The Treasury Department and the IRS will release soon proposed guidance on the updated Production Tax Credit (PTC) and Investment Tax Credit (ITC).
The Inflation Reduction Act repeals the existing PTC (Sec. 45 of the Tax Code) and ITC (Sec. 48) by limiting their availability to projects that begin construction before 2025. Instead, they will switch to the technology-neutral ‘clean electricity production credit’. (Sec. 45Y) and “Clean Electricity Investment Credit (Sec. 48E) for projects commissioned after December 31, 2024. The recognized technologies include wind, solar, hydro, marine and hydrokinetic, nuclear fission and fusion, geothermal and certain types of waste energy recovery (WERP) properties.
Credit: Bowman
The proposed guidance will also clarify how energy storage technologies qualify for the ITC. The statute requires clean energy technologies that rely on combustion or gasification to produce electricity to undergo a life-cycle greenhouse gas analysis to demonstrate net-zero emissions.
The Treasury Department is seeking comment on the proposed rules and will consult with experts from various agencies to evaluate how additional clean energy technologies, including combustion and gasification technologies, could qualify for the clean electricity credits.
“The Inflation Reduction Act’s new technology-neutral Clean Electricity Credits, which take effect in 2025, are one of the law’s most important contributions to addressing the climate crisis,” said John Podesta, Senior Advisor to the President for International Climate Policy. “Today’s initial guidance from the Treasury will provide long-term certainty for investors and developers, support new zero-emission innovations and accelerate our progress towards a 100% clean energy sector.”
These proposed rules generally follow the rules of the existing PTC and ITC, which should provide clarity and certainty to developers as they move forward with clean energy production projects. In addition, the notice includes proposed rules that provide clarity on the inclusion of interconnection-related property costs for lower-efficiency clean energy facilities using the ITC. Eligible costs include the costs of upgrades to local transmission and distribution networks necessary to connect the installation to the electricity grid.
The Treasury Department encourages the public to submit written comments in response to the proposed rules. Comments will be accepted for 60 days afterward publication in the Federal Registerand a public hearing is scheduled for August 12 and 13.