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Initial guidance released for first $4 billion of $10 billion Advanced Energy Project Credit Program

March 13, 2023
6 minute read

Initial guidance released for first $4 billion of $10 billion Advanced Energy Project Credit Program

March 13, 2023
6 minute read

Authored By

Mark Bender

Mark C. Bender

Special Counsel

John Clancy

John L. Clancy



The U.S. Department of the Treasury recently issued initial guidance for $4 billion of the $10 billion in tax credits under the Section 48C Qualifying Advanced Energy Project Credit Allocation Program. The Inflation Reduction Act (IRA) requires that at least $4 billion be reserved for projects in “energy communities” where coal mines have closed, or coal-fired power plants retired, so the initial guidance reserves $1.6 billion of tax credits for these areas.

Internal Revenue Code (IRC) § 48C provides a base credit rate of 6% for a qualified investment, but that credit increases to 30% for any project which satisfies prevailing wage and apprenticeship requirements. There are three main categories of projects eligible to receive the tax credit. Those projects include the following:

  1. Re-equips, expands or establishes an industrial or a manufacturing facility for the production or recycling of specified advanced energy property. The guidance lists the following examples of advanced energy property:
    • property designed for use in the production of solar, wind, geothermal, or other renewable energy resources
    • Fuel cells, microturbines, or energy storage systems and components
    • Carbon capture equipment
    • Equipment used to refine, electrolyze, or blend any fuel chemical or product that is renewable or low-carbon and low-emission
    • Electric, fuel cell, or hybrid vehicles
    • Equipment used in energy efficiency technologies
  2. Re-equips any industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20% through the installation of:
    • Low or zero carbon process heat systems,
    • Carbon capture, transport, utilization and storage systems,
    • Energy efficiency and reduction in waste from industrial processes, or
    • Any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary of the Treasury.
  3. Re-equips, expands or establishes an industrial facility for the processing, refining, or recycling of critical materials.
    • Examples include facilities that process raw ore, brines, mine tailings, end, end of life products, waste streams and other source materials.

The Section 48C program requires taxpayers to apply for a portion of the $10 billion allocation in a two-stage process. Interested entities must first submit a concept paper by July 31, 2023. The Department of Energy (DOE) will review the concept paper and send the taxpayer a letter of encouragement or discouragement related to submitting an application. However, taxpayers may apply regardless of DOE’s response to the concept paper. 

For the second stage, applications must be submitted by the date listed and according to additional IRS guidance that has yet to be issued. Once submitted, DOE will review the applications and provide recommendations and a ranking of applications to the IRS. The IRS then accepts or denies applications for the tax credits. Taxpayers must submit both a concept paper and application to be eligible.

If an application is accepted, taxpayers have 2 years from the date of acceptance to place the project into service and meet certain requirements of the approval. Once DOE and IRS certify the requirements are met, the taxpayer may then claim the Section 48C credit for the year the project was placed in service. It is important to note that a Section 48C credit is not allowed for any qualified investment for which a credit is claimed under Sections 48 (Energy), 48A (Advanced Coal), 48B (Gasification), 48E (Clean Electricity), 45Q (Carbon Oxide Sequestration), or 45V (Clean Hydrogen).

Godfrey & Kahn has assisted with numerous applications for grants and incentives related to energy programs, as well as financing and development of energy projects that combine tax credit financing, grant funding, and other funding sources. We have also assisted numerous organizations, municipalities, and tribes in packaging federal grants with other state and/or utility grants and tax incentives, investment tax credits, new market tax credits, or other private funding to drive down the cost of energy-related projects, often resulting in the construction of projects with no upfront capital costs. Now, with the Inflation Reduction Act providing numerous expanded funding opportunities, we can work with you to help fully fund numerous clean energy projects.

The credits under this manufacturing program can be a valuable financing source for qualifying projects. Attorneys in our Energy Practice Group would be happy to assist with reviewing eligibility for these bonus credits and assisting with the application process.

For more information about strategies to utilize the allocation amounts to meet your organization’s energy goals, please contact a member of our Energy Practice Group.

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