In this Q&A blog post, we break down the IRS guidance on the Qualifying Advanced Energy Project, Section 48C.
How much is the qualified advanced energy project credit?
The qualified advanced energy project credit is 6% for qualified investments made in qualifying projects.
- The rate can be increased to 30% if the project meets prevailing wage and apprenticeship requirements.
What projects are eligible for the qualified advanced energy project credit?
Qualified projects fall in three broad categories:
- industrial and manufacturing facilities for the production or recycling of items used in green energy technologies;
- re-equipping an industrial or manufacturing facility with equipment designed to reduce greenhouse emissions by at least 20 percent; and
- re-equipping, expanding or establishing an industrial facility for the processing, refining or recycling of critical materials.
What expenses are eligible for the qualified advanced energy project credit?
The qualified investment for a particular taxable year is generally calculated based on eligible property placed in service during that taxable year. However, a taxpayer can make an election to include certain progress expenditures.
Qualifying investments generally excludes land and buildings.
Does one need to apply for the qualified advanced energy project credit?
Yes. The credits need to be applied for and allocated to a taxpayer by the Department of Treasury (in consultation with the Department of Energy).
To be certified to receive a credit the project must have a reasonable expectation of commercial viability and the following factors are taken into account:
- job creation;
- net impact in avoiding or reducing air pollutants or anthropogenic emissions of greenhouse gasses;
- potential for technological innovation and commercial deployment;
- low levelized cost of generated or stored energy;
- low levelized cost of measured reduction in energy consumption or greenhouse gas emissions (based on the costs of the full supply chain);
- short project time from certification to completion.
Are qualified advanced energy project credits capped?
Yes.
Are qualified advanced energy project credits eligible for direct payment?
It depends. Qualified advanced energy project credits available for direct payment if the owner of the credit falls into certain categories which includes tax-exempt organizations and state or local governments.
Are qualified advanced energy project credits eligible for transferability?
Yes. Qualified advanced energy project credits are eligible to be sold to a buyer.
As a buyer of a tax credit, are there any advantages of purchasing qualified advanced energy project credits?
As with other transferable credits, buyers can benefit by purchasing a tax credit below par and using it to reduce their tax bill. It is important for buyers to understand the risks associated with credits and to take steps to mitigate those risks.
