General Rules and Specifications for Substitute Forms and Schedules. This procedure provides guidelines and general requirements for the development, printing, and approval of the 2022 substitute tax forms. This procedure will be reproduced as the next revision of Publication 1167. Rev. Proc. 2021-42 is superseded.

This procedure publishes the amounts of unused housing credit carryovers allocated to qualified states under section 42(h)(3)(D) of the Code for calendar year 2022.

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also: Part I, §§ 6011, 6662, 6662A, 6707A; 1-6011-4.)

This notice expands the application of the permitted change-in-status rules for health coverage under a section 125 cafeteria plan (cafeteria plan). In particular, this notice addresses the situation in which, during a period of coverage (typically a plan year), a cafeteria plan participant may wish to revoke the employee’s election under the cafeteria plan for other-than-self-only (family) coverage under a group health plan (other than a flexible spending arrangement) in order to allow one or more family members to enroll in a Qualified Health Plan through a Health Insurance Exchange in the individual market.

Following enactment of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), this notice requests comments related to the clean vehicles provisions under §§ 25E and 30D of the Internal Revenue Code. Comments received in response to this notice will help to inform development of guidance implementing §§ 30D and 25E.

This notice requests comments on issues concerning §§ 45X and 48C, as amended or added by Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA).

Following enactment of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), this notice requests comments regarding the provisions of §§ 25C, 25D, 45L and 179D of the Internal Revenue Code. Comments received in response to the notice will help to inform the development of guidance implementing §§ 25C, 25D, 45L and 179D.

The notice requests comments on issues concerning §§ 45, 48, 45U, 45Y, and 48E, as amended or added by Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act (IRA).

The notice requests comments on the elective payment provisions under § 6417 and the elective credit transfer provisions under § 6418 of the Internal Revenue Code, as added by § 13801 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022.

This notice requests comments on issues concerning §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D, as amended or added by Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act (IRA) relating to the prevailing wage, apprenticeship, domestic content, and energy community requirements for increased or bonus credit or deduction amounts under those sections.

The Department of the Treasury and the Internal Revenue Service are issuing this notice to modify and amplify provisions of Notice 2022–05, 2022–5 I.R.B. 457, by providing additional temporary relief from certain requirements under § 42 of the Internal Revenue Code for qualified low-income housing projects. This additional temporary relief is provided due to unavoidable labor and supply-chain disruptions delaying the construction, rehabilitation, and restoration of properties throughout the United States.

This notice expands the application of the permitted change-in-status rules for health coverage under a section 125 cafeteria plan (cafeteria plan). In particular, this notice addresses the situation in which, during a period of coverage (typically a plan year), a cafeteria plan participant may wish to revoke the employee’s election under the cafeteria plan for other-than-self-only (family) coverage under a group health plan (other than a flexible spending arrangement (FSA)) in order to allow one or more family members to enroll in a Qualified Health Plan (QHP) through a Health Insurance Exchange (Exchange) in the individual market. Under this notice, the employee will be able to elect out of family coverage and into self-only coverage (or family coverage including one or more already-covered related individuals) under that health plan prospectively during a period of coverage, provided specific conditions are satisfied.

The Department of the Treasury and the Internal Revenue Service intend to modify the Income Tax Regulations under section 125 of the Internal Revenue Code (Code) consistent with the provisions of this notice. Taxpayers may rely on the guidance in this notice for plan amendments allowing elections effective on or after January 1, 2023.

This notice is being issued in conjunction with regulations under section 36B, which provide that the affordability of an offer of group health plan coverage for a related individual is based on the employee’s cost to cover the employee and the employee’s related individuals. See § 1.36B-2(c)(3)(v)(A)(2); 87 FR 61979 (Oct. 13, 2022).

Section 125(d)(1) defines a cafeteria plan as a written plan maintained by an employer under which all participants are employees and under which all participants may choose among two or more benefits consisting of cash and qualified benefits. Section 125(f) generally defines a qualified benefit as any benefit which, with the application of section 125(a), is not includable in the gross income of the employee by reason of an express provision of the Code (with certain exceptions). Qualified benefits include employer-provided accident and health plans excludable from gross income under sections 106 and 105(b), but exclude long term care insurance and certain QHPs.

Consistent with longstanding rules for cafeteria plans, a written cafeteria plan generally must provide that elections are irrevocable, except to the extent that the optional change-in-status rules in § 1.125-4 have been included in the cafeteria plan.¹ Section 1.125-4 provides rules on the circumstances in which a cafeteria plan may permit changes to elections under the plan. Cafeteria plans are not required to allow any of the changes permitted under § 1.125-4.

Section 1.125-4(c) permits a cafeteria plan to allow an employee to revoke an election during a period of coverage with respect to coverage under an accident or health plan as defined in § 1.105-5 and make a new election for the remaining portion of the period if, under the facts and circumstances, (i) a change in status occurs, and (ii) the election change satisfies the consistency requirements of § 1.125-4(c)(3). A change in status for this purpose includes a change in employment status as described in § 1.125-4(c)(2)(iii). A change in employment status for this purpose includes only a change in an individual’s employment status that results in a change in the individual’s eligibility for coverage under the group health plan. Thus, under the regulations, a change in employment status that does not result in an employee or a related individual either becoming or ceasing to be eligible for coverage under the group health plan is not a change in status for which a plan may allow the employee to revoke an election of health coverage under the cafeteria plan during a period of coverage.

Even if the change in status results in a change in eligibility for coverage under the group health plan, any revocation of an election must satisfy the consistency requirements of § 1.125-4(c)(3)(i) and (iii). Those requirements provide that if an employee’s change in status results in an individual covered by a group health plan due to the individual’s relationship to the employee ceasing to satisfy eligibility requirements for coverage, the employee is not permitted to elect to revoke an election of coverage under the cafeteria plan for any individual who did not lose eligibility. Similarly, if a change in status results in an individual gaining eligibility for coverage under a second group health plan, an employee’s election to cease or decrease coverage for that individual under the cafeteria plan is permitted only if the individual enrolls in the coverage for which the individual is newly eligible.

Furthermore, § 1.125-4(b) permits a cafeteria plan to allow an employee to revoke an election under a group health plan during a period of coverage and to make a new election that corresponds with the special enrollment rights under section 9801(f).

The Affordable Care Act² created the ability to enroll in QHPs through an Exchange. Special enrollment rights under section 9801(f) concern rights to enroll in a group health plan due to loss of other coverage or certain family events, but do not include the ability to enroll in a QHP through an Exchange. The ACA includes separate provisions regarding enrollment in QHPs through an Exchange during open and special enrollment periods. In order to allow employees to enroll in a QHP through an Exchange if they would prefer that coverage, Notice 2014-55 (2014-41 IRB 672) expanded the ability of cafeteria plans to allow employees to revoke elections for group health plan coverage in two situations.

The first situation in Notice 2014-55 addresses an employee with a specified reduction in hours. Specifically, a cafeteria plan may allow that employee to revoke prospectively an election for group health plan coverage if (1) the change in that employee’s status does not result in the employee ceasing to be eligible under the group health plan; and (2) the revocation of the election of coverage under the group health plan corresponds with the intended enrollment of the employee, and any related individuals who cease coverage due to the revocation, in another plan that provides minimum essential coverage, with the new coverage effective no later than the first day of the second month following the month that includes the date the original coverage is revoked.

The second situation in Notice 2014-55 addresses an employee who is eligible to enroll in a QHP through an Exchange. Specifically, a cafeteria plan may allow an employee to revoke prospectively an election for group health plan coverage if (1) the employee is eligible for a special enrollment period to enroll in a QHP through an Exchange pursuant to guidance issued by the Department of Health and Human Services³ and any other applicable guidance, or the employee seeks to enroll in a QHP during the Exchange’s annual open enrollment period; and (2) the revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee, and any related individuals who cease coverage due to the revocation, in a QHP through an Exchange for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked. However, Notice 2014-55 does not allow the revocation of an election for group health plan coverage when only related individuals, and not the employee, become eligible to enroll in a QHP through an Exchange.

Section 36B allows a premium tax credit to applicable taxpayers who satisfy certain eligibility requirements, including that an individual in the taxpayer’s family enrolls in a QHP through an Exchange for one or more months in which the individual is not eligible for employer-sponsored minimum essential coverage (including group health plan coverage) or certain other minimum essential coverage. See section 36B(c)(2)(B) and § 1.36B-3(c). Section 36B(c)(2)(C) generally provides that an individual is not treated as eligible for group health plan coverage if the coverage offered is unaffordable or does not provide minimum value. However, an individual who enrolls in group health plan coverage is eligible for that coverage, and therefore ineligible for a premium tax credit, irrespective of whether it is affordable or provides minimum value.

Previous regulations under section 36B provided that the affordability of an offer of group health plan coverage for an individual who may enroll in the coverage because of a relationship to an employee of the employer (a related individual) was based on the employee’s self-only cost to enroll in the coverage.⁴ This rule was changed in recently issued regulations under section 36B, which provide that the affordability of an offer of group health plan coverage for a related individual is based on the employee’s cost to cover the employee and the employee’s related individuals. See § 1.36B-2(c)(3)(v)(A)(2); 87 FR 61979 (Oct. 13, 2022). Affordability of an offer of group health plan coverage to an employee, however, continues to be based on the employee’s self-only cost to enroll in the coverage.

In addition to the situations described in Notice 2014-55, a non-calendar year cafeteria plan may allow an employee to revoke prospectively an election of family coverage under a group health plan that is not a health FSA and that provides minimum essential coverage (as defined in section 5000A(f)(1)) provided the following conditions are satisfied:

(1) One or more related individuals are eligible for a special enrollment period to enroll in a QHP through an Exchange pursuant to guidance issued by the Department of Health and Human Services⁵ and any other applicable guidance, or one or more already-covered related individuals seeks to enroll in a QHP during the Exchange’s annual open enrollment period; and

(2) The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the related individual or related individuals in a QHP through an Exchange for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked. If the employee does not enroll in a QHP through an Exchange as set forth in Notice 2014-55, the employee must elect self-only coverage (or family coverage including one or more already-covered related individuals) under the group health plan.

A cafeteria plan may rely on the reasonable representation of an employee that the employee and/or related individuals have enrolled or intend to enroll in a QHP through an Exchange for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.

The guidance in this notice is effective for elections effective on or after January 1, 2023. Taxpayers may rely on the guidance in this notice pending further guidance.

To allow the new permitted election changes under this notice, an employer must amend a cafeteria plan to provide for these election changes. An employer must adopt the amendment on or before the last day of the plan year in which the elections are allowed, and the amendment may be effective retroactively to the first day of that plan year, provided that the cafeteria plan operates in accordance with the guidance under this notice and the employer informs participants of the amendment, and provided further that an employer may amend a cafeteria plan to adopt the new permitted election changes for a plan year that begins in 2023 at any time on or before the last day of the plan year that begins in 2024. However, in no event may an employer amend a cafeteria plan to allow an election to revoke coverage on a retroactive basis.

Notice 2014-55 is amplified.

The principal author of this notice is Jennifer Friedman of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further information regarding this notice, contact Jennifer Friedman at (202) 317-5500 (not a toll-free number).

¹See, e.g., Prop. Reg. § 1.125-1(c)(1)(iii); 72 FR 43938, 43948 (Aug. 6, 2007).

²The Patient Protection and Affordable Care Act, Pub. L. 111–148 (124 Stat. 119 (2010)), and the Health Care and Education Reconciliation Act of 2010, Pub. L. 111–152 (124 Stat. 1029 (2010)), collectively referred to as the Affordable Care Act or ACA.

³See 45 CFR § 155.420(d).

⁴See 78 FR 7264 (Feb. 1, 2013).

⁵See 45 CFR § 155.420(d).

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) plan to issue guidance under § 30D and § 25E of the Internal Revenue Code (Code), as amended by §§ 13401 and 13402, respectively, of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). This notice requests general comments on questions under § 25E and the amendments to § 30D, as well as specific comments involving questions described in section 3 of this notice. Comments received in response to this notice will help to inform development of guidance implementing §§ 30D and 25E.

.01 Section 30D, Clean Vehicle Credit

Section 30D of the Code was originally enacted by § 205(a) of the Energy Improvement and Extension Act of 2008, Division B of Public Law 110-343, 122 Stat. 3765, 3835 (October 3, 2008), to provide a credit for purchasing and placing in service of new qualified plug-in electric drive motor vehicles. Section 30D of the Code has been amended several times since its enactment, most recently by § 13401 of the IRA. In general, the amendments made by § 13401 of the IRA to § 30D of the Code apply to vehicles placed in service after December 31, 2022, except as provided in § 13401(k)(2) through (5) of the IRA.

Section 13401(a) of the IRA amends § 30D(b) of the Code to provide a maximum credit of $7,500 per vehicle, consisting of $3,750 in the case of a vehicle that meets certain critical minerals requirements and $3,750 in the case of a vehicle that meets certain battery components requirements. The amendments made by § 13401(a) of the IRA are applicable to vehicles placed in service after the date on which the Secretary of the Treasury or her delegate (Secretary) issues proposed guidance described in new § 30D(e)(3)(B) of the Code (proposed battery guidance date) relating to new critical minerals requirements described in new § 30D(e)(1)(A) and new battery components requirements described in new § 30D(e)(2)(A). See § 13401(k)(3) of the IRA.

Section 13401(b) of the IRA amends § 30D(d) of the Code by adding new § 30D(d)(1)(G) and new § 30D(d)(5) applicable to vehicles sold after the date of enactment of the IRA (that is, August 16, 2022). See § 13401(k)(2) of the IRA. Section 30D(d)(1)(G) requires any vehicle eligible for the credit under § 30D to undergo final assembly in North America. For purposes of new § 30D(d)(1)(G), new § 30D(d)(5) defines “final assembly” as the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.

Section 13401(c) of the IRA further amends § 30D(d) of the Code by making the credit applicable to “new clean vehicles,” instead of “new qualified plug-in electric drive motor vehicles,” for vehicles placed in service after December 31, 2022. As amended by § 13401(c) and (g)(2) of the IRA, § 30D(d)(1) of the Code defines a “new clean vehicle” as a motor vehicle that satisfies the following eight requirements set forth in § 30D(d)(1)(A) through (H) of the Code:

(A) The original use of the motor vehicle must commence with the taxpayer.

(B) The motor vehicle must be acquired for use or lease by the taxpayer and not for resale.

(C) The motor vehicle must be made by a qualified manufacturer.

(D) The motor vehicle must be treated as a motor vehicle for purposes of title II of the Clean Air Act.

(E) The motor vehicle must have a gross vehicle weight rating of less than 14,000 pounds.

(F) The motor vehicle must be propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of not less than 7 kilowatt hours, and is capable of being recharged from an external source of electricity.

(G) The final assembly of the motor vehicle must occur within North America.

(H) The person who sells any vehicle to the taxpayer must furnish a report to the taxpayer and to the Secretary containing the following six items:

(i) The name and taxpayer identification number of the taxpayer.

(ii) The vehicle identification number of the vehicle, unless, in accordance with any applicable rules promulgated by the Secretary of Transportation, the vehicle is not assigned such a number.

(iii) The battery capacity of the vehicle.

(iv) Verification that original use of the vehicle commences with the taxpayer.

(v) The maximum credit under § 30D allowable to the taxpayer with respect to the vehicle.

(vi) In the case of a taxpayer who makes an election to transfer the credit under § 30D(g)(1) (described below), any amount described in § 30D(g)(2)(C) which has been provided to such taxpayer. The Secretary may prescribe the time and manner of the report.

Section 13401(c) of the IRA further amends § 30D(d)(3) of the Code to replace the term “manufacturer” with “qualified manufacturer” applicable to vehicles placed in service after December 31, 2022. As amended by the IRA, § 30D(d)(3) of the Code defines a “qualified manufacturer” as any manufacturer (within the meaning of the regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.)) that enters into a written agreement with the Secretary under which such manufacturer agrees to make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) providing vehicle identification numbers and such other information related to each vehicle manufactured by such manufacturer as the Secretary may require.

Section 13401(c) of the IRA adds new § 30D(d)(6) to the Code, which includes in the definition of the term “new clean vehicle” applicable to vehicles placed in service after December 31, 2022, any “new qualified fuel cell motor vehicle” (as defined in § 30B(b)(3)) that meets the requirements under § 30D(d)(1)(G) and (H). Section 13401(c) of the IRA also makes conforming amendments to § 30D(a) and (b)(1) of the Code to allow a credit for the taxable year with respect to each “new clean vehicle” placed in service by a taxpayer during the taxable year and after December 31, 2022.

Section 13401(d) of the IRA eliminates the manufacturer limitation on the number of vehicles eligible for the § 30D credit by striking former § 30D(e) applicable to vehicles sold after December 31, 2022. See § 13401(k)(5) of the IRA.

Section 13401(e) of the IRA provides new critical minerals requirements and new battery components requirements in new § 30D(e) applicable to vehicles placed in service after the proposed battery guidance date. New § 30D(e)(1)(A) provides that the critical minerals requirement with respect to the battery from which the electric motor of a vehicle draws electricity is satisfied if the percentage of the value of the applicable critical minerals (as defined in § 45X(c)(6)) contained in such battery that were (i) extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or (ii) recycled in North America, is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary). The applicable percentage for the critical minerals requirement is set forth in § 30D(e)(1)(B)(i) through (v) of the Code and varies based on when the vehicle is placed in service. In the case of a vehicle placed in service after the proposed battery guidance date and before January 1, 2024, the applicable percentage is 40 percent. In the case of a vehicle placed in service during calendar year 2024, 2025, and 2026, the applicable percentage is 50 percent, 60 percent, and 70 percent, respectively. In the case of a vehicle placed in service after December 31, 2026, the applicable percentage is 80 percent.

Section 13401(e) of the IRA amends § 30D(e)(2)(A) of the Code applicable to vehicles placed in service after the proposed battery guidance date to provide that the battery components requirement with respect to the battery from which the electric motor of a vehicle draws electricity is satisfied if the percentage of the value of the components contained in such battery that were manufactured or assembled in North America is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary). The applicable percentage for the battery components requirement is set forth in § 30D(e)(2)(B)(i) through (vi) of the Code and varies based on when the vehicle is placed in service. In the case of a vehicle placed in service after the proposed battery guidance date and before January 1, 2024, the applicable percentage is 50 percent. In the case of a vehicle placed in service during calendar year 2024 or 2025, the applicable percentage is 60 percent. In the case of a vehicle placed in service during calendar year 2026, 2027, and 2028, the applicable percentage is 70 percent, 80 percent, and 90 percent, respectively. In the case of a vehicle placed in service after December 31, 2028, the applicable percentage is 100 percent.

New § 30D(e)(3)(A) of the Code authorizes the Secretary to issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of new § 30D(e), including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the new critical minerals requirements and new battery components requirements of new § 30D(e). New § 30D(e)(3)(B) of the Code requires the issuance of proposed guidance with respect to the new critical minerals requirements and new battery components requirements under new § 30D(e) not later than December 31, 2022.

As amended by § 13401(e) of the IRA, § 30D(d)(7) of the Code excludes, after certain specified dates, vehicles placed in service with batteries containing certain critical minerals or battery components from a foreign entity of concern from the definition of the term “new clean vehicle.” In particular, amended § 30D(d)(7) provides that the term “new clean vehicle” does not include (A) any vehicle placed in service after December 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle (as described in § 30D(e)(1)(A)) were extracted, processed, or recycled by a foreign entity of concern (as defined in § 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5))), or (B) any vehicle placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle (as described in § 30D(e)(2)(A)) were manufactured or assembled by a foreign entity of concern (as so defined).

Section 13401(f) of the IRA adds four new special rules under § 30D(f) applicable to vehicles placed in service after December 31, 2022. New § 30D(f)(8) provides that the § 30D credit is only allowed once with respect to a vehicle, as determined based upon the vehicle identification number of a vehicle, including any vehicle with respect to which the taxpayer elects the application of § 30D(g) (described below). New § 30D(f)(9) provides that no credit is allowed with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.

New § 30D(f)(10)(A) provides that no credit is allowed for any taxable year if (i) the lesser of (I) the modified adjusted gross income of the taxpayer for such taxable year, or (II) the modified adjusted gross income of the taxpayer for the preceding taxable year, exceeds (ii) the threshold amount. New § 30D(f)(10)(B) provides that the threshold amount shall be (i) in the case of a joint return or a surviving spouse (as defined in § 2(a) of the Code), $300,000, (ii) in the case of a head of household (as defined in § 2(b) of the Code), $225,000, and (iii) in the case of any other taxpayer, $150,000. New § 30D(f)(10)(C) defines “modified adjusted gross income” as adjusted gross income increased by any amount excluded from gross income under § 911, 931, or 933.

