Electricity produced from certain renewable resources, etc.
General rule
For purposes of section 38, the renewable electricity production credit for any taxable year is an amount equal to the product of—
0.3 cents, multiplied by
the kilowatt hours of electricity—
produced by the taxpayer—
from qualified energy resources, and
at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and
sold by the taxpayer to an unrelated person during the taxable year.
Limitations and adjustments
Phaseout of credit
The amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
the amount by which the reference price for the calendar year in which the sale occurs exceeds 8 cents, bears to
3 cents.
Credit and phaseout adjustment based on inflation
Credit reduced for tax-exempt bonds
The amount of the credit determined under subsection (a) with respect to any facility for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and the lesser of 15 percent or a fraction—
the numerator of which is the sum, for the taxable year and all prior taxable years, of proceeds of an issue of any obligations the interest on which is exempt from tax under section 103 and which is used to provide financing for the qualified facility, and
the denominator of which is the aggregate amount of additions to the capital account for the qualified facility for the taxable year and all prior taxable years.
The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year.
Credit rate and period for electricity produced and sold from certain facilities
Credit rate
Credit period
In general
Certain open-loop biomass facilities
Termination
Phaseout of credit for wind facilities
In the case of any facility using wind to produce electricity which is placed in service before
in the case of any facility the construction of which begins after
in the case of any facility the construction of which begins after
in the case of any facility the construction of which begins after
in the case of any facility the construction of which begins after
Increased credit amount for qualified facilities
In general
Qualified facility requirements
A qualified facility meets the requirements of this subparagraph if it is one of the following:
A facility with a maximum net output of less than 1 megawatt (as measured in alternating current).
A facility the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (7)(A) and (8).
A facility which satisfies the requirements of paragraphs (7)(A) and (8).
Prevailing wage requirements
In general
The requirements described in this subparagraph with respect to any qualified facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
the construction of such facility, and
with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2)(A)(ii), the alteration or repair of such facility,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (6)(A) for a taxable year, the requirement under clause (ii) is applied to such taxable year in which the alteration or repair of the qualified facility occurs.
Correction and penalty related to failure to satisfy wage requirements
In general
In the case of any taxpayer which fails to satisfy the requirement under subparagraph (A) with respect to the construction of any qualified facility or with respect to the alteration or repair of a facility in any year during the period described in subparagraph (A)(ii), such taxpayer shall be deemed to have satisfied such requirement under such subparagraph with respect to such facility for any year if, with respect to any laborer or mechanic who was paid wages at a rate below the rate described in such subparagraph for any period during such year, such taxpayer—
makes payment to such laborer or mechanic in an amount equal to the sum of—
an amount equal to the difference between—
the amount of wages paid to such laborer or mechanic during such period, and
the amount of wages required to be paid to such laborer or mechanic pursuant to such subparagraph during such period, plus
interest on the amount determined under item (aa) at the underpayment rate established under section 6621 (determined by substituting “6 percentage points” for “3 percentage points” in subsection (a)(2) of such section) for the period described in such item, and
makes payment to the Secretary of a penalty in an amount equal to the product of—
$5,000, multiplied by
the total number of laborers and mechanics who were paid wages at a rate below the rate described in subparagraph (A) for any period during such year.
Deficiency procedures not to apply
Intentional disregard
If the Secretary determines that any failure described in clause (i) is due to intentional disregard of the requirements under subparagraph (A), such clause shall be applied—
in subclause (I), by substituting “three times the sum” for “the sum”, and
in subclause (II), by substituting “$10,000” for “5,000 1
Limitation on period for payment
Apprenticeship requirements
The requirements described in this paragraph with respect to the construction of any qualified facility are as follows:
Labor hours
Percentage of total labor hours
Applicable percentage
For purposes of clause (i), the applicable percentage shall be—
in the case of a qualified facility the construction of which begins before
in the case of a qualified facility the construction of which begins after
in the case of a qualified facility the construction of which begins after
Apprentice to journeyworker ratio
Participation
Exception
In general
A taxpayer shall not be treated as failing to satisfy the requirements of this paragraph if such taxpayer—
satisfies the requirements described in clause (ii), or
subject to clause (iii), in the case of any failure by the taxpayer to satisfy the requirement under subparagraphs (A) and (C) with respect to the construction, alteration, or repair work on any qualified facility to which subclause (I) does not apply, makes payment to the Secretary of a penalty in an amount equal to the product of—
$50, multiplied by
the total labor hours for which the requirement described in such subparagraph was not satisfied with respect to the construction, alteration, or repair work on such qualified facility.
