Last week, the Department of the Treasury and the Internal Revenue Service released a notice of intent to issue proposed regulations on the domestic content bonus credit for certain clean energy projects. In this Legal Update, we’ll examine the proposed regulations, what taxpayers will need to do to reap the benefits, and the recordkeeping requirements dictated by the proposal.
On April 4, 2023, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released a notice of intent to issue proposed regulations on qualifying for the energy community bonus credit under Sections 45, 45Y, 48 and 48E (Notice). Pursuant to the Inflation Reduction Act that was passed last August, eligible taxpayers can receive a bonus of up to 10% in excess of the investment tax credit under Sections 48 and 48E and an increase of 10% for the production tax credit under Sections 45 and 45Y for clean energy projects and facilities that are located in certain energy communities.
Electric vehicle and electric battery manufacturers and critical mineral producers will want to take note of a notice of proposed rulemaking (NPRM) on Section 30D of the Internal Revenue Code of 1986, as amended, released by the Department of the Treasury and the Internal Revenue Service on March 31, 2023. The NPRM provides further guidance on the federal income tax credit relating to clean vehicles such as electric vehicles and new qualified fuel cell vehicles and the critical mineral and battery components required. Under Section 30D, new “clean motor vehicles” that meet certain requirements are eligible for up to $7,500 in tax credits.
The White House today released a new resource titled Building a Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate Action, which it describes as “provid[ing] clear descriptions of the law’s tax incentives and funding programs to build a clean energy economy, lower energy costs, tackle climate change, and reduce harmful pollution.” Here is in link to the Guidebook.
IRS and Treasury today issued Revenue Procedure 2022-42, which includes procedures for manufacturers of electric vehicles eligible for tax credits under Section 30D, Section 25E and Section 45W. Here is a link to the Notice.
As noted in yesterday’s post, the IRS published Notice 2022-61 regarding the prevailing wage & apprenticeship requirements. In addition, the Department of Labor yesterday issued two Frequently Asked Question (FAQ) documents: one on prevailing wage and the other one on apprenticeships. You’ll need to scroll down and click on the “+” signs to expand and see each FAQ.
The IRS has published a notice that will start the clock on the 60-day period respect to the applicability of the prevailing wage and apprenticeship requirements under numerous provisions of the Inflation Reduction Act of 2022 (the IRA). For a taxpayer to avoid application of the prevailing wage and apprenticeship requirements of the IRA, it must begin construction of a project before the 60th day after the issuance of such guidance (that is, within 59 days of the issuance of such guidance).
The Notice sets forth rules on how to satisfy the prevailing wage requirements and the apprenticeship requirements. It also describes the beginning of construction rules and extends existing rules to other credits. Stay tuned for a more fulsome update.
The Notice can be found at this link.
The IRS today released Announcement 2022-23, which sets forth the new rate for the production tax credit (PTC) under Section 45 for facilities that are placed in service after December 31, 2021. The rate is 2.75 cents per kWh for a wind facility (i) with a maximum net output of less than 1 MW, (ii) that satisfies the prevailing wage and apprenticeship requirements, or (iii) the construction of which began before the date that is 60 days after Treasury publishes guidance on the prevailing wage and apprenticeship requirements. The announcement was necessary because the Inflation Reduction Act of 2022 changed the manner in which the PTC is calculated. The rate previously announced in Notice 2022-20, which is 2.6 cents per kWh for a wind facility, remains unchanged for facilities that were placed in service before January 1, 2022. Here is a link to Announcement 2022-23.
On November 3, 2022, the U.S. Internal Revenue Service (IRS) issued three additional notices requesting public input on key aspects of climate and clean energy tax provisions in the Inflation Reduction Act. Here is list of, and links to, these three notices.
- Notice 2022-56 requests comments related to the qualified commercial clean vehicles provisions under Section 45W and the alternative fuel vehicle refueling property under Section 30C.
- Notice 2022-57 requests comments related to the credit for carbon capture under Section 45Q.
- Notice 2022-58 requests comments related to the credit for the production of clean hydrogen under Section 45V and the clean fuel production credit under Section 45Z.
On October 5, 2022, the U.S. Internal Revenue Service (IRS) issued six notices requesting comments on various aspects of extensions and enhancements of energy tax benefits in the Inflation Reduction Act. Here is list of, and links to, the notices.
- Notice 2022-46 requests comments on credits for clean vehicles.
- Notice 2022-47 requests comments on energy security tax credits for manufacturing.
- Notice 2022-48 requests comments on incentive provisions for improving the energy efficiency of residential and commercial buildings.
- Notice 2022-49 requests for comments on certain energy generation incentives.
- Notice 2022-50 requests comments on elective payment of applicable credits and transfer of certain credits.
- Notice 2022-51 requests comments on prevailing wage, apprenticeship, domestic content, and energy communities requirements.