New § 30D(f)(11)(A) provides that no credit is allowed for a vehicle with a manufacturer’s suggested retail price in excess of the applicable limitation. New § 30D(f)(11)(B) provides that the applicable limitation for each vehicle classification is as follows: in the case of a van, $80,000; in the case of a sport utility vehicle, $80,000; in the case of a pickup truck, $80,000; and in the case of any other vehicle, $55,000. New § 30D(f)(11)(C) authorizes the Secretary to prescribe such regulations or other guidance as the Secretary determines necessary to determine vehicle classifications using criteria similar to that employed by the Environmental Protection Agency and the Department of the Energy to determine size and class of vehicles.

Section 13401(g) of the IRA amends § 30(D)(g) of the Code applicable to vehicles placed in service after December 31, 2023, to provide that, subject to such regulations or other guidance as the Secretary determines necessary, a taxpayer may elect under § 30D(g) to “transfer” a § 30D credit with respect to a new clean vehicle to an eligible entity (transfer election). If the taxpayer who acquires a new clean vehicle makes a transfer election under § 30D(g) with respect to such vehicle, the § 30D credit that would otherwise be allowed to such taxpayer with respect to such vehicle is allowed to the eligible entity specified in such election (and not the taxpayer). Section 30D(g)(2) defines an “eligible entity” with respect to the vehicle for which the credit is allowed as the dealer that sold such vehicle to the taxpayer and that satisfies the following four requirements set forth in § 30D(g)(2)(A) through (D):

(A) The dealer, subject to § 30D(g)(4), must be registered with the Secretary for purposes of § 30D(g)(2), at such time, and in such form and manner, as the Secretary prescribes.

(B) The dealer, prior to the transfer election and not later than at the time of sale, must have disclosed to the taxpayer purchasing such vehicle (i) the manufacturer’s suggested retail price, (ii) the value of the credit allowed and any other incentive available for the purchase of such vehicle, and (iii) the amount provided by the dealer to such taxpayer as a condition of the transfer election.

(C) The dealer, not later than at the time of sale, must have paid the taxpayer (whether in cash or in the form of a partial payment or down payment for the purchase of such vehicle) an amount equal to the credit otherwise allowable to such taxpayer.

(D) The dealer with respect to any incentive otherwise available for the purchase of a vehicle for which a credit is allowed under § 30D, including any incentive in the form of a rebate or discount provided by the dealer or manufacturer, must have ensured that (i) the availability or use of such incentive does not limit the ability of a taxpayer to make a transfer election and (ii) such election does not limit the value or use of such incentive.

Amended § 30D(g)(3) provides that any transfer election cannot be made by the taxpayer any later than the date on which the vehicle for which the § 30D credit is allowed is purchased. Amended § 30D(g)(4) provides that upon determination by the Secretary that a dealer has failed to comply with the requirements described in § 30D(g)(2), the Secretary may revoke the dealer’s registration.

Amended § 30D(g)(5) provides that with respect to any payment described in § 30D(g)(2)(C), such payment (A) is not includible in the gross income of the taxpayer, and (B) with respect to the dealer, is not deductible under the Code. Section 30D(g)(6) provides that, in the case of any transfer election with respect to any vehicle (A) the requirements of § 30D(f)(1) and (2) apply to the taxpayer who acquired the vehicle in the same manner as if the § 30D credit determined with respect to such vehicle were allowed to such taxpayer, (B) § 30D(f)(6) does not apply, and (C) the requirement of § 30D(f)(9) is treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the Secretary in such manner as the Secretary may provide.

Amended § 30D(g)(7)(A) provides for the establishment of a program to make advance payments to any eligible entity in an amount equal to the cumulative amount of the credits allowed with respect to any vehicles sold by such entity for which a transfer election described in § 30D(g)(1) has been made. Amended § 30D(g)(7)(B) details that rules similar to the rules of § 6417(d)(6) apply for purposes of any excessive payments.

Amended § 30D(g)(8) defines the term “dealer” as a person licensed by a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government, or any Alaska Native Corporation (as defined in § 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)) to engage in the sale of vehicles.

Amended § 30D(g)(9) defines the term “Indian tribal government” as the recognized governing body of any Indian or Alaska Native tribe, band, nation, pueblo, village, community, component band, or component reservation, individually identified (including parenthetically) in the list published most recently as of the date of enactment of § 30D(g) (that is, August 16, 2022) pursuant to § 104 of the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 5131).

Amended § 30D(g)(10) provides that in the case of any taxpayer who has made a transfer election with respect to a new clean vehicle and received a payment from an eligible entity, if the §30D credit would otherwise (but for § 30D(g)) not be allowable to such taxpayer pursuant to the application of § 30D(f)(10), the income tax imposed on such taxpayer under chapter 1 of the Code for the taxable year in which such vehicle was placed in service must be increased by the amount of the payment received by such taxpayer.

Amended § 30D(h) provides that no credit is allowed with respect to any vehicle placed in service after December 31, 2032.

Section 13401(k) of the IRA provides the effective date for the amendments to § 30D of the Code. As noted above, except as provided in § 13401(k)(2) through (5) of the IRA, the amendments made by § 13401 of the IRA apply to vehicles placed in service after December 31, 2022. Section 13401(k)(2) of the IRA provides that the amendments made by § 13401(b) of the IRA relating to final assembly apply to vehicles sold after the date of enactment of the IRA (August 16, 2022). Section 13401(k)(3) of the IRA provides that the amendments made by § 13401(a) and (e) of the IRA relating to the per vehicle dollar limitation and related requirements apply to vehicles placed in service after the date on which the proposed guidance described in new § 30D(e)(3)(B) is issued by the Secretary. Section 13401(k)(4) of the IRA provides that the amendments made by § 13401(g) of the IRA relating to transfers of the § 30D credit apply to vehicles placed in service after December 31, 2023. Section 13401(k)(5) of the IRA provides that the amendment made by § 13401(d) of the IRA eliminating the manufacturer limitation applies to vehicles sold after December 31, 2022.

Section 13401(l) of the IRA provides a transition rule for a taxpayer who purchased or entered into a written binding contract to purchase a new qualified plug-in electric drive motor vehicle (as defined in § 30D(d)(1) of the Code, as in effect on the day before the date of enactment of the IRA (August 15, 2022)) after December 31, 2021 and before the date of enactment of the IRA (August 16, 2022), and placed such vehicle in service on or after the date of enactment of the IRA. The transition rule provides that such a taxpayer may elect (at such time, and in such form and manner as the Secretary may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of the IRA.

.02 Section 25E, Previously Owned Clean Vehicles

New § 25E of the Code was enacted by § 13402 of the IRA. Section 25E(a) provides that in case of a qualified buyer who during a taxable year, places in service a previously-owned clean vehicle, an income tax credit is allowed for the taxable year equal to the lesser of (1) $4,000, or (2) the amount equal to 30 percent of the sale price with respect to such vehicle (§ 25E credit).

Section 25E(b)(1) sets a limitation based on modified adjusted gross income and provides that no credit is allowed for any taxable year if (A) the lesser of (i) the modified adjusted gross income of the taxpayer for such taxable year, or (ii) the modified adjusted gross income of the taxpayer for the preceding taxable year, exceeds (B) the threshold amount. The threshold amount is set forth in § 25E(b)(2) and varies based on a taxpayer’s filing status. In the case of a taxpayer filing a joint return or who is a surviving spouse (as defined in § 2(a) of the Code), the threshold amount is $150,000. In the case of a taxpayer who is a head of household (as defined in § 2(b) of the Code), the threshold amount is $112,500. In the case of any other taxpayer, the threshold amount is $75,000. Section 25E(b)(3) defines modified adjusted gross income as adjusted gross income increased by any amount excluded from gross income under § 911, 931, or 933.

Section 25E(c) defines certain terms for purposes of the § 25E credit. Section 25E(c)(1) defines “previously-owned clean vehicle” as, with respect to a taxpayer, a motor vehicle that satisfies the following four requirements set forth in § 25E(c)(1)(A) through (D) of the Code:

(A) The model year of the motor vehicle is at least 2 years earlier than the calendar year in which the taxpayer acquires such vehicle.

(B) The original use of the motor vehicle commences with a person other than the taxpayer.

(C) The motor vehicle is acquired by the taxpayer in a qualified sale.

(D) The motor vehicle (i) meets the requirements of § 30D(d)(1)(C), (D), (E), (F), and (H) (except for § 30D(d)(1)(H)(iv)), or (ii) is a motor vehicle which (I) satisfies the requirements under § 30B(b)(3)(A) and (B), and (II) has a gross vehicle weight rating of less than 14,000 pounds.

Section 25E(c)(2) defines a “qualified sale” as a sale of a motor vehicle (A) by a dealer (as defined in § 30D(g)(8)), (B) for a sale price which does not exceed $25,000, and (C) which is the first transfer since the date of enactment to a qualified buyer other than the person with whom the original use of such vehicle commenced.

Section 25E(c)(3) defines “qualified buyer” as, with respect to a sale of a motor vehicle, a taxpayer (A) who is an individual, (B) who purchases such vehicle for use and not for resale, (C) with respect to whom no deduction is allowable with respect to another taxpayer under § 151, and (D) who has not been allowed a credit under § 25E for any sale during the 3-year period ending on the date of the sale of such vehicle.

Section 25E(c)(4) defines “motor vehicle” and “capacity” to have the meaning given such terms in § 30D(d)(2) and (4), respectively. Section 25E(d) provides that no credit is allowed under § 25(a) with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year. Section 25E(e) and (f) provide that rules similar to the rules of § 30D(f) (without regard to paragraph (10) or (11) thereof) and the rules of § 30D(g) apply for purposes of § 25E. Section 25E(g) provides that no credit is allowed with respect to any vehicle acquired after December 31, 2032.

Section 13402(e) of the IRA provides the effective date for the amendments made by § 13402 of the IRA. In general, except as provided in § 13402(e)(2) of the IRA, the amendments made by § 13402 of the IRA apply to vehicles acquired after December 31, 2022. The amendments made by § 13402(b) of the IRA relating to transfers of the § 25E credit apply to vehicles placed in service after December 31, 2023.

The Treasury Department and the IRS request comments on any questions arising from the IRA amendments to § 30D and the enactment of § 25E that should be addressed in guidance. Commenters are encouraged to specify the issues on which guidance is needed most quickly as well as the most important issues on which guidance is needed. In addition to general comments regarding these provisions, the Treasury Department and the IRS request comments that address the following specific questions:

.01 Clean Vehicles (§ 30D)

(1) Definitions. Section 30D(d)(1)(B) of the Code defines a “new clean vehicle,” in part, as a motor vehicle which is acquired for use or lease by the taxpayer and not for resale. As used in this definition, what, if any, guidance is needed as to the meaning of the terms “acquired,” “use,” and “lease?”

(2) Critical Minerals. Section 30D(e)(1) provides the new critical minerals requirements, including the applicable percentage requirements to be phased in over several years.

(a) What factors and definitions should be considered to determine the place of extracting or processing such critical minerals, and, in particular, to determine whether extracting or processing occurred in the United States or in any country with which the United States has a free trade agreement in effect?

(b) What factors and definitions should be considered to determine the place of recycling such critical minerals and, in particular, to determine whether recycling occurred in North America?

(c) What factors and definitions should be considered to determine (i) the total value of the critical minerals contained in a vehicle’s battery, and (ii) the percentage of that total value attributable to critical minerals (I) extracted or processed in the United States or a country with which the United States has a free trade agreement in effect, or (II) recycled in North America?

(3) Battery Components. Section 30D(e)(2) provides the new battery component requirements, including the applicable percentage requirements to be phased in over several years.

(a) What factors should be considered in defining the components of a battery of a clean vehicle?

(b) What factors and definitions should be considered to determine the place of manufacture or assembly of the components of a battery of a clean vehicle and, in particular, to determine whether manufacture or assembly occurred in North America?

(c) What factors and definitions should be considered to determine (i) the total value of the components contained in the battery of a clean vehicle, and (ii) the percentage of that total value attributable to components that were manufactured or assembled in North America?

(4) Applicable Values. The new critical mineral and battery component requirements in § 30D(e) are based on value. What existing battery technology supply chain tracking methodologies or regulatory frameworks should be considered in determining applicable values?

(5) Foreign Entity of Concern. Section 30D(d)(7) provides that some vehicles are excluded from the availability of the credit, including when any of the applicable critical minerals contained in the battery were extracted, processed, or recycled by a foreign entity of concern (defined in 42 U.S.C. 18741(a)(5)), or if any of the components contained in the battery of such vehicle were manufactured or assembled by a foreign entity of concern.

(a) Is guidance needed to clarify the definition of “foreign entity of concern”?

(b) What existing regulatory or guidance frameworks for recordkeeping requirements or supply chain tracking methodologies may be useful for qualified manufacturers to verify that its vehicles are not excluded under § 30D(d)(7)?

(6) Recordkeeping and Reporting.

(a) In addition to VIN numbers, what additional information should a qualified manufacturer provide to the Secretary to be considered a qualified manufacturer with respect to a particular vehicle, per § 30D(d)(3)?

(b) What existing regulatory or guidance frameworks for recordkeeping requirements or information reporting or existing battery technology supply chain tracking methodologies may be useful for developing guidance for qualified manufacturers under § 30D(e)(3)?

(c) What information should be included in the report furnished by the seller of the vehicle to the taxpayer and the Secretary under § 30D(d)(1)(H), including the election to transfer the credit under § 30D(g)?

(7) Tax-exempt Entities. Section 30D(f)(3) is stricken by § 13401(g) of the IRA with respect to vehicles placed in service after December 31, 2023. How should clean vehicles acquired and used by a tax-exempt entity after this statutory change becomes effective be treated for purposes of § 30D?

(8) Registered Dealer and Eligible Entity.

(a) What guidance, if any, is needed to determine who is a licensed dealer who can be registered with the Secretary for purposes of the transfer of the credit under § 30D(g)(2), (7), and (8)?

(b) What guidance, if any, is needed regarding what circumstances may lead to the revocation of such registration under § 30D(g)(4)?

(9) Final Assembly Requirement. Is guidance needed to clarify the definition of the term “final assembly” in § 30D(d)(5) or the area included in the term “North America” for purposes of § 30D(d)(1)(G)?

(10) Vehicle Classifications.

(a) What, if any, guidance is needed to define how vehicles are classified as vans, sport utility vehicles, pickup trucks, or other designations of vehicles for purposes of the manufacturer’s suggested retail price limitation in § 30D(f)(11)?

(b) What criteria employed by the Environmental Protection Agency and Department of Energy, or other factors (for example, Department of Transportation motor vehicle type classification) should be considered in determining the designation of such vehicles?

(c) Is guidance needed to clarify how the manufacturer’s suggested retail price is calculated?

(11) Election to Transfer and Advance Payments.

(a) What factors should be considered in determining the time and manner of the taxpayer’s election under § 30D(g) to transfer the § 30D credit to an eligible entity?

(b) Is guidance needed regarding the definition of “taxpayer,” such as whether non-individual taxpayers are eligible for the credit under § 30D?

(c) If an election to transfer the credit is made by the taxpayer, what issues should be considered regarding the transfer of the § 30D credit?

(d) What considerations and factors should be taken into account in determining the time and manner of advance payments made pursuant to §30D(g)(7)(A)?

(e) For purposes of § 30D(g), what guidance, if any, is needed regarding a determination by an eligible entity regarding whether a credit is allowable to the taxpayer?

(12) Recapture.

(a) Is guidance needed to coordinate the application of the excess payment provision under § 30D(g)(7)(B) and the recapture provision under § 30D(g)(10) as between the transferors and transferees of the credit under § 30D(g)?

(b) In the event of a recapture event, how should recapture be reported by the taxpayer?

(13) Please provide comments on any other terms that may require definition or additional guidance.

.02 Previously Owned Cleans Vehicle (§ 25E)

(1) What, if any, guidance is needed to address how a taxpayer can verify that a vehicle qualifies as a “previously-owned clean vehicle” as defined in § 25E(c)(1)?

(2) Section 25E(e) provides that rules similar to the rules of § 30D(f) (without regard to paragraph (10) or (11) thereof) apply for purposes of the § 25E credit. What rules of § 30D(f) should be applied under § 25E(e) without any modification? What rules of § 30D(f) should be applied in modified form for purposes of § 25E and in what way should they be modified?

(3) Section 25E(f) provides that rules similar to the rules of § 30D(g) apply for purposes of the § 25E credit. What rules of § 30D(g) should be applied under § 25E(f) without any modification? What rules of § 30D(g) should be applied in modified form for purposes of § 25E and in what way should they be modified?

(4) Please provide comments on any other terms that may require definition or additional guidance.

.01 Written comments should be submitted by Friday, November 4, 2022. Consideration will be given, however, to any written comment submitted after Friday, November 4, 2022, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2022-46. Comments may be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-0046 in the search field on the regulations.gov homepage to find this notice and submit comments).

(2) Alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2022-46), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically and on paper to its public docket on regulations.gov.

Notice 2009-89, 2009-48 I.R.B. 714 was modified Notice 2016-51, 2016-37 I.R.B. 344, by updating section 6.03 of Notice 2009-89, updating the address to which a manufacturer (or, in the case of a foreign manufacturer, its domestic distributor) sends quarterly reports and/or certifications. Taxpayers may rely on Notice 2009-89, as modified by Notice 2016-51, until additional guidance on these issues is issued.

For purposes of § 30D(e)(3)(B), the publication of this notice requesting comments is not the publication of proposed guidance with respect to the critical mineral and battery component requirements under § 30D(e). The Treasury Department and the IRS will explicitly identify when they have published proposed guidance with respect to the critical mineral and battery component requirements under § 30D(e).

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) plan to issue guidance regarding the advanced manufacturing production credit under new § 45X (§ 45X credit) and the qualifying advanced energy project credit under § 48C (§ 48C credit) of the Internal Revenue Code (Code), as added and amended, by §§ 13502 and 13501, respectively, of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). This notice requests general and specific comments on questions pertaining to the implementation and administration of §§ 45X and 48C, which will help to inform the development of guidance implementing §§ 45X and 48C.

.01 Advanced Manufacturing Production Credit (§ 45X)

(1) Overview

Section 13502(a) of the IRA added new § 45X to the Code to establish the advanced manufacturing production credit. Section 45X(a)(1) and (2) provide that, for purposes of the general business credit under § 38 of the Code, the advanced manufacturing production credit for any taxable year is an amount equal to the sum of the credit amounts determined under § 45X(b) with respect to each eligible component (as defined in § 45X(c)) produced by the taxpayer and sold by such taxpayer to an unrelated person, but only if such production and sale is in a trade or business of the taxpayer.

Section 45X(a)(3) provides rules regarding the sale of components to an unrelated person, and generally provides a special rule that, for purposes of § 45X(a), treats a taxpayer as selling components to an unrelated person if such component is sold to such person by a person related to the taxpayer. Under § 45X(a)(3)(B), a taxpayer may make an election in the form and manner prescribed by the Secretary of the Treasury or her delegate (Secretary) to treat a sale of components by such taxpayer to a related person as made to an unrelated person. As a condition of, and prior to, a taxpayer making this election, the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper or excessive credit amount.

(2) Credit amounts

Section 45X(b)(1)(A) through (M) and § 45X(b)(2)(A) set forth the credit amounts for each type of eligible component, which amounts, except for purposes of determining the credit amount with respect to any applicable critical mineral, are subject to phase out rules set forth in § 45X(b)(3). For any eligible component sold after December 31, 2029, the credit amount with respect to such component equals the product of the amount determined under § 45X(b)(1) with respect to such component multiplied by the phase out percentages under § 45X(b)(3)(B)(i) through (iv). In the case of an eligible component sold during calendar year 2030, 2031, and 2032, the phase out percentages are 75 percent, 50 percent, and 25 percent, respectively. In the case of an eligible component sold after December 31, 2032, the phase out percentage is 0 percent.

Section 45X(b)(4) prescribes capacity limitations used to compute the credit amount for eligible battery cells and battery modules under § 45X(b)(1)(K) and (L), respectively. For purposes of computing the credit for these eligible components, § 45X(b)(4)(A) provides that the capacity determined with respect to a battery cell or battery module must not exceed a capacity-to-power ratio of 100:1. Section 45X(b)(4)(B) defines the term “capacity-to-power-ratio” for this purpose as the ratio of the capacity of a battery cell or battery module to the maximum discharge amount of such cell or module.

