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Proposed Regulations – Section 48 Investment Tax Credit

Get details on new proposed regulations that offer some clarity to questions on the Section 48 ITC.
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The Proposed Regulations REG-132569-17 (Proposed Regs) provide some clarity to long-awaited questions regarding the Section 48 Investment Tax Credit (ITC). The ITC is a clean energy credit altered by the Inflation Reduction Act of 2022 (IRA) that allows taxpayers to claim a credit based on the amount of their investment in energy property. While §48 provided initial rules, submitted comments and further considerations have resulted in these new Proposed Regs, which provide clarity to three broad topics: 1) §48 definitions and clarifications (amending §1.48-9), 2) rules applicable to energy property (introducing §1.48-14), and 3) clarifications to prevailing wage and apprenticeship (PWA) requirements (withdrawing and replacing §1.48-13).

Why this matters to you: To claim the ITC, the first step is to determine whether the property is eligible for the credit. These Proposed Regs give taxpayers a better idea of what may qualify come Final Regulations (whether it be the type of property or what components of a project would qualify as energy property), so they can help with planning investments, modeling out clean energy or construction projects, and determining whether investments from the past year could result in a credit.

Section 1.48-9: §48 Definitions & Clarifications

There is a defined list of the type of property eligible for the ITC. The Proposed Regs dig deeper into each of these categories, and adopt or alter previously proposed definitions. While clarifications as to certain aspects of each category also are included, there remain requests for comments that indicate the potential for future guidance.

The following chart examines the proposed definitions, clarifications, and updates for eligible property for the §48 credit per the Proposed Regs REG-13256-17. These definitions and clarifications are subject to change until final regulations are issued.

PropertyProposed/Updated Definition(s)Clarifications/Notes
Solar Energy PropertyThe Proposed Regs adopt but modify the statutory definition:
  • Equipment that uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat, and parts related to the functioning of such equipment, excluding property used to generate energy for purposes of heating a swimming pool.
  • Solar electric generation equipment converts sunlight into electricity through the use of devices such as solar cells or other collectors.
  • Solar process heat equipment: Equipment that uses solar energy to generate steam at high temperatures for use in industrial or commercial processes.
  • No exclusion for passive solar.
  • Includes equipment that uses solar energy to heat or cool a structure or provide hot water for use in a structure, and parts related to the functioning of such equipment.
Fiber-Optic Solar Energy PropertyProposed Regs adopt the statutory definition:
  • Equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight.
Electrochromic Glass PropertyProposed Regs clarify the statutory regulations.

