Qualifying Advanced Energy Project Credit
- Specialty Tax Team
- Jun 14, 2023
- 2 min read
The Inflation Reduction Act (IRA) provided $10 billion in funding for the Qualifying Advanced Energy Project Credit Allocation Program under section 48C(e).
The qualifying advanced energy project credit is an investment credit originally enacted by the American Recovery and Reinvestment Act of 2009. The IRA renewed and expanded the credit under section 48C(e).
The Internal Revenue Service and Department of Treasury issued Notice 2023-18 to establish the program and to provide initial guidance. Additional guidance for the program is provided in Notice 2023-44.
The program provides incentives for clean energy property manufacturing and recycling, industrial decarbonization, and critical materials processing, refining and recycling. Appendix A, as modified in Notice 2023-44, provides examples of eligible projects for which applicants can apply for an award of an investment tax credit. The base credit rate is 6% of the taxpayer's qualified investment, which increases to 30% if the project satisfies the prevailing wage and apprenticeship requirements.
The IRA requires at least $4 billion to be reserved for projects that are in section § 48C(e) Energy Communities Census Tracts where:
No pre-IRA qualified advanced energy projects were located and,
Have certain closed coal mines, retired coal-fired power plants or are census tracts adjacent to those census tracts.
Appendix C of Notice 2023-44 provides a list of Energy Communities Census Tracts.
The first allocation round outlined in Notice 2023-18 includes $4 billion, with approximately $1.6 billion reserved for projects located in § 48C(e) Energy Communities Census Tracts. The IRS anticipates providing at least two allocation rounds under the § 48C(e) program.
Notice 2023-44 informs potential applicants that a project placed in service before the allocation of the award is ineligible for the program.
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