Reinstated by the Inflation Reduction Act of 2022 (IRA), Section 48C of the Internal Revenue Code provides $10 billion in allocable credits for qualifying advanced energy projects, $4 billion of which must be allocated to projects located in energy communities. The amount of the credit equals 30 percent of the qualified investment for such taxable year with respect to any qualifying advanced energy project placed in service in the taxable year. The credit is reduced to one-fifth of the otherwise available amount if prevailing wage and apprenticeship requirements are not satisfied. (For more about the prevailing wage and apprenticeship requirements, see Holland & Knight's previous alert, "60-Day Clock Is Ticking on Prevailing Wage, Apprenticeship Requirements," Dec. 21, 2022.)
Unlike most tax credits, taxpayers must apply for a certification of potentially qualified investments eligible for Section 48C credits. Such applications will be reviewed by the U.S. Department of Energy, which will make a recommendation whether the project should proceed to a full application. Round one of allocations of Section 48C opens on May 31, 2023, and closes on July 31, 2023. Notice 2023-18, released on Feb. 13, 2023, provided initial program guidance for implementation of the Section 48C program. (For more information, see Holland & Knight's previous alert, "Treasury Department Releases Section 48C Guidance with Billions in Tax Credits Up for Grabs," Feb. 14, 2023.) The IRS released additional guidance in the form of Notice 2023-44 on May 31, 2023.