Good faith effort
For purposes of clause (i), a taxpayer shall be deemed to have satisfied the requirements under this paragraph with respect to a qualified facility if such taxpayer has requested qualified apprentices from a registered apprenticeship program, as defined in section 3131(e)(3)(B), and—
such request has been denied, provided that such denial is not the result of a refusal by the taxpayer or any contractors or subcontractors engaged in the performance of construction, alteration, or repair work with respect to such qualified facility to comply with the established standards and requirements of the registered apprenticeship program, or
the registered apprenticeship program fails to respond to such request within 5 business days after the date on which such registered apprenticeship program received such request.
Intentional disregard
Definitions
For purposes of this paragraph—
Labor hours
The term “labor hours”—
means the total number of hours devoted to the performance of construction, alteration, or repair work by any individual employed by the taxpayer or by any contractor or subcontractor, and
excludes any hours worked by—
foremen,
superintendents,
owners, or
persons employed in a bona fide executive, administrative, or professional capacity (within the meaning of those terms in part 541 of title 29, Code of Federal Regulations).
Qualified apprentice
Domestic content bonus credit amount
In general
Requirement
In general
Steel and iron
Manufactured product
Adjusted percentage
In general
Offshore wind facility
Phaseout for elective payment
In general
In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with—
the value of such credit (determined without regard to this paragraph), multiplied by
the applicable percentage.
100 percent applicable percentage for certain qualified facilities
In the case of any qualified facility—
which satisfies the requirements under paragraph (9)(B), or
with a maximum net output of less than 1 megawatt (as measured in alternating current),
the applicable percentage shall be 100 percent.
Phased domestic content requirement
Subject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be—
if construction of such facility began before
if construction of such facility began in calendar year 2024, 90 percent.
Exception
In general
For purposes of this paragraph, the Secretary shall provide exceptions to the requirements under this paragraph if—
the inclusion of steel, iron, or manufactured products which are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or
relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.
Applicable percentage
Special rule for qualified facility located in energy community
In general
Energy community
For purposes of this paragraph, the term “energy community” means—
a brownfield site (as defined in subparagraphs (A), (B), and (D)(ii)(III) of section 101(39) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601(39))),
a metropolitan statistical area or non-metropolitan statistical area which—
has (or, at any time during the period beginning after
has an unemployment rate at or above the national average unemployment rate for the previous year (as determined by the Secretary), or
a census tract—
in which—
after
after
which is directly adjoining to any census tract described in subclause (I).
Regulations and guidance
Resources
For purposes of this section:
In general
The term “qualified energy resources” means—
wind,
closed-loop biomass,
open-loop biomass,
geothermal energy,
solar energy,
small irrigation power,
municipal solid waste,
qualified hydropower production, and
marine and hydrokinetic renewable energy.
Closed-loop biomass
Open-loop biomass
In general
The term “open-loop biomass” means—
any agricultural livestock waste nutrients, or
any solid, nonhazardous, cellulosic waste material or any lignin material which is derived from—
any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,
solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled, or
agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.
Such term shall not include closed-loop biomass or biomass burned in conjunction with fossil fuel (cofiring) beyond such fossil fuel required for startup and flame stabilization.
Agricultural livestock waste nutrients
In general
Agricultural livestock
Geothermal energy
Small irrigation power
The term “small irrigation power” means power—
generated without any dam or impoundment of water through an irrigation system canal or ditch, and
the nameplate capacity rating of which is not less than 150 kilowatts but is less than 5 megawatts.
Municipal solid waste
Refined coal
In general
The term “refined coal” means a fuel—
which—
is a liquid, gaseous, or solid fuel produced from coal (including lignite) or high carbon fly ash, including such fuel used as a feedstock,
is sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam, and
is certified by the taxpayer as resulting (when used in the production of steam) in a qualified emission reduction, or
which is steel industry fuel.
