IRS Issues Proposed Rules on New Tech-Neutral Clean Energy PTC and ITC

On May 29, 2024, the Internal Revenue Service (IRS) and the Department of Treasury issued proposed regulations (REG-119283-23) addressing the new technology neutral clean electricity production tax credit (PTC) in section 45Y and the clean electricity investment tax credit (ITC) in section 48E, each of which was designed to become available for projects that are placed in service after December 31, 2024, when their corresponding predecessors (sections 45 and 48, respectively) generally expire. Added to the tax code by the Inflation Reduction Act of 2022 (IRA, P.L. 117-169), these new tax credits were designed to incentivize the generation of electricity for which the greenhouse gas (GHG) emissions rate (expressed as grams of CO₂e per kWh) is not greater than zero.

Given the novelty and potentially broad applicability of these tech-neutral credits, the industry has been eagerly awaiting guidance fleshing out the rules for claiming them in order to ascertain whether projects might qualify. In addition to numerous technical topics that the IRS is requesting public comments on, the proposed regulations describe how GHG emissions rates are expected to be established as well as details on recapture event thresholds for the new tax credit programs. The proposed regulations also discuss the categorization and requirements for combustion and gasification facilities (C&G Facilities) vs. non-combustion and gasification facilities (non-C&G Facilities) and provide details on lifecycle analysis emissions assessments.

Akin’s Project and Energy Transition Team is reviewing the proposed regulations and will provide additional analysis. You may subscribe to our mailing list here.