(3) Eligible components

Section 45X(c) sets forth the different types of eligible components. Section 45X(c)(1)(A) provides that the term “eligible component” means any solar energy component, wind energy component, inverter described in § 45X(c)(2)(B) through (G), qualifying battery component, and applicable critical mineral. Section 45X(c)(1)(B) clarifies that the term “eligible component” does not include any property that is produced at a facility if the basis of any property that is part of such facility is taken into account for purposes of the qualifying advanced energy project credit allowed under § 48C after August 16, 2022 (that is, the date of enactment of the IRA).

Section 45X(c)(2)(A) generally defines “inverter” as an end product that is suitable to convert direct current electricity from 1 or more solar modules or certified distributed wind energy systems into alternating current electricity. Section 45X(c)(2)(B) through (G) define the following different types of eligible inverters: central inverter, commercial inverter, distributed wind inverter, microinverter, residential inverter, and utility inverter.

Section 45X(c)(3)(A) defines a “solar energy component” as photovoltaic cells, photovoltaic wafers, polymeric backsheets, solar grade polysilicon, solar modules, and torque tubes or structural fasteners. Section 45X(c)(3)(B) defines these different types of eligible solar energy components as well as the term “solar tracker.”

Section 45X(c)(4)(A) defines “wind energy component” as blades, nacelles, towers, offshore wind foundations, and related offshore wind vessels. Section 45X(c)(4)(B) defines these different types of eligible wind energy components.

Section 45X(c)(5)(A) defines a “qualifying battery component” as electrode active materials, battery cells, and battery modules. Section 45X(c)(5)(B) defines these different types of qualifying battery components.

Section 45X(c)(6) provides the following list of 50 minerals that when converted or purified to specified purities are considered an “applicable critical mineral” for purposes of the § 45X credit: aluminum, antimony, arsenic, barite, beryllium, bismuth, cerium, cesium, chromium, cobalt, dysprosium, erbium, europium, fluorspar, gadolinium, gallium, germanium, graphite, hafnium, holmium, indium, iridium, lanthanum, lithium, lutetium, magnesium, manganese, neodymium, nickel, niobium, palladium, platinum, praseodymium, rhodium, rubidium, ruthenium, samarium, scandium, tantalum, tellurium, terbium, thulium, tin, titanium, tungsten, vanadium, ytterbium, yttrium, zinc, and zirconium.

(4) Special rules

Section 45X(d) prescribes special rules applicable for the § 45X credit. Section 45X(d)(1) provides that persons are treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under the common control rules of § 52(b) of the Code. Section 45X(d)(2) provides that sales of eligible components are taken into account under § 45X only with respect to eligible components the production of which is within the United States (including continental shelf areas described in § 638(1) of the Code), or a U.S. territory (including continental shelf areas described in § 638(2)). Section 45X(d)(3) directs the Secretary to promulgate regulations adopting rules similar to the rules of § 52(d) to apportion credit amounts between estates or trusts and their beneficiaries on the basis of the income of the estates or trusts allocable to each and pass-thru any apportioned credit amounts to the beneficiaries. Section 45X(d)(4) provides that for purposes of the § 45X credit, a person is treated as having sold an eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component which is sold to an unrelated person.

.02 Qualifying Advanced Energy Project Credit (§ 48C)

(1) Overview

Section 48C was originally enacted by § 1302(b) of the American Recovery and Reinvestment Act of 2009, Public Law 111-5, Division B, Title I, Subtitle D, 123 Stat. 115, 345 (February 17, 2009), to provide an allocated credit for qualified investments in qualifying advanced energy projects. For purposes of the investment tax credit determined for any taxable year under § 46 of the Code, § 48C generally allows a qualifying advanced energy project credit equal to 30 percent of a taxpayer’s qualified investment for such taxable year with respect to any qualifying advanced energy project of the taxpayer.¹ The amount treated as the qualified investment for all taxable years with respect to a qualifying advanced energy project cannot exceed the amount allocated to the project by the Secretary.

Section 48C has been amended several times, most recently by § 13501 of the IRA. Section 13501(a) of the IRA adds new § 48C(e) to the Code to extend the § 48C credit to provide an additional credit allocation of $10 billion. Section 13501(b) of the IRA modifies the definition of a “qualifying advanced energy project” contained in § 48C(c)(1)(A). Section 13501(c) and (d) of the IRA make conforming amendments to § 48C(c)(2)(A) and (f). The amendments made by § 13501 of the IRA are effective on January 1, 2023. See § 13501(e) of the IRA.

(2) New § 48C(e)

Section 48C(e)(1) directs the Secretary to establish a program to consider and award certifications for qualified investments eligible for § 48C credits to qualifying advanced energy project sponsors.

Section 48C(e)(2) provides that the total amount of § 48C credits that may be allocated under such program cannot exceed $10 billion, of which no greater than $6 billion may be allocated to qualified investments which (1) prior to August 16, 2022 (the date of enactment of § 48C(e)), have not received a certification and allocation of credits under § 48C(d), and (2) are not located within one of the following census tracts described in § 45(b)(11)(B)(iii):

a) A census tract in which a coal mine has closed after December 31, 1999.

b) A census tract in which a coal-fired electric generating unit has been retired after December 31, 2009.

c) A census tract directly adjoining such a census tract described in a) or b).

Section 48C(e)(3)(A) provides that each applicant for certification must submit an application at such time and containing such information as the Secretary may require. Section 48C(e)(3)(B) provides that each applicant for certification has 2 years from the date of acceptance by the Secretary of the application to provide to the Secretary evidence that the requirements of the certification have been met.

Section 48C(e)(3)(C) provides that an applicant who receives a certification has 2 years from the date of issuance of the certification to place the project in service and to notify the Secretary that such project has been so placed in service. If the project is not placed in service within the two year period, then the certification is no longer valid. If any certification is revoked under § 48C(e)(3), the total amount of the credits that may be allocated under § 48C(e)(2) is increased by the amount of § 48C credit with respect to such revoked certification.

Section 48C(e)(3)(D) provides that in the case of an applicant which receives a certification, if the Secretary determines that the project has been placed in service at a location that is materially different than the location specified in the application for such project, the certification is no longer valid.

Section 48C(e)(7) provides that the Secretary must, upon making a certification under § 48C(e), publicly disclose the identity of the applicant and the amount of the § 48C credit with respect to such applicant.

(3) Amendments to § 48C(c)(1)(A)

As amended by the IRA, § 48C(c)(1)(A) defines the term “qualifying advanced energy project” as one of the three following project types, any portion of the qualified investment of which is certified by the Secretary under § 48C(e) as eligible for a § 48C credit:

(i) A project that re-equips, expands, or establishes an industrial or manufacturing facility for the production or recycling of one of the following nine property types:

(I) Property designed to be used to produce energy from the sun, water, wind, geothermal deposits or other renewable resources.

(II) Fuel cells, microturbines, or energy storage systems and components.

(III) Electric grid modernization equipment or components.

(IV) Property designed to capture, remove, use, or sequester carbon oxide emissions.

(V) Equipment designed to refine, electrolyze, or blend any fuel, chemical, or product which is renewable or low-carbon and low-emission.

(VI) Property designed to produce energy conservation technologies (including residential, commercial, and industrial applications).

(VII) Light, medium, or heavy-duty electric or fuel cell vehicles, as well as technologies, components, or materials for such vehicles, and associated charging or refueling infrastructure.

(VIII) Hybrid vehicles with a gross vehicle weight rating of not less than 14,000 pounds, as well as technologies, components, or materials for such vehicles.

(IX) Other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary.

(ii) A project that re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of (I) low- or zero-carbon process heat systems, (II) carbon capture, transport, utilization, and storage systems, (III) energy efficiency and reduction in waste from industrial processes, or (IV) any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary.

(iii) A project that re-equips, expands, or establishes an industrial facility for the processing, refining, or recycling of critical materials (as defined in § 7002(a) of the Energy Act of 2020 (30 USC § 1606(a)).

Section 48C(c)(2)(A) defines “eligible property” as any property that is necessary for the production or recycling of property described in § 48C(c)(1)(A)(i), re-equipping an industrial or manufacturing facility described in § 48C(c)(1)(A)(ii), or re-equipping, expanding, or establishing an industrial facility described in § 48C(c)(1)(A)(iii).

(4) Denial of Double Benefit

As amended by § 13501(c) of the IRA, § 48C(f) provides that a § 48C credit is not allowed for a qualified investment for which a credit is allowed under §§ 48, 48A, 48B, 48E, 45Q or 45V.

The Treasury Department and the IRS request comments on issues arising from new § 45X and the amendments made by the IRA to § 48C that should be addressed in guidance. Commenters are encouraged to specify the issues on which guidance is needed most quickly as well as the most important issues on which guidance is needed. In addition to general comments, the Treasury Department and the IRS request comments that address the following specific issues:

.01 Section 45X Advanced Manufacturing Production Credit.

(1) Section 45X(a)(3)(B)(i) allows a taxpayer to make an election to treat a sale of components by such taxpayer to a related person as made to an unrelated person. Is guidance needed to clarify the meaning of the terms “unrelated person” and “related person”? If so, how should these terms be clarified?

(2) Section 45X(d)(4) provides that for purposes of § 45X, a person is treated as having sold an eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component which is sold to an unrelated person. How should “integrated, incorporated, or assembled” be determined?

(3) What factors should the Treasury Department and the IRS consider in determining what information or registration is necessary for purposes of preventing duplication, fraud, or any improper or excessive credit amount, as referenced in § 45X(a)(3)(B)?

(4) Is guidance needed regarding the capacity-to-power ratio in § 45X(b)(4)? If so, what guidance?

(5) Is additional clarification needed regarding the definitions of an “eligible component” in § 45X(c)?

(a) How should the amount of the § 45X credit be calculated for components that could be used in systems of varying capacities?

(b) In such cases, how should verification of the applicable credit amount be demonstrated?

(6) Section 45X(c)(4) identifies “related offshore wind vessels” as one of the qualifying “wind energy components.”

(a) What should the requirements be for establishing that a vessel is for offshore wind development?

(b) Where it is uncertain how much a vessel will be used for offshore wind, how should such situations be addressed?

(7) Section 45X(c)(6) identifies “applicable critical minerals,” and includes minimum purity percentages by mass.

(a) How should purity percentages be determined?

(b) Should an independent third party be required to verify the results?

(c) If so, what qualifications should be required of an independent third-party providing such verification?

(8) Is guidance needed regarding the definitions of “converted” and “purified”?

(9) Is guidance needed regarding the apportionment and pass-thru of credit amounts to beneficiaries of estates or trusts as provided in § 45X(d)(3)?

(10) Please provide comments on any other topics under § 45X that may require guidance.

.02 Qualifying Advanced Energy Project Credit (§ 48C)

(1) Section 48C(c)(1)(A)(i), as amended by the IRA, includes additional types of equipment and property that may be produced or recycled at a project that re-equips, expands, or establishes an industrial or manufacturing facility.

(a) Is guidance needed to define “equipment designed to refine electrolyze, or blend any fuel, chemical, or product which is renewable, or low-carbon and low-emission”? If so, how should this be defined?

(b) Is guidance needed to define “property designed to produce energy conservation technologies (including residential, commercial, and industrial applications)”? If so, how should this be defined?

(c) What should the Treasury Department and the IRS consider in determining “other advanced energy property designed to reduce greenhouse gas emissions”?

(2) Section 48C(c)(1)(A)(ii) adds to the list of eligible projects any project which re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of certain systems, including through the installation of energy efficiency and reduction in waste from industrial processes.

(a) Is guidance needed to define “energy efficiency”? If so, how should this be defined?

(b) Is guidance needed to define “reduction in waste from industrial processes”? If so, how should this be defined?

(c) Is guidance needed to define baseline criteria, boundary conditions and/or timeframe to determine achievement of the 20 percent threshold?

(3) What should the Treasury Department and the IRS consider in determining “any other industrial technology designed to reduce greenhouse gas emissions”? Is guidance needed to include eligibility of facilities currently producing industrial materials for use in the construction or alteration of buildings and infrastructure projects (such as concrete, steel, asphalt, and flat glass) that can be retrofitted to produce materials that have substantially lower levels of embodied greenhouse gas emissions?

(4) How should a qualifying advanced energy project substantiate its eligibility based on any of the available criteria, but particularly the criteria provided by § 13501 of the IRA?

(a) Are there industry guidelines currently in place that a taxpayer may use to demonstrate that a project reduces greenhouse gas or other pollutant emissions? If so, what guidelines?

(b) Are there existing industry guidelines or regulatory practices employed by local governments or states that a taxpayer may use to demonstrate that a project reduces greenhouse gas or other pollutant emissions, including submittal of environmental product declarations (EPDs) that include measurements of the embodied greenhouse gas emissions of the relevant material or product and conform with international standards?

(5) Section 48C(e) directs the Secretary to establish a program to consider and award certifications of qualified investments eligible for the § 48C credit.

(a) What should the Treasury Department and the IRS consider in determining the selection criteria for awarding the § 48C credit and to what extent should the Treasury Department and the IRS rely on precedent from previous experience administering the § 48C credit during previous allocation rounds provided in Notice 2009-72, 2009-37 I.R.B. 325 and Notice 2013-12, 2013-10 I.R.B. 543?

(b) What aspects of the previous allocation rounds of the § 48C credit should the Treasury Department and IRS consider revising in establishing a new § 48C program and administering it?

(6) Section 48C(e)(3)(C) provides, in part, that if any certification is revoked, the amount of the limitation under § 48C(e)(2) must be increased by the amount of the credit with respect to such revocation.

(a) Is guidance needed on revocation of certifications? If so, what guidance?

(7) Please provide comments on any other topics that may require guidance.

.01 Written comments should be submitted by Friday, November 4, 2022. Consideration will be given, however, to any written comment submitted after Friday, November 4, 2022, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2022-47 Comments may be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-0047 in the search field on the regulations.gov homepage to find this notice and submit comments).

(2) Alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2022-47), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, and to the extent practicable on paper, to its public docket.

For purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D, the publication of this notice requesting comments is not the publication of guidance with respect to the prevailing wage and apprenticeship requirements, and it is not relevant in determining whether the prevailing wage and apprenticeship requirements are satisfied under such sections. The Treasury Department and the IRS will explicitly identify when it has published guidance with respect to the prevailing wage and apprenticeship requirements that is relevant for determining whether such requirements have been satisfied for purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D.

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

¹Section 48C(e)(4)(A) provides a base credit rate of 6 precent for allocations under § 48C(e). The base credit rate is increased to 30 precent for any project that satisfies the prevailing wage requirements of § 48C(e)(5)(A) and the apprenticeship requirements of § 48C(e)(6). See Notice 2022-51 requesting comments on prevailing wage and apprenticeship requirements.

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) plan to issue guidance regarding the provisions of §§ 25C, 25D, 45L, and 179D of the Internal Revenue Code (Code), as amended by §§ 13301, 13302, 13304, and 13303, respectively, of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). This notice requests general comments on questions arising because of these amendments, as well as specific comments involving questions listed in section 3 of this notice. Comments received in response to this notice will help to inform the development of guidance implementing §§ 25C, 25D, 45L, and 179D.

.01 Energy Efficient Home Improvement Credit (§ 25C)

Section 25C was originally enacted by § 1333(a) of the Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594, 1026 (August 8, 2005), to provide the nonbusiness energy property credit for the purchase and installation of certain energy efficient improvements in taxpayers’ principal residences. Section 25C has been amended several times, most recently by § 13301 of the IRA, which renamed this provision the “energy efficient home improvement credit” (§ 25C credit).

Before the enactment of the IRA, § 25C had expired after December 31, 2021. Section 13301(a) of the IRA amends § 25C(g) to make the § 25C credit available through December 31, 2032.

Section 13301(b) of the IRA amends § 25C(a) to allow a credit for 30 percent of amounts paid or incurred by individual taxpayers during the taxable year for qualified energy efficiency improvements and residential energy property expenditures. As amended by § 13301(c) of the IRA, the § 25C credit is generally limited to an annual cap of $1,200, with exceptions for certain categories of improvements. The caps and categories of improvements under these exceptions are as follows: $600 for qualified energy property; $600 for exterior windows and skylights; $250 for any single exterior door; and $500 in the aggregate for all exterior doors. Heat pumps, heat pump water heaters, biomass stoves, and biomass boilers are allowed an aggregate annual credit for such improvements of up to $2,000.

Section 13301(d) of the IRA amends the definition of “energy efficient building envelope components” and “building envelope component,” terms that help define the types of improvements that are qualified energy efficiency improvements. As amended by the IRA, § 25C(c)(2) defines “energy efficient building envelope component” as a building envelope component that meets, (A) in the case of an exterior window or skylight, Energy Star most efficient certification requirements, (B) in the case of an exterior door, applicable Energy Star requirements, and (C) in the case of any other component, the criteria for such component established by the most recent International Energy Conservation Code standard in effect as of the start of the calendar year 2 years prior to the calendar year in which such component is placed in service. As amended by the IRA, § 25C(c)(3) defines “building envelope component” as (A) any insulation material or system, including air sealing material or system, which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on the dwelling unit, (B) exterior windows (including skylights), and (C) exterior doors.

Section 13301(e) of the IRA amends the definitions of “residential energy property expenditures” and “qualified energy property.” As amended by the IRA, § 25C(d)(1) defines “residential energy property expenditures” as expenditures made by the taxpayer for qualified energy property that is (A) installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer, and (B) originally placed in service by the taxpayer, including labor costs properly allocable to onsite preparation, assembly, or original installation of the property. As amended by the IRA, § 25C(d)(2) defines “qualified energy property” as:

(A) Any of the following that meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency that is in effect as of the beginning of the calendar year in which the property is placed in service: (i) an electric or natural gas heat pump water heater, (ii) an electric or natural gas heat pump, (iii) a central air conditioner, (iv) a natural gas, propane, or oil water heater, or (v) a natural gas, propane, or oil furnace or hot water boiler.

(B) A biomass stove or boiler that (i) uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and (ii) has a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel).

(C) Any oil furnace or hot water boiler that (i) is placed in service after December 31, 2022 and before January 1, 2027, and (I) meets or exceeds 2021 Energy Star efficiency criteria, and (II) is rated by the manufacturer for use with fuel blends at least 20 percent of the volume of which consists of an eligible fuel, or (ii) is placed in service after December 31, 2026, and (I) achieves an annual fuel utilization efficiency rate of not less than 90, and (II) is rated by the manufacturer for use with fuel blends at least 50 percent of the volume of which consists of an eligible fuel.

(D) Any improvement to, or replacement of, a panelboard, sub-panelboard, branch circuits, or feeders that (i) is installed in a manner consistent with the National Electric Code, (ii) has a load capacity of not less than 200 amps, (iii) is installed in conjunction with (I) any qualified energy efficiency improvements, or (II) any qualified energy property described in § 25C(d)(2)(A) through (C) for which a credit is allowed under this section, and (iv) enables the installation and use of any property described in subclause (I) or (II) of § 25C(d)(2)(D)(iii).

As amended by the IRA, § 25C(d)(3) defines “eligible fuel” as (A) biodiesel and renewable diesel (within the meaning of § 40A), (B) second generation biofuel (within the meaning of § 40), and (C) transportation fuel (as defined in § 45Z(d)(5)).

Section 13301(f) of the IRA expands the types of expenditures eligible for the § 25C credit to include expenditures for home energy audits. Section 25C(e) defines “home energy audit” as an inspection and written report with respect to a dwelling unit located in the United States and owned or used by the taxpayer as the taxpayer’s principal residence that (1) identifies the most significant and cost-effective energy efficiency improvements with respect to such dwelling unit, including an estimate of the energy and cost savings with respect to each such improvement, and (2) is conducted and prepared by a home energy auditor that meets the certification or other requirements specified by the Secretary of the Treasury or her delegate (Secretary) in regulations or other guidance. As amended by the IRA, § 25C(b)(6) limits the credit for such expenditures to $150 and imposes a substantiation requirement.

