48E Clean Electricity Investment Credit

CLEAN ELECTRICITY INVESTMENT TAX CREDIT

The Inflation Reduction Act of 2022 introduced and expanded the Investment Tax Credit to support the production, storage, and use of clean energy. This includes the enhancement of the §48 Energy Credit and the creation of the §48E Clean Electricity Investment Credit. These tax credits are applicable to newly constructed and renovated qualifying energy properties, such as solar, wind, geothermal, and energy storage systems. Both commercial building owners and certain government agencies, as well as other tax-exempt entities, can benefit from these incentives.

CREDIT BENEFITS AND REQUIREMENTS

For facilities placed in service after December 31, 2022, the maximum available tax credit is up to 70% of qualifying costs.

• If construction adheres to prevailing wage and apprenticeship rules, or fall under a safe harbor, the base credit of 6% is increased to a bonus rate of 30%. Safe harbors include:
  • Physical construction had started, or 5%+ of the project’s costs were incurred prior to January 30, 2023.
  • Projects with a maximum net output of less than 1 megawatt (or equivalent) based on nameplate capacity.
• Additional bonus credits of up to 40% are available for projects which meet certain location and manufacturing requirements including:
  • Produced using domestic content.
  • Located in an Energy Community.
  • Qualify for an Environmental Justice Allocation.

Tax-exempt entities can now directly monetize the credit.

For qualifying property placed in service after December 31, 2022, certain tax-exempt entities can obtain the credit via elective (direct) pay from Treasury, these entities include:

• Public Organizations, such as:
  • K-12 Schools, higher education, and libraries.
  • Municipal buildings (police, fire stations, courthouses, and more).
• Other Tax-Exempt Entities, such as:
  • State, local or tribal governments.
  • Public institutions.
  • Rural electric cooperatives.
  • Religious institutions.
  • Private schools and colleges.
  • Non-profit hospitals.
  • Any other organization falling under §501(c).

QUALIFIED PROPERTIES

§48 Energy credit. Properties must be placed in service in 2023-2024

• Solar Energy Property: Equipment that uses solar energy to generate electricity, heat or cool structures, or provide solar process heat.
• Wind Energy Property: Equipment that uses wind to produce electricity.
• Geothermal Energy Property: Equipment used to produce, distribute, or use energy derived from a geothermal deposit.
• Fuel Cell Property: Integrated systems comprised of a fuel cell stack assembly and associated balance of plant components that convert fuel into electricity using electrochemical means.
• Small Wind Energy Property: Wind turbines with a nameplate capacity of not more than 100 kilowatts.
• Microturbine Property: Stationary microturbine power plants with a capacity of less than 2,000 kilowatts.
• Combined Heat and Power (CHP) Systems: Systems that produce both electricity and useful thermal energy.
• Energy Storage Technology: Equipment that receives, stores, and delivers energy using batteries, compressed air, pumped hydropower, hydrogen storage, thermal energy storage, regenerative fuel cells, flywheels, capacitors, superconducting magnets, or other technologies.
• Waste Energy Recovery Property: Equipment that generates electricity from waste heat.
• Qualified Biogas Property: Equipment that converts biomass into a gas which is at least 52% methane.
• Microgrid Controllers: Equipment that enables the integration and coordination of various distributed energy resources to enable microgrids.
• Electrochromic Glass: The glass uses electricity to change its light transmission properties.

§48E Clean Electricity Investment Credit. Properties must be placed in service in 2025-2032

• Solar Energy Property: Equipment that uses solar energy to generate electricity, heat or cool structures, or provide solar process heat.
• Wind Energy Property: Equipment that uses wind to produce electricity.
• Geothermal Energy Property: Equipment used to produce, distribute, or use energy derived from a geothermal deposit.
• Energy Storage Technology: Equipment that receives, stores, and delivers energy using batteries, compressed air, pumped hydropower, hydrogen storage, thermal energy storage, regenerative fuel cells, flywheels, capacitors, superconducting magnets, or other technologies.

CASE STUDY

ICS successfully obtained over $2,200,000 in direct pay credits for a tax-exempt organization who installed a geothermal heat pump system for their higher education classroom building.

CREDIT TIERS

Base credit: 6% or 30% with PWA
Additional credits:
Domestic Content: 10% bonus
Energy Community: 10% bonus
Environmental Justice Allocation: 10-20% bonus
TOTAL CREDIT: up to 70%

PROPOSAL REQUEST