Renewable Energy and Advanced Energy Investment Tax Credits
3 key provisions to know
By Randy Crabtree, CPA, Nick Pantaleo and Barry Devine
October 19, 2023
The 2022 Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law are offering billions of dollars in energy-related tax incentives to companies that invest in clean energy and clean energy technologies that help combat climate change. Chances are you have many business clients that could qualify for at least one of the three general business credits for renewable energy generation and products:
- IRC §48 Energy Credit (RE-ITC): Renewable Energy Investment Tax Credit
- IRC §48C Advanced Energy Project Credit (ITC): Facilities to make and recycle renewable energy products or reduce carbon footprint
- IRC §45X Advanced Manufacturing Production Credit (PTC)
Let’s break down each one in turn.
1. IRC §48 Energy Credit – Renewable Energy Investment Tax Credit (RE-ITC)
Nearly any business or facility that uses electricity to generate heat, light, or produce goods or services can take advantage of the RE-ITC. This credit is not just for big energy, utilities and tax equity investors. Credits can amount to up to 30% of your clients’ qualified costs for renewable energy property placed in service after Dec. 31, 2021, and where construction begins by Dec. 31, 2024. With bonuses, credits can be even higher than 30%.
Types of qualified energy property
• Energy storage/batteries placed in service after 2022 (NEW).
• Microgrid controllers placed in service after 2022 (NEW).
• Interconnection property placed in service after 2022 (NEW).
• Qualified biogas property placed in service after 2022 (NEW).
• Qualified small wind (less than 5 MW output).
• Solar (less than 5 MW output).
• Combined heat and power (CHP).
• Waste energy recovery property.
• Fiber-optic solar lighting.
• Geothermal heat pump.
• Qualified microturbine.
• Qualified fuel cell.
Rates and operating rules
• Credit rates range from 6% to 30% depending on type, construction start date and placed-in-service date.
• Credits for certain “energy projects” can be increased 5 times by meeting prevailing wage and apprenticeship rules.
• The Energy Credit can be treated as a tax payment if the taxpayer is a not-for-profit entity per §6417.
• Construction must be completed, or original use of the property must commence with the taxpayer.
• The Energy Credit is a “specified credit” that can offset AMT per §38(c)(4)(B)(x).
• Property must conform to performance and quality standards.
• Requires a §50(c)(3) basis reduction of 50% of the ITC.
• The Energy Credit can be transferred per §6418.
• Property must be depreciable.
2. IRC §48C - Advanced Energy Project Credit (ITC)
If you have clients that are expanding their plants to manufacture renewable energy products, or if they are adding or expanding recycling facilities for renewable energy equipment or critical materials, or if planning to install equipment in a plant to reduce greenhouse gases, they may qualify for up to a 30% federal tax credit! Even if clients can’t use the credits directly, the credits may be sold for cash through the Inflation Reduction Act of 2022 provisions.
- Qualifying Category 1 includes re-equipping, expanding, or establishing industrial or manufacturing plants to produce or recycle renewable equipment or produce carbon capture equipment.
- Qualifying Category 2 includes re-equipping industrial or manufacturing plants to reduce greenhouse gas emissions by at least 20%.
- Qualifying Category 3 includes facilities to re-equip, expand or establish an industrial facility for processing, refining or recycling certain critical materials and minerals such as non-fuel minerals, elements, substances or materials with high risk of supply chain disruption. They serve essential functions in energy technologies that produce, transmit, store, or conserve energy and those using critical minerals like lithium and cobalt. For more information, refer to the Department of the Interior’s 2022 Final List of Critical Minerals.
NOTE: Available funds are limited. To apply, visit the
Exchange Energy portal.
Concept papers (5 pages in length) are required to be eligible to apply for the tax credit. Applicants must indicate which advanced energy project category their project qualifies for when submitting a concept paper.
3. IRC §45X - Advanced Manufacturing Production Credit (PTC)
If your clients manufacture certain renewable energy or energy storage products, parts, or components in the US, produce critical materials, including aluminum, beryllium, chromium, cobalt, or lithium, and sell to an unrelated person as a part of your company’s trade or business, they may qualify for a production tax credit for up to 10 years through 2032! And for companies that can’t use the credits, there may be a direct pay refundable credit available or can be sold for cash through provisions of the IRA.
NOTE: This credit cannot be taken if facilities were constructed using §48C Advanced Energy Project investment tax credit.
Eligible component: Solar energy
• Photovoltaic cells.
• Photovoltaic wafers.
• Polymeric back sheets.
• Solar grade polysilicon.
• Solar modules.
• Solar trackers and components, including torque tubes and structural fasteners.
Eligible component: Wind energy
• Blades.
• Nacelles.
• Towers.
• Offshore wind foundations.
• Related offshore wind vessels.
Eligible component: Inverters (DC to AC)
• Central inverters with capacity greater than 1 MW.
• Commercial inverters suitable for commercial or utility-scale applications.
• Distributed wind inverters with capacity up to 150 kilowatts.
• Microinverters with rated output of 120 / 240-volt single phase or 208 / 480 three phase power.
• Residential inverters with rated output of 120 / 240-volt single phase power.
• Utility inverters with rated output of not less than 600-volt three phase power.
Eligible component: Batteries
• Electrodes.
• Battery cells.
• Battery modules.
Eligible component: Critical minerals
• Minerals that are critical components in the manufacture of certain renewable energy products.
• Aluminum, beryllium, chromium, cobalt, graphite, lithium, nickel, tungsten and others.
Understanding what’s out there
As the nation’s largest energy incentive effort in history, the IRA offers hundreds of billions of dollars in credits to companies across numerous industries. Chances are, you have many clients that may qualify. Just make sure you adhere to the qualifying rules and have a skilled provider to assist you. Penalties for erroneous claims can be significant.
Nick Pantaleo is a Partner and the Chief Financial Officer at Tri-Merit.
Randy Crabtree, co-founder and partner of Tri-Merit Specialty Tax Professionals,
is a widely followed author, lecturer and host of “The Unique CPA” podcast.
Barry Devine is Business Development Director at Tri-Merit.
