Section 48 Energy Investment Tax Credit

WHAT TYPES OF RENEWABLE ENERGY PROJECTS MAY BE ELIGIBLE FOR THE ENERGY CREDIT?

Projects that may qualify for the Energy Credit must involve the construction or installation of at least one category of the energy properties listed below.

• • Geothermal
  • Fuel Cell Power Plant
  • Microturbine Power Plant
  • Combined Heat and Power System
  • Wind Energy (Onshore or Offshore)
  • Waste Energy Recovery
  • Energy Storage (including thermal energy storage)
  • Biogas Systems
  • Microgrid Controller
  • Solar

   

  How IS THE CREDIT CALCULATED?

   

  For eligible projects where construction began prior to January 29, 2023, the base credit is 30% of the basis of each qualified energy property that has been placed into service.

   

  For eligible projects where construction began after January 29, 2023, the base credit is 6% of the basis of each qualified energy property that has been placed into service.  However, if the project meets prevailing wage and apprenticeship requirements, the credit increases to 30% of each qualified energy project.

   

  Regardless of the construction start date, the credit may increase by an additional 10% if it meets certain domestic content, energy community, or low-income community requirements.

   

  IN WHAT TAX YEAR IS THE CREDIT CLAIMED?

   

  The credit is claimed on the tax return for the tax year in which the energy property was placed into service.

   

  IS THE CREDIT CLAIMED BY THE TAXPAYER THAT OWNS THE ENERGY PROPERTY OR THE TAXPAYERS THAT CONSTRUCTED AND/OR INSTALLED THE ENERGY PROPERTY?

   

  The credit can be claimed by the taxpayer that has basis in the energy property (the owner of the property.)  Further, that taxpayer must be the original user of the energy property.  If a taxpayer purchases qualified energy property that had already been in use prior to the purchase, they would not be entitled to claim the Energy Credit as the original use of the energy property did not begin with them.  A constructor/designer/installer of the energy property is not able to receive the credit (unless the original owner of the energy property also constructed/designed/installed.)

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  DOES THE ENERGY PROPERTY NEED TO MEET A CERTAIN ENERGY PERFORMANCE REQUIREMENT TO BE ELIGIBLE?

   

  Yes.  The energy property must meet certain energy performance requirements that are specific to each category of energy property to be eligible for the credit.

   

  IS THE ENERGY CREDIT TRANSFERRABLE?

   

  Yes. The Energy Credit allows most taxpayers to sell their tax credits to an unrelated party in exchange for cash. This facilitates alternative options for renewable energy developers with limited tax capacity to utilize the Energy Credit.