Definition clarifications:
  • Light transmittance properties include both visible light and near-infrared light.
  • Must meet performance and quality standards: New windows rated with NFRC and secondary glazing rated with AERC Rating and Certification Process.
Electrochromic Glass Property has only two eligible types:
  • Electrochromic glass incorporated into a full window that is installed directly into a building, or
  • Electrochromic glass incorporated into a secondary window (known as secondary glazing) that is installed on top of an existing window.
Included in each type:
  • Separate control package consisting of electronics, power supply, sensors, and software necessary to control the operations of the electrochromic glass property.
  • Electrochromic glass coating and the balance of window and installation components, including glass, flashing, framing, and sealants.
Geothermal Energy PropertyThe Proposed Regs adopt but modify the statutory definition:
  • Equipment used to produce, distribute, or use energy derived from a geothermal deposit, but only—in the case of electricity generated by geothermal power—up to the electrical transmission stage.
  • Geothermal Energy Property includes production equipment and distribution equipment.
  • Production equipment definition modified:
    • Includes equipment necessary to bring geothermal energy from the subterranean deposit to the surface.
    • Would expand the types of wells that may qualify as production equipment to production, injection, and monitoring wells.
    • Include the electricity-generating equipment as production equipment for those projects that convert geothermal energy to electricity.
  • Distribution equipment definition modified to add components of a building’s heating or cooling system as distribution equipment.
Proposed Regs would not specifically include costs incurred to drill failed or nonproducing wells. In fact, the U.S. Department of the Treasury and the IRS have determined that these costs cannot be included in the basis of the geothermal energy property for purposes of calculating the §48 credit.
Qualified Fuel Cell PropertyProposed Regs adopt the statutory definition:
  • Fuel cell power plant that has a nameplate capacity of at least 0.5 kilowatt (kW) (1 kW in the case of a fuel cell power plant with a linear generator assembly) of electricity using an electrochemical process or electromechanical process and an electricity-only generation efficiency greater than 30%.
  • Section 48(c)(1)(C) defines the term “fuel cell power plant” as an integrated system consisting of a fuel cell stack assembly, or linear generator assembly, and associated balance of plant components that converts a fuel into electricity using electrochemical or electromechanical means.
Electricity-only generation efficiency may be calculated by dividing the heat rate of the fuel cell, e.g., kilowatt-hours (kWh) electricity produced per kilogram (kg) of fuel consumed, by the higher heating value of the fuel, e.g., kWh per kg.
Qualified Microturbine PropertyProposed Regs adopt the statutory definition:
  • A “stationary microturbine power plant” is an integrated system consisting of a gas turbine engine, a combustor, a recuperator or regenerator, a generator or alternator, and associated balance of plant components that convert a fuel into electricity and thermal energy.
  • Stationary microturbine power plant has a nameplate capacity of less than 2,000 kW and an electricity-only generation efficiency of not less than 26% at International Standard Organization conditions.
A stationary microturbine power plant also includes all secondary components located between the existing infrastructure for fuel delivery and the existing infrastructure for power distribution, including equipment and controls for meeting relevant power standards, such as voltage, frequency, and power standards.
Combined Heat and Power (CHP) SystemThe Proposed Regs adopt a simplified version of the statutory definition:
  • Property comprising a system that uses the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of useful thermal energy (including heating and cooling applications).
  • Section 48(c)(3)(A) further provides, in part, that a CHP property must produce at least 20% of its total useful energy in the form of thermal energy that is not used to produce electrical or mechanical power (or combination thereof), and at least 20% of its total useful energy in the form of electrical or mechanical power (or combination thereof), and that the energy-efficiency percentage of the system must exceed 60%.
  • Credit is reduced to the extent that a CHP property has an electrical or mechanical capacity in excess of applicable limits (15 megawatts (MW) or a mechanical capacity of more than 20,000 horsepower or an equivalent combination of electrical and mechanical energy capacities). Proposed Regs define the fraction for reducing the credit.
  • Property with a capacity in excess of 50MW or mechanical energy capacity in excess of 67,000 horsepower (or an equivalent combination of electrical and mechanical energy capacities) does not qualify.
  • Does not include property used to transport the energy source to the generating facility or to distribute energy produced by the facility.
  • If fuel source is at least 90% from closed or open-loop biomass, and fails to meet the efficiency standard, it would still be eligible for a credit reduced in proportion to the degree to which it fails to meet the efficiency standard.
Qualified Small Wind Energy PropertyThe Proposed Regs adopt a simplified version of the statutory definition:
  • Property using a qualifying small wind turbine (which has a nameplate capacity of not more than 100 kW) to generate electricity.
Geothermal Heat Pump EquipmentThe Proposed Regs adopt the statutory definition with a modification:
  • Equipment that uses the ground or groundwater as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure.
  • The Proposed Regs modify the general definition to include that other underground working fluids may be used as a thermal energy source or as a thermal energy sink.
Energy distribution equipment may be considered geothermal heat pump equipment.
Waste Energy Recovery Property (WERP)The Proposed Regs adopt the statutory definition:
  • Property (with a capacity not in excess of 50 MW) that generates electricity solely from heat from buildings or equipment if the primary purpose of such building or equipment is not the generation of electricity.
  • Property that could be treated as WERP (determined without regard to §48(c)(5)), which is part of a CHP property, is not treated as WERP for purposes of §48 unless the taxpayer elects not to treat such system as a CHP property for purposes of §48.
  • Examples of buildings or equipment (the primary purpose of which is not the generation of electricity) include: manufacturing plants, medical care facilities, facilities on college campuses, pipeline compressor stations, and associated equipment.
Energy Storage TechnologyThe Proposed Regs adopt the statutory definition:
  • Property (other than property primarily used in the transportation of goods or individuals and not for the production of electricity) that receives, stores, and delivers energy for conversion to electricity (or, in the case of hydrogen, that stores energy), and has a nameplate capacity of not less than 5 kWh.
  • Includes thermal energy storage property.
  • Rechargeable electrochemical batteries of all types meet the definition.
  • Excludes property primarily used in transportation of goods or individuals and not for the production of electricity. Batteries or other storage technologies that are physically separate from such modes of transportation qualify.
  • Non-exclusive list of examples included in Proposed Regs.
  • Includes modifications to energy storage technologies to have a nameplate capacity of not less than 5kWh (except that the basis of the existing property prior to modification is not considered for §48).
  • Thermal energy storage property includes:
    • Property directly connected to a heating, ventilation, or air conditioning system;
    • Property that removes heat from, or adds heat to, a storage medium for subsequent use; and
    • Property that provides energy for the heating or cooling of the interior of a residential or commercial building.
    • Does not include a swimming pool, a combined heat and power system property, or a building or its structural components.
  • Hydrogen energy storage property must store hydrogen that is solely used as energy and not for the production of end products, such as fertilizer.
  • Included is hydrogen used to produce heat, to generate electricity, or to be used in a fuel cell vehicle. The type of hydrogen storage medium, e.g., physical based or material based, is not limited.
  • Recycled components may be used to meet the modification rule for energy storage technology.
Qualified Biogas PropertyThe Proposed Regs adopt the statutory definition:
  • Qualified biogas property converts biomass (as defined in §45K(c)(3), as in effect on the date of enactment of §48(a)(3)(A) (August 16, 2022)) into a gas that consists of not less than 52% methane by volume, or is concentrated by such system into a gas that consists of not less than 52% methane, and captures such gas for sale or productive use, and not for disposal via combustion.
  • Includes property that is part of a cleaning or conditioning system.
  • Upgrading equipment is not qualified/interdependent.
  • Includes property if it is functionally interdependent. Examples include: a waste feedstock collection system, a landfill gas collection system, mixing or pumping equipment, and an anaerobic digester.
  • Methane should be measured at the point at which gas exits the biogas production system (which may include an anerobic digester, landfill gas collectors, or thermal gasification equipment) of a qualified biogas property. This is the point where the taxpayer must determine whether to convert biogas to fuel for sale or use it directly to generate heat or fuel an electricity generation unit.
Microgrid ControllersThe Proposed Regs adopt the statutory definition:
  • A qualified microgrid is an electrical system that includes equipment that is capable of generating not less than 4 kW and not greater than 20 MW of electricity; is capable of operating in connection with the electrical grid and as a single controllable entity with respect to such electrical grid, and independently (and disconnected) from such electrical grid; and is not part of a bulk-power system.
  • The Proposed Regs clarify that equipment which is part of a qualified microgrid designed and used to monitor and control the energy resources and loads on such microgrid.
An eligible microgrid includes an electrical system that is capable of operating in connection with the larger electrical grid whether or not the microgrid is physically connected to the electrical grid.

