Inflation Reduction Act Provisions for Energy Producers

ENERGY PRODUCERS
TAX PROVISIONS Production Tax Credit for Electricity from Renewables
DESCRIPTION Provides a tax credit for production of electricity from renewable sources.
ELIGIBLE RECIPIENTS Facilities generating electricity from wind, biomass, geothermal, solar, small irrigation, landfill and trash, hydropower, and marine and hydrokinetic renewable energy.
BASE CREDIT AMOUNT $0.03/kW, inflation adjusted
BONUS CREDIT AMOUNT Credit is increased by 5 times for projects meeting prevailing wage and registered apprenticeship requirements. Credit is increased by 10% if the project meets certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by 10% if located in an energy community.
U.S. CODE 26 U.S. Code 45
IRA SECTION 13101
FUNDING MECHANISM Production tax credit
NEW OR MODIFIED? Modified and extended. Extended for projects beginning construction before 1/1/25. Modified to tie the value of the credit to meeting prevailing wage and apprenticeship requirements.
PERIOD OF AVAILABILITY Projects beginning construction before 1/1/25.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and 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.
TRANSFERABLE Yes
STACKABLE Credit reduced for tax-exempt bonds with similar rules as section 45(b)(3).
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Renewable Electricity Production Credit | (irs.gov)
Treasury Releases Guidance to Drive Investment to Coal Communities | U.S. Department of the Treasury
Federal Solar Tax Credits for Businesses | Department of Energy

 

ENERGY PRODUCERS
TAX PROVISIONS Investment Tax Credit for Energy Property
DESCRIPTION Provides a tax credit for investment in renewable energy projects.
ELIGIBLE RECIPIENTS Fuel cell, solar, geothermal, small wind, energy storage, biogas, microgrid controllers, and combined heat and power properties. For solar, includes (1) equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, and (2) equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight or electrochromic glass that uses electricity to change its light transmittance properties in order to heat or cool a structure.
BASE CREDIT AMOUNT 6% of qualified investment (basis of energy property)
BONUS CREDIT AMOUNT Credit is increased by 5 times for projects meeting prevailing wage and registered apprenticeship requirements. Credit is increased by up to 10 percentage points for projects meeting certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by up to 10 percentage points if located in an energy community.
U.S. CODE 26 U.S. Code 48
IRA SECTION 13102
FUNDING MECHANISM Investment tax credit
NEW OR MODIFIED? Modified and extended to include standalone energy storage with capacity of at least 5 kWh, biogas, microgrid controllers (20MW or less), and interconnection property for small projects (5MW or less). Value of the credit tied to prevailing wage and apprenticeship requirements.
PERIOD OF AVAILABILITY Facilities beginning construction before 1/1/25. 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.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
TRANSFERABLE Yes
STACKABLE Credit reduced for tax-exempt bonds with similar rules as section 45(b)(3).
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)
Treasury Releases Guidance to Drive Investment to Coal Communities | U.S. Department of the Treasury
Federal Solar Tax Credits for Businesses | Department of Energy

 

 

ENERGY PRODUCERS
TAX PROVISIONS Credit for Carbon Oxide Sequestration
DESCRIPTION Provides a credit for carbon dioxide sequestration coupled with permitted end uses within the United States.
ELIGIBLE RECIPIENTS U.S. facilities within minimum volumes: 1,000 metric tons of CO2 per year for DAC facilities; 18,750 metric tons for electricity generating facilities (with carbon capture capacity of 75% of baseline CO2 production); 12,500 metric tons for any other facility.
BASE CREDIT AMOUNT $17/metric ton of carbon dioxide captured and sequestered; $12/metric ton for carbon dioxide that is injected for enhanced oil recovery or utilized. Those amounts are $36 and $26, respectively, for direct air capture facilities.
BONUS CREDIT AMOUNT 5 times the base amounts if the facility meets prevailing wage and apprenticeship requirements.
U.S. CODE 26 U.S. Code 45Q
IRA SECTION 13104
FUNDING MECHANISM Production tax credit based on carbon capture and sequestration, injection for enhanced oil recovery (EOR), or utilization
NEW OR MODIFIED? Extended and modified, tying the credit amounts to meeting prevailing wage and apprenticeship requirements, providing an enhanced credit for direct air capture (DAC), and lowering the carbon capture threshold requirements at facilities.
PERIOD OF AVAILABILITY Credit can be claimed for 12 years after a facility is placed in service. Facilities must be placed in service before 1/1/33.
DIRECT PAY Yes, for tax-exempt organizations, states, political subdivisions, the Tennessee Valley Authority, Indian Tribal governments, Alaska Native Corporations, and rural electricity co-ops (applicable entities). Entities other than applicable entities are eligible for up to 5 years of direct pay (which is less than the full credit period and expires at the end of 2032) if they make an election. Applies to carbon capture equipment (CCE) that is originally placed in service after December 31, 2022. Applies separately with respect to CCE placed in service during a taxable year.
TRANSFERABLE Yes
STACKABLE Credit reduced for tax-exempt bonds with similar rules as section 45(b)(3).
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Carbon Oxide Sequestration Credit | (irs.gov)

