FS-2023-16, June 2023 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 The qualifying advanced energy project credit is an investment credit originally enacted by the American Recovery and Reinvestment Act of 2009.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. Program timeline Taxpayers must use the Department of Energy's (DOE) eXCHANGE portal, or any successor portal to submit their information. Concept paper materials are available for applicants to download from the eXCHANGE portal at Qualifying Advanced Energy Project 48C Credit Program. The DOE portal is now open. Concept papers must be submitted by July 31, 2023, at noon ET through the eXCHANGE portal. DOE reserves the right to extend the deadline for concept paper submissions based on any changes included in DOE's final critical materials determination. After review of the concept paper, DOE will encourage or discourage the taxpayer to submit an application. All taxpayers who submit timely concept papers are eligible to submit an application, regardless of DOE's response to their concept paper. DOE will begin the acceptance process for a taxpayer's application seven days after the date of the letter of encouragement or discouragement. The application must be submitted no later than 45 days after DOE begins the acceptance process for the taxpayer's application. All timely submitted and complete applications that meet the requirements as stated in Appendix B of Notice 2023-44 will be evaluated and ranked on their merit regardless of when in the application period they are submitted. If an application for DOE recommendation is received timely and otherwise meets the preliminary compliance review criteria, DOE will determine the merits of the project. DOE will then provide its ranked recommendation to the IRS, who will make a final determination. The IRS will issue the taxpayer a letter of its determination no later than March 31, 2024. If the application is accepted, the date of this allocation letter will be treated as the acceptance date and the allocation letter will state the amount of the credit allocated to the project. If the application is denied, a taxpayer may request a debriefing with DOE regarding its review of the taxpayer's application. The timeliness for any concept paper and application will be determined by the submittal date and time information provided by the eXCHANGE portal. The eXCHANGE portal will provide instructions for submitting concept papers, applications and supporting documents. Within two years of receiving an allocation letter, the taxpayer must notify DOE through the eXCHANGE portal that the certification requirements have been met. If the requirements as stated in Appendix B of Notice 2023-44 are met, DOE will notify the taxpayer and the IRS, and the IRS will issue a certification letter. Within two years of receiving the certification letter, the taxpayer must notify DOE through the eXCHANGE portal that the property has been placed into service. If the taxpayer has placed the project in service within the required 2-year period and has notified DOE, the taxpayer may claim the §48C credit on its income tax return for the taxable year in which the project was placed in service. Qualifying advanced energy projects Eligible projects are ones that: Re-equip, expand or establish a manufacturing or industrial facility for the production or recycling of: property designed to be used to produce energy from the sun, water, wind, geothermal deposits or other renewable resources; fuel cells, microturbines or energy storage systems and components; electric grid modernization equipment and components; property designed to remove, use or sequester carbon oxide emissions; equipment designed to refine, electrolyze or blend any fuel, chemical or product which is renewable or low-carbon and low-emission; property designed to produce energy conservation technologies; light-, medium-, or heavy-duty electric or fuel-cell vehicles as well as technologies, components or materials for such vehicles and associated charging infrastructure; hybrid vehicles weighing not less than 14,000 pounds, including technologies, components or materials for such vehicles; or other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary. Re-equip an industrial manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20% through the installation of: low or zero-carbon process heat systems; carbon capture, transport, utilization and storage systems; energy efficiency and reduction in waste from industrial process; or any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary. Re-equip, expand or establish an industrial facility for the processing, refining or recycling of critical materials are also included. Eligible property is: property necessary for the above projects; tangible personal property; or other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment facility. Depreciation (or amortization in lieu of deprecation) is allowable. For more information on qualifying advanced energy projects, see Appendix A of Notice 2023-44. Webinar for potential applicants The DOE and Treasury hosted a virtual, informational webinar for potential applicants on June 27, 2023. This webinar provided information about how to prepare and submit the concept paper. Additional information can be found on IRS.gov advanced energy project and the Department of Energy website.
