IRS Section 48E
Clean Electricity Facility Transferable Investment Tax Credit

Summary:

The Clean Electricity Facility Investment Transferable Tax Credit offers new access to clean energy tax credits with an emphasis on reaching disadvantaged populations. Certain projects may be eligible for bonus credits if they meet specific thresholds outlines by the Treasury.

Minimum requirements include:

  • Projects must be less than 5 MWAC (megawatt alternating current)

  • Requires allocation by Treasury -Capped at 1.8 GWDC (gigawatt direct current) per year

  • Projects can't be placed in service before applying for allocation

Provides a benefit for investments in advanced energy manufacturing projects. The credit supports new technologies which improve or reduce greenhouse gas emissions in U.S facilities. The credit also looks to incentivize technologies assisting domestic supply chains for critical materials which serve as inputs for clean energy technology production.

Date in Effect:

January 1, 2025 – December 31, 2032

*Phase-out begins in 2032 or when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower.*

Calculation Details:

The calculation is broken into to categories separated by production thresholds each year. Projects that produce less than 1 MWAC (megawatt alternating current) start with a base credit of 30%. Facilities producing greater than 1 MWAC (megawatt alternating current) start with a base credit of 6%. The credit offers bonus multiples for specific actions completed by the facility. [Prevailing wage and apprenticeship] requirements are necessary to increase the base credit to 24% for facilities that produce more than 1 MWAC (megawatt alternating current).

The three bonus credits are listed below.

Domestic Content Bonus – 10%

  • 40% of facilities must be constructed with US Material in 2024

  • 45% of facilities must be constructed with US Material in 2025

  • 50% of facilities must be constructed with US Material in in2026

  • 55% of facilities must be constructed with US Material in in 2027+

Brownfields/Energy Community – 10%

Facilities that are in designated counties that tended to be economically tied to fossil fuel, most notably coal. i) a brownfield site; (ii) a census tract or any adjoining tract in which a coal mine closed after Dec. 31, 1999, or a coal-fired electric power plant was retired after Dec. 31, 2009; and (iii) an area that has (or, at any time during the period beginning after Dec. 31, 1999, had) significant employment or local tax revenue related to the extraction, processing, transport or storage of coal, oil or natural gas.

Low-income Community or Indian Land – Environmental Justice – 10% to 20%

Certain wind and solar facilities with less than 5 MWAC (megawatt alternating current) output may be eligible for an additional bonus. The project must receive an allocation of environmental justice solar and wind limitation. Once it does, the project will receive a 10% bonus if located in a low-income community or on Indian land. The project may also receive an additional 20% credit if such project is part of a qualified low-income residential building project or qualified low-income economic benefit project.

Base Credit

=IF[(Project Energy Output is < 1 MWAC, THEN(Project cost * 30%), ELIF(Prevailing Wage and Apprenticeship = Met, THEN(Investment cost * 24%), ELSE(6)]

Bonus Credit

=Base Credit + IF[(Bonus Credit Domestic Content = Met, THEN(Project Cost * 10%), ELSE(0)] + IF[(Bonus Credit Brownfield = Met, THEN(Project Cost * 10%), ELSE,(0)] + IF[AND(Low- Income / Indian = Met, Low Income Residential Building = Met, THEN(Project cost * 20%), ELIF(Low-Income / Indian Land = Met, THEN(Project cost * 10%), ELSE(0)]

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

  • If seeking solar justice bonus, need to complete an allocation application

  • Complete form 3468

Direct Pay:

Direct Pay is an election that allows the taxpayer to sell directly to the Internal Revenue Service. IRS Section 48E 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