Qualified emission reduction
Steel industry fuel
In general
The term “steel industry fuel” means a fuel which—
is produced through a process of liquifying coal waste sludge and distributing it on coal, and
is used as a feedstock for the manufacture of coke.
Coal waste sludge
Qualified hydropower production
In general
The term “qualified hydropower production” means—
in the case of any hydroelectric dam which was placed in service on or before the date of the enactment of this paragraph, the incremental hydropower production for the taxable year, and
in the case of any nonhydroelectric dam described in subparagraph (C), the hydropower production from the facility for the taxable year.
Determination of incremental hydropower production
In general
Operational changes disregarded
Nonhydroelectric dam
For purposes of subparagraph (A), a facility is described in this subparagraph if—
the hydroelectric project installed on the nonhydroelectric dam is licensed by the Federal Energy Regulatory Commission and meets all other applicable environmental, licensing, and regulatory requirements,
the nonhydroelectric dam was placed in service before the date of the enactment of this paragraph and operated for flood control, navigation, or water supply purposes and did not produce hydroelectric power on the date of the enactment of this paragraph, and
the hydroelectric project is operated so that the water surface elevation at any given location and time that would have occurred in the absence of the hydroelectric project is maintained, subject to any license requirements imposed under applicable law that change the water surface elevation for the purpose of improving environmental quality of the affected waterway.
The Secretary, in consultation with the Federal Energy Regulatory Commission, shall certify if a hydroelectric project licensed at a nonhydroelectric dam meets the criteria in clause (iii). Nothing in this section shall affect the standards under which the Federal Energy Regulatory Commission issues licenses for and regulates hydropower projects under part I of the Federal Power Act.
Indian coal
In general
The term “Indian coal” means coal which is produced from coal reserves which, on
were owned by an Indian tribe, or
were held in trust by the United States for the benefit of an Indian tribe or its members.
Indian tribe
Marine and hydrokinetic renewable energy
In general
The term “marine and hydrokinetic renewable energy” means energy derived from—
waves, tides, and currents in oceans, estuaries, and tidal areas,
free flowing water in rivers, lakes, and streams,
free flowing water in an irrigation system, canal, or other man-made channel, including projects that utilize nonmechanical structures to accelerate the flow of water for electric power production purposes,
differentials in ocean temperature (ocean thermal energy conversion), or
pressurized water used in a pipeline (or similar man-made water conveyance) which is operated—
for the distribution of water for agricultural, municipal, or industrial consumption, and
not primarily for the generation of electricity.
Exceptions
Qualified facilities
For purposes of this section:
Wind facility
Closed-loop biomass facility
In general
In the case of a facility using closed-loop biomass to produce electricity, the term “qualified facility” means any facility—
owned by the taxpayer which is originally placed in service after
owned by the taxpayer which before
For purposes of clause (ii), a facility shall be treated as modified before
Expansion of facility
Special rules
In the case of a qualified facility described in subparagraph (A)(ii)—
the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than the date of the enactment of this clause, and
if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.
Open-loop biomass facilities
In general
In the case of a facility using open-loop biomass to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which—
in the case of a facility using agricultural livestock waste nutrients—
is originally placed in service after the date of the enactment of this subclause and the construction of which begins before
the nameplate capacity rating of which is not less than 150 kilowatts, and
in the case of any other facility, the construction of which begins before
Expansion of facility
Credit eligibility
Geothermal or solar energy facility
Small irrigation power facility
Landfill gas facilities
Trash facilities
Refined coal production facility
In the case of a facility that produces refined coal, the term “refined coal production facility” means—
with respect to a facility producing steel industry fuel, any facility (or any modification to a facility) which is placed in service before
with respect to any other facility producing refined coal, any facility placed in service after the date of the enactment of the American Jobs Creation Act of 2004 and before
Qualified hydropower facility
In general
In the case of a facility producing qualified hydroelectric production described in subsection (c)(8), the term “qualified facility” means—
in the case of any facility producing incremental hydropower production, such facility but only to the extent of its incremental hydropower production attributable to efficiency improvements or additions to capacity described in subsection (c)(8)(B) placed in service after the date of the enactment of this paragraph and before
any other facility placed in service after the date of the enactment of this paragraph and the construction of which begins before
Credit period
Special rule
Indian coal production facility
Marine and hydrokinetic renewable energy facilities
In the case of a facility producing electricity from marine and hydrokinetic renewable energy, the term “qualified facility” means any facility owned by the taxpayer—
which has a nameplate capacity rating of at least 25 kilowatts, and
which is originally placed in service on or after the date of the enactment of this paragraph and the construction of which begins before
Definitions and special rules
For purposes of this section—
Only production in the United States taken into account
Sales shall be taken into account under this section only with respect to electricity the production of which is within—
the United States (within the meaning of section 638(1)), or
a possession of the United States (within the meaning of section 638(2)).
