Tax Planning For Sustainable and Eco-Friendly Startups in 2023

Tax Planning For Sustainable and Eco-Friendly Startups in 2023

Environmentally conscious companies are becoming more prevalent, creating green startups to foster an attitude of care for our planet.

Stakeholders expect, and are increasingly demanding, transparency regarding a company’s tax strategy and contributions to sustainability initiatives.

Solar Energy Companies

Solar energy companies can take advantage of the federal solar investment tax credit (ITC) to lower operating expenses. Installers of residential or commercial solar generation systems placed into service during any tax year can claim a credit against their tax liability for every installation claim they submit during that year.

The ITC also includes a bonus for installing solar systems on homes located in communities of color, rural areas facing economic hardship and communities that bear environmental pollution burdens – potentially cutting in half their costs of going solar for those eligible.

Sustainability and long-term value have become increasingly vital components of business operations. As more organizations adopt ESG metrics, transparency around their environmental impact becomes key in building trust with investors and stakeholders alike. Going forward, more green tax incentives may play a part in spurring sustainable business practices.


At present, businesses must demonstrate a greater commitment to sustainability due to numerous factors, including consumer demand for planet-friendly goods and services, the cost-cutting benefits of adopting eco-friendly practices such as energy conservation, recycling, water saving equipment and solar power, plus federal and state business tax incentives, grants savings credits that reward them for being eco-friendly.

However, transitioning to greener practices will pay dividends over time. Not only will utility costs drop but companies can even earn extra income by selling Emission Reduction Credits (ERCs) to high polluters – while also drawing more environmentally aware customers who value spending their money at establishments that share similar beliefs.

Environmental startups at the intersection of business and technology strive to make positive global changes through nature-based systems and artificial intelligence, such as more sustainable fishing practices or through their Bowery Farming project enabling urban farmers to cultivate organic vegetables indoors using smart farming techniques.

Electric Vehicle Companies

As businesses embrace sustainability and environmental consciousness more broadly, businesses are adapting their products to satisfy customer demands. For instance, many coffee shops now provide straws which are more easily recycled, and their ordering apps include an option allowing patrons to choose whether or not to use plastic silverware.

Electric vehicle (EV) buyers can claim a federal tax credit of up to $7,500 when their EV meets certain criteria pertaining to assembly in the US and its batteries, parts, and minerals being sourced within US borders. To be eligible for this rebate, however, your vehicle must also meet requirements as to where its batteries, parts, minerals are sourced from and assembled within United States boundaries.

As another way for companies to go green, investing in renewable energy investments can also be an effective strategy. The IRS offers tax credits and incentives for renewable energies such as wind, solar, fuel cell storage, microturbines and small wind energy properties as well as geothermal heat pumps. Transparency regarding how these investments impact your business and bottom line will build trust among stakeholders – employees, customers, investors as well as others will want to know whether carbon neutral policies meet corporate social responsibility goals of your organization.

Biofuel Companies

With more people becoming aware of the need to protect our environment, companies have emerged to support these goals. Environmental startups are at the cutting-edge of technological development and work toward making our lives more sustainable for everyone.

Encamp is a startup helping organizations manage sustainability goals more easily by tracking digital data and unifying workflows, while FuelGems works on making traditional fuels more sustainable by producing an additive which decreases emissions from both diesel and gasoline vehicles.

The Environmental Protection Agency has proposed increasing the minimum level of biofuels that must be blended into gasoline and diesel in 2023-2025, representing a major step in the right direction. Unfortunately, biofuel industry special interests have received multiple federal tax credits, subsidies under the Farm Bill Energy Title, infrastructure subsidies and special interest subsidies that have distort markets, increased food costs and fuel costs without producing significant greenhouse gas reductions.