared the backlog of unprocessed 2022 individual tax returns with no errors, launched two new digital tools and enabled a new direct-deposit refund option for taxpayers with amended returns.

Taxpayers will see additional improvements in Filing Season 2024, including important new updates to the Where’s My Refund tool, which is the IRS’ most popular customer service tool. Updates will allow taxpayers to see more detailed refund status messages in plain language and enhance use of the tool on mobile devices. This will reduce the need for taxpayers to call the IRS for answers to basic questions. 

New 1099 filing option for small businesses

In January 2023, the IRS launched an online portal to allow businesses the option to file Form 1099 series information returns electronically rather than through the mail. This free electronic filing service is secure, accurate, free, and requires no special software. Small business owners often prepare their own taxes, rather than hire professional preparers, and this new tool is saving small business owners significant time and money. Click here to find out more about e-filing forms 1099.

Conclusion

Over the next ten years, Inflation Reduction Act investments will transform the IRS so that it provides world class service to taxpayers, delivers refunds quickly, supports the Inflation Reduction Act’s clean energy investments, and ensures that all Americans receive tax benefits for which they are eligible. Put together, the Inflation Reduction Act is a historic investment in building an economy that works for everyone.

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