Section 48 guidance has been released, updating the requirements for the ITC under the Inflation Reduction Act.
When the Inflation Reduction Act (IRA) of 2022 was passed, one of the cornerstones of the $369 billion set aside for climate and energy spending was the Investment Tax Credit (ITC).
The US Treasury Department has released guidance on how to access the ITC. Find the full document here.
The ITC reserves a federal tax credit of 30% of installed system costs for clean energy technologies such as solar, wind and energy storage. The credit is offered as a base of 6% and the credit of 30% is only offered to projects that meet this requirement prevailing wage requirements.
An additional 10% tax credit is offered to eligible projects Energy communitieswhich are defined by the income status and economic impact of existing energy systems in their area.
For projects that meet this requirement, an additional 10% addition can be applied domestic content requirements. Much of the IRA’s spending is focused on supporting the buildout of U.S.-based clean energy manufacturing, and the 10% domestic content addition is intended to stimulate demand for these products. The three credits can be combined to cover 50% of the installed system costs.
Two other important facets of the ITC are: direct pay and portability. Direct rewards are made available to tax-exempt entities that invest in clean energy projects. Credits, including the 30% investment tax credit, plus any applicable additions, may be used by these entities as payment for the tax liability, and any remaining balance may be returned to these entities as a direct payment. Tax years beginning on January 1, 2023 are eligible for this transaction.
pv magazine print edition
The November edition of pv magazine is dominated by the issue of global oversupply and examines the effects of an abundance of solar energy in the European Union, the United States and other markets. We shine a spotlight on PV developments in South Korea, Taiwan and Africa, updating readers on technological advances in thin films, kerless wafering and mass-produced heterojunction PV.
Organizations exempt from tax under § 501(a) are eligible for the direct payment option, as are the organizations described in § 501(c), including public charities, private foundations, social welfare organizations, labor organizations, business associations and others. The option is also available to tribal governments, rural cooperative electric utilities and the Tennessee Valley Authority. a frequently asked questions page provides more information.
In terms of portability, this process allows project owners to monetize tax credits by transferring them to other taxpayers. This transaction essentially allows renewable energy developers and owners to sell tax credits for cash, making it easier to finance new clean energy projects. The portability option is generally open to entities not covered by the direct payment option. More information in the Frequently asked questions section can be found here.
pv magazine USA will continue to provide updates on the Section 48 guidance as we may read in full here.
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