Overview of Section 48E - Clean Electricity Investment Tax Credit (2025 onwards)
This tax credit is designed to promote investment in facilities that produce clean electricity, replacing the prior investment tax credit for renewable energy facilities (extended under Section 13102 through 2024). It is technology-neutral, encouraging a broad spectrum of clean energy technologies.
Key Features of the Tax Credit:
Direct Pay Eligibility: Tax-exempt organizations, states, political subdivisions, the Tennessee Valley Authority, Indian Tribal governments, Alaska Native Corporations, and rural electricity co-operatives can receive payments directly.
Transferability: The credit can be transferred, providing flexibility in its use and financial planning.
Stackability: The credit amount may be reduced if tax-exempt bonds finance the project. It is not possible to claim both the §48E Investment Tax Credit (ITC) and the §45Y Production Tax Credit (PTC) for the same facility.
Energy Community Bonus: Additional incentives are available for projects located in designated energy communities.
Detailed Provisions:
Period of Availability: The credit applies to facilities that are placed in service after December 31, 2024. The phase-out of the credit begins in 2032 or when U.S. greenhouse gas emissions from electricity production drop to 25% of their 2022 levels, whichever is later.
Tax Mechanism: The credit is an investment tax credit calculated as a percentage of the qualified investment in the facility.
Base Credit Amount: Initially set at 6% of the investment cost.
Bonus Credit Amounts:
- Labor Requirements: The credit increases by 5 times for facilities that meet prevailing wage and registered apprenticeship requirements.
- Domestic Content: An additional increase of up to 10 percentage points is available for facilities using domestic materials for steel, iron, and manufactured products.
- Location Bonus: Facilities situated in energy communities receive an additional credit increase of up to 10 percentage points.