IRS Releases List of Tech-Neutral Facilities Eligible for Energy Credits
By Mike Smith and Michael De Prima of CliftonLarsonAllen
The IRS released its first table of clean energy technologies eligible for tax credits under Sections 45Y and 48E, impacting renewable energy projects.
On January 15, the IRS released Revenue Procedure 2025-14 introducing its first table of clean energy technologies that are eligible for tax credits under Sections 45Y and 48E.
The much-anticipated guidance could have broad impacts on the types of renewable energy projects that are ultimately pursued by developers and investors.
Background on Sections 45Y and 48E
The Inflation Reduction Act (IRA) added Sections 45Y and 48E to the Internal Revenue Code, which authorize the “technology-neutral” clean electricity production tax credit (PTC) and investment tax credit (ITC), respectively.
Sections 45Y and 48E generally replace the previous PTC and ITC rules under Sections 45 and 48 with respect to qualified facilities and energy storage technology placed in service after December 31, 2024. The new tech-neutral PTC and ITC focus on electricity generating facilities that achieve zero greenhouse gas (GHG) emission rates, unlike previous PTC and ITC rules, which are highly technology-specific.
Under the new statutory framework, some technologies that were previously eligible for energy credits, such as combined heat and power systems and certain types of biomass facilities, were effectively phased out since they do not achieve zero GHG emission rates.
This led to a scramble amongst developers to begin construction on certain project types before the January 1, 2025 effective date under Sections 45Y and 48E. (It’s important to note that the ITC available for geothermal HVAC projects, which has been a major source of energy credits for many organizations, continues to be governed by “old” Section 48).
What does the new IRS guidance cover?
First Annual Table
The IRS’s first Annual Table enumerates the following eight categories of facilities with a GHG emissions rate that is not greater than zero:
- Wind (including small wind properties)
- Hydropower
- Marine and hydrokinetic
- Solar (including photovoltaic and concentrated solar power)
- Geothermal (including flash and binary plants)
- Nuclear fission
- Fusion energy
- Waste energy recovery property that derives energy from a source described in # 1 – 7
Reliance on the Annual Table
Generally, a taxpayer that owns a facility described in the Annual Table on the first day of the taxable year in which its Section 45Y or Section 48E credit is determined must use the most recent Annual Table published as of that date to determine the facility’s GHG emissions rate for the taxable year. The IRS has indicated that future Annual Tables may add or remove certain types or categories of facilities.
However, construction-date safe harbors are also provided. Specifically, for purposes of Section 45Y, a taxpayer may rely on the Annual Table in effect as of the date it began construction on a facility to determine the facility’s GHG emissions rate for any taxable year that is within the 10-year PTC period.
Similarly, for purposes of Section 48E, a taxpayer may rely on the Annual Table in effect as of the date it began construction on a facility provided the facility continues to operate as a type of facility described in the Annual Table for the entire taxable year.
Mike Smith is a Principal with CliftonLarsonAllen. He provides international and M&A tax consulting services to private industry clients. Smith helps with inbound and outbound tax structuring, transfer pricing documentation, and attribute optimization tax strategies. He can be reached at 704.816.8449.
Michael De Prima is a Principal and leads CLA’s Federal Tax Strategies group. He provides specialized tax services for clients across a wide range of industries, including manufacturing, software, architecture and engineering, and life sciences. De Prima’s primary areas of focus are research tax credits, mergers and acquisitions, manufacturing incentives, and fixed assets. He can be reached at 239.280.3548.