IRS Section 48
Transferable Investment Tax Credit for Energy Property

Summary:

Section 48 transferable tax credit provides a credit for the investment in renewable energy products including; fuel cell, solar, geothermal, small wind, energy storage, biogas, microgrid controllers, and combined heat and power properties. The credit is calculated by a percentage of the Taxpayers investment in renewable energy production. This investment tax credit is designed to continue to push development in renewable energy investments.

Date in Effect:

January 1, 2023 – December 31, 2024

Calculation Details:

The base credit available under IRS Section 48 is 6% of qualified investment. Taxpayers can increase this credit to 30% if Prevailing Wage and apprenticeship requirements are met.

Additional bonuses are available to enhance the credit.

10% increased for projects meeting certain domestic content requirements for steel, iron, and manufactured products. The guidelines for the threshold are likely to change and have still not been completely published as of today (2023). It is likely to require 45% - 55% of materials to be domestic in order to receive this bonus.

10% increase if the eligible facility is located in a defined energy community. A map of applicable geographies can be accessed here

*For geothermal heat property, the base investment tax credit is 6% for the first 10 years, scaling down to 5.2% in 2033 and 4.4% in 2034*

Credit Pre-Bonus

=IF[(Prevailing wage and apprenticeship requirement = met, THEN(Facility Cost * 30%), ELSE(Facility Cost * 6%)]

Credit Bonus 1

=IF [(Domestic content requirement = met, THEN(Facility Cost * 10%),ELSE(0%)] + Credit Pre Bonus

Credit Bonus 2

=IF[(Located in eligible community = met, THEN(Facility Cost * 10%), ELSE(0%)] + Credit Bonus 1

Filing Requirements:

  • Register and obtain unique identifier number from the Internal Revenue Service

  • File tax return for self, or if transferring the credit for cash, then reflect the sale of both buyer and seller’s tax return

Direct Pay:

Direct Pay is an election that allows the taxpayer to sell directly to the Internal Revenue Service. Section 48 E transferable tax credits allow the following entities to make this election:

  • Tax-exempt organizations

  • States

  • Political subdivisions

  • The Tennessee Valley Authority

  • Indian Tribal governments

  • Alaska Native Corporations

  • Rural electricity co-ops.

*Applies to qualified facilities that are originally placed in service after December 31, 2022; applies separately with respect to each qualified facility*