Over the past year, inflation has surged to record highs. Everyone in the country can feel its effects, as prices for necessities, such as fuel, food and housing, have surged.
The government has stepped in with the Inflation Reduction Act to prevent inflation from getting too out of control. This act is intended to help American workers as well as lower the country’s greenhouse gas emissions to help combat climate change.
The Inflation Reduction Act will significantly impact the supply chain sector, encouraging the use of green energy and the strict enforcement of taxes. Understanding these changes and the act’s effects is important when preparing as a company.
What Is the Inflation Reduction Act?
President Biden signed the Inflation Reduction Act in August 2022 in an attempt to help the economy and industry sectors during the period of high inflation. The act contains many provisions to help American workers, such as providing more jobs and lowering healthcare costs.
It also has many green initiatives, like helping to build a stronger clean energy supply chain and providing incentives for businesses that use clean energy.
5 Ways the Inflation Reduction Act Impacts Truckers and the Supply Chain
As the name suggests, the main goal of the Inflation Reduction Act is to reduce inflation. However, it also has many green energy initiatives that help combat climate change and lower U.S. greenhouse gas emissions. Here’s how it may impact drivers, fleet owner-operators and other workers across the supply chain.
Electric Trucks
One of the biggest green initiatives in the act is providing incentives for electric vehicles and trucks. Fleet owners and operators who purchase an electric semi truck will be eligible for a tax incentive that is the price difference between an electric and diesel truck, or 30% of the electric truck’s purchase price. Either way, the credit is capped at $40,000.
This fairly large tax credit can help truckers at tax time. However, electric trucks are still more expensive than traditional diesel trucks. So, the incentive might not completely balance out these prices.
But owner-operators will also save on fuel costs. These savings, paired with the tax credit, can lead to an increase in electric semi trucks on the road.
Green Energy Incentives
Trucks are the heart and soul of any fleet company, but they are not the only part of the company that requires energy. Owner-operators also need electricity to power their warehouses, and other supply chain members need energy for their stores, distribution centers or other locations. Every step along the supply chain requires electricity.
Using clean energy, such as installing solar panels on the warehouse roof, can help the environment and lower energy costs over time. However, the upfront cost can be steep enough to sway business owners away from solar panel installation.
The Inflation Reduction Act has introduced incentives for companies that power their facilities with green energy. Whether that’s through self-sustained solar panels or by purchasing green energy from an energy company is up to the owner. However, it will make energy cheaper and greener so that companies can decrease their carbon footprint while also saving money on utilities.
Supply Chain Jobs
These green initiatives will likely greatly increase the demand for clean energy generated on American soil. This means the country will have to increase its green energy infrastructure, which could cause a boom in supply chain jobs.
The demand for green energy will trickle down the supply chain. For example, components for solar panels, wind turbines, and electric vehicles will be in demand, so there will be more jobs in manufacturing. These components will then need to be transported, assembled, installed, and operated, creating jobs across industries.
Tax incentives go along with this process, but many of them require that components are sourced and created in the U.S. It is also necessary for workers to meet certain training and wage requirements. This could make it more difficult for companies to get those incentives since the current green energy domestic supply chain is underdeveloped.
Greening Ports
The Inflation Reduction Act also seeks to lower the emissions released by cargo ports. It contains $3 billion in grants and rebates to help port authorities and marine terminals purchase zero-emission cargo-handling equipment.
However, this equipment must be human-operated or human maintained, which means no automatic equipment will be eligible. This may also create more jobs since ports will need employees to operate this equipment. But it may also change how ports operate.
Audit Risk
Another part of the Inflation Reduction Act is ensuring that companies and corporations pay their taxes correctly and on time. This will hold companies to a higher level of accountability, which might result in frequent and stricter auditing by the IRS.
This means that after the Inflation Reduction Act, trucking and supply chain companies will be more important than ever to ensure their taxes are prepared properly and on time. If taxes are done incorrectly or turned in late, the IRS will be more likely to audit your company, which could be detrimental to the future of your business.
Prepare For Upcoming Changes
If you have any questions or concerns about how the Inflation Reduction Act will affect your fleet, warehouse, distribution center, or other supply chain business, you should speak to a tax professional. They will be able to tell you if you need to change anything in your tax preparation documents or if you’re eligible for any new incentives and grants.
You may also want to look closely at the new green initiatives to see if they are a big enough incentive to switch to greener energy and technology. You might even have the opportunity to cut costs, but you’ll need to know what’s best for your business.
A tax professional can help you make those decisions. It’s important that owner-operators and truck drivers understand the Inflation Reduction Act as well as the impact it will have on their careers and business.
FAQ
Truck drivers and owner-operators are greatly impacted by the economy. If the economy slows or there are disruptions in the supply chain, truck drivers may have less work, resulting in them making less money. Rising fuel costs can also increase the cost of operating a fleet.
Joe Manchin and Chuck Schumer introduced the Inflation Reduction Act as a revised version of the Build Back Better Act, which Manchin opposed.
You can claim one EV credit per eligible vehicle.
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