 

 

ENERGY PRODUCERS
TAX PROVISIONS Zero-Emission Nuclear Power Production Credit
DESCRIPTION Tax credit for electricity produced at a qualified nuclear power facility.
ELIGIBLE RECIPIENTS Existing nuclear power plants at time of enactment that are not eligible for the 45J credit.
BASE CREDIT AMOUNT 0.3 cents/kWh, inflation adjusted after 2024. Credit amount phases down depending on the amount of energy produced and the gross receipts of the nuclear power facility.
BONUS CREDIT AMOUNT 5 times the base credit if prevailing wage requirement is met for workers doing alteration or repair at the facility.
U.S. CODE 26 U.S. Code 45U
IRA SECTION 13105
FUNDING MECHANISM Production tax credit
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY Available for electricity produced and sold after 12/31/23, in tax years beginning after that date. Not available for tax years beginning after 12/31/32.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
TRANSFERABLE Yes
STACKABLE Facilities eligible for the 45J advanced nuclear production tax credit are not eligible for the 45U credit. Payments from federal, state, or local zero-emission nuclear subsidies reduce the credit amount.
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)

 

 

ENERGY PRODUCERS
TAX PROVISIONS Clean Hydrogen Production Tax Credit
DESCRIPTION Provides a tax credit for the production of clean hydrogen at a qualified clean hydrogen production facility.
ELIGIBLE RECIPIENTS Producers of hydrogen in the United States.
BASE CREDIT AMOUNT $0.60/kg multiplied by the applicable percentage. The applicable percentage ranges from 20% to 100% depending on lifecycle greenhouse gas emissions. The $0.60/kg is adjusted for inflation.
BONUS CREDIT AMOUNT 5 times the base credit if the facility meets prevailing wage and apprenticeship requirements.
U.S. CODE 26 U.S. Code 45V
IRA SECTION 13204
FUNDING MECHANISM Production tax credit
NEW OR MODIFIED? New. The existing excise tax credit for liquefied hydrogen terminates after 12/31/22.
PERIOD OF AVAILABILITY Credit is for hydrogen produced after 12/31/22. Credit is available for facilities placed in service before 1/1/33 for their first 10 years in service.
DIRECT PAY Yes, for tax-exempt organizations, states, political subdivisions, the Tennessee Valley Authority, Indian Tribal governments, Alaska Native Corporations, and rural electricity co-ops (applicable entities). Applies to facilities placed in service after December 31, 2012. Applies separately with regard to each facility. Entities other than applicable entities are eligible for up to 5 years of direct pay, which is less than the full credit period and expires at the end of 2032, if they make an election.
TRANSFERABLE Yes
STACKABLE Taxpayers can make an irrevocable election to choose the ITC in lieu of the 45V credit as long as they have not claimed the 45Q credit for carbon sequestration. Credit reduced for tax-exempt bonds with similar rules as section 45.
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)

 

 

ENERGY PRODUCERS
TAX PROVISIONS Clean Electricity Production Tax Credit
DESCRIPTION Provides a technology-neutral tax credit for production of clean electricity. Replaces the production tax credit for electricity generated from renewable sources (extended in Section 13201 through 2024).
ELIGIBLE RECIPIENTS Facilities generating electricity for which the greenhouse gas emissions rate is not greater than zero.
BASE CREDIT AMOUNT $0.03/kW [inflation adjusted]
BONUS CREDIT AMOUNT Credit is increased by 5 times for projects meeting prevailing wage and apprenticeship requirements. Credit is increased by 10% for projects meeting certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by 10% if located in an energy community.
U.S. CODE 26 U.S. Code 45Y
IRA SECTION 13701
FUNDING MECHANISM Production tax credit
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY Facilities placed in service after 12/31/24. Phase-out starts the later of (a) 2032 or (b) when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops. Applies separately with regard to each facility.
TRANSFERABLE Yes
STACKABLE Credit reduced for tax-exempt bonds with similar rules as section 45(b)(3).
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)
Treasury Releases Guidance to Drive Investment to Coal Communities | U.S. Department of the Treasury
Federal Solar Tax Credits for Businesses | Department of Energy

 

 

