From the Infrastructure Investment and Jobs Act1 in late 2021 to the Inflation Reduction Act2 (the biggest climate bill in U.S. history3), the legislative push toward solar, wind, and natural gas alternatives is well underway.
While these recent legislative acts invest billions of dollars into the manufacturing of new solar products for instance, contractors can also benefit from the ripple effects of those direct incentive programs by way of new facility construction and existing infrastructure expansion.
But any government incentive program comes with a plethora of procedural, regulatory, and tax considerations that contractors must evaluate to properly assess risk. This article reviews the highlights of each piece of legislation and dives into what it means for the construction industry.
The Infrastructure Investment & Jobs Act
The Infrastructure Investment and Jobs Act was signed into law on November 15, 2021, and largely focuses on turning investments into physical infrastructure.
Hundreds of billions of dollars are included for the replacement and expansion of various public transit modes. According to §40552 of the Act, the investments will range from replacing existing trains and buses (including school buses) with zero emission vehicles to developing a national network of electric vehicle charging stations (§11401) to replacing and eliminating the current use of lead pipes in public water systems (§50105).
Further, as noted in §70912 of the Act, billions more dollars are earmarked for existing infrastructure repairs to highways, bridges, ports, airports, and power networks. These latter efforts are intended, in part, to reduce the current supply chain congestions affecting many construction projects.
Superfund & Brownfield Reclamation & Clean Up
In addition to infrastructure improvements, the Infrastructure Investment and Jobs Act sets aside more than $20 billion for superfund and brownfield site reclamation and clean up. This money reinstates the federal superfund tax for cleaning up legacy sites (§80201). These efforts may also expedite additional sites to proceed through the regulatory approval process for clearance to redevelop.
State Level Programs
Certain states are also benefitting from the Infrastructure Investment and Jobs Act’s programs, with several Atlantic coast states partnering with the federal government on an offshore wind turbine lease program. The Department of Interior, through its Bureau of Ocean Energy Management (BOEM), auctioned off multiple sites off the coasts of New York, New Jersey, and North Carolina for about $5 billion in early 2022, with several other offshore locations targeted for future wind energy development.
As an example of federal credits under the new legislation, BOEM offered bidders in a North Carolina auction a 20% credit for a commitment to invest in programs advancing domestic workforce training and supply chain development.4
Build America, Buy America
The Infrastructure Investment and Jobs Act expands existing federal Build America, Buy America requirements for infrastructure projects (§70911). Previously, those requirements only covered certain transit-related programs such as the Federal Highway Administration.
Under the Infrastructure Investment and Jobs Act, all federal infrastructure projects will be subject to Buy America preferences regardless of whether the Act’s funds are utilized for the project. Similarly, according to §41101, the Davis-Bacon Act, a prevailing wage standard implemented 90 years ago, will provide construction worker protection under most projects funded by the Infrastructure Investment and Jobs Act.
The Associated General Contractors of America (AGC) supported the Act and has provided its own summaries and analysis of the pros and cons to its members.5
The Associated Builders and Contractors (ABC) remained neutral on it, although they encouraged the potential benefits to the industry.
Specific to the transportation benefits, the U.S. Department of Transportation issued a state-by-state fact sheet applying the benefits of the Act to the concerns in each jurisdiction.6
The White House also released a Guidebook to assist governments in unlocking benefits of the law.7
The Inflation Reduction Act
Signed into law on August 16, 2022, the Inflation Reduction Act is rooted in similar interests as the Infrastructure Investment and Jobs Act, but tackles the expanded implementation and use of alternative energy programs by largely relying on subsidies and tax credits if certain requirements are met (§13201).
The Inflation Reduction Act intends to reduce the costs of solar panels, electric vehicles, and various other energy-efficient consumables using tax subsidies and credits upon purchase or fiscal year filing; however, certain income requirements must be met to take full advantage of these benefits.8
Businesses can similarly benefit under measures intended to encourage replacement of traditional fossil fuel fleets for construction and use of cleaner energy facilities but are subject to minimum corporate taxes in certain situations. The commercial benefits are intended to last for at least a decade and will also apply to publicly owned utilities and nonprofits.
Expanding Existing & New Federal Tax Programs
According to Part 1 of the Inflation Reduction Act, eligibility under these expanded and added measures is tied to conditions precedent on energy output, implementation of apprenticeship programs, and the date when construction commenced. The Inflation Reduction Act similarly expands an intent to increase domestic manufacturing and supply chains by conditioning the extent of certain credit availability to the sourcing location of raw materials (e.g., batteries for electric vehicles) (§50143).
Greener Construction Products
The primary goal of the Inflation Reduction Act appears to be rooted in encouraging the use of greener construction products. More than $5 billion has been identified solely for the use of low-carbon building products in federal government agency buildings and public infrastructure projects alone.
The EPA is designated as the government agency responsible for determining application and qualification of these products under the program.
Notably, both the AGC9 and ABC10 oppose the Inflation Reduction Act based on the prescriptive constraints on construction employers, increased taxes, and expanded federal mandates.