Treasury Issues Additional Guidance on Section 48C Advanced Energy Project Tax Credit
On May 31, 2023, the Department of the Treasury (the “Treasury”) and the Internal Revenue Service (the “Service”) issued Notice 2023-44 (the “Notice”), providing additional guidance on the program established under section 48C(e)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), to allocate $10 billion of tax credits for qualifying investments in eligible advanced energy projects (the “Advanced Energy Project Credit”). The Notice clarifies and modifies Notice 2023-18, issued on February 13, 2023, which established the Advanced Energy Project Credit program.1 Our prior coverage of Notice 2023-18 can be found here, and our prior coverage of the Inflation Reduction Act of 2022 can be found here and here.
The Notice updates Appendix A from Notice 2023-18 with minor revisions to the definitions and examples of property and projects which may qualify for the Advanced Energy Project Credit. The Notice also updates Appendix B from Notice 2023-18 with technical review criteria and application content requirements. Technical review criteria described in Appendix B generally includes (i) commercial viability, (ii) impact on greenhouse gas emissions, (iii) strengthening U.S. supply chains and domestic manufacturing for a net zero economy, and (iv) workforce and community engagement.
In a new Appendix C, the Notice provides a list of “Energy Community Census Tracts.” Pursuant to the Notice, a project is deemed to be in an Energy Community Census Tract if 50 percent or more of the project’s square footage is located in an Energy Community Census Tract. The determination of whether a project is located in an Energy Community Census Tract will be made at the time that the Department of Energy (“DOE”) informs the Service whether the project merits a DOE recommendation and will not be redetermined.
The Notice sets forth the process for submitting concept papers and joint applications for DOE recommendations and Advanced Energy Project Credit certifications. Taxpayers are required to submit concept papers prior to 12:00 p.m., Eastern time, on July 31, 2023, through an online portal available at eXCHANGE portal (which will be available by June 30, 2023). The Service will make final decisions for “Round 1” allocation by March 31, 2024. According to the Notice, property placed in service prior to being awarded an Advanced Energy Project Credit allocation is not eligible to receive the allocation.
The Notice also describes the procedure for informing the Service and the DOE of a significant change in plans for a project that has received an Advanced Energy Project Credit allocation and the requirement that the Treasury must publicly disclose certain information upon making an Advanced Energy Project Credit certification, including the identity of the taxpayer and allocation amounts. Finally, the Notice provides a variety of definitions which are relevant to the Advanced Energy Project Credit program.
1 Also on May 31, 2023, the Treasury and the Service issued Proposed Treasury Regulations 110412-23 with respect to the Low-Income Communities Bonus program under Code section 48(e). Our coverage of Treasury Regulations 110412-23 can be found here.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.