Section 45Y Clean Electricity Production Credit and Section 48E Clean Electricity Investment Credit

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 1</CFR> <DEPDOC>[TD 10024]</DEPDOC> <RIN>RIN 1545-BR17</RIN> <SUBJECT>Section 45Y Clean Electricity Production Credit and Section 48E Clean Electricity Investment Credit</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Final regulations. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document sets forth final regulations regarding the clean electricity production credit and the clean electricity investment credit established by the Inflation Reduction Act of 2022. These final regulations provide rules for determining greenhouse gas emissions rates resulting from the production of electricity; petitioning for provisional emissions rates; and determining eligibility for these credits in various circumstances. The final regulations affect all taxpayers that claim the clean electricity production credit with respect to a qualified facility or the clean electricity investment credit with respect to a qualified facility or energy storage technology, as applicable, that is placed in service after 2024. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> These regulations are effective on January 15, 2025. <E T="03">Applicability dates:</E> For dates of applicability, see §§ 1.45Y-1(e), 1.45Y-2(d), 1.45Y-3(d) 1.45Y-4(e), 1.45Y-5(j), 1.48E-1(e), 1.48E-2(h), 1.48E-3(f), 1.48E-4(j), and 1.48E-5(l). </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Maksim Berger, John M. Deininger, Martha M. Garcia, Boris Kukso, Nathaniel Kupferman, and Alexander Scott at (202) 317-6853 (not a toll-free number). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This Treasury decision amends the Income Tax Regulations (26 CFR part 1) to implement the statutory provisions of sections 45Y and 48E of the Internal Revenue Code (Code). The regulations contained in this Treasury decision are issued by the Secretary of the Treasury or her delegate (Secretary) pursuant to the authority granted under sections 45Y(f), 48E(i) and 7805(a) of the Code (final regulations). Section 45Y(f) provides an express delegation of authority to the Secretary to prescribe rules to implement section 45Y, “including calculation of greenhouse gas emissions rates for qualified facilities and determination of clean electricity production credits under section 45Y.” Section 48E(i) provides an express delegation of authority to prescribe rules “regarding implementation of [section 48E].” Finally, section 7805(a) authorizes the Secretary “to prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.” <HD SOURCE="HD1">Background</HD> On August 30, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking and a notice of public hearing (REG-100908-23) in the <E T="04">Federal Register</E> (88 FR 60018), <E T="03">corrected in</E> 88 FR 73807 (Oct. 27, 2023), and 89 FR 25550 (April 11, 2024), providing guidance on the Prevailing Wage and Apprenticeship (PWA) requirements under sections 30C, 45, 45L, 45Q, 45U, 45V, 45Y, 45Z, 48, 48C, 48E, and 179D (PWA proposed regulations). On November 22, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking and a notice of public hearing (REG-132569-17) in the <E T="04">Federal Register</E> (88 FR 82188), <E T="03">corrected in</E> 89 FR 2182 (January 12, 2024), proposing rules that would provide guidance under section 48 (section 48 proposed regulations). On February 22, 2024, the Treasury Department and the IRS published a second correction to the proposed regulations in the <E T="04">Federal Register</E> (89 FR 13293) that re-opened the comment period through March 25, 2024. Among other matters, the section 48 proposed regulations withdrew and reproposed § 1.48-13 of the PWA proposed regulations addressing the PWA requirements under section 48, the rules under section 48(a)(9)(B)(i) related to an energy project with a maximum net output of less than one megawatt of electrical (as measured in alternating current) or thermal energy (One Megawatt Exception), and the recapture rules under section 48(a)(10)(C) related to the prevailing wage requirements. Although the section 48 proposed regulations withdrew certain portions of the PWA proposed regulations, the section 48 proposed regulations incorporated the preamble to the PWA proposed regulations for generally applicable rules. On June 3, 2024, a notice of proposed rulemaking (REG-119283-23) relating to the clean electricity production credit determined under section 45Y (section 45Y credit) and the clean electricity investment credit determined under section 48E (section 48E credit) was published in the <E T="04">Federal Register</E> (89 FR 47792) proposing amendments to 26 CFR part 1 (proposed regulations). <E T="03">See</E> the Background and Explanation of Provisions