Section 13301(g) of the IRA adds new § 25C(h), which imposes a product identification number requirement. Section 25C(h)(1) provides that no § 25C credit is allowed for any item of specified property placed in service after December 31, 2024, unless (A) such item is produced by a qualified manufacturer, and (B) the taxpayer includes the qualified product identification number of such item on the return of tax for the taxable year. Section 25C(h)(2) defines “qualified product identification number” as, with respect to any item of specified property, the product identification number assigned to such item by the qualified manufacturer pursuant to the methodology referred to in § 25C(h)(3). Section 25C(h)(3) defines “qualified manufacturer” as any manufacturer of specified property that enters into an agreement with the Secretary that provides that such manufacturer will (A) assign a product identification number to each item of specified property produced by such manufacturer utilizing a methodology that will ensure that such number is unique to each such item (by utilizing numbers or letters that are unique to such manufacturer or by such other method as the Secretary may provide), (B) label such item with such number in such manner as the Secretary may provide, and (C) make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) of the product identification numbers so assigned and including such information as the Secretary may require with respect to the item of specified property to which such number was so assigned. Section 25C(h)(4) defines “specified property” as any qualified energy property and any property described in § 25C(c)(3)(B) or (C), referencing exterior windows (including skylights) and exterior doors.

Section 13301(i) of the IRA provides the effective dates for the amendments to § 25C. In general, except as provided in § 13301(i)(2) and (3), the amendments apply to property placed in service after December 31, 2022. Section 13301(i)(2) of the IRA provides that amendments made by § 13301(a) of the IRA relating to the extension of the credit apply to property placed in service after December 31, 2021. Section 13301(i)(3) of the IRA provides that amendments made by § 13301(g) of the IRA relating to the requirements for product identification numbers apply to property placed in service after December 31, 2024.

.02 Residential Clean Energy Credit (§ 25D)

Section 25D was originally enacted by § 1335(a) of the Energy Policy Act of 2005, Pub. L. 109–58, 119 Stat. 594, 1033 (August 8, 2005) to provide a tax credit for expenditures made to improve the energy efficiency of taxpayers’ residential property. Section 25D has been amended several times, most recently by § 13302 of the IRA. Section 25D(a) allows a credit for individual taxpayers for an amount equal to the sum of the applicable percentages of certain qualified expenditures, such as solar electric property and geothermal heat pump property, made during the taxable year (§ 25D credit).

Section 13302(a)(1) of the IRA amends § 25D(h), extending § 25D through December 31, 2034. Section 13302(a)(2) of the IRA amends the phaseout of the tax credit provided in § 25D(g). As amended by the IRA, § 25D(g)(1) through (5) provides that for purposes of calculating the § 25D credit, the applicable percentage of the phaseout is:

(1) in the case of property placed in service after December 31, 2016, and before January 1, 2020, 30 percent;

(2) in the case of property placed in service after December 31, 2019, and before January 1, 2022, 26 percent;

(3) in the case of property placed in service after December 31, 2021, and before January 1, 2033, 30 percent;

(4) in the case of property placed in service after December 31, 2032, and before January 1, 2034, 26 percent, and

(5) in the case of property placed in service after December 31, 2033, and before January 1, 2035, 22 percent.

Section 13302(b) of the IRA amends § 25D(a)(6) to include “qualified battery storage technology expenditures” as eligible for the § 25D credit and amends § 25D(d)(6). As amended by the IRA, § 25D(d)(6) defines the term “qualified battery storage technology expenditure” as an expenditure for battery storage technology that is installed in connection with a dwelling unit located in the United States that is used as a residence by the taxpayer, and has a capacity of not less than 3 kilowatt hours.

Section 13302(d)(1) of the IRA provides that except as provided in § 13302(d)(2) of the IRA, the amendments made to § 25D by § 13302 of the IRA apply to expenditures made after December 31, 2021. Section 13302(d)(2) of the IRA provides that the amendments to § 25D pertaining to qualified battery energy technology apply to expenditures made after December 31, 2022.

.03 New Energy Efficient Home Credit (§ 45L)

Section 45L was originally enacted by § 1332(a) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat 594, 1024 (on August 8, 2005), to provide a credit for the construction of new energy efficient homes (§ 45L credit). Section 45L has been amended several times, most recently by § 13304 of the IRA.

Section 13304 of the IRA retroactively extends the § 45L credit for dwelling units acquired after December 31, 2021, by retaining the credit requirements in place prior to the enactment of the IRA. For dwelling units acquired after December 31, 2022, the IRA adds new energy efficiency standards, and new credit amounts, some of which are increased based on meeting a prevailing wage requirement.¹ As amended by the IRA, the § 45L credit is available for dwelling units acquired before January 1, 2033.

Section 45L(a)(1) provides that for purposes of the general business credit under § 38 of the Code, in the case of an eligible contractor, the § 45L credit for the taxable year is the applicable amount for each qualified new energy efficient home that is constructed by the eligible contractor and acquired by a person from such eligible contractor for use as a residence during the taxable year.

Section 45L(a)(2) provides that the “applicable amount” ranges from between $500 and $5,000 and is based on a combination of (A) whether the dwelling unit is eligible to participate in the Energy Star Residential New Construction Program, the Energy Star Manufactured New Homes program, or the Energy Star Multifamily New Construction Program; and (B) whether the dwelling unit is certified as a zero energy ready home under the zero energy ready home program of the Department of Energy as in effect on January 1, 2023 (or any successor program determined by the Secretary). In all cases, the dwelling unit must satisfy either the amended energy saving requirements provided in § 45L(c)(2) for single family homes or in § 45L(c)(3) for multifamily homes (whichever applies).

.04 Energy Efficient Commercial Buildings Deduction (§ 179D)

Section 179D was originally enacted by § 1331(a) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1020 (August 8, 2005), to provide a deduction for the cost of energy efficient commercial building property. Section 179D has been amended several times, most recently by § 13303 of the IRA.

Section 13303 of the IRA amends § 179D by changing the deduction amount (subject to prevailing wage and apprenticeship requirements), revising the energy efficiency requirements, removing the partial deduction and the interim rule for lighting systems, broadening the type of entities that may allocate the deduction to a designer, and providing a new alternative deduction for energy efficient building retrofit property (alternative deduction). The amendments are generally effective for taxable years beginning after December 31, 2022. However, the alternative deduction applies to property placed in service after December 31, 2022 (in taxable years ending after such date) if such property is placed in service pursuant to a qualified retrofit plan established after December 31, 2022.

Section 179D(a) allows as a deduction an amount equal to the cost of energy efficient commercial building property (EECBP) placed in service during the taxable year. As amended by § 13303(a) of the IRA, § 179D(b)(1) provides that the deduction with respect to any building for any taxable year cannot exceed the excess (if any) of the product of the applicable dollar value and the square footage of the building, over the aggregate amount of § 179D deductions (including under the alternative deduction) with respect to the building for the 3 taxable years immediately preceding such taxable year (or, in the case of any such deduction allowable to a person other than the taxpayer, for any taxable year ending during the 4-taxable-year period ending with such taxable year). Section 179D(b)(2) provides that the applicable dollar value is an amount equal to $0.50 increased (but not above $1.00) by $0.02 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent.

Section 179D(b)(3) provides an increased deduction amount for property that satisfies prevailing wage and apprenticeship requirements.²

Section 179D(b)(3)(B) provides that in the case of any EECBP, energy efficient building retrofit property, or property installed pursuant to a qualified retrofit plan, such property meets the requirements for an increased deduction amount if installation of such property begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the prevailing wage and apprenticeship requirements of § 179D(b)(4)(A) or (5), or installation of such property satisfies the prevailing wage and apprenticeship requirements.

Section 179D(b)(6) directs the Secretary to issue regulations or other guidance as the Secretary determines necessary to carry out the purposes of § 179D(b), including regulations or other guidance that provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of § 179D(b).

Section 13303(a)(2) of the IRA decreased the minimum energy efficiency savings required for the § 179D deduction by amending the definition of EECBP. As amended by the IRA, § 179D(c)(1) now defines EECBP, in part, as property that is certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 25 percent or more in comparison to a reference building that meets the minimum requirements of Reference Standard 90.1.

As amended by the IRA, § 179D(c)(2) provides that for purposes of § 179D, the term “Reference Standard 90.1” means, with respect to any property, the more recent of (A) Standard 90.1-2007 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America; or (B) the most recent Standard 90.1 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America for which the Department of Energy has issued a final determination and that has been affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of § 179D not later than the date that is 4 years before the date such property is placed in service.

As redesignated and then amended by § 13303(c) of the IRA, § 179D(d)(1) directs the Secretary, after consultation with the Secretary of Energy, to promulgate regulations that describe in detail methods for calculating and verifying energy and power consumption and cost with respect to any property, based on the provisions of the most recent California Nonresidential Alternative Calculation Method Approval Manual affirmed by the Secretary, after consultation with the Secretary of Energy, for purposes of § 179D not later than the date that is 4 years before the date such property is placed in service.

As redesignated and then amended by § 13303(a)(6) of the IRA, § 179D(d)(3)(A) provides that in the case of EECBP installed on or in property owned by a specified tax-exempt entity, the Secretary is to promulgate regulations or guidance to allow the allocation of the deduction to the person primarily responsible for designing the property in lieu of the tax-exempt owner of such property, which person is treated as the taxpayer for purposes of § 179D. As amended by the IRA, § 179D(d)(3)(B) defines “specified tax-exempt entity” as –

(i) the United States, any State or political subdivision thereof, any U.S. territory, or any agency or instrumentality of any of the foregoing;

(ii) an Indian tribal government (as defined in § 30D(g)(9) of the Code) or Alaska Native Corporation (as defined in § 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)); and

(iii) any organization exempt from tax imposed by chapter 1 of the Code.

Section 13303(a)(7) of the IRA adds new § 179D(f) to provide an alternative deduction for energy efficient building retrofit property. Section 179D(f)(1) provides that in the case of a taxpayer that elects (at such time and in such manner as the Secretary may provide) the alternative deduction with respect to any qualified building, the taxpayer is allowed as a deduction for the taxable year that includes the date of the qualifying final certification with respect to the qualified retrofit plan of such building, an amount equal to the lesser of (A) the excess described in § 179D(b) (determined by substituting “energy use intensity” for “total annual energy and power costs” in § 179D(b)(2)); or (B) the aggregate adjusted basis (determined after taking into account all adjustments with respect to such taxable year other than the reduction under § 179D(e)) of energy efficient building retrofit property placed in service by the taxpayer pursuant to such qualified retrofit plan.

Section 179D(f)(2) provides that for purposes of the alternative deduction the term “qualified retrofit plan” means a written plan prepared by a qualified professional that specifies modifications to a building that, in the aggregate, are expected to reduce such building’s energy use intensity by 25 percent or more in comparison to the baseline energy use intensity of such building. A qualified retrofit plan must require a qualified professional to –

(A) certify the energy use intensity of such building as of any date during the 1-year period ending on the date on which the property installed pursuant to such a plan is placed in service;

(B) certify the status of property installed pursuant to such plan as meeting the requirements of § 179D(f)(3)(B) and (C); and

(C) certify the energy use intensity of such building as of any date that is more than 1 year after the date on which the property installed pursuant to such plan is placed in service.

Section 179D(f)(3) provides that for purposes of the alternative deduction, the term “energy efficient building retrofit property” means property (A) with respect to which depreciation (or amortization in lieu of depreciation) is allowable; (B) that is installed on or in any qualified building; (C) that is installed as part of (i) the interior lighting systems, (ii) the heating, cooling, ventilation, and hot water systems, or (iii) the building envelope; and (D) that is certified in accordance with § 179D(f)(2)(B) as meeting the requirements of § 179D(f)(3)(B) and (C).

Section 179D(f)(4) provides that for purposes of the alternative deduction, the term “qualified building” means any building that is located in the United States and was originally placed in service not less than 5 years before the establishment of the qualified retrofit plan with respect to such building.

Section 179D(f)(5) provides that for purposes of the alternative deduction, the term “qualifying final certification” means, with respect to any qualified retrofit plan, the certification described in § 179D(f)(2)(C) if the energy use intensity certified in such certification is not more than 75 percent of the baseline energy use intensity of the building.

Section 179D(f)(6)(A) provides that for purposes of the alternative deduction, the term “baseline energy use intensity” means the energy use intensity certified under § 179D(f)(2)(A), as adjusted to take into account weather. Section 179D(f)(6)(B) provides that for purposes of § 179D(f)(6)(A), the adjustments described in § 179D(f)(6)(A) must be determined in such manner as the Secretary provides.

Section 179D(f)(7)(A) provides that for purposes of the alternative deduction, the term “energy use intensity” means the annualized, measured site energy use intensity determined in accordance with such regulations or other guidance as the Secretary provides and measured in British thermal units. Section 179D(f)(7)(B) provides that the term “qualified professional” means an individual who is a licensed architect or a licensed engineer and meets such other requirements as the Secretary may provide.

Section 179D(f)(8)(A) provides that in the case of any building with respect to which an election is made for an alternative deduction, the term EECBP does not include any energy efficient building retrofit property with respect to which a deduction is allowable under § 179D(f). Section 179D(f)(8)(B)(i) provides that except as provided in § 179D(f)(8)(B)(ii), the special rules provided by § 179D(d) do not apply for purposes of the alternative deduction. Section 179D(f)(8)(B)(ii) provides that rules similar to the rules of § 179D(d)(3) related to the allocation of the deduction for public property apply for purposes of the alternative deduction.

The Treasury Department and the IRS request comments on questions arising from the amendments made by the IRA to §§ 25C, 25D, 45L, and 179D. Commenters are encouraged to specify the issues on which guidance is needed most quickly as well as the most important issues on which guidance is needed. In addition to general comments, the Treasury Department and the IRS request comments that address the following specific questions:

.01 Energy Efficient Home Improvement Credit (§ 25C):

(1) Section 25C(e)(2) directs the Secretary to prescribe “certification or other requirements” for home energy auditors for credit eligibility. What criteria should the Treasury Department and the IRS consider requiring for certification or other requirements for home energy auditors?

(2) Is guidance needed regarding the definition of “qualified energy property” in § 25C(d)(2) as amended by the IRA, such as definitions for the terms “panelboard” or “feeders”? Specifically, § 25C(d)(2)(B) defines “qualified energy property” to include biomass stoves or boilers, but only those that have “a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel).” Is guidance needed to define the term “thermal efficiency rating”? If so, what testing procedures should the Treasury Department and the IRS consider requiring or permitting to be used by manufacturers to measure thermal efficiency and demonstrate ratings that are valid for purposes of the § 25C credit?

(3) Section 25C(h) requires qualified manufacturers to provide unique product identification numbers to each item of specified property and make periodic written reports to the Secretary of the product identification numbers assigned. What should the Treasury Department and the IRS consider (1) in determining the manner of agreements between the IRS and the qualified manufacturer; (2) in developing a methodology to ensure that each product identification number is unique to each item of specified property; (3) in prescribing the manner by which such specified property must be labeled with unique product identification numbers; and (4) in developing the requirements for the qualified manufacturers’ periodic written reports?

(4) Please provide comments on any other topics relating to the § 25C credit that may require guidance.

.02 Residential Clean Energy Credit (§ 25D):

(1) Is guidance needed regarding the definition of “qualified battery storage technology expenditure” in § 25D(d)(6)?

(2) Section 25D(b)(2) provides that no credit is allowed under § 25D for an item of property described in § 25D(d)(1) unless such property is certified for performance by the non-profit Solar Rating Certification Corporation, or a comparable entity endorsed by the government of the State in which such property is installed. What information should the Treasury Department and the IRS consider in determining what constitutes a “comparable entity”?

(3) Please provide comments on any other topics relating to the § 25D credit that may require guidance.

.03 New Energy Efficient Home Credit (§ 45L):

(1) Section 45L(b)(3) provides that for purposes of § 45L, the term “construction” includes “substantial reconstruction and rehabilitation.” Is guidance defining the term “substantial reconstruction and rehabilitation” needed? If so, how should the term be defined? If needed, should the definition align with requirements or standards used in the qualified Energy Star and Zero Energy Ready Home Programs?

(2) Please provide comments on any other topics relating to the § 45L credit that may require guidance.

.04 Energy Efficient Commercial Buildings Deduction (§ 179D):

(1) Section 179D(d)(3)(A) provides that in the case of EECBP installed on or in property owned by a specified tax-exempt entity, the Secretary is to promulgate regulations or guidance to allow the allocation of the deduction “to the person primarily responsible for designing the property in lieu of the owner of such property.” What criteria should the Treasury Department and the IRS consider in providing rules to determine the person that is “primarily responsible for designing the property” under § 179D(3)(A)?

(2) Section 179D(f)(7)(A) provides that for purposes of § 179D(f), the term “energy use intensity” means the annualized, measured site energy use intensity determined in accordance with such regulations or other guidance as the Secretary provides and measured in British thermal units.

(a) What criteria should the Treasury Department and the IRS consider in developing regulations or other guidance addressing this determination?

(b) How should the instruction in § 179D(h)(1) requiring that new technologies regarding renewable energy be taken into account in determining energy efficiency and savings be taken into account in determining energy use intensity?

(3) Section 179D(f)(2) provides detail on a “qualified retrofit plan.” Is guidance providing additional definitions or other guidance regarding qualified retrofit plans needed?

(4) Section 179D(f)(7)(B) provides that the term “qualified professional” means an individual who is a licensed architect or a licensed engineer and meets such other requirements as the Secretary provides. Is any guidance providing other requirements that licensed architects or licensed engineers must satisfy needed?

(5) Please provide comments on any other topics relating to the § 179D deduction that may require guidance.

.01 Written comments should be submitted by Friday, November 4, 2022. Consideration will be given, however, to any written comment submitted after Friday, November 4, 2022, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2022-48. Comments may be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-0048 in the search field on the regulations.gov homepage to find this notice and submit comments).

(2) Alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2022-48), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, or on paper, to its public docket on regulations.gov.

For purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D, the publication of this notice requesting comments is not the publication of guidance with respect to the prevailing wage and apprenticeship requirements, and it is not relevant in determining whether the prevailing wage and apprenticeship requirements are satisfied under such sections. The Treasury Department and the IRS will explicitly identify when it has published guidance with respect to the prevailing wage and apprenticeship requirements that is relevant for determining whether such requirements have been satisfied for purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D.

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

¹Similar prevailing wage requirements were added by the IRA to several other tax credit provisions of the Code. These provisions will be addressed in a separate notice requesting comments.

²Similar prevailing wage and apprenticeship requirements were added by the IRA to several other tax credit provisions of the Code. These provisions will be addressed in a separate notice requesting comments.

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) plan to issue guidance regarding the provisions of §§ 45, 45U, 45Y, 48, and 48E of the Internal Revenue Code (Code), as amended or added by §§ 13101, 13105, 13701, 13102, and 13702, respectively, of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). This notice requests general as well as specific comments on issues arising under §§ 45, 45U, 45Y, 48, and 48E. Comments received in response to this notice will help to inform development of guidance implementing §§ 45, 45U, 45Y, 48, and 48E.

.01 Renewable Electricity Production Credit (§ 45).

For purposes of computing the general business credit under § 38 of the Code, § 45(a) allows a credit for any taxable year for electricity produced by the taxpayer from qualified energy resources at a qualified facility and sold to an unrelated person during the taxable year. The § 45 credit has been amended many times since its enactment on October 24, 1992. Most recently, §§ 13101(a) to (c), (e)(1) and (2)(A), (f) through (j), 13102(f)(4), and 13204(b)(1) of the IRA made amendments to § 45. These amendments include, but are not limited to: changing the credit rate (and associated rounding convention) for electricity produced by certain facilities; extending the beginning of construction and placed in service deadlines for certain facilities; adding a special rule for electricity used at a clean hydrogen facility; amending the definition of marine and hydrokinetic renewable energy; and providing the Secretary of the Treasury or her delegate (Secretary) with the authority to issue regulations or other guidance as necessary to carry out the purposes of § 45(b), including regulations or other guidance which provides requirements for recordkeeping or information reporting for purposes of administering the requirements of § 45(b).¹

.02 Energy Investment Credit (§ 48).

For purposes of the investment credit under § 46, § 48(a)(1) provides, in part, that the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year. Congress has repeatedly amended § 48, including repealing and suspending the credit, changing the amount of the credit and rules for eligibility.

Most recently, §§ 13101(d), (e)(2)(B) and (3), 13102(a) through (f)(3), (g), (h), (j) through (m), (o), (p), 13103(a), and 13204(c)(1) and (2) of the IRA made amendments to § 48. These amendments include, but are not limited to: changing the energy percentage used to calculate the credit; amending the definitions of certain types of energy property; extending the beginning of construction and placed in service deadlines for certain types of energy property; adding a new rule for interconnection property; adding an election to treat clean hydrogen production facilities as energy property; expanding the definition of “energy property” to include certain electrochromic glass, energy storage technology, qualified biogas property, and microgrid controllers; modifying eligibility dates regarding the election to treat as energy property certain types of qualified facilities referred to as a “qualified investment credit facility”; establishing a special program to encourage the placement of certain facilities in connection with low-income communities (discussed in section 2.06 of this notice); and providing the Secretary with the authority to issue regulations or other guidance as necessary to carry out the purposes of § 48, including regulations or other guidance providing for recapture of the credit in certain situations and the recordkeeping or information reporting for purposes of administering the requirements of § 48(a).