Section 1.48-9: Definition of Energy Property

The Proposed Regs provide more insight into which components may qualify as energy property.

Defining Energy Property

In general, there are multiple parts or pieces of property that must be installed or present in order for clean energy property to function as intended. For example, framing, interconnection property, or power conditioning equipment all could be part of the overall system that allows for clean energy property to operate. In fact, the taxpayer would not pay for this “additional” property were it not for the clean energy property installed. Therefore, the Proposed Regs state that,

“Components of an energy property are those that would be included in a unit of energy property because they are functionally interdependent (as described in proposed §1.48-9(f)(2)(ii)) as well as property owned by the same taxpayer that is an integral part of such energy property (as described in proposed §1.48-9(f)(3)). Additionally, components of property must not be a type of property specifically excluded from energy property (as described in proposed §1.48-9(d)).”

A unit of energy property is essentially a group of components that operate together for a specified purpose. If different components depend on each other to accomplish this purpose, are all owned by the taxpayer, and can operate separate from other property within the broader project, then the amalgamation of components is considered a unit of property. The technical term for the coordinated operation of these components is functional interdependence:

“The placing in service of each component is dependent upon the placing in service of each of the other components in order to perform its intended function as provided in section 48(c) and as described in proposed §1.48-9(e). Energy property, with certain exceptions, includes all components necessary to generate or store electricity or thermal energy for transmission, distribution, or use up to (but not including) the stage that transmits, distributes, or uses electricity or thermal energy.”

It does not in fact matter whether the components share the same location as long as they remain functionally interdependent and the components are a part of the unit of property. Further, the Proposed Regs specifically exclude power purchase agreements, renewable energy certificates, goodwill, and going concern value from the definition of energy property due to this functional interdependency requirement.

Section 1.48-14: Rules Applicable to Energy Property

The Proposed Regs cover a variety of other topics meant to clarify what property taxpayers can use for the ITC:

Retrofitted Energy Property (80/20 Rule)

Many credits within the IRA require “original use” for the taxpayer to claim the credit. Essentially, property has to be new property for which the taxpayer is the first user. The Proposed Regs have adopted what is colloquially referred to as the “80/20 Rule” to handle retrofits. If “the fair market value of the used property is not more than 20 percent of the qualified facility’s total value (that is, the cost of the new property plus the value of the used property),” then the costs incurred for new components is considered a part of a qualified facility eligible for a clean energy credit. The 80/20 Rule does not only apply to the definition of energy property. Taxpayers also can use this concept when it comes to determining when construction has begun for purposes of the ITC, which is critical when determining prevailing wage rates for the PWA Bonus Credit.