ENERGY PRODUCERS
TAX PROVISIONS Clean Electricity Investment Tax Credit
DESCRIPTION Provides a technology-neutral tax credit for investment in facilities that generate clean electricity. Replaces the investment tax credit for facilities generating electricity from renewable sources (extended in Section 13202 through 2024).
ELIGIBLE RECIPIENTS Facilities that generate electricity with a greenhouse gas emissions rate that is not greater than zero and qualified energy storage technologies.
BASE CREDIT AMOUNT 6% of qualified investment (basis)
BONUS CREDIT AMOUNT Credit is increased by 5 times for facilities meeting prevailing wage and apprenticeship requirements. Credit is increased by up to 10 percentage points for facilities meeting certain domestic content requirements for steel, iron, and manufactured products. Credit is increased by up to 10 percentage points if located in an energy community.
U.S. CODE 26 U.S. Code 48E
IRA SECTION 13702
FUNDING MECHANISM Investment tax credit
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY Facilities placed in service after 12/31/24. Phase-out starts the later of (a) 2032 or (b) when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
TRANSFERABLE Yes
STACKABLE Credit reduced for tax-exempt bonds with similar rules as section 45(b)(3).
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)
Treasury Releases Guidance to Drive Investment to Coal Communities | U.S. Department of the Treasury
Federal Solar Tax Credits for Businesses | Department of Energy

 

 

ENERGY PRODUCERS
TAX PROVISIONS Cost Recovery for Qualified Facilities, Qualified Property, and Energy Storage Technology
DESCRIPTION Section 13703 offers an additional tax deduction for facilities or property qualifying for this tax credit. These facilities or property will be treated as a 5-year property for purposes of cost recovery; meaning, they will be able to deduct from their ta
ELIGIBLE RECIPIENTS Any qualified facility (as defined in section 45Y(b)(1)(A)), any qualified property (as defined in subsection (b)(2) of section 48E) that is a qualified investment (as defined in subsection (b)(1) of such section), or any energy storage technology (as defined in subsection (c)(2) of such section).
BASE CREDIT AMOUNT  
BONUS CREDIT AMOUNT  
U.S. CODE 168(e)(3)(B)
IRA SECTION 13703
FUNDING MECHANISM Cost Recovery
NEW OR MODIFIED? Modified
PERIOD OF AVAILABILITY Applies to facilities and property placed in service after December 31, 2024.
DIRECT PAY  
TRANSFERABLE TBD
STACKABLE No rules
TRIBAL ELIGIBILITY  
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)

 

 

ENERGY PRODUCERS
TAX PROVISIONS Increase in Energy Credit for Solar and Wind Facilities Placed in Service in Connection with Low-Income Communities
DESCRIPTION Provides an additional investment tax credit for small-scale solar and wind facilities in low-income communities.
ELIGIBLE RECIPIENTS Allocates 1.8 gigawatts of capacity available in 2023 across four categories for solar and wind projects with maximum output of less than five megawatts (MW). The notice announces allocations for 2023: 700 MW for facilities located in low-income communities; 200 MW for facilities located on Tribal land; 200 MW for facilities serving federally-subsidized residential buildings, including housing supported by the Low-Income Housing Tax Credit and Section 8 of the Housing Act; and 700 MW for facilities where at least 50 percent of the financial benefits of the electricity produced go to households with incomes below 200 percent of the poverty line or below 80 percent of area median gross income. Subject to annual capacity limits. Application Process, Year 1 application opens in late 2023.
BASE CREDIT AMOUNT 6% of qualified investment (basis of energy property)
BONUS CREDIT AMOUNT Credit is increased by 10 percentage points for projects located in low-income communities or on Tribal land. Credit is increased by 20 percentage points for projects that are part of certain federally subsidized housing programs or that offer at least 50 percent of the financial benefits of the electricity produced to low-income households. This bonus amount will require an application by the taxpayer, with a cumulative total of 1.8 GW of direct current capacity per year available for allocation.
U.S. CODE 26 U.S. Code 48(e); 26 U.S. Code 48E(h)
IRA SECTION 0
FUNDING MECHANISM Allocated investment credit, capped at 1.8 GW per year. Unused capacity carries over to following year.
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY 48(e) begins in 2023 and ends when the 48E(h) Clean Electricity Investment Tax Credit becomes available in 2025 through 2032.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
TRANSFERABLE Yes
STACKABLE No rules
TRIBAL ELIGIBILITY Yes, facilities on Indian land qualify for the 10 percentage point bonus credit.
RELEVANT LINKS Initial Guidance Establishing Program to Allocate Environmental Justice Solar and Wind Capacity Limitation Under Section 48(e)