.03 Zero-Emission Nuclear Power Production Credit (§ 45U).

Section 13105 of the IRA added new § 45U, the zero-emission nuclear power production credit, to provide an income tax credit for electricity produced at a qualified nuclear power facility and sold by the taxpayer to an unrelated person in taxable years beginning after December 31, 2023, and before January 1, 2033. A qualified nuclear power facility is a facility owned by the taxpayer that was placed in service before the enactment of § 45U and uses nuclear energy to produce electricity. A facility that is an advanced nuclear power facility as defined in § 45J(d)(1) is not a qualified nuclear power facility under § 45U.

The credit under § 45U(a) is calculated by multiplying the kilowatt hours of electricity produced and sold during the taxable year by 0.3 cents (adjusted for inflation), and then subtracting the “reduction amount” for such taxable year. Section 45U(b)(2)(A) defines the term “reduction amount” as the lesser of (1) the credit amount determined before application of the reduction amount or (2) the amount equal to 16 percent of the excess of (a) the gross receipts from any electricity produced by the facility and sold to an unrelated person during the taxable year, over (b) the amount equal to the product of 2.5 cents (adjusted for inflation) multiplied by the kilowatt hours of electricity produced by the facility and sold to an unrelated person during the taxable year. Section 45U(b)(2)(B) provides rules regarding the treatment of gross receipts. The credit amount determined under § 45U(a) is multiplied by 5 if certain prevailing wage requirements are met. Section 45U(d)(3) grants the Secretary authority to issue regulations or other guidance to administer the wage requirements of § 45U.

.04 Clean Electricity Production Credit (§ 45Y).

Section 13701 of the IRA added new § 45Y, the clean electricity production credit, to provide a tax credit for electricity produced by the taxpayer at a qualified facility and either (1) sold by the taxpayer to an unrelated person during the taxable year, or (2) in the case of a qualified facility which is equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year. Section 45Y(b)(1)(A) defines a “qualified facility” as a facility owned by the taxpayer that is used for the production of electricity, placed in service after 2024, and has a greenhouse gas emissions rate of not greater than zero. A facility will be considered a qualified facility for a period of ten years beginning on the date it is placed in service. A facility placed in service before January 1, 2025, also can be considered a qualified facility to the extent of the increased amount of electricity produced at the facility by reason of a new unit placed in service after December 31, 2024, or additions of capacity placed in service after December 31, 2024.

Section 45Y(a)(1) provides that the amount of the credit is equal to the product of (A) the kilowatt hours of electricity produced and sold to an unrelated person (or sold, consumed, or stored if the facility is equipped with a metering device) by the taxpayer during the taxable year, multiplied by (B) the applicable amount with respect to such qualified facility. Section 45Y(a)(2) provides that the applicable amount is generally 0.3 cents (adjusted for inflation), which can be increased to 1.5 cents (adjusted for inflation) if requirements for prevailing wage and apprenticeship are met.

Section 45Y(b)(2) provides that the greenhouse gas emissions rate is the amount of greenhouse gases emitted into the atmosphere by a facility that produces electricity, expressed as grams of CO₂e per KWh. The emissions rate for different types or categories of facilities will be published annually by the Secretary, and to the extent not established by the Secretary, a taxpayer that owns the facility may file a petition for determination of the rate. Section 45Y(b)(2) also provides special greenhouse gas accounting rules allowing calculation of a net greenhouse gas emissions rate for facilities producing electricity through combustion or gasification.

Section 45Y(d) provides a credit phase-out for projects the construction of which begins during the first, second, or third calendar year following the “applicable year,” which is the later of (i) the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of such emissions for calendar year 2022, or (ii) 2032.

Section 45Y(f) directs the Secretary to issue guidance regarding implementation of § 45Y not later than January 1, 2025, including calculation of greenhouse gas emission rates for qualified facilities and determination of clean electricity production credits under § 45Y.

.05 Clean Electricity Investment Credit (§ 48E).

Section 13702 of the IRA added § 48E, the clean electricity investment credit, to provide an investment tax credit for qualified property. The credit amount for any taxable year is equal to the applicable percentage of the qualified investment for such taxable year with respect to any qualified facility and any energy storage technology. The applicable percentage for both qualified facilities and energy storage technology is generally 6 percent. The applicable percentage can be increased to 30 percent if prevailing wage and apprenticeship requirements are met.

A qualified facility is a facility used for the generation of electricity and placed in service after December 31, 2024, for which the anticipated greenhouse gas emissions rate is not greater than zero. Section 48E(b)(3) incorporates the special greenhouse gas accounting rules provided in § 45Y(b)(2) that allow the calculation of a net greenhouse gas emissions rate for facilities producing electricity through combustion or gasification and for facilities that include carbon capture and sequestration equipment.

A taxpayer’s qualified investment with respect to any qualified facility for any taxable year is the sum of: the basis of any qualified property placed in service by the taxpayer during a taxable year that is part of a qualified facility plus, for qualified facilities with a maximum net output of not greater than 5 megawatts, certain expenditures paid or incurred by the taxpayer for qualified interconnection property. A taxpayer’s qualified investment with respect to energy storage technology for any taxable year is the basis of the energy storage technology placed in service by the taxpayer during such taxable year.

Section 48E(h) provides a special program for certain facilities placed in service in connection with low-income communities. These rules are discussed in section 2.06 of this notice with the discussion of § 48(e). Section 48E(i) directs the Secretary to issue guidance regarding the implementation of § 48E not later than January 1, 2025.

.06 Special programs for certain facilities placed in service in connection with low-income communities (§§ 48(e) and 48E(h)).

Section 13103 of the IRA amended § 48 to add new § 48(e), which establishes a special program for certain solar and wind facilities placed in service in connection with low-income communities, effective January 1, 2023. Section 13702(a) of the IRA also enacted § 48E(h), which provides a similar special program for certain facilities placed in service in connection with low-income communities in calendar years after 2024. These provisions increase the amount of the § 48 credit and § 48E credit for facilities with a maximum net output of less than 5 megawatts (as measured in alternating current) by providing a 10 percent increase in the energy percentage (in the case of § 48(e)) or the applicable percentage (in the case of § 48E(h)), used to calculate the credit amount, for certain facilities located in low-income communities (as defined in § 45D(e) of the Code) or on Indian land (as defined in § 2601(2) of the Energy Policy Act of 1992 (25 U.S.C. 3501(2))), or a 20 percent increase in the energy percentage or applicable percentage for certain facilities that are part of certain low-income residential building projects or low-income economic benefit projects. These increased credit amounts are limited by the facility’s environmental justice solar and wind capacity limitation allocation (§ 48(e)) or its environmental justice capacity limitation allocation (§ 48E(h)).

Section 48(e)(4) directs the Secretary to establish a program to allocate amounts of environmental justice solar and wind capacity limitation to qualified solar and wind facilities within 180 days of enactment of the IRA. The total amount of environmental justice solar and wind capacity allocation available during any calendar year is limited to 1.8 gigawatts of direct current capacity for each of the years 2023 and 2024. If the 1.8-gigawatt capacity limitation for any calendar year exceeds the aggregate amount allocated for such year, the excess is carried forward to the next year, but not beyond a calendar year after 2024. After that, the excess from 2024 may be carried forward and applied to the capacity limitation for 2025 under § 48E(h).

Section 48E(h)(4)(A) directs the Secretary to establish a program to allocate amounts of environmental justice capacity limitation to applicable facilities not later than January 1, 2025. The total amount of environmental justice capacity limitation available during any calendar year is limited to 1.8 gigawatts of direct current capacity for each calendar year during the period beginning on January 1, 2025, and ending on December 31 of the Applicable Year (as defined in § 45Y(d)(3)), and zero thereafter. If the 1.8-gigawatt capacity limitation for any calendar year exceeds the aggregate amount allocated for such year, the excess increases the limitation for the next year. However, no amount may be carried forward to any calendar year after the third calendar year following the Applicable Year. To be eligible for the credit increase, the facility must be placed in service within 4 years after the date of the allocation of environmental justice capacity limitation to the facility.

The Treasury Department and the IRS request comments on any questions arising from the IRA amendments to §§ 45 and 48 and the IRA’s enactment of §§ 45U, 45Y, and 48E. Commenters are encouraged to specify the issues on which guidance is needed most quickly as well as the most important issues on which guidance is needed. In addition to general comments, the Treasury Department and the IRS request comments that address the following specific issues:

.01 IRA Changes to the Renewable Electricity Production Credit (§ 45)

(1) Section 45(e)(13) provides that electricity produced by a taxpayer will be treated as sold by such taxpayer to an unrelated person during the taxable year if (A) such electricity is used during such taxable year by the taxpayer or a person related to the taxpayer at a qualified clean hydrogen production facility (as defined in § 45V(c)(3)) to produce qualified clean hydrogen (as defined in § 45V(c)(2)), and (B) such use and production is verified (in such form or manner as the Secretary may prescribe) by an unrelated third party.

(a) What existing industry standards, if any, should the Treasury Department and the IRS consider in establishing guidelines for how an unrelated third party will verify that electricity produced by a facility for which the taxpayer is claiming the § 45 credit has been used to produce qualified clean hydrogen?

(b) The term “unrelated person” is used in § 45 (as well as other provisions discussed in this notice that were added or amended by the IRA). Is guidance needed to clarify the meaning of the term “unrelated person”? If so, how should that term be clarified?

(2) Sections 45(b)(3), 48(a)(4), 45Y(g)(8), 48E(d)(2) and several other sections in the IRA include a reduction in the respective credit for tax-exempt bond financing. The reduction is calculated in accordance with § 45(b)(3) (or rules similar to the rule under § 45(b)(3)). What additional guidance would be helpful in determining how to calculate the reduction?

(3) Section 45(c)(10)(A)(v), as amended by the IRA, provides a modified definition of marine and hydrokinetic energy by adding pressurized water used in a pipeline (or similar man-made conveyance) that is operated for the distribution of water for agricultural, municipal, or industrial consumption and not primarily for the generation of electricity. Is guidance needed to define these qualified facilities? If so, how should these qualified facilities be defined?

(4) Please provide comments on any other topics relating to the § 45 credit that may require guidance.

.02 The Energy Investment Credit (§ 48)

(1) IRA Changes to the Energy Investment Credit (§ 48)

(a) The IRA expanded the definition of energy property to include electrochromic glass, energy storage technology, qualified biogas property, and microgrid controllers.

(i) What should the Treasury Department and the IRS consider in determining what types of technologies are included in the definitions of these new types of energy property?

(ii) What should the Treasury Department and the IRS consider in determining what components of those technologies are included in energy property?

(b) Section 48(a)(8) provides that for certain energy property amounts paid or incurred for qualified interconnection property may be included in basis.

(i) For interconnection property, what types of additions, modifications, or upgrades to the transmission or distribution system are required for the purpose of accommodating interconnection?

(ii) For interconnection property, what type of documentation, in addition to interconnection agreements and cost certification reports, is readily available for a taxpayer to demonstrate that they have paid or incurred interconnection costs?

(iii) For interconnection property, is guidance needed to define energy property that has a maximum net output of not greater than 5 megawatts (as measured in alternating current)?

(c) Please provide comments on any other topics relating to the § 48 credit that may require guidance.

(2) Additional Issues Regarding the Energy Investment Credit (§ 48)

(a) Is guidance needed to determine whether an investment credit facility that elects to claim the § 48 investment tax credit in lieu of the § 45 production tax credit is subject to all of the requirements of § 45, including the requirement that electricity generated by the investment credit facility be sold to an unrelated person? If so, what factors should the Treasury Department and the IRS consider regarding such guidance?

(b) Is clarification needed on the applicability of the 80/20 rule used to determine whether retrofitted or repowered projects may qualify as new energy property? If so, how should this be clarified?

(c) Section 48(a)(3)(A)(i) provides that energy property includes “equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure.” Is guidance needed to clarify the meaning of the term “structure”? If so, how should this term be clarified?

(d) Please provide comments on any other topics relating to the § 48 credit that may require guidance.

.03 IRA Addition of the Zero-Emission Nuclear Power Production Credit (§ 45U)

(1) Section 45U(a)(2) reduces the amount of the § 45U credit by a “reduction amount” that is calculated, in part, based on the gross receipts from any electricity produced by the facility. Section 45U(b)(2)(B) provides that gross receipts generally include any amount received by a qualified facility that are from a zero-emission credit program, unless an exclusion applies. Is guidance needed to clarify the meaning of the term “gross receipts,” especially as it applies to taxpayers receiving revenue through cost-of-service regulation or regulated contracts and who do not sell electricity in a manner attributable to individual nuclear reactors such as through sales into organized electricity markets or via power purchase agreements to third parties? If so, how should “gross receipts” be clarified? Should it be defined by cross reference to § 448(c) of the Code?

(2) Section 45U(b)(2)(B)(ii) defines the term “zero-emission credit program.” What should the Treasury Department and the IRS consider in determining whether a payment is as a result of a government program for the zero-emission, zero-carbon, or air quality attributes of any portion of the electricity produced by the facility?

(3) Section 45U(b)(2)(B)(iii) excludes from gross receipts, for purposes of the reduction amount calculation, any amount received by the taxpayer from a zero-emission credit program if the full amount of the § 45U credit (determined without regard to § 45U(b)(2)(B)) is used to reduce payments from such zero-emission credit program. What should the Treasury Department and the IRS consider when determining whether the full amount of the § 45U credit (calculated pursuant to § 45U(a)) is used to reduce payments from a zero-emission credit program?

(4) Please provide comments on any other topics relating to the § 45U credit that may require guidance.

.04 IRA Addition of the Clean Electricity Production Credit (§ 45Y)

(1) What existing industry standards, if any, should the Treasury Department and the IRS consider in determining a taxpayer’s eligibility for the § 45Y credit?

(2) Section 45Y(b)(2)(C)(i) requires the Secretary to annually publish a table that sets forth the greenhouse gas emissions rates for types or categories of facilities. What should the Treasury Department and the IRS consider in publishing this table, including considerations around scope and the factors?

(3) Section 45Y(a)(1) generally provides a credit for electricity produced by the taxpayer at a qualified facility and either (1) sold by the taxpayer to an unrelated person during the taxable year, or (2) in the case of a qualified facility which is “equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year.” Is guidance needed to clarify when a facility is “equipped with a metering device which is owned and operated by an unrelated person” or when electricity produced at such a facility is “sold, consumed, or stored by the taxpayer during the taxable year”?

(4) Section 45Y(b)(2)(C)(ii) provides that, in the case of any facility for which an emissions rate has not been established by the Secretary, a taxpayer that owns such facility may file a petition with the Secretary for a determination of the emissions rate with respect to such facility. What procedures should be provided by the Treasury Department and the IRS for taxpayers to file such a petition? What should the Secretary consider when making such determinations?

(5) Please provide comments on any other topics relating to the § 45Y credit that may require guidance.

.05 IRA Addition of the Clean Electricity Investment Credit (§ 48E)

(1) What industry mechanisms currently exist for a taxpayer to demonstrate eligibility for the credit?

(2) Please provide comments on any other topics relating to the § 45E credit that may require guidance.

.06 IRA Addition of Special Programs for Certain Facilities Placed in Service in Connection with Low-income Communities (§§ 48(e) and 48E(h))

(1) Sections 48(e)(4)(A) and 48E(h)(4)(A) require the Secretary to establish a program to allocate amounts of environmental justice capacity limitation to applicable facilities. In establishing such program, the Secretary must provide procedures to allow for an efficient allocation process.

(a) What should the Treasury Department and the IRS consider in providing guidance regarding the application process for taxpayers seeking an allocation of the environmental justice capacity limitation?

(b) How can the application procedures and application process be made accessible to taxpayers?

(c) How can the process incorporate community input, engagement, and benefit for projects seeking an allocation of the environmental justice capacity limitation?

(2) What stage of completion, if any, should be required of the taxpayer at the time of application for or allocation of amounts of environmental justice capacity limitation (since the taxpayer will have four years to place the facility in service)?

(3) What methods currently exist or need to be designed for a taxpayer to certify that a project is being built in a low-income community, on Indian land, or as part of a low-income residential building project or a qualified low-income economic benefit project?

(4) What mechanisms exist for a taxpayer to demonstrate that the financial benefits of the electricity produced by an applicable facility are allocated equitably among the occupants of a low-income residential building project and do not impact the occupants’ eligibility for their housing? Similarly, what mechanisms exist for a taxpayer to demonstrate that at least 50 percent of the financial benefits of electricity produced by an applicable facility which is part of a low-income economic benefit project are provided to households within certain income thresholds?

(5) Is guidance needed to clarify the meaning of the term “financial benefit”?

(6) What is a financial benefit of the electricity produced by an applicable facility other than electricity acquired at a below-market rate for occupants of low-income residential building projects and low-income economic benefit projects?

(7) What should the Treasury Department and the IRS consider in providing guidance regarding the recapture of the benefits of the credit increase allowed under §§ 48(e) and 48E(h) when property ceases to be property eligible for such credit increase? How should the one-time restoration of eligibility be documented before recapture?

(8) Please provide comments on any other topics relating to the environmental justice capacity limitation under §§ 48(e) and 48E(h) that may require guidance.

.01 Written comments should be submitted by Friday, November 4, 2022. Consideration will be given, however, to any written comment submitted after Friday, November 4, 2022, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2022-49. Comments may be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-0049 in the search field on the regulations.gov homepage to find this notice and submit comments).

(2) Alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2022-49), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, or on paper, to its public docket on www.regulations.gov.

For purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D, the publication of this notice requesting comments is not the publication of guidance with respect to the prevailing wage and apprenticeship requirements, and it is not relevant in determining whether the prevailing wage and apprenticeship requirements are satisfied under such sections. The Treasury Department and the IRS will explicitly identify when they have published guidance with respect to the prevailing wage and apprenticeship requirements that is relevant for determining whether such requirements have been satisfied for purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D.

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

¹Other amendments made by the IRA to § 45 increase the credit amount if certain prevailing wage, apprenticeship, domestic content, and energy communities requirements are satisfied. The IRA also provides an election for a taxpayer to receive a direct payment or to transfer the credit. Another amendment made by the IRA addresses the credit phaseout for a taxpayer that makes an election for direct payment. Similar provisions were added by the IRA to several other provisions of the Code discussed in this notice. See Notice 2022-51 requesting comments on prevailing wage, energy communities, and apprenticeship requirements related to several Code sections and Notice 2022-50 requesting comments on direct payment and transferability issues related to several Code sections.

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) anticipate issuing guidance to implement the elective payment provisions under § 6417 and the elective credit transfer provisions under § 6418 of the Internal Revenue Code (Code), as added by § 13801 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). This notice requests general comments on questions arising under new §§ 6417 and 6418, as well as specific comments on questions listed in section 3 of this notice. Comments received in response to this notice will help to inform development of future guidance implementing §§ 6417 and 6418.

.01 Elective Payment of Applicable Credits (§ 6417).

Section 6417 of the Code was enacted by § 13801(a) of the IRA, to allow certain taxpayers to elect to treat certain credits as a direct payment rather than a credit against their federal income tax liabilities.

Section 6417(a) provides that, in the case of an applicable entity making an election with respect to any applicable credit determined with respect to such entity, such entity is treated as making a payment against the tax imposed by subtitle A (that is, federal income taxes) for the taxable year with respect to which such credit was determined equal to the amount of such credit. Any election under § 6417 can only be made at such time and in such manner as the Secretary of the Treasury or her delegate (Secretary) may provide.

Section 6417(b) defines the term “applicable credit” to mean each of the following:

(1) so much of the credit for alternative fuel vehicle refueling property allowed under § 30C that, pursuant to § 30(d)(1), is treated as a credit listed in § 38(b);

(2) so much of the renewable electricity production credit determined under § 45(a) as is attributable to qualified facilities that are originally placed in service after December 31, 2022;

(3) so much of the credit for carbon oxide sequestration determined under § 45Q(a) as is attributable to carbon capture equipment that is originally placed in service after December 31, 2022;

(4) the zero-emission nuclear power production credit determined under § 45U(a);

(5) so much of the credit for production of clean hydrogen determined under § 45V(a) as is attributable to qualified clean hydrogen production facilities that are originally placed in service after December 31, 2012;

(6) in the case of a tax-exempt entity described in § 168(h)(2)(A)(i), (ii), or (iv), the credit for qualified commercial vehicles determined under § 45W by reason of § 45W(d)(3);

(7) the credit for advanced manufacturing production under § 45X(a);

(8) the clean electricity production credit determined under § 45Y(a);

(9) the clean fuel production credit determined under § 45Z(a);

(10) the energy credit determined under § 48;

(11) the qualifying advanced energy project credit determined under § 48C; and

(12) the clean electricity investment credit determined under § 48E.

