Clean Energy Can Mean More Cash for Transportation and Logistics Companies

From federal clean energy credits to state and local level property tax benefits, a variety of energy-related tax credits offer transportation and logistics companies the opportunity to pay fewer taxes and help the environment at the same time. Businesses in unexpected sectors may find that they qualify for the following tax credits and other incentives with little or no changes to their current operations.

Federal Clean Vehicles

The Inflation Reeducation Act of 2022 (IRA) created a tax credit for businesses that purchase eco-friendly commercial vehicles in 2023 and 2024. Under IRC Section 45W, qualifying businesses can receive a credit of up to 30 percent of the cost of the vehicle or its incremental cost, with a cap of $7,500 for vehicles under 14,000 pounds and a $40,000 cap for heavier vehicles. Commercial vehicles, including those powered by hydrogen fuel cells and battery-powered electric vehicles, which do not use gasoline, diesel or other conventional fuels can qualify for this credit.

Real Estate Investments

IRC Section 179D allows businesses to deduct up to $5.36 per square foot for property improvements that meet or exceed energy efficiency standards set by the Department of Energy. In an effort to reward businesses that achieve higher levels of energy savings, changes to IRC Section 179D made by the IRA introduced a sliding scale for the deduction.  This sliding scale rewards businesses that attain higher levels of energy savings, further encouraging greater energy efficiency.

State-Level Incentives for Clean Energy Initiatives

Several states offer tax credits and other incentives for companies that invest in solar and other clean energy sources. Texas, for instance, exempts businesses engaged in solar energy-related activities from the state’s franchise tax, along with other deductions. Texas also allows businesses to deduct the full cost of a solar or wind energy system from their taxable capital or choose to deduct 10 percent of the full cost from their taxable income.

Texas businesses engaging in clean energy initiatives may qualify for a franchise tax credit, applicable for up to three projects, with each project eligible for a credit up to $100 million or 10 percent of the total capital cost (whichever is less). This credit can be carried forward up to 20 years, offering long-term tax relief and allowing companies to assign the credit to one or more of their taxable entities to optimize their tax strategies.

California encourages the use of active solar energy systems through a specific tax exclusion. Newly constructed active solar energy systems are not assessed in determining a property’s taxable value. This property tax exclusion encourages businesses to invest in solar energy infrastructure and effectively reduces the property tax associated with the installation and equipment costs of the solar panels and other energy systems.

For transportation and logistics companies, these state-specific incentives can encourage investments in solar and other clean energy sources while helping companies reduce their carbon footprint.

By tapping into these and other opportunities, businesses can optimize their tax approach and at the same time advance their sustainability goals. To find out more about potential tax incentives for your transportation and logistics company, contact us.

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