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IRS Releases New Proposal for IRA Renewable Energy Tax Credits

published: 2024-06-04 15:01

On June 3rd, the U.S. government proposed new incentives under the Inflation Reduction Act (IRA) that would provide tax credits for electricity with low or zero greenhouse gas emissions, thereby aligning financial assistance with environmental goals. The proposed regulations, which claim the clean power production credit for facilities or energy storage technologies (if applicable) placed in service after 2024, would affect all ratepayers that manufacture clean power.

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have detailed these provisions in sections 45Y and 48E of the Internal Revenue Code. For projects beginning construction before 2025, the current production tax credit and investment tax credit will be phased out; for projects placed in service after December 31, 2024, the clean power production credit and clean power investment credit will be implemented.

U.S. Treasury Secretary Yellen said the Clean Power Tax Credit provides certainty to the market and is expected to drive further significant market growth while reducing utility and gas costs over the long term. The tax credits are projected to reduce carbon emissions from the power sector by 73 percent by 2035 compared to 2022 and save consumers money on electricity costs.

The proposed rule identifies technologies eligible for the tax credit, which include wind, solar, hydroelectric, ocean and fluid dynamics, nuclear fission and fusion, geothermal, energy storage, and certain waste energy recovery projects. At the same time, technologies that rely on combustion or gasification would have to pass a life-cycle analysis in order to demonstrate net-zero emissions.

The proposed regulations provide guidance on a number of topics, including how to calculate the tax credit; defining qualifying facilities and energy storage technologies, describing the property included in qualifying facilities and the energy storage technologies and property that are part of qualifying facilities and energy storage technologies; and defining metering devices; explaining the rules regarding recycling; defining greenhouse gas (GHG) emissions and emission rates, and the impacts of carbon capture; designating facilities that meet the prevailing wage and apprenticeship requirements for increased tax credits for facility production that meets carbon emission standards; defines the GHG emission rate from electricity generation; applies for temporary emission rates; and determines eligibility for these credits under various circumstances. Also, to verify emissions, taxpayers are required to keep complete records, including third-party reports.

The Department of the Treasury is soliciting public comment on the proposal and will issue a final version of the regulations in 60 days.

Source: https://mp.weixin.qq.com/s/12_q88622gx75pACyEeT9A

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