Section 6417(c)(1) provides that, in the case of any applicable credit determined with respect to any facility or property held directly by a partnership or S corporation, any election under § 6417(a) is to be made by such partnership or S corporation and must be made in such manner as the Secretary may provide. If such partnership or S corporation makes an election under § 6417(a) with respect to any applicable credit, (A) the Secretary must make a payment to such partnership or S corporation equal to the amount of such credit, (B) § 6417(e) is applied with respect to such credit before determining any partner’s distributive share, or shareholder’s pro rata share, of such credit, (C) any amount with respect to which the election in § 6417(a) is made is treated as tax exempt income for purposes of §§ 705 and 1366, and (D) a partner’s distributive share of such tax exempt income is based on such partner’s distributive share of the otherwise applicable credit for each taxable year.

Section 6417(c)(2) provides that, in the case of any facility or property held directly by a partnership or S corporation, no election by any partner or shareholder is allowed under § 6417(a) with respect to any applicable credit determined with respect to such facility or property.

Section 6417(d)(1)(A) defines the term “applicable entity” to mean (i) any organization exempt from tax imposed by subtitle A; (ii) any State or political subdivision thereof; (iii) the Tennessee Valley Authority; (iv) an Indian tribal government (as defined in § 30D(g)(9)); (v) any Alaska Native Corporation (as defined in § 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)); or (vi) any corporation operating on a cooperative basis that is engaged in furnishing electric energy to persons in rural areas.

Pursuant to § 6417(d)(1)(B), if a taxpayer, other than an entity listed in § 6417(d)(1)(A), makes an election under § 6417(d)(1)(B) with respect to any taxable year in which such taxpayer has placed in service a qualified clean hydrogen production facility (as defined in § 45V(c)(3)), such taxpayer is treated as an applicable entity for purposes of § 6417 for the taxable year, but only with respect to the credit under § 45V to the extent described in § 6417(b)(5).

Pursuant to § 6417(d)(1)(C), if a taxpayer, other than an entity listed in § 6417(d)(1)(A), makes an election under § 6417(d)(1)(C) with respect to any taxable year in which such taxpayer has, after December 31, 2022, placed in service carbon capture equipment at a qualified facility (as defined in § 45Q(d)), such taxpayer is treated as an applicable entity for purposes of § 6417 for such taxable year, but only with respect to the credit under § 45Q to the extent described in § 6417(b)(3).

Section 6417(d)(1)(D)(i) provides that, if a taxpayer other than an entity described in § 6417(d)(1)(A) makes an election under § 6417(d)(1)(D) with respect to any taxable year in which such taxpayer has, after December 31, 2022, produced eligible components (as defined in § 45X(c)(1)), such taxpayer is treated as an applicable entity for purposes of § 6417 for such taxable year, but only with respect to the credit under § 45X to the extent described in § 6417(b)(7).

Pursuant to § 6417(d)(1)(D)(ii)(I), except as provided in § 6417(d)(1)(D)(ii)(II), if a taxpayer makes an election under § 6417(d)(1)(D) with respect to any taxable year, such taxpayer is treated as having made such election for each of the 4 succeeding taxable years ending before January 1, 2033.

Pursuant to § 6417(d)(1)(D)(ii)(II), a taxpayer may elect to revoke the application of the election made under § 6417(d)(1)(D) to any taxable year described in § 6417(d)(1)(D)(ii)(I). Any such election, if made, applies to the applicable year specified in such election and each subsequent taxable year within the period described in § 6417(d)(1)(D)(ii)(I). Any election under § 6417(d)(1)(D) cannot be revoked once made.

Section 6417(d)(1)(D)(iii) provides that, for any taxable year described in § 6417(d)(1)(D)(ii)(I), no election may be made by the taxpayer under § 6418(a) for such taxable year with respect to eligible components for purposes of the credit described in § 6417(b)(7) (that is, the credit for advanced manufacturing production under § 45X(a)).

Pursuant to § 6417(d)(1)(E)(i), an election made under § 6417(d)(1)(B), (C), or (D) must be made at such time and in such manner as the Secretary may provide.

Pursuant to § 6417(d)(1)(E)(ii), no election may be made under § 6417(d)(1)(B), (C), or (D) with respect to any taxable year beginning after December 31, 2032.

Section 6417(d)(2) provides that, in the case of any applicable entity that makes the election described in § 6417(a), any applicable credit is determined (A) without regard to § 50(b)(3) and (4)(A)(i), and (B) by treating any property with respect to which such credit is determined as used in a trade or business of the applicable entity.

Section 6417(d)(3)(A)(i) provides that, any election under § 6417(a) cannot be made later than (I) in the case of any government, or political subdivision, described in § 6417(d)(1) and for which no return is required under § 6011 or § 6033(a), such date as is determined appropriate by the Secretary, or (II) in any other case, the due date (including extensions of time) for the tax return for the taxable year for which the election is made, but in no event earlier than 180 days after the date of the enactment of § 6417 by § 13801(a) of the IRA (that is, in no event earlier than 180 days after August 16, 2022).

Section 6417(d)(3)(A)(ii) provides that, any election under § 6417(a) applies (except as otherwise provided in § 6417(d)(3)(A)) with respect to any credit for the taxable year for which the election is made and, once made, is irrevocable.

Section 6417(d)(3)(B) provides that, in the case of the credit described in § 6417(b)(2) (that is, the renewable electricity production credit under § 45(a)), any election under § 6417(a): (i) applies separately with respect to each qualified facility, (ii) must be made for the taxable year in which such qualified facility is originally placed in service, and (iii) applies to such taxable year and to any subsequent taxable year that is within the period described in § 45(a)(2)(A)(ii) with respect to such qualified facility.

Section 6417(d)(3)(C)(i) provides that, in the case of the credit described in § 6417(b)(3) (that is, the credit for carbon oxide sequestration under § 45Q(a)), any election under § 6417(a): (i) applies separately with respect to the carbon capture equipment originally placed in service by the applicable entity during a taxable year, and (ii)(I) in the case of a taxpayer who makes an election described in § 6417(d)(1)(C), applies to the taxable year in which such equipment is placed in service and the 4 subsequent taxable years with respect to such equipment that end before January 1, 2033, and (II) in any other case, applies to such taxable year and to any subsequent taxable year that is within the period described in § 45Q(a)(3)(A) or (4)(A) with respect to such equipment.

Section 6417(d)(3)(C)(ii) provides that, for any taxable year described in § 6417(d)(3)(C)(i)(II)(aa) with respect to carbon capture equipment, no election may be made by the taxpayer under § 6418(a) for such taxable year with respect to such equipment for purposes of the credit described in § 6417(b)(3).

Section 6417(d)(3)(C)(iii) provides that, in the case of a taxpayer who makes an election described in § 6417(1)(C) with respect to carbon capture equipment, such taxpayer may, at any time during the 5-year period described in § 6417(d)(3)(C)(i)(II)(aa), revoke the application of such election with respect to such equipment for any subsequent taxable years during such period. Any such election, if made, applies to the applicable year specified in such election and each subsequent taxable year within the 5-year period described in § 6417(d)(3)(C)(i)(II)(aa). Any election under § 6417(d)(3)(C)(iii) may not be subsequently revoked.

Section 6417(d)(3)(D)(i) provides that, in the case of the credit described in § 6417(b)(5) (that is, the credit for production of clean hydrogen under § 45V(a)), any election under § 6417(a): (i) applies separately with respect to each qualified clean hydrogen production facility; (ii) must be made for the taxable year in which such facility is placed in service (or within the 1-year period subsequent to the date of enactment of § 6417 in the case of facilities placed in service before December 31, 2022), and (iii)(I) in the case of a taxpayer who makes an election described in § 6417(d)(1)(B), applies to such taxable year and the 4 subsequent taxable years with respect to such facility that end before January 1, 2033, and (II) in any other case, applies to the taxable year and all subsequent taxable years with respect to such facility.

Section 6417(d)(3)(D)(ii) provides that, for any taxable year described in § 6417(d)(3)(C)(i)(III)(aa) with respect to a qualified clean hydrogen production facility, no election may be made by the taxpayer under § 6418(a) for such taxable year with respect to such facility for purposes of the credit described in § 6417(b)(5).

Section 6417(d)(3)(D)(iii) provides that, in the case of a taxpayer who makes an election described in § 6417(1)(B) with respect to a qualified clean hydrogen production facility, such taxpayer may, at any time during the period described in § 6417(d)(3)(D)(i)(III)(aa), revoke the application of such election with respect to such facility for any subsequent taxable years during such period. Any such election, if made, applies to the applicable year specified in such election and each subsequent taxable year within the period described in § 6417(d)(3)(D)(i)(II)(aa). Any election under § 6417(d)(3)(D)(iii) may not be revoked once made.

Section 6417(d)(3)(E) provides that, in the case of the credit described in § 6417(b)(8) (that is, the clean electricity production credit under § 45Y(a)), any election under § 6417(a): (i) applies separately with respect to each qualified facility, (ii) must be made for the taxable year in which such facility is placed in service, and (iii) applies to such taxable year and to any subsequent taxable year that is within the period described in § 45Y(b)(1)(B) with respect to such facility.

Section 6417(d)(4)(A) provides that, in the case of any government, or political subdivision described in § 6417(d)(1), and for which no return is required under § 6011 or § 6033(a), the payment described in § 6417(a) is treated as made on the later of the date that a return would be due under § 6033(a) if such government or subdivision were described in § 6033 or the date on which such government or subdivision submits a claim for credit or refund. Any claim for credit or refund must be made at such time and in such manner as the Secretary provides. Section 6417(d)(4)(B) provides that, in any other case, the payment described in § 6417(a) is treated as made on the later of the due date (determined without regard to extensions) of the return of tax for the taxable year or the date on which such return is filed.

Section 6417(d)(5) provides that, as a condition of, and prior to, any amount being treated as a payment that is made by an applicable entity under § 6417(a), the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, improper payments, or excessive payments under § 6417.

Section 6417(d)(6)(A) provides that, in the case of any amount treated as a payment that is made by the applicable entity under § 6417(a), or the amount of the payment made pursuant to § 6417(c), that the Secretary determines constitutes an excessive payment, the tax imposed on such entity by chapter 1 (regardless of whether such entity would otherwise be subject to tax under such chapter) for the taxable year in which such determination is made must be increased by an amount equal to the sum of (i) the amount of such excessive payment, plus (ii) an amount equal to 20 percent of such excessive payment.

Pursuant to § 6417(d)(6)(B), § 6417(d)(6)(A)(ii) (that is, the 20 percent of excessive payment increase) does not apply if the applicable entity demonstrates to the satisfaction of the Secretary that the excessive payment resulted from reasonable cause.

Section 6417(d)(6)(C) defines the term “excessive payment” to mean, with respect to a facility or property for which an election is made under § 6417 for any taxable year, an amount equal to the excess of (i) the amount treated as a payment that is made by the applicable entity under § 6417(a), or the amount of the payment made pursuant to § 6417(c), with respect to such facility or property for such taxable year, over (ii) the amount of the credit that, without application of § 6417, would be otherwise allowable (as determined pursuant to § 6417(d)(2) and without regard to § 38(c)) with respect to such facility or property for such taxable year.

Section 6417(e) provides that, in the case of an applicable entity making an election under § 6417 with respect to an applicable credit, such credit must be reduced to zero and, for any other purposes under this title, must be deemed to have been allowed to such entity for such taxable year.

Section 6417(g) states that, “[e]xcept as otherwise provided in [§ 6417(c)(2)(A)], rules similar to the rules of section 50 shall apply for purposes of [§ 6417].”

Section 13801(g) of the IRA provides that § 6417 applies to taxable years beginning after December 31, 2022.

.02 Transfer of Certain Credits (§ 6418).

Section 6418 of the Code was enacted by § 13801(b) of the IRA to permit eligible credits to be transferred from eligible taxpayers to an unrelated taxpayer.

Section 6418(a) provides that, in the case of an eligible taxpayer that elects to transfer all (or any portion specified in the election) of an eligible credit determined with respect to such taxpayer for any taxable year to another taxpayer (transferee taxpayer) that is not related (within the meaning of § 267(b) or § 707(b)(1)) to the eligible taxpayer, the transferee taxpayer specified in such election (and not the eligible taxpayer) is treated as the taxpayer for purposes of the Code with respect to such credit (or such portion thereof). Any election under § 6418 must be made at such time and in such manner as the Secretary may provide.

Pursuant to § 6418(b), with respect to any amount paid by a transferee taxpayer to an eligible taxpayer as consideration for a transfer described in § 6418(a), such consideration (1) must be required to be paid in cash, (2) is not includible in the gross income of the eligible taxpayer, and (3) with respect to the transferee taxpayer, is not deductible under the Code.

Section 6418(c)(1) provides that, in the case of any eligible credit determined with respect to any facility or property held directly by a partnership or S corporation, such partnership or S corporation may make an election under § 6418(a) with respect to such credit in such manner as the Secretary may provide. If such partnership or S corporation makes an election under § 6418(a) with respect to such credit, (A) any amount received as consideration for a transfer described in § 6418(a) is treated as tax exempt income for purposes of §§ 705 and 1366, and (B) a partner’s distributive share of such tax exempt income is based on such partner’s distributive share of the otherwise eligible credit for each taxable year.

Section 6418(c)(2) provides that, in the case of any facility or property held directly by a partnership or S corporation, no election by any partner or shareholder is allowed under § 6418(a) with respect to any eligible credit determined with respect to such facility or property.

Under § 6418(d), in the case of any credit (or portion thereof) with respect to which an election is made under § 6418(a), such credit is taken into account in the first taxable year of the transferee taxpayer ending with, or after, the taxable year of the eligible taxpayer with respect to which the credit was determined.

Under § 6418(e)(1), any election under § 6418(a) must be made not later than the due date (including extensions of time) for the tax return for the taxable year for which the credit is determined, but cannot be made earlier than 180 days after the date of the enactment of § 6418 by § 13801(a) of the IRA. Any election, once made, is irrevocable.

Section 6418(e)(2) provides that no election may be made under § 6418(a) by a transferee taxpayer with respect to any portion of an eligible credit that has been previously transferred to such taxpayer pursuant to § 6418.

Section 6418(f)(1)(A) defines the term “eligible credit” to mean each of the following: (i) so much of the credit for alternative fuel vehicle refueling property allowed under § 30C that, pursuant to § 30(d)(1), is treated as a credit listed in § 38(b); (ii) the renewable electricity production credit determined under § 45(a); (iii) the carbon oxide sequestration credit determined under § 45Q(a); (iv) the zero-emission nuclear power production credit determined under § 45U(a); (v) the clean hydrogen production credit determined under § 45V(a); (vi) the advanced manufacturing production credit determined under § 45X(a); (vii) the clean electricity production credit determined under § 45Y(a); (viii) the clean fuel production credit determined under § 45Z(a); (ix) the energy credit determined under § 48; (x) the qualifying advanced energy project credit determined under § 48C; and (xi) the clean electricity investment credit determined under § 48E.

Under § 6418(f)(1)(B), in the case of any eligible credit described in § 6418(f)(1)(A)(ii), (iii), (v), or (vii), an election under § 6418(a) must be made (i) separately with respect to each facility for which such credit is determined, and (ii) for each taxable year during the 10-year period beginning on the date such facility was originally placed in service (or, in the case of the credit described in § 6418(f)(1)(A)(iii), for each year during the 12-year period beginning on the date the carbon capture equipment was originally placed in service at such facility).

Pursuant to § 6418(f)(1)(C), the term “eligible credit” does not include any business credit carryforward or carryback determined under § 39.

Section 6418(f)(2) defines the term “eligible taxpayer” to mean any taxpayer that is not described in § 6417(d)(1)(A).

Section 6418(g)(1) provides that, as a condition of, and prior to, any transfer of any portion of an eligible credit pursuant to § 6418(a), the Secretary may require such information (including, in such form or manner as is determined appropriate by the Secretary, such information returns) or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, improper payments, or excessive payments under § 6418.

Section 6418(g)(2)(A) provides that, in the case of any portion of an eligible credit that is transferred to a transferee taxpayer pursuant to § 6418(a) that the Secretary determines constitutes an excessive credit transfer, the tax imposed on the transferee taxpayer by chapter 1 (regardless of whether such entity would otherwise be subject to tax under such chapter) for the taxable year in which such determination is made is increased by an amount equal to the sum of (i) the amount of such excessive credit transfer, plus (ii) an amount equal to 20 percent of the excessive credit transfer.

Pursuant to § 6418(g)(2)(B), § 6418(g)(2)(A)(ii) (that is, the 20 percent of excessive credit transfer increase) does not apply if the transferee taxpayer demonstrates to the satisfaction of the Secretary that the excessive credit transfer resulted from reasonable cause.

Section 6418(g)(2)(C) defines the term “excessive credit transfer” to mean, with respect to a facility or property for which an election is made under § 6418(a) for any taxable year, an amount equal to the excess of (i) the amount of the eligible credit claimed by the transferee taxpayer with respect to such facility or property for such taxable year, over (ii) the amount of such credit that, without application of § 6418, would be otherwise allowable under this title with respect to such facility or property for such taxable year.

Section 6418(g)(3) provides that, in the case of any election under § 6418(a) with respect to any portion of an eligible credit described in § 6418(f)(1)(A)(ix) through (xi), (A) § 50(c) will apply to the applicable investment credit property (as defined in § 50(a)(5)) as if such eligible credit was allowed to the eligible taxpayer, and (B) if, during any taxable year, the applicable investment credit property (as defined in § 50(a)(5)) is disposed of, or otherwise ceases to be investment credit property with respect to the eligible taxpayer, before the close of the recapture period described in § 50(a)(1), (i) such eligible taxpayer must provide notice of such occurrence to the transferee taxpayer (in such form and manner as the Secretary prescribes), and (ii) the transferee taxpayer must provide notice of the recapture amount (as defined in § 50(c)(2)), if any, to the eligible taxpayer (in such form and manner as the Secretary prescribes).

Pursuant to § 6418(g)(4), § 6418 does not apply with respect to any amount of an eligible credit that is allowed pursuant to rules similar to the rules of § 46(c)(4) and (d) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

Section 13801(g) of the IRA provides that § 6418 applies to taxable years beginning after December 31, 2022.

The Treasury Department and the IRS request comments on any questions arising from §§ 6417 and 6418, as added by the IRA, that should be addressed in guidance. Commenters are encouraged to specify the issues on which guidance is needed most quickly as well as the most important issues on which guidance is needed. In addition to general comments, the Treasury Department and the IRS request comments that address the following specific questions:

.01 Elective Payment of Applicable Credits (§ 6417).

(1) What, if any, guidance is needed to clarify the meaning of certain terms in § 6417, such as applicable credit and excessive payment? Is there any term not defined in § 6417 that should be defined in future guidance? If so, what is the term and how should it be defined?

(2) With respect to the Secretary’s discretion to determine the time and manner for making an election under § 6417(a):

(a) What, if any, issues could arise when an applicable entity described in § 6417(d)(1)(A) makes an election under § 6417(a) and what, if any, guidance is needed with respect to such issues?

(b) What factors should the Treasury Department and the IRS consider in determining the time and manner for making the election?

(3) In determining the amount treated as making a payment against tax under § 6417(a), is guidance needed to clarify the application of any other Code provision? If so, what is the Code provision and what clarification is needed?

(4) With respect to an election under § 6417(a) made by a partnership or S corporation pursuant to § 6417(c)(1) for any applicable credit determined with respect to any facility or property held directly by a partnership or S corporation:

(a) What, if any, issues could arise when a partnership or S corporation makes an election under § 6417(a) and what, if any, guidance is needed with respect to such issues?

(b) Is guidance needed to clarify the treatment of a payment made pursuant to § 6417(c)(1)(A) to the electing partnership or S corporation? If so, what clarification is needed?

(5) With respect to the definition of the term “applicable entity” in § 6417(d)(1):

(a) What, if any, guidance is needed to clarify which entities are applicable entities for purposes of § 6417(d)(1)(A), and which taxpayers may elect to be treated as applicable entities under § 6417(d)(1)(B), (C), or (D) for purposes of § 6417?

