Powering Strong Communities

Treasury, IRS Release Additional Details on Applying for Energy Credit Program

The U.S. Department of the Treasury and the Internal Revenue Service on May 31 released guidance that provides additional information about the application process and technical guidance for the expanded Qualifying Advanced Energy Project Credit program under the Internal Revenue Code.

Treasury and IRS established the expanded program under section 48C of the Internal Revenue Code on February 13, 2023.

The guidance is available on the IRS website.

The Qualifying Advanced Energy Project Credit renews and expands a tax credit created in 2009 through the American Recovery and Reinvestment Act.

It provides incentives for clean energy manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling.

A broad variety of projects are eligible to apply for an investment tax credit of up to 30 percent, ranging from manufacturing of fuel cells and components for geothermal electricity and hydropower, to producing carbon capture equipment or installing it at an industrial facility, to critical minerals processing.

The Inflation Reduction Act provided $10 billion in new funding for the Qualifying Advanced Energy Project Credit program. Congress required that at least $4 billion be reserved for projects in communities with closed coal mines or retired coal-fired power plants. The initial funding round will include $4 billion, with about $1.6 billion reserved for projects in these designated coal communities.

To apply, taxpayers will submit concept papers describing the proposed project. Taxpayers whose concept papers receive a favorable review will be encouraged to submit a full application.

Concept paper submissions will be accepted starting June 30, 2023, and the deadline for concept papers will be July 31, 2023.  Starting on May 31, taxpayers can access information and materials for preparing their concept papers.

More information for potential applicants, including a 48C mapping tool and an upcoming informational webinar, is available on the Department of Energy’s 48C webpage. 

Treasury and IRS also released a Notice of Proposed Rulemaking for the Low-Income Communities Bonus Credit program under Section 48(e) of the Internal Revenue Code, which was established earlier this year.

The NPRM proposes rules for the application process and technical guidance for this program, which provides up to a 20-percentage point boost to the Investment Tax Credit for up to 1.8 gigawatts annually of solar and wind energy projects (with maximum output of less than 5 megawatts) located in low-income communities or otherwise serving low-income populations.

The NPRM reflects recommendations from a broad array of industry and environmental justice stakeholders to evaluate applications on an expedited basis and provide applicants clarity as quickly as possible.

Treasury and IRS intend to release final guidance related to the 2023 program prior to applications opening later this year.