Recent legislation can help your business implement sustainable practices

July 10, 2023 | 4 minute read

Most small business owners today are seeking ways to implement sustainable business practices – from minimizing paper consumption to purchasing electric vehicles (EVs) for their operations – to reduce costs, reach target consumers and help recruit employees. Unfortunately, it’s not always as easy as it looks.

 

According to Bank of America’s 2023 Small Business Owner Report, nearly half of the business owners who have implemented sustainable business practices say that their initiatives have come with increased costs, making long-term actions a challenge. But that may soon change. Recent legislation has made it not only easier for small businesses to embrace sustainability, but also made it a potential financial value add.

 

Two bills in particular offer support and incentives to small businesses. The Infrastructure and Jobs Act (IIJA), passed by Congress in late 2021, will invest 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 IIJA 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.

 

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. 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.

Important Disclosures and Information

 

Bank of America, Merrill, their affiliates and advisors do not provide legal, tax or accounting advice. Consult your own legal and/or tax advisors before making any financial decisions. Any informational materials provided are for your discussion or review purposes only. The content on the Center for Business Empowerment (including, without limitations, third party and any Bank of America content) is provided “as is” and carries no express or implied warranties, or promise or guaranty of success. Bank of America does not warrant or guarantee the accuracy, reliability, completeness, usefulness, non-infringement of intellectual property rights, or quality of any content, regardless of who originates that content, and disclaims the same to the extent allowable by law. All third party trademarks, service marks, trade names and logos referenced in this material are the property of their respective owners. Bank of America does not deliver and is not responsible for the products, services or performance of any third party.

 

Not all materials on the Center for Business Empowerment will be available in Spanish.

 

Certain links may direct you away from Bank of America to unaffiliated sites. Bank of America has not been involved in the preparation of the content supplied at unaffiliated sites and does not guarantee or assume any responsibility for their content. When you visit these sites, you are agreeing to all of their terms of use, including their privacy and security policies.

 

Credit cards, credit lines and loans are subject to credit approval and creditworthiness. Some restrictions may apply.

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S" or “Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC, and a wholly owned subsidiary of BofA Corp.

 

Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC, and wholly owned subsidiaries of BofA Corp.

 

“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets division of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.

 

Investment products: