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Treasury and IRS Issue Proposed Guidance on Clean Energy Tax Credits

S.J. Steinhardt
Published Date:
May 30, 2024


The U.S. Treasury Department and the IRS released proposed guidance for owners of qualified clean electricity facilities and energy storage technology who may want to claim relevant tax credits., Accounting Today and CPA Practice Advisor reported.

These credits, the Clean Electricity Production Credit and the Clean Electricity Investment Credit, were established by the Inflation Reduction Act of 2022 as part of an effort to increase renewable energy production.

The 2022 tax-and-climate law terminates the existing Production Tax Credit (Section 45 of the tax code) and Investment Tax Credit (Section 48) by limiting their availability to projects beginning construction before 2025. Instead, the new Clean Electricity Production Credit (Section 45Y) and the Clean Electricity Investment Credit (Section 48E) will be available for projects placed in service after Dec. 31, 2024. 

The "technology-neutral" tax credits provide incentives to clean energy facilities that achieve net-zero greenhouse gas emissions, giving them the ability for new zero greenhouse gas emissions technologies to develop over time, while also offering longer-term certainty to investors and developers of clean energy projects, according to the Treasury Department, CPA Practice Advisory reported.

The proposed guidancelists specific technologies that meet the environmental standards under the Inflation Reduction Act and would  thus qualify as zero greenhouse gas emissions for the purposes of the Clean Electricity Production Credit and Clean Electricity Investment Credit. Those technologies include wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, goethermal and certain types of waste energy recovery property.

The proposed regulations provide guidance on several topics including the following:

● Calculating the amount of the credits;
● Defining qualified facilities and energy storage technology and describing property included in a qualified facility and energy storage technology and property that is an integral part of a qualified facility and energy storage technology;
● Defining metering devices;
● Defining related and unrelated persons;
● Explaining rules of general application – such as rules related to the expansion of a facility;
● Explaining rules regarding recapture;
● Defining greenhouse gas emissions and emission rates as well as the effects of carbon capture; and
● Listing certain qualified facilities that have a qualifying greenhouse gas emissions rate and explaining the path other facilities can take to obtain a provisional emissions rate.

The proposed regulations explain how the public may send comments to the IRS as well as information on the public hearing.

“President Biden’s Inflation Reduction Act has driven an investment boom that is adding historic levels of new clean power to the grid while keeping consumer energy costs in check, reducing greenhouse gas emissions, and bolstering energy security,” said Treasury Secretary  Janet L. Yellen in a statement. “The Clean Electricity Tax Credits created under the Inflation Reduction Act provide certainty to the market and are poised to drive substantial further growth and lower utility bills over the long-run.”

"This tech-neutral tax policy is the centerpiece of the largest climate action in our history, which Democrats passed in the Inflation Reduction Act, and it represents a huge step forward in the effort to reduce carbon emissions," said Senate Finance Committee chairman Ron Wyden (D-Ore.) in a statement. "With today's announcement, the Treasury Department provides long-term certainty to a host of clean energy sources, including promising new technologies that will become essential parts of our energy system in the future."

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