Dual-Use Property (50% Cliff)

The Proposed Regs changed the approach to dual-use property based on submitted comments in response to Notice 2015-70. As background, it is possible for energy property to be used for both qualifying and disqualifying purposes. In these situations, the question is whether any or only a portion of the property’s basis would qualify for the §48 credit. Historically, at least 75% of the energy would have to qualify for any portion of the property itself to be considered eligible for the ITC (“the 75-percent Cliff”). Further, the “dual-use rule” previously “preclude[d] an energy property from receiving and aggregating energy from a combination of qualifying sources (solar energy property, wind energy property, and geothermal equipment).” However, upon issuance of the Proposed Regs, both of these rules were modified. The Proposed Regs change the 75% cliff to a 50% cliff, allowing more flexibility with more complex energy systems. The altered rule would state:

Similar to the operation of the 75-percent Cliff in existing §1.48-9, if the energy used from qualifying sources is between 50 percent and 100 percent, only a proportionate amount of the eligible basis of the energy property will be taken into account in computing the amount of the section 48 credit. If less than 50 percent of the energy used is from qualifying sources, then the eligible basis is zero, and the property is not eligible for the section 48 credit.

In addition, the dual-use rule allows aggregation of energy sources when arriving at this now 50% threshold. The Proposed Regs now would “permit taxpayers to calculate credit basis by aggregating all inputs from qualifying sources that would otherwise individually qualify for the section 48 credit (all types of energy property and any qualified facilities for which an election is made to claim the section 48 credit as a “qualified investment credit facility” under section 48(a)(5)).” The measuring period for this test is the 365 (or 366) days following the date placed in service or a 365-day period beginning the day after the last day of the immediately preceding annual measuring period.

Energy Property That Could Be Eligible for Multiple Credits

Though the §45 Production Tax Credit (PTC) and §48 ITC are mutually exclusive, a taxpayer may have energy property eligible for multiple credits. For example, the §25D credit and the §48 credit can be claimed on the same property that is used for different purposes. See Q&A #27 of Notice 2013-70. However, proposed §1.48-14(c)(2) states that “in no event may a taxpayer claim both a section 48 credit and another Federal income tax credit with respect to the same eligible basis in an energy property.”

Incremental Cost

The Proposed Regs indicate that “incremental cost” is key to this determination. Incremental cost is defined as “the excess of the total cost of equipment over the amount that would have been expended for the equipment if the equipment were not used for a qualifying purpose related to the section 48 credit.” The incremental cost is, therefore, what is eligible as basis for the ITC.

Special Rules Concerning Ownership

In the case that there are multiple owners in a single piece of qualifying property, the Proposed Regs state that each owner’s credit is limited to the “extent of the party’s fractional ownership interest.” If “Owner A” owns 50% of the energy property, then the credit generated from that portion of the property’s basis would be allocated to Owner A. Proposed Reg §1.48-14(e)(4) provides multiple examples.

Election to Treat Qualified Facilities as Energy Property

One of the more quizzical portions of the updated §48 credit under the IRA is the rule that allows for an election to treat qualified facilities, i.e., facilities that would be otherwise qualified for the §45 production tax credit, as energy property eligible for the §48 credit. Note that this facility cannot have been (and will not be) claimed and allowed for the PTC, and that the election to pursue the §48 credit is irrevocable. These facilities include: “wind, closed- and open-loop biomass, geothermal, solar, landfill gas, trash, hydropower, marine and hydrokinetic facilities.” This election allows, for example, large wind facilities, i.e., facilities not meeting the definition of qualified small wind energy property, to qualify for the ITC when not otherwise eligible. The property within these facilities that is considered the qualified property must meet the general requirements of other §48 eligible property: tangible property (not including a building or its structural components), an integral part of the qualified facility, subject to depreciation or amortization, constructed or acquired by taxpayer, and original use commences with the taxpayer.

To make this election, taxpayers must file Form 3468, Investment Credit, with the income tax return for the year the energy property is placed in service. It is important to note that this is an “all or nothing” election for the property as a whole, even if multiple owners have fractional interests in the property. If one owner elects to treat the property as a §48 qualified investment credit facility, then the election is binding on “all taxpayers that directly or indirectly own an interest in the facility.”

