Recent legislation can help your business implement sustainable practices

Many business owners today are seeking ways to implement sustainable business practices. However, balancing profitability with sustainability can be a challenge, particularly for small businesses with limited budget and resources. 

Bank of America’s 2024 Business Owner Report found that 44% of the business owners who have implemented sustainable business practices say that their initiatives come with increased costs, making long-term actions challenging. Given these challenges, it’s important for businesses to be aware of available resources, including recent legislation designed to promote and facilitate the implementation of sustainable practices.

Two bills in particular offer support and incentives to small businesses. The Bipartisan Infrastructure Law (BIL), passed by Congress in late 2021, is investing over a trillion dollars in updating the nation’s infrastructure in a way that supports clean energy development, EV adoption and climate resilience. Congress followed this law up with the Inflation Reduction Act (IRA), which passed in August 2022. Through a more targeted approach, the IRA uses a mix of tax incentives, grants and loan guarantees to help businesses scale clean energy solutions and boost sustainability.

Financial incentives offered by the IRA

Projected to support almost a million jobs a year over the next decade, the IRA offers assistance for small and large businesses alike. Small businesses should be aware of these financial incentives offered by the IRA as they build their programs and initiatives to be more sustainable:

Cost savings for EV purchases

The IRA created a tax credit that covers up to 30% of the cost of purchasing clean commercial vehicles, like EVs or fuel cell models, so that small businesses can shift to more sustainable transit models. The BIL complements this credit by spending tens of billions of dollars to build out the technology and nationwide infrastructure to support widespread adoption of EVs, so that small businesses across the country can invest and be confident they will have the resources and recharging stations they need to succeed.

Lower taxes through energy efficiency

Also included in the IRA is a tax credit to support energy efficiency upgrades in commercial buildings. The credit provides $5 per square foot and can include updating lighting systems, heating, cooling and ventilation systems or even roofing and windows.

Funding for clean energy investments 

The IRA’s Greenhouse Gas Reduction Fund awarded eight nonprofit and community development financial institutions (CDFIs) a total of $20 billion, creating a national network to finance clean energy projects. The grant money can be used to support a wide range of projects, including net-zero retrofits of small businesses. 

Grant funding for rural businesses

For small businesses in rural America, loan financing and grant funding may be available through expansions to the Rural Energy for America Program. This funding can be used to purchase and install renewable energy systems or make energy efficiency improvements. The U.S. Department of Agriculture estimates this expansion will reach more than 41,500 small businesses and farms.

Opportunity to save on energy bills

Small businesses can also take advantage of a tax credit that covers 30% of the upfront cost of switching to lower-cost solar power. For companies that can’t put solar panels on the roofs of their buildings, the IRA is also spending billions to support community solar projects – local solar facilities shared by multiple community subscribers – so more organizations will have access to clean energy.

One provision that makes the IRA such a gamechanger is the transferability of tax credits. This complex-sounding provision will allow entities to transfer all or a portion of tax credits to an unrelated party for cash. Instead of waiting to claim the credit on tax filings, companies can transfer the credit to the manufacturer or installer they’re working with, creating an immediate discount.

There are also many incentives for small business manufacturing, innovation and entrepreneurship. For example, the IRA provides small businesses with opportunities to expand their research and development functions by doubling the small business R&D tax credit from $250,000 to $500,000. The goal is to encourage small businesses and startups to invest in innovation and technological advancements.

Next steps

Consider talking to a certified public accountant about the options available for your business. The Department of Energy’s Funding & Financing page is a great resource to learn about energy efficiency and renewable energy opportunities other government programs, as is the Database of State Incentives for Renewables & Efficiency and Energy Star Tax Deductions for Commercial Buildings page. You may also be able to find more information through your regional chamber of commerce, which typically tracks this type of information to share with its members.