The Treasury Department and the IRS finalized rules on Jan. 7 for the Clean Electricity Investment and Production Tax Credits—also known as the “technology-neutral credits”— in sections 45Y and 48E of the tax code.
Both tax credits are intended to encourage more investments in clean energy systems over the next few years.
The Clean Electricity Investment Tax Credit lowers the cost of clean energy infrastructure installations. Projects that generate 1 megawatt hour of clean power or less get a base credit that covers 30% of the project cost, with larger projects getting 6% of the project value, according to a fact sheet.
This credit covers clean power technologies, including solar, wind, municipal solid waste, geothermal, tidal, energy storage, microgrid controllers, fuel cells, combined heat and power systems, microturbines, and interconnection costs.
The Clean Electricity Production Tax Credit makes it cheaper to produce clean energy, with credits given based on the number of kilowatt hours produced. The credits are designed to incentivize producers to generate as much clean energy as possible, with projects that generate more than 1000 kilowatt hours receiving a greater credit.
The tax credit can subsidize the cost of clean power technologies including solar, wind, municipal solid waste, geothermal, tidal, biomass, landfill gas, hydroelectric, marine and hydrokinetic power.
“The Clean Electricity Credits encourage innovation by allowing new zero-emissions technologies to develop over time while also providing durable incentives for companies to make investments in clean energy technologies that are already contributing to the clean energy investment and manufacturing boom,” the Treasury Department said in a media release last Tuesday. “The final rules issued today provide important clarity and certainty around what clean electricity zero-emissions technologies qualify for the credits—including wind, solar, hydropower, marine and hydrokinetic, geothermal, nuclear, and certain waste energy recovery property. Treasury and the IRS anticipate releasing the first Annual Table confirming this list of qualifying technologies imminently. The final rules also provide guidance to clarify how combustion and gasification technologies can qualify in the future—including on how lifecycle analysis assessments compliant with the statute will be conducted.”
To receive the full value of the credits, taxpayers have to meet standards for paying prevailing wages and employing registered apprentices, helping ensure more clean energy jobs are good-paying jobs, and growing career opportunities for workers in the clean energy sector, Treasury said. The technology-neutral Clean Electricity Production and Investment Tax Credits are also eligible for bonus credits related to siting projects in energy communities and meeting certain standards for using domestic content.
According to an analysis from the Department of Energy, the tech-neutral credits, along with other Inflation Reduction Act and Bipartisan Infrastructure Law provisions, are expected to save American families up to $38 billion on electricity bills through 2030.
“The final rules issued today will help ensure America’s clean energy investment boom continues—driving down utility costs for American families and small businesses, creating good-paying construction jobs, and strengthening energy security by making the U.S. more resistant to price shocks,” Treasury Secretary Janet Yellen said in a statement.
The existing Production Tax Credit and Investment Tax Credit will be available to projects that began construction before 2025. Qualifying projects placed in service after Dec. 31, 2024, will be eligible for the new Clean Electricity Credits.
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Tags: IRS, Small Business, Taxes