(b) What types of structures are anticipated to be used by applicable entities, and taxpayers who have elected to be treated as applicable entities under § 6417(d)(1)(B), (C), or (D), when seeking to apply § 6417(a)?

(c) Is guidance needed to clarify the application of any Code provision other than § 6417 to an applicable entity, or a taxpayer electing to be treated as an applicable entity, that makes an election under § 6417(a)? If so, what is the Code provision and what clarification is needed?

(d) Are there specific issues that the Treasury Department and the IRS should address for applicable entities that are subject to non-tax legal requirements or other rules that may affect such entities’ ability to make an election under § 6417(a)?

(6) With respect to the elections under § 6417(d)(1)(B), (C), or (D):

(a) What, if any, issues could arise when an entity makes an election under § 6417(d)(1)(B), (C), or (D) and what, if any, guidance is needed with respect to such issues?

(b) What factors should the Treasury Department and the IRS consider in determining the time and manner for making the election?

(c) What, if any, issues could arise when an entity revokes an election made under § 6417(d)(1)(B), (C), or (D) and what, if any, guidance is needed with respect to such issues?

(d) Is guidance needed to clarify the prohibition of a transfer described in § 6418(a) by a taxpayer who has made an election under § 6417(d)(1)(B), (C), or (D)? If so, what clarification is needed?

(7) Section 6417(d)(3)(A)(i)(I) provides that, in the case of any government, or political subdivision, described in § 6417(d)(1), and for which no return is required under § 6011 or 6033(a), any election made by these applicable entities under § 6417(a) must be made no later than such date as is determined appropriate by the Secretary. What factors should the Treasury Department and the IRS consider when providing guidance on the due date of the election for these applicable entities?

(8) Section 6417(d)(4)(A) provides that, in the case of any government, or political subdivision described in § 6417(d)(1), and for which no return is required under § 6011 or 6033(a), the payment described in § 6417(a) is treated as made on the later of the date that a return would be due under § 6033(a) if such government or subdivision were described in § 6033 or the date on which such government or subdivision submits a claim for credit or refund at such time and in such manner as the Secretary provides. What factors should the Treasury Department and the IRS consider when providing guidance to clarify the timing and manner of a payment made by these governments or political subdivisions?

(9) For purposes of preventing duplication, fraud, improper payments, or excessive payments under § 6417, what information, including any documentation created in or out of the ordinary course of business, or registration, should the IRS require as a condition of, and prior to, any amount being treated as a payment made by an applicable entity under § 6417(a)? What factors should the Treasury Department and the IRS consider as to when documentation or registration should be required? Should the IRS require the same documentation or registration as a condition of, and prior to, any amount being treated as a payment made by both an applicable entity as well as a taxpayer who is treated as an applicable entity after making an election under § 6417(d)(1)(B), (C), or (D)? Should the IRS require the same documentation or registration for all applicable credits? If not, how should the information or registration differ between applicable credits? What other processes could be implemented by the IRS to prevent duplication, fraud, improper payments, or excessive payments under § 6417?

(10) What, if any, guidance is needed to clarify the application of the excessive payment provisions of § 6417? What factors should be taken into account in determining whether reasonable cause exists for purposes of § 6417(d)(6)(B)? What, if any, guidance is needed to calculate the excessive payment amount under § 6417(d)(6)(C)?

(11) For purposes of § 6417(g), what, if any, guidance is needed to clarify the application of § 50 for credit recapture and basis adjustments to investment credit property?

(12) The advanced manufacturing investment credit under § 48D also contains an elective payment provision under § 48D(d). The Treasury Department and the IRS seek comments on whether the elective payment provisions of § 6417 should operate similarly or differently than the elective payment provision under § 48D.

(13) Please provide comments on any other topics that may require guidance.

.02 Transfer of Certain Credits (§ 6418).

(1) What, if any, guidance is needed to clarify the meaning of certain terms in § 6418, such as eligible credit, eligible taxpayer, and excessive credit transfer? Is there any term not defined in § 6418 that should be defined in guidance? If so, what is the term and how should it be defined?

(2) Section 6418(c)(1) provides that, in the case of any eligible credit determined with respect to any facility or property held directly by a partnership or S corporation, the Secretary determines the manner in which such partnership or S corporation makes an election under § 6418(a) with respect to such credit.

(a) What, if any, issues could arise when a partnership or S corporation makes an election under § 6418(a) and what, if any, guidance is needed with respect to such issues?

(b) What factors should the Treasury Department and the IRS consider in determining the time and manner for making the election?

(3) Section 6418(c)(2) provides that, in the case of any facility or property held directly by a partnership or S corporation, no election by any partner or shareholder is allowed under § 6418(a) with respect to any eligible credit determined with respect to such facility or property. If the election is made, what issues should be considered regarding the transfer of any portion of an eligible credit and what, if any, guidance is needed with respect to such issues? Further, what, if any, guidance is needed on allocating any amount received as consideration for transferring any portion of an eligible credit?

(4) What, if any, guidance is needed with respect to parameters or limitations on a transferee taxpayer’s eligibility to claim the credit?

(5) For purposes of § 6418(d), what, if any, guidance is required to determine the proper taxable year in which to claim any credit that was transferred pursuant to an election made under § 6418(a)?

(6) In determining the amount of eligible credit transferred under § 6418(a), is guidance needed to clarify the application of any other Code provision? If so, what is the Code provision and what clarification is needed?

(7) Is guidance needed to clarify how any other Code provision applies to an eligible taxpayer or a transferee taxpayer when an election is made under § 6418? If so, what is the Code provision and what clarification is needed?

(8) For purposes of preventing duplication, fraud, improper payments, or excessive credit transfers under § 6418, what information, including any documentation created in or out of the ordinary course of business, or registration, should be required by the IRS as a condition of, prior to, or after any transfer of any portion of an eligible credit pursuant to § 6418(a)? What factors should the Treasury Department and the IRS consider as to when documentation or registration should be required? Should the IRS require the same documentation or registration for all eligible credits? If not, how should the information or registration differ between eligible credits? What other processes could be implemented by the IRS to prevent duplication, fraud, improper payments, or excessive credit transfers under § 6418?

(9) What, if any, guidance is needed to clarify the application of the excessive credit transfer provisions of § 6418? What factors should be taken into account in determining whether reasonable cause exists for purposes of § 6418(g)(2)(B)? What guidance is needed to calculate the excessive credit transfer amount?

(10) For purposes of § 6418(g)(3), what, if any, guidance is needed to clarify the application of § 50 for purposes of credit recapture, basis adjustments, and eligibility related to § 50(b)(3)? Pursuant to § 6418(g)(3)(B)(i), an eligible taxpayer must notify the transferee taxpayer if, during any taxable year, the applicable investment credit property is disposed of, or otherwise ceases to be investment credit property with respect to the eligible taxpayer, before the close of the recapture period. What factors should be considered in determining the form and manner of this notice? Likewise, pursuant to § 6418(g)(3)(B)(ii), the transferee taxpayer must notify the eligible taxpayer of the recapture amount. What factors should be considered in determining the form and manner of this notice?

(11) Is guidance needed to clarify the application of § 6418(g)(4) regarding progress expenditures? If so, what clarification is needed?

(12) Please provide comments on any other topics that may require guidance.

.01 Written comments should be submitted by Friday, November 4, 2022. Consideration will be given, however, to any written comment submitted after Friday, November 4, 2022, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2022-50. Comments may be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-0050 in the search field on the regulations.gov homepage to find this notice and submit comments).

(2) Alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2022-50), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, or on paper, to its public docket on regulations.gov.

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) plan to issue guidance regarding the provisions of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D of the Internal Revenue Code (Code), as amended or added by Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). This notice requests comments on general as well as specific questions pertaining to the prevailing wage, apprenticeship, domestic content, and energy community requirements for increased or bonus credit (or deduction) amounts under those respective provisions of the Code. Comments received in response to this notice will help to inform development of guidance implementing the provisions of the IRA relating to §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D.

.01 Overview.

Taxpayers may qualify for increased credit amounts under §§ 30C, 45, 45Q, 45V, 45Y, 45Z, 48, 48C, and 48E, or an increased deduction amount under § 179D, if certain prevailing wage and apprenticeship requirements are satisfied.¹ In addition, taxpayers may claim an increased credit amount under §§ 45L and 45U for satisfying prevailing wage requirements.² Further, taxpayers may qualify for bonus credit amounts under §§ 45, 48, 45Y, and 48E if certain domestic content requirements are satisfied.³ Finally, taxpayers may qualify for increased credit amounts under §§ 45, 48, 45Y, and 48E for investment in energy communities.⁴

.02 Prevailing Wage Requirement.

Sections 45(b)(7), 30C(g)(2), 45L(g), 45Q(h)(3), 45U(d)(2), 45V(e)(3), 45Y(g)(9), 45Z(f)(6), 48(a)(10), 48C(e)(5), and 48E(d)(3) include prevailing wage requirements that taxpayers must satisfy to qualify for increased credit amounts under those sections of the Code. Section 179D(b)(4) includes prevailing wage requirements that taxpayers must satisfy to qualify for an increased deduction amount under that section. The prevailing wage requirements under these various provisions are described below.

Section 45(b)(7)(A) provides, in general, that a taxpayer satisfies the prevailing wage requirements with respect to a qualified facility if the taxpayer ensures that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the construction of such facility, and with respect to any taxable year for any portion of such taxable year that is within the period described in § 45(a)(2)(A)(ii), the alteration or repair of such facility, are paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. To determine an increased credit amount for a taxable year, the requirement under § 45(b)(7)(A)(ii) is applied to the taxable year in which the alteration or repair of the qualified facility occurs.

Section 45(b)(7)(B)(i) generally provides a correction and penalty mechanism for a taxpayer that claims the increased credit amount but fails to satisfy the prevailing wage requirement under § 45(b)(7)(A). Section 45(b)(7)(B)(ii) provides that the deficiency procedures under subchapter B of chapter 63 of the Code do not apply with respect to the assessment or collection of any penalty imposed by § 45(b)(7). Section 45(b)(7)(B)(iii) increases the penalty if the Secretary of the Treasury or her delegate (Secretary) determines that any failure to satisfy the prevailing wage requirement under § 45(b)(7)(A) is due to intentional disregard of the requirements under § 45(b)(7)(A).

Section 48(a)(10) provides, in general, that a taxpayer satisfies the prevailing wage requirements with respect to an energy project if the taxpayer ensures that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the construction of such energy project, and for the 5-year period beginning on the date such project is originally placed in service the alteration or repair of such project, are paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such project is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40 of the United States Code. Subject to § 48(a)(10)(C), for purposes of any determination under § 48(a)(9)(A)(i) for the taxable year in which the energy project is placed in service, the taxpayer will be deemed to satisfy the requirement under § 48(a)(10)(A)(ii) at the time such project is placed in service. Section 48(a)(10)(B) provides that rules similar to the rules of § 45(b)(7)(B) (that is, the correction and penalty mechanism for failure to satisfy the prevailing wage requirement) apply. Section 48(a)(10)(C) provides that the Secretary is to, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under § 48(a) by reason of § 48(a)(10) with respect to any project that does not satisfy the requirements under § 48(a)(10)(A) (after application of § 48(a)(10)(B)) for the period described in § 48(a)(10)(A)(ii) (but which does not cease to be investment credit property within the meaning of § 50(a)). The period and percentage of such recapture are determined under rules similar to the rules of § 50(a).

The prevailing wage requirements under §§ 30C(g)(2), 45L(g),⁵ 45Q(h)(3),⁶ 45U(d)(2),45V(e)(3),45Y(g)(9), 45Z(f)(6)(A), 48C(e)(5), 48E(d)(3), and 179D(b)(4) are similar to the requirements under § 45(b)(7) and § 48(a)(10).

.03 Apprenticeship Requirements.

Sections 45(b)(8), 30C(g)(3), 45Q(h)(4), 45V(e)(4), 45Y(g)(10), 45Z(f)(7), 48(a)(11), 48C(e)(6), and 48E(d)(4) include apprenticeship requirements that taxpayers must satisfy to qualify for increased credit amounts under those sections of the Code. Section 179D(b)(5) includes apprenticeship requirements that taxpayers must satisfy to qualify for an increased deduction amount. The apprenticeship requirements under these various provisions are described below.

Section 45(b)(8)(A)(i) provides that a taxpayer satisfies the apprenticeship requirements with respect to the construction of any qualified facility if the taxpayer ensures that not less than the applicable percentage of the total labor hours of the construction, alteration, or repair work (including such work performed by any contractor or subcontractor) with respect to such facility is, subject to § 45(b)(8)(B), performed by qualified apprentices. Section 45(b)(8)(E)(ii) defines “qualified apprentice” as “an individual who is employed by the taxpayer or by any contractor or subcontractor and who is participating in a registered apprenticeship program, as defined in section 3131(e)(3)(B).” Section 3131(e)(3)(B) of the Code defines a “registered apprenticeship program” as an “apprenticeship registered under the Act of August 16, 1937 (commonly known as the “National Apprenticeship Act”; 50 Stat. 664, chapter 663; 29 U.S.C. 50 et seq.) that meets the standards of subpart A of part 29 and part 30 of title 29, Code of Federal Regulations.”

Under § 45(b)(8)(A)(ii), the applicable percentage of total labor hours to be performed by a qualified apprentice is (1) in the case of a qualified facility the construction of which begins before January 1, 2023, 10 percent, (2) in the case of a qualified facility the construction of which begins after December 31, 2022, and before January 1, 2024, 12.5 percent, and (3) in the case of a qualified facility the construction of which begins after December 31, 2023, 15 percent.

Section 45(b)(8)(B) provides that the requirement under § 45(b)(A)(i) is subject to any applicable requirements for apprentice-to-journeyworker ratios of the Department of Labor or the applicable State apprenticeship agency.

Section 45(b)(8)(C) provides that each taxpayer, contractor, or subcontractor who employs four or more individuals to perform construction, alteration, or repair work with respect to the construction of a qualified facility must employ one or more qualified apprentices to perform such work.

Section 45(b)(8)(D)(i) provides that a taxpayer will not be treated as failing to satisfy the apprenticeship requirements if the taxpayer (1) satisfies the good faith effort requirements described in § 45(b)(8)(D)(ii), or (2) subject to § 45(b)(8)(D)(iii), in the case of any failure by the taxpayer to satisfy the requirements under § 45(b)(8)(A) and (C) with respect to the construction, alteration, or repair work on any qualified facility to which § 45(b)(8)(D)(i)(I) does not apply, makes payment to the Secretary of a penalty in an amount equal to the product of $50, multiplied by the total labor hours for which the requirement was not satisfied with respect to the construction, alteration, or repair work on such qualified facility.

Section 45(b)(8)(D)(ii) provides that a taxpayer will be deemed to have satisfied the requirements under § 45(b)(8)(A) with respect to a qualified facility if such taxpayer has requested qualified apprentices from a registered apprenticeship program and (1) such request has been denied, provided that such denial is not the result of a refusal by the taxpayer or any contractors or subcontractors engaged in the performance of construction, alteration, or repair work with respect to such qualified facility to comply with the established standards and requirements of the registered apprenticeship program, or (2) the registered apprenticeship program fails to respond to such request within 5 business days after the date on which such registered apprenticeship program received such request.

Section 45(b)(8)(D)(iii) provides that if the Secretary determines that any failure described in § 45(b)(8)(D)(i)(II) is due to intentional disregard of the apprenticeship requirements, § 45(b)(8)(D)(i)(II) must be applied by substituting $500 for $50 for purposes of computing the penalty.

Section 45(b)(8)(E)(i) defines the term “labor hours.”

Sections 30C(g)(3), 45Q(h)(4), 45V(e)(4), 45Y(g)(10), 45Z(f)(7), 48(a)(11), 48C(e)(6) (effective for taxable years beginning after January 1, 2023), 48E(d)(4), and 179D(b)(5) apply rules similar to those under § 45(b)(8).

.04 Domestic Content Requirement.

Sections 45(b)(9), 48(a)(12), 45Y(g)(11) and 48E(a)(3)(B) provide domestic content requirements that taxpayers must satisfy to qualify for bonus credit amounts under those sections of the Code. Sections 45(b)(9)(A) and 45Y(g)(11)(A) provide for a 10 percent domestic content bonus credit amount if the domestic content requirements are satisfied. Under §§ 48(a)(12)(C) and 48E(a)(3)(B), the domestic content bonus credit amount is reduced from 10 percent to 2 percent if certain other requirements are not satisfied.

Section 45(b)(9)(B)(i) provides that with respect to any qualified facility, the domestic content requirement is satisfied if the taxpayer certifies to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that any steel, iron, or manufactured product that is a component of such facility (upon completion of construction) was produced in the United States (as determined under 49 C.F.R. § 661).

Section 45(b)(9)(B)(ii) provides that in the case of steel or iron, § 45(b)(9)(B)(i) is applied in a manner consistent with 49 C.F.R. § 661.5. For purposes of § 45(b)(9)(B)(i), § 45(b)(9)(B)(iii) provides that the manufactured products that are components of a qualified facility upon completion of construction are deemed to have been produced in the United States if not less than the adjusted percentage (as determined under § 45(b)(9)(C)) of the total costs of all such manufactured products of such facility are attributable to manufactured products (including components) that are mined, produced, or manufactured in the United States.

Section 45(b)(9)(C)(i) provides that the adjusted percentage is 40 percent. Section 45(b)(9)(C)(ii) provides an exception for a qualified facility that is an offshore wind facility, for which the adjusted percentage is 20 percent.⁷

Section 45(b)(10) provides for the phaseout of elective payments. Section 45(b)(10)(A) provides that in the case of a taxpayer making an election under § 6417 with respect to a credit under § 45, the amount of such credit will be replaced with the value of such credit (determined without regard to § 45(b)(10)), multiplied by the applicable percentage. Section 45(b)(10)(B) provides that in the case of any qualified facility (1) that satisfies the requirements under § 45(b)(9)(B), or (2) with a maximum net output of less than 1 megawatt (as measured in alternating current), the applicable percentage is 100 percent. Section 45(b)(10)(C) provides for a phased domestic content requirement, and states that subject to the exceptions in § 45(b)(10)(D), for any qualified facility that is not described in § 45(b)(10)(B), the applicable percentage is (1) 100 percent if construction of such facility begins before January 1, 2024, and (2) 90 percent if construction of such facility begins in calendar year 2024.⁸

Section 45(b)(10)(D)(i) provides that the Secretary is to provide exceptions to the requirements under § 45(b)(10)(D) if (1) the inclusion of steel, iron, or manufactured products that are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or (2) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality. Section 45(b)(10)(D)(ii) provides that in any case in which the Secretary provides an exception pursuant to § 45(b)(10)(D)(i), the applicable percentage is 100 percent.

Sections 48(a)(12), 45Y(g)(11), and 48E(a)(3)(B) apply similar rules to those under § 45(b)(9). Sections 48(a)(13), 45Y(g)(12), and 48E(d)(5) apply similar elective payments rules to those under § 45(b)(10).

.05 Energy Community Requirement. Sections 45(b)(11), 48(a)(14), 45Y(g)(7), and 48E(a)(3)(A) provide energy community requirements that taxpayers must satisfy to qualify for increased credit amounts under those provisions of the Code. Section 45(b)(11)(A) provides that in the case of a qualified facility located in an energy community, the credit determined under § 45(a) (determined after the application of § 45(b)(1) through (10), without the application of § 45(b)(9)) is increased by an amount equal to 10 percent of the amount so determined. Section 45Y(g)(7) provides a similar rule. Under §§ 48(a)(14) and 48E(a)(3)(A), the increase in the credit amount for satisfying the energy community requirements is reduced from 10 percent to 2 percent if certain other requirements are not satisfied.

Section 45(b)(11)(B) provides that for purposes of § 45(b)(11), the term energy community means: (1) A brownfield site (as defined in 42 U.S.C. 9601(39)(A), (B), and (D)(ii)(III)), (2) A metropolitan statistical area or non-metropolitan statistical area that has (or had, at any time after December 31, 2009) 0.17 percent or greater direct employment or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary), and has an unemployment rate at or above the national average unemployment rate for the previous year (as determined by the Secretary), or (3) A census tract (i) in which a coal mine has closed after December 31, 1999; or (ii) in which a coal-fired electric generating unit has been retired after December 31, 2009; or (iii) that is directly adjoining to any census tract described in § 45(b)(11)(B)(iii)(I).