Computation of inflation adjustment factor and reference price
In general
Inflation adjustment factor
Reference price
Production attributable to the taxpayer
Related persons
Pass-thru in the case of estates and trusts
Repealed. Pub. L. 109–58, title XIII, § 1301(f)(3), Aug. 8, 2005, 119 Stat. 990]
Credit not to apply to electricity sold to utilities under certain contracts
In general
The credit determined under subsection (a) shall not apply to electricity—
produced at a qualified facility described in subsection (d)(1) which is originally placed in service after
sold to a utility pursuant to a contract originally entered into before
Exception
Subparagraph (A) shall not apply if—
the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii),
such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of—
the average annual quantity of electricity sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998, or
the estimate of the annual electricity production set forth in the contract, or, if there is no such estimate, the greatest annual quantity of electricity sold to the utility under the contract in any of the calendar years 1996, 1997, or 1998, and
such amendment provides that energy and capacity in excess of the limitation in clause (ii) may be—
sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or
sold to a third party subject to a mutually agreed upon advance notice to the utility.
For purposes of this subparagraph, avoided cost prices shall be determined as provided for in 18 CFR 292.304(d)(1) or any successor regulation.
Refined coal production facilities
Determination of credit amount
In the case of a producer of refined coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to $4.375 per ton of qualified refined coal—
produced by the taxpayer at a refined coal production facility during the 10-year period beginning on the date the facility was originally placed in service, and
sold by the taxpayer—
to an unrelated person, and
during such 10-year period and such taxable year.
Phaseout of credit
The amount of the increase determined under subparagraph (A) shall be reduced by an amount which bears the same ratio to the amount of the increase (determined without regard to this subparagraph) as—
the amount by which the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) for the calendar year in which the sale occurs exceeds an amount equal to 1.7 multiplied by the reference price for such fuel in 2002, bears to
$8.75.
Application of rules
Special rule for steel industry fuel
In general
In the case of a taxpayer who produces steel industry fuel—
this paragraph shall be applied separately with respect to steel industry fuel and other refined coal, and
in applying this paragraph to steel industry fuel, the modifications in clause (ii) shall apply.
Modifications
Credit amount
Credit period
No phaseout
Modifications
Barrel-of-oil equivalent
Coordination with credit for producing fuel from a nonconventional source
In general
Refined coal facilities
In general
Exception for steel industry coal
Indian coal production facilities
Determination of credit amount
In the case of a producer of Indian coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to the applicable dollar amount per ton of Indian coal—
produced by the taxpayer at an Indian coal production facility during the 16-year period beginning on
sold by the taxpayer—
to an unrelated person (either directly by the taxpayer or after sale or transfer to one or more related persons), and
during such 16-year period and such taxable year.
Applicable dollar amount
In general
The term “applicable dollar amount” for any taxable year beginning in a calendar year means—
$1.50 in the case of calendar years 2006 through 2009, and
$2.00 in the case of calendar years beginning after 2009.
Inflation adjustment
Application of rules
Allocation of credit to patrons of agricultural cooperative
Election to allocate
In general
Form and effect of election
Treatment of organizations and patrons
The amount of the credit apportioned to any patrons under subparagraph (A)—
shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and
shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
Special rules for decrease in credits for taxable year
If the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—
such reduction, over
the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
Eligible cooperative defined
Coordination with energy credit for qualified biogas property
Special rule for electricity used at a qualified clean hydrogen production facility
Electricity produced by the taxpayer shall be treated as sold by such taxpayer to an unrelated person during the taxable year if—
such electricity is used during such taxable year by the taxpayer or a person related to the taxpayer at a qualified clean hydrogen production facility (as defined in section 45V(c)(3)) to produce qualified clean hydrogen (as defined in section 45V(c)(2)), and
such use and production is verified (in such form or manner as the Secretary may prescribe) by an unrelated third party.