Inclusion of Qualified Interconnection Costs

It is easy to understand that the cost of a solar panel, wind turbine, or battery would each qualify for the §48 credit based on the definition previously detailed in this article. However, for each of these properties to function for their qualifying purposes, there often is “interconnection property” that must be present to allow the property to “come online.” More specifically, interconnection property is defined as:

With respect to an energy project which is not a microgrid controller, any tangible property that is part of an addition, modification, or upgrade to a transmission or distribution system that is required at or beyond the point at which the energy project interconnects to such transmission or distribution system in order to accommodate such interconnection; is either that is constructed, reconstructed, or erected by the taxpayer, or for which the cost with respect to the construction, reconstruction, or erection of such property is paid or incurred by such taxpayer; and the original use of which, pursuant to an interconnection agreement, commences with a utility.

However, it is important to note that the related energy property must have a net output of not greater than 5 MW (as measured in alternating current, and on a by-property basis, even if multiple properties are included in an energy project). If these requirements are met, then the cost of the interconnection property can be included in the eligible basis when calculating the ITC. However, interconnection property placed in service in relation to the following types of energy property is not qualified for the §48 credit: microgrid controllers, electrochromic glass property, fiber-optic solar energy, energy properties that generate thermal energy (such as certain geothermal property), and qualified biogas property.

Therefore, while the basis of qualifying interconnection property can be included in the basis for the calculation of the §48 base credit, the Proposed Regs clarify that taxpayers do not need to consider the location of manufacture of this interconnection property when considering the Domestic Content or Energy Community Bonus Credits. For example, taxpayers can ignore interconnection property when calculating either the 10% steel or 40% manufactured product domestic content threshold for the bonus credit percentage.

Practically speaking, when accounting for interconnection property, if including this property in the overall ITC credit claimed, then the expense for the interconnection property should be reduced. In short, there is no “double benefit” of both a credit and a deduction for the same property allowed (a concept that applies to the “main” energy property as well). Further, if a taxpayer is reimbursed for any portion of the property, then the qualifying basis should be reduced accordingly.

Oftentimes, a taxpayer pays a third party to construct or implement their energy property. To claim a credit in these cases, the Proposed Regs state that “final information with conclusive details such as a true-up report with the actual costs, final invoices, proof of payment or reimbursement, and permission to operate documentation or any other final project accounting documentation should be maintained.”

Section 1.48-13: Prevailing Wage & Apprenticeship (PWA) Clarifications

The following section outlines clarifications and changes provided in the Proposed Regs. For further background surrounding the requirements in general, see our related FORsights™ articles (“Prevailing Wage & Apprenticeship Proposed Regulations: What This Means for You” and “FAQs Answered: Prevailing Wage & Apprenticeship Requirements”). Three overarching topics include: the definition of an “energy project” for the PWA requirements, guidance concerning the One-Megawatt Exception, and recapture rules if PWA requirements are not satisfied.

Section 48(a)(10)(C) Recapture Rules

If a §48 energy credit is claimed on energy property that is then disposed of within five years, recapture would apply to the taxpayer (or transferee when considering recapture in general, or transferor when considering the PWA requirements). The guidance states, “The five-year recapture period begins on the date the project is placed in service and ends on the date that is five full years after the placed in-service date.” At the end of each year within the five-year period, taxpayers should consider whether a recapture event has occurred. This analysis should be included within the PWA documentation requirements as otherwise outlined. Further, there may be reporting requirements that attest to the fact that no recapture event has occurred at the close of each recapture year. If a recapture event has occurred, then the percentage used varies depending on the year of the recapture event per §50(a).

Observation From FORVIS: Note that any annual compliance requirement to this effect may require a nonprofit making the direct pay election to file a Form 990-T for the five-year recapture period, even if it otherwise would not have to.

Definition of Energy Project

At times, the §48 credit references energy property and, other times, energy projects. In short, an energy project is defined as “one or more energy properties that are operated as part of a single energy project.” Therefore, the two terms are definitionally intertwined. However, when looking between credits, the relationship between energy properties and projects gets murkier. The Proposed Regs state that “Section 45 qualified facilities that are co-located with section 48 energy property will not be considered part of an energy project (unless they elect under section 48(a)(5) to be treated as energy property).” This election is discussed further in this article above.