The definition of an energy community in § 45(b)(11)(B) is adopted by §§ 45Y(g)(7), 48(a)(14) (subject to certain modifications), and 48E(a)(3)(A).

The Treasury Department and the IRS request comments on questions arising from the amendments in the IRA regarding prevailing wage, apprenticeship, domestic content, and energy community requirements that should be addressed in guidance. Commenters are encouraged to specify the issues on which guidance is needed most quickly as well as the most important issues on which guidance is needed. In addition to general comments, the Treasury Department and the IRS request comments that address the following specific questions:

.01 Prevailing Wage Requirement

(1) Section 45(b)(7)(A) provides that a taxpayer must ensure that any laborers and mechanics employed by the taxpayer, or any contractor or subcontractor, are paid wages at rates not less than the prevailing wage rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, which is commonly known as the Davis-Bacon Act. Is guidance necessary to clarify how the Davis-Bacon prevailing wage requirements apply for purposes of § 45(b)(7)(A)?

(2) Section 45(b)(7)(B)(i) generally provides a correction and penalty mechanism for failure to satisfy prevailing wage requirements. What should the Treasury Department and the IRS consider in developing rules for taxpayers to correct a deficiency for failure to satisfy prevailing wage requirements?

(3) What documentation or substantiation should be required to show compliance with the prevailing wage requirements?

(4) Is guidance for purposes of § 45(b)(7)(A) needed to clarify the treatment of a qualified facility that has been placed in service but does not undergo alteration or repair during a year in which the prevailing wage requirements apply?

(5) Please provide comments on any other topics relating to the prevailing wage requirements for purposes of § 45(b)(7)(A) that may require guidance.

.02 Apprenticeship Requirement

(1) Section 45(b)(8)(C) provides that each taxpayer, contractor, or subcontractor who employs four or more individuals to perform construction, alteration, or repair work with respect to a qualified facility must employ one or more qualified apprentices from a registered apprenticeship program to perform that work. What factors should the Treasury Department and the IRS consider regarding the appropriate duration of employment of individuals for construction, alteration, or repair work for purposes of this requirement?

(2) Section 45(b)(8)(D)(ii) provides for a good faith effort exception to the apprenticeship requirement.

(a) What, if any, clarification is needed regarding the good faith effort exception?

(b) What factors should be considered in administering and promoting compliance with this good faith effort exception?

(c) Are there existing methods to facilitate reporting requirements, for example, through current Davis-Bacon reporting forms, current performance reporting requirements for contracts or grants, and/or through DOL’s Registered Apprenticeship Partners Information Management Data System (RAPIDS) database or a State Apprenticeship Agency’s database?

(3) What documentation or substantiation do taxpayers maintain or could they create to demonstrate compliance with the apprenticeship requirements in § 45(b)(8)(A), (B), and (C), or the good faith effort exception?

(4) Please provide comments on any other topics relating to the apprenticeship requirements in § 45(b)(8)(B) that may require guidance.

.03 Domestic Content Requirement

(1) Sections 45(b)(9)(B) and 45Y(g)(11)(B) provide that a taxpayer must certify that any steel, iron, or manufactured product that is a component of a qualified facility (upon completion of construction) was produced in the United States (as determined under 49 C.F.R. 661).

(a) What regulations, if any, under 49 C.F.R. 661 (such as 49 C.F.R. 661.5 or 661.6) should apply in determining whether the requirements of section §§ 45(b)(9)(B) and 45Y(g)(11)(B) are satisfied? Why?

(b) What should the Treasury Department and the IRS consider when determining “completion of construction” for purposes of the domestic content requirement? Should the “completion of construction date” be the same as the placed in service date? If not, why?

(c) Should the definitions of “steel” and “iron” under 49 C.F.R. 661.3, 661.5(b) and (c) be used for purposes of defining those terms under §§ 45(b)(9)(B) and 45Y(g)(11)(B)? If not, what alternative definitions should be used?

(d) What records or documentation do taxpayers maintain or could they create to substantiate a taxpayer’s certification that they have satisfied the domestic content requirements?

(2) Sections 45(b)(9)(B)(iii) and 45Y(g)(11)(B)(iii) provide that manufactured products that are components of a qualified facility upon completion of construction will be deemed to have been produced in the United States if not less than the adjusted percentage of the total costs of all of such manufactured products of such facility are attributable to manufactured products (including components) that are mined, produced, or manufactured in the United States.

(a) Does the term “component of a qualified facility” need further clarification? If so, what should be clarified and is any clarification needed for specific types of property, such as qualified interconnection property?

(b) Does the determination of “total costs” with regard to all manufactured products of a qualified facility that are attributable to manufactured products (including components) that are mined, produced, or manufactured in the United States need further clarification? If so, what should be clarified? Is guidance needed to clarify the term “mined, produced, or manufactured”?

(c) Does the term “manufactured product” with regard to the various technologies eligible for the domestic content bonus credit need further clarification? If so, what should be clarified? Is guidance needed to clarify what constitutes an “end product” (as defined in 49 C.F.R. 661.3) for purposes of satisfying the domestic content requirements?

(d) Does the adjusted percentage threshold rule that applies to manufactured products need further clarification? If so, what should be clarified?

(e) Does the treatment of subcomponents with regard to manufactured products need further clarification? If so, what should be clarified?

(3) Solely for purposes of determining whether a reduction in an elective payment amount is required under § 6417, §§ 45(b)(10)(D) and 45Y(g)(12)(D) provide an exception for the requirements contained in §§ 45(b)(9)(B) and 45Y(g)(10)(B) (respectively) if the inclusion of steel, iron, or manufactured productions that are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent or relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.

(a) Does the determination of “overall costs” and increases in the overall costs with regard to construction of a qualified facility need further clarification? If so, what should be clarified?

(b) What factors should the Secretary include in guidance to clarify when an exception to the requirements under section §§ 45(b)(10)(D) and 45Y(g)(12)(D) applies? What existing regulatory or guidance frameworks, such as the Federal Acquisition Regulation (FAR) and Build America Buy America (BABA) guidance, may be useful for developing guidance to grant exceptions under §§ 45(b)(10)(D) and 45Y(g)(12)(D)?

(c) Do the “sufficient and reasonably available quantities” and “satisfactory quality” standards need further clarification? If so, what should be clarified?

(4) Sections 48 and 48E have domestic content bonus amount rules similar to other provisions of the Code. Section 48(a)(12) has domestic content requirement rules similar to § 45(b)(9)(B) and § 48E(a)(3)(B) has domestic content rules similar to the rules of § 48(a)(12). What should the Treasury Department and the IRS consider in providing guidance regarding the similar domestic content requirements under § 48(a)(12) and § 48E(a)(3)(B)?

(5) Please provide comments on any other topics relating to the domestic content requirements that may require guidance.

.04 Energy Community Requirement

(1) Section 45(b)(11)(A) provides an increased credit amount for a qualified facility located in an energy community. What further clarifications are needed regarding the term “located in” for this purpose, including any relevant timing considerations for determining whether a qualified facility is located in an energy community? Should a rule similar to the rule in § 1397C(f) (Enterprise Zones rule regarding the treatment of businesses straddling census tract lines), the rules in 26 C.F.R. §§ 1.1400Z2(d)-1 and 1.1400Z2(d)-2, or other frameworks apply in making this determination?

(2) Does the determination of a brownfield site (as defined in subparagraphs (A), (B), and (D)(ii)(III) of § 101(39) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601(39))) need further clarification? If so, what should be clarified?

(3) Which source or sources of information should the Treasury Department and the IRS consider in determining a “metropolitan statistical area” (MSA) and “non-metropolitan statistical area” (non-MSA) under § 45(b)(11)(B)(ii)? Which source or sources of information should be used in determining whether an MSA or non-MSA meets the threshold of 0.17 percent or greater direct employment related to the extraction, processing, transport, or storage of coal, oil, or natural gas, and an unemployment rate at or above the national average unemployment rate for the previous year? What industries or occupations should be considered under the definition of “direct employment” for purposes of this section?

(4) Which source or sources of information should the Treasury Department and the IRS consider in determining census tracts that had a coal mine closed after December 31, 1999, or had a coal-fired electric generating unit retired after December 31, 2009, under § 45(b)(11)(B)(iii)? How should the closure of a coal mine or the retirement of a coal-fired electric generating unit be defined under § 45(b)(11)(B)(iii)?

(5) For each of the three categories of energy communities allowed under § 45(b)(11)(B), what past or possible future changes in the definition, scope, boundary, or status of a “brownfield site” under § 45(b)(11)(B)(i), a “metropolitan statistical area or non-metropolitan statistical area” under § 45(b)(11)(B)(ii), or a “census tract” under § 45(b)(11)(B)(iii) should be considered, and why?

(6) Under § 45(b)(11)(B)(ii)(I), what should the Treasury Department and the IRS consider in determining whether a metropolitan statistical area or non-metropolitan statistical area has or had 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas? What sources of information should be used in making this determination? What tax revenues (for example, municipal, county, special district) should be considered under this section? What, if any, consideration should be given to the unavailability of consistent public data for some of these types of taxes?

(7) Please provide comments on any other topics relating to the energy community requirement that may require guidance.

.05 Increased Credit Amount for Qualified Facility With Maximum Net Output of Less than 1 Megawatt

Section 45(b)(6)(A) provides for an increased credit amount in the case of any qualified facility that satisfies the requirements of § 45(b)(6)(B). One way that a qualified facility can satisfy the requirements of § 45(b)(6)(B) is if it is a facility with a maximum net output of less than 1 megawatt (as measured in alternating current). Similarly, § 48(a)(9)(A) provides for an increased credit amount in the case of any energy project that satisfies the requirements of § 48(a)(9)(B), and one way that an energy project can satisfy the requirements of § 48(a)(9)(B) is if it is a project with a maximum net output of less than 1 megawatt of electrical (as measured in alternating current) or thermal energy. Sections 45Y(a)(2)(B) and 48E(a)(2)(A) also provide similar rules. Does the determination of when a facility or project will be considered to have a maximum net output of less than 1 megawatt need further clarification? If so, what should be clarified?

.01 Written comments should be submitted by Friday, November 4, 2022. Consideration will be given, however, to any written comment submitted after Friday, November 4, 2022, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2022-51. Comments may be submitted in one of two ways:

(1) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2022-51 in the search field on the regulations.gov homepage to find this notice and submit comments).

(2) Alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2022-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, or on paper, to its public docket on regulations.gov.

For purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 48, 48C, 48E, and 179D, the publication of this notice requesting comments is not the publication of guidance with respect to the prevailing wage and apprenticeship requirements, and it is not relevant in determining whether the prevailing wage and apprenticeship requirements are satisfied under such sections. The Treasury Department and the IRS will explicitly identify when it has published guidance with respect to the prevailing wage and apprenticeship requirements that is relevant for determining whether such requirements have been satisfied for purposes of §§ 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 48, 48C, 48E, and 179D.

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

¹See § 13404(d) of the IRA for the prevailing wage and apprenticeship requirements under § 30C(g); § 13101(f) of the IRA for the prevailing wage and apprenticeship requirements under § 45(b)(7); § 13104(d) of the IRA for the prevailing wage and apprenticeship requirements under § 45Q(h)(3) and (h)(4); § 13204(a)(1) of the IRA for the prevailing wage and apprenticeship requirements under § 45V(e)(3) and (e)(4); § 13701(a) of the IRA for the prevailing wage and apprenticeship requirements under § 45Y(g)(10); § 13704(a) of the IRA for the prevailing wage and apprenticeship requirements under § 45Z(f)(7); § 13102(k) of the IRA for the prevailing wage and apprenticeship requirements under § 48(a)(10) and (a)(11); § 13501(a) of the IRA for the prevailing wage and apprenticeship requirements under § 48C(e)(5) and (e)(6); § 13702(a) of the IRA for the prevailing wage and apprenticeship requirements under § 48E(c)(3) and (c)(4); and § 13303(a)(1) of the IRA for the prevailing wage and apprenticeship requirements under § 179D(b)(4) and (b)(5).

²See § 13304(d) of the IRA for the prevailing wage requirement under § 45L(g) and § 13105(a) for the prevailing wage requirements under § 45U(d)(2).

³See § 13101(g) of the IRA for the domestic content requirements under § 45(b)(9), § 13102(l) of the IRA for the domestic content requirements under § 48(a)(12), § 13701(a) of the IRA for the domestic content requirements under § 45Y(g)(11), and § 13702(a) of the IRA for the domestic content requirements under § 48E(a)(3)(B).

⁴See § 13101(g) of the IRA for the energy community provisions under § 45(b)(11), § 13102(o) of the IRA for the energy community provisions under § 48(a)(14), § 13701(a) of the IRA for the energy community provisions under § 45Y(g)(7), and § 13702(a) of the IRA for the energy community provisions under § 48E(a)(3)(A).

⁵Section 45L (New energy efficient home credit) includes a modified prevailing wage requirement under § 45L(g). Section 45L(g)(3) provides that the Secretary is to issue such regulations or other guidance necessary to carry out the purposes of § 45L(g).

⁶Section 45Q(h)(3)(A) applies with respect to any qualified facility and any carbon capture equipment.

⁷For purposes of §§ 45, 48, and 48E, the adjusted percentage is 40 percent (20 percent in the case of offshore wind facilities). For purposes of § 45Y, § 45Y(g)(11)(C) provides the adjusted percentages, ranging from 40 precent (20 percent in the case of offshore wind facilities) to 55 percent depending on when construction of a facility begins.

⁸For purposes of §§ 45Y(g)(12) and 48E(d)(5), the applicable percentages are the same as for §§ 45 and 48 for facilities that begin construction in 2024 or earlier, but the applicable percentages decrease from 85 percent for facilities that begin construction in 2025 to 0 percent for facilities that begin construction after 2025.

This notice modifies and amplifies sections IV.C, IV.D, IV.F, and V.B of Notice 2022-05, 2022–5 I.R.B. 457, by providing additional temporary relief from certain requirements under § 42 of the Internal Revenue Code (Code) for qualified low-income housing projects. The Internal Revenue Service and the Department of the Treasury have received numerous inquiries related to unavoidable labor and supply-chain disruptions delaying the construction, rehabilitation, and restoration of properties throughout the United States. In view of the unique circumstances resulting from the labor and supply-chain disruptions and their effect on the existing relief provided in Notice 2022-05, it is appropriate to provide the additional temporary relief in this notice.

.01 Extension of certain placed-in-service deadlines. This notice modifies and amplifies section IV.C of Notice 2022-05 by designating the four bullets under section IV.C of Notice 2022-05 as section IV.C.(1) through (4), revising section IV.C.(2) and (4), and adding new section IV.C.(5) to extend placed-in-service deadlines for projects receiving allocations in 2019, 2020, and 2021. As so modified and amplified, section IV.C of Notice 2022-05 now reads:

C. PLACED-IN-SERVICE DEADLINE

(1) For purposes of § 42(h)(1)(E)(i), if the original deadline for a low-income building to be placed in service is the close of calendar year 2020, the new deadline is the close of calendar year 2022 (that is, December 31, 2022).

(2) If the original placed-in-service deadline is the close of calendar year 2021 and the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was before April 1, 2020, the new placed-in-service deadline is the close of calendar year 2023 (that is, December 31, 2023).

(3) If the original placed-in-service deadline is the close of calendar year 2021 and the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was on or after April 1, 2020, and on or before December 31, 2020, then the new placed-in-service deadline is the close of calendar year 2023 (that is, December 31, 2023).

(4) If the original placed-in-service deadline is the close of calendar year 2022 (and thus the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was in 2021), then the new placed-in-service deadline is the close of calendar year 2024 (that is, December 31, 2024).

(5) If the original placed-in-service deadline is the close of calendar year 2023 (and thus the original deadline for the 10-percent test in § 42(h)(1)(E)(ii) was in 2022), then the new placed-in-service deadline is the close of calendar year 2024 (that is, December 31, 2024).

.02 Extension of Agency-set reasonable restoration periods. This notice modifies and amplifies section IV.D of Notice 2022-05 by permitting a twenty-four-month extension of reasonable restoration periods set by an Agency. As so modified and amplified, section IV.D of Notice 2022-05 now reads:

D. REASONABLE PERIOD FOR RESTORATION OR REPLACEMENT IN THE EVENT OF CASUALTY LOSS

For purposes of § 42(j)(4)(E) both in the case of a casualty loss not due to a pre-COVID-19-pandemic Major Disaster and in situations governed by section 8.02 of Rev. Proc. 2014-49 in the case of a casualty loss due to a pre-COVID-19-pandemic Major Disaster, if a low-income building’s qualified basis is reduced by reason of the casualty loss and the reasonable period to restore the loss by reconstruction or replacement that was originally set by the Agency (original Reasonable Restoration Period) ends on or after April 1, 2020, then the last day of the Reasonable Restoration Period is postponed by twenty-four months but not beyond December 31, 2023. Notwithstanding the preceding sentence, the Agency may require a shorter extension, or no extension at all.

For purposes of determining the credit amount allowable under § 42(a) in the case of a credit year that ends on or after April 1, 2020, and not later than the end of the Reasonable Restoration Period (taking into account any extension under the preceding paragraph), if the Owner restores the building by the end of that extended Reasonable Restoration Period, then for taxable years ending after the first day of the casualty and before the completion of the restoration, the Owner must use the building’s qualified basis at the end of the taxable year immediately preceding the first day of the casualty as the building’s qualified basis for that credit year.

.03 Extension of Agency-set correction periods. This notice modifies and amplifies section IV.F of Notice 2022-05 by extending the correction period set by an Agency by twelve months. As so modified and amplified, section IV.F of Notice 2022-05 now reads:

F. CORRECTION PERIOD

For purposes of § 1.42-5, if a correction period that was set by the Agency ends on or after April 1, 2020, and before December 31, 2022, then the end of the correction period (including as already extended, if applicable) is extended by a year, but not beyond December 31, 2023. If the correction period originally set by the Agency ends during 2023, the end of the period is extended to December 31, 2023. Notwithstanding the preceding sentences, the Agency may require a shorter extension, or no extension at all.

.04 Extension of waivers of compliance monitoring physical inspections. This notice modifies and amplifies section V.B of Notice 2022-05 by extending the temporary waiver for compliance monitoring physical inspections. As so modified and amplified, section V.B of Notice 2022-05 now reads:

B. COMPLIANCE-MONITORING—PHYSICAL INSPECTIONS

For purposes of § 1.42-5, an Agency is not required to conduct compliance-monitoring physical inspections in the period beginning on April 1, 2020, and ending on June 30, 2022. Because of high State-to-State and intra-State variability of COVID-19 transmission, an Agency, consistent with a general or specific health and safety recommendation of a State or local public health authority, may extend the waiver in the preceding sentence if the level of transmission makes such an extension appropriate. Depending on varying rates of transmission, the extension may be State-wide, may be limited to specific locales, or may be on a project-by-project basis. No such extension may go beyond December 31, 2023. The Agency must resume compliance-monitoring reviews as due under § 1.42-5 once the waiver expires.

For purposes of § 1.42-5(c)(2)(iii)(C)(3), between April 1, 2020, and the end of 2022 only, when the Agency gives an Owner reasonable notice that it will physically inspect not-yet-identified low-income units, it may treat reasonable notice as being up to 30 days. Beginning on January 1, 2023, for this purpose reasonable notice again is generally no more than 15 days

Notice 2022-05 is modified and amplified.

The principal author of this notice is Dillon Taylor, Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, please contact Dillon Taylor at (202) 317-4137 (not a toll-free number).

NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1167, General Rules and Specifications for Substitute Forms and Schedules.

This revenue procedure publishes the amounts of unused housing credit carryovers allocated to qualified states under § 42(h)(3)(D) of the Internal Revenue Code for calendar year 2022.

Rev. Proc. 2019-45, 2019-48 I.R.B. 524, provides guidance to state housing credit agencies of qualified states on the procedure for requesting an allocation of unused housing credit carryovers under § 42(h)(3)(D). The amount of unused housing credit carryovers allocated to qualified states for a calendar year from a national pool of unused credit authority (the National Pool) is published by the Internal Revenue Service in the Internal Revenue Bulletin. This revenue procedure publishes these amounts for calendar year 2022.

The unused housing credit carryover amount allocated from the National Pool by the Secretary to each qualified state for calendar year 2022 is as follows:

26 CFR 1.42-14. Allocation rules for post-1989 State housing credit ceiling amounts.

Guidance is provided to state housing credit agencies of qualified states that request an allocation of unused housing credit carryover under section 42(h)(3)(D) of the Internal Revenue Code. See Rev. Proc. 2022-37