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IRS, Treasury Provide More Guidance for Advanced Energy Project Credit

The qualifying advanced energy project credit program was re-established last year by the Inflation Reduction Act. 


The IRS and the Treasury Department on Wednesday provided additional information about the application process and technical guidance for the qualifying advanced energy project credit program under section 48C of the Internal Revenue Code, which was re-established last year by the Inflation Reduction Act. 

The qualifying advanced energy project credit program renews and expands a tax credit created in 2009 through the American Recovery and Reinvestment Act. It provides incentives for clean energy manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling, the Treasury Department said.

On Feb. 13, the Treasury Department and the IRS issued Notice 2023-18 to establish the section 48C(e) program to allocate $10 billion in credits. Congress required that at least $4 billion be reserved for projects in communities with closed coal mines or retired coal-fired power plants. The initial funding round will include $4 billion, with about $1.6 billion reserved for projects in these designated coal communities.

Eligible projects that are placed in service prior to receiving an allocation under the 48C program are not eligible for the credit. Allocation letters are expected to be issued on or about March 31, 2024.

Notice 2023-44, issued yesterday, updates the earlier version of Appendix A, defining qualifying advance energy projects, with clearer definitions and examples, and updates the earlier version of Appendix B, providing the Department of Energy application process, by adding technical review criteria and application content requirements.

The notice also provides the process for submitting concept papers and joint applications for Energy Department recommendations and for section 48C(e) certifications, and it clarifies the selection criteria used to evaluate whether a project merits an Energy Department recommendation.

In addition, Notice 2023-44 defines the term “facility” for purposes of sections 45X and 48C, provides the procedure for informing the Energy Department and IRS of a significant change to the project plan, includes information regarding the disclosure of certain information, and clarifies that eligible property that is placed in service before being awarded an allocation of section 48C credits is ineligible for the 48C(e) program.

Finally, the guidance provides information regarding section 48C(e) energy communities census tracts, including a new Appendix C, which contains a list of those census tracts.

To apply, taxpayers will submit concept papers describing the proposed project, and if their concept papers receive a favorable review, they will be encouraged to submit a full application, the Treasury Department said. Concept paper submissions will be accepted starting June 30, and the deadline for concept papers will be July 31, 2023.

Taxpayers can now access information and materials for preparing their concept papers, such as a section 48C mapping tool and an upcoming informational webinar, by going on the Energy Department’s 48C webpage.