Smart Cities Dive: On clean energy tax credits, mayors want clearer federal guidance

But direct pay is still new terrain for localities. In June, the Treasury Department and Internal Revenue Service proposed guidance to help eligible entities understand the scope and eligibility requirements of the IRA provisions. The Climate Mayors’ letter was submitted during the public comment period on this proposed guidance, although cities have been thinking about how they can use direct payments since the IRA was enacted last year, said the organization’s policy director, Meghan Pazik. 

“The overall top line of the letter was ‘Try to make the guidance as simple as possible for cities but also these now eligible entities,’” Pazik said.

In the letter, the mayors repeatedly noted their appreciation of the incentives and proposed guidance. The letter acknowledges that the Treasury, in particular, “faces an immense challenge in rolling out a program that is so new to the agency so quickly” while complying with various requirements and nuances. 

But the letter is also clear about some of the challenges localities face in using the incentives. “In addition to the feedback and comments we have provided, it is critical that the Administration understands the limited capacity of localities and the need for as much clarification and specificity as possible when it comes to eligible projects, eligible entities, and the process to receive elective payments,” the letter says.