Source
(Added Pub. L. 102–486, title XIX, § 1914(a),Notes
Inflation Adjusted Items for Certain Years
Editorial Notes
References in Text
Prior Provisions
Amendments
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
In general.—
Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and section 48 of this title] shall apply to facilities placed in service after
Credit reduced for tax-exempt bonds.—
The amendment made by subsection (h) [amending this section] shall apply to facilities the construction of which begins after the date of enactment of this Act [
Domestic content, phaseout, energy communities, and hydropower.—
The amendments made by subsections (g) and (j) [amending this section] shall apply to facilities placed in service after
In general.—
Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 48, 50, and 7701 of this title] shall apply to property placed in service after
Other property.—
The amendments made by subsections (f), (g), (h), (i), (j), (l), (n), and (o) [amending this section and sections 48, 50, and 7701 of this title] shall apply to property placed in service after
Special rule for property financed by tax-exempt bonds.—
The amendments made by subsection (m) [amending section 48 of this title] shall apply to property the construction of which begins after the date of enactment of this Act [
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Extension.—
The amendments made by subsection (a) [amending this section] shall apply to coal produced after
Modifications.—
The amendments made by subsections (b) and (c) [amending this section] shall apply to coal produced and sold after
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
In general.—
Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section, section 48 of this title, and provisions set out as a note under section 48 of this title] shall take effect on the date of the enactment of this Act [
Modification to definition of municipal solid waste.—
The amendments made by subsection (a)(2) [amending this section] shall apply to electricity produced and sold after the date of the enactment of this Act, in taxable years ending after such date.
Technical corrections.—
The amendments made by subsection (c) [amending section 48 of this title and provisions set out as a note under section 48 of this title] shall apply as if included in the enactment of the provisions of the American Recovery and Reinvestment Act of 2009 [Pub. L. 111–5] to which they relate.”
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
In general.—
The amendments made by subsection (a) [amending this section] shall apply to property placed in service after the date of the enactment of this Act [
Technical amendment.—
The amendment made by subsection (b) [amending this section] shall take effect as if included in section 102 of the Energy Improvement and Extension Act of 2008 [Pub. L. 110–343].”
Effective Date of 2008 Amendment
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to property originally placed in service after
Refined coal.—
The amendments made by subsection (b) [amending this section] shall apply to coal produced and sold from facilities placed in service after
Trash facility clarification.—
The amendments made by subsection (c) [amending this section] shall apply to electricity produced and sold after the date of the enactment of this Act [
Expansion of biomass facilities.—
The amendments made by subsection (d) [amending this section] shall apply to property placed in service after the date of the enactment of this Act.”
Effective Date of 2007 Amendment
Effective Date of 2005 Amendments
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and section 168 of this title and amending provisions set out as a note under this section] shall take effect on the date of the enactment of this Act [
Technical amendments.—
The amendments made by subsections (e) and (f) [amending this section and section 168 of this title and amending provisions set out as a note under this section] shall take effect as if included in the amendments made by section 710 of the American Jobs Creation Act of 2004 [Pub. L. 108–357].”
Effective Date of 2004 Amendments
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 48 of this title] shall apply to electricity produced and sold after the date of the enactment of this Act [
Certain biomass facilities.—
With respect to any facility described in section 45(d)(3)(A)(ii) of the Internal Revenue Code of 1986, as added by subsection (b)(1), which is placed in service before the date of the enactment of this Act, the amendments made by this section shall apply to electricity produced and sold after
Credit rate and period for new facilities.—
The amendments made by subsection (c) [amending this section] shall apply to electricity produced and sold after
Nonapplication of amendments to preeffective date poultry waste facilities.—
The amendments made by this section shall not apply with respect to any poultry waste facility (within the meaning of section 45(c)(3)(C), as in effect on the day before the date of the enactment of this Act) placed in service before
Refined coal production facilities.—
Section 45(e)(8) of the Internal Revenue Code of 1986, as added by this section, shall apply to refined coal produced and sold after the date of the enactment of this Act.”