sections of the preamble to the proposed regulations, which is incorporated in this preamble to the extent consistent with the following Summary of Comments and Explanation of Revisions. Additionally, the Treasury Department and the IRS requested comments on the proposed definition of a qualified facility with a maximum net output of less than one megawatt (as measured in alternating current) for purposes of the One Megawatt Exception under section 45Y(a)(2)(B)(i). The proposed regulations incorporated the preamble to the PWA proposed regulations for generally applicable rules. On June 25, 2024, the Treasury Department and the IRS published final regulations (T.D. 9998) in the <E T="04">Federal Register</E> (89 FR 53184) adopting the PWA proposed regulations (PWA final regulations) with certain modifications and revisions in response to public comments on the PWA proposed regulations. Comments received on generally applicable rules in response to the PWA proposed regulations, including rules that merely referenced section 48 or 48E, are addressed in the PWA final regulations. The preamble to the PWA final regulations explained that comments received regarding the specific PWA requirements related to the One Megawatt Exception under sections 45Y, 48, and 48E, and the recapture rules in section 48(a)(10)(C), whether received in response to the PWA proposed regulations or the section 48 proposed regulations, would be addressed in future guidance. Because proposed § 1.48E-3 of the PWA proposed regulations generally incorporated the rules of proposed § 1.48-13, the PWA final regulations did not include final regulations under section 48E. Proposed § 1.48E-3 of the PWA proposed regulations and the provisions relating to section 48E of the proposed regulations would be addressed in future guidance. On December 12, 2024, the Treasury Department and the IRS published final regulations (T.D. 10015) in the <E T="04">Federal Register</E> (89 FR 100598) adopting the section 48 proposed regulations, including the rules for the PWA requirements in § 1.48-13 (section 48 final regulations). The Treasury Department and the IRS addressed the comments related to the PWA requirements with respect to section 48 including the One Megawatt Exception under section 48(a)(9)(B)(i), the recapture rules under section 48(a)(10)(C), and the definition of an energy project in the section 48 final regulations. As described in the Summary of Comments and Explanation of Revisions, this Treasury decision adopts the proposed regulations with certain modifications after full consideration of all comments received, including comments pertaining to the One Megawatt Exception under section 45Y(a)(2)(B)(i) and to issues related to the PWA requirements under section 48E and proposed § 1.48E-3. <HD SOURCE="HD1">Summary of Comments and Explanation of Revisions</HD> <HD SOURCE="HD2">I. Overview</HD> The Treasury Department and the IRS received over 1,800 written comments timely submitted by the August 2, 2024, comment submission deadline, in response to the proposed regulations, which are available for public inspection at <E T="03">https://www.regulations.gov</E> or upon request. A public hearing was held in person on August 12, 2024, and telephonically on August 13, 2024, at which 36 speakers provided testimony over the two days. After careful consideration of the comments and testimony, the proposed regulations are adopted with modifications as described in this Summary of Comments and Explanation of Revisions. Comments summarizing the statute or the proposed regulations, recommending statutory revisions to sections 45Y and 48E or other statutes, or addressing issues that are outside the scope of this rulemaking (such as revising other Federal regulations and recommending changes to IRS forms) are generally not described in this Summary of Comments and Explanation of Revisions or adopted in these final regulations. In addition to modifications described in this Summary of Comments and Explanation of Revisions, the final regulations also include non-substantive grammatical or stylistic changes to the proposed regulations. Unless otherwise indicated in this Summary of Comments and Explanation of Revisions, provisions of the proposed regulations with respect to which no comments were received are adopted without substantive change. The Treasury Department and the IRS consulted extensively with scientific and technical experts from across the Federal government, including personnel from the Department of Energy (DOE), the Environmental Protection Agency (EPA), and the Department of Agriculture (USDA), in developing and drafting these final regulations. The Treasury Department and the IRS had re ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 928k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━