Unlike the election needed for §45, for qualified facilities to be treated as an energy project under §48, there is no election needed for multiple pieces of energy property to be considered as one energy project when certain factors apply. The Proposed Regs outline these factors:

“If at any point during the construction of the multiple energy properties, they are owned by a single taxpayer … and any two or more of the following factors) are present:

  • The energy properties are constructed on contiguous pieces of land;
  • The energy properties are described in a common power purchase, thermal energy, or other off-take agreement or agreements;
  • The energy properties have a common intertie;
  • The energy properties share a common substation, or thermal energy off-take point;
  • The energy properties are described in one or more common environmental or other regulatory permits;
  • The energy properties are constructed pursuant to a single master construction contract; or
  • The construction of the energy properties are financed pursuant to the same loan agreement,”

then the qualified facilities are treated as one single energy project for §48.

This “grouping” of energy property can be important both for administrative purposes and for credit calculation purposes. The IRA created the opportunity for multiple “bonus credits,” and the grouping concept for the §48 credit also applies to these bonus credits. Namely, the PWA Bonus Credit, the Domestic Content Bonus Credit, and the Energy Community Bonus Credit. These bonus credits consider the “energy project,” not the “energy property.” Therefore, a taxpayer that has one piece of otherwise qualifying energy property for one of the bonus credits may have their eligibility for these bonus credits tainted if another piece of energy property within an energy project does not meet the requirements. For example, there are two solar panels being installed on the taxpayer’s land. The solar panels meet the aforementioned factors and are, therefore, considered together as an energy project. In this example, Solar Panel #1 is placed in service in February, and the taxpayer meets the PWA requirement during the entirety of its construction. In June, Solar Panel #2 is placed in service, and it happens that the taxpayer mistakenly underpaid a few of the workers during its construction. Considering Solar Panel #1 and #2 are deemed to be part of the same energy project, neither Solar Panel #1 nor Solar Panel #2 are eligible for the PWA “five times” bonus credit for the year.

It is important to note that “this rule would apply to an energy project for which construction begins after the date final regulations are published.”

One Megawatt Exception

The “five times” bonus credit allows taxpayers to multiply the base credit percentage under §48 by five automatically if the One-Megawatt Exception applies (and, as a result, the PWA requirements need not be considered). However, the specifics of how this “one megawatt” is calculated and applied to each qualifying energy property had not previously been explained. The Proposed Regs state “nameplate capacity will provide the necessary guidance to determine the maximum electrical generating output in MWs of electrical (as measured in alternating current) or thermal energy that the unit is capable of producing on a steady state basis and during continuous operation under standard conditions.” For example, the Proposed Regs discuss the specificities of the nameplate capacity for an electrical generating unit, electrical energy storage property, thermal energy storage, hydrogen energy storage, projects that produce thermal energy or fuels, and property generating thermal energy.

Note that not all energy properties qualify for the One-Megawatt Exception, meaning in order to obtain the “five times” bonus credit taxpayers would need to meet the PWA requirements. Nonqualifying properties include electrochromic glass property, fiber-optic solar, and microgrid controllers.

Timing Considerations

The rules within the Proposed Regs “would apply for property placed in service after 12/31/22 and during a taxable year beginning after the date final regulations are published.”

Given the variation and specificity of applicability dates, the timing considerations are provided here:

Except for the provisions of proposed §§1.48-13 …, these regulations generally are proposed to apply with respect to property that is placed in service after December 31, 2022, and during a taxable year beginning after the date final regulations are published in the Federal Register. … A taxpayer may rely on proposed §§ 1.48-9, 1.48-14 … with respect to property that is placed in service after December 31, 2022, and during a taxable year beginning on or before the date final regulations are published in the Federal Register, provided the taxpayer and all related persons (within the meaning of sections 267(b) and 707(b) of the Code) apply proposed §§ 1.48-9 and 1.48-14 in their entirety and in a consistent manner. Proposed §1.48-13 is proposed to apply to projects placed in service in taxable years ending after the date final regulations are published in the Federal Register, and the construction of which begins after the date final regulations are published in the Federal Register. However, proposed §1.48-13(d) is proposed to apply to energy projects the construction of which begins after [the date of publication in the federal register]. Taxpayers may rely on §1.48-13 with respect to construction of a property or project beginning on or after January 29, 2023, and on or before the date these regulations are published as final regulations in the Federal Register, provided, that beginning after the date that is 60 days after August 29, 2023, taxpayers follow proposed §1.48-13 in its entirety and in a consistent manner.

If you have any questions or need assistance, please reach out to a professional at FORVIS.

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