26 U.S.C. § 48: Energy credit

§ 1.48-1 Definition of section 38 property.§ 1.48-2 New section 38 property.§ 1.48-3 Used section 38 property.§ 1.48-4 Election of lessor of new section 38 property to treat lessee as purchaser.§ 1.48-5 Electing small business corporations.§ 1.48-6 Estates and trusts.§ 1.48-9 Definition of energy property.§ 1.48-10 Single purpose agricultural or horticultural structures.§ 1.48-11 Qualified rehabilitated building; expenditures incurred before January 1, 1982.§ 1.48-12 Qualified rehabilitated building; expenditures incurred after December 31, 1981.§ 1.48-13 Rules relating to the increased credit amount for prevailing wage and apprenticeship.§ 1.48-14 Rules applicable to energy property.§ 1.48-15 Election to treat clean hydrogen production facility as energy property.§ 7.48-1 Election to have investment credit for movie and television films determined in accordance with previous litigation.§ 7.48-2 Election of forty-percent method of determining investment credit for movie and television films placed in service in a taxable year beginning before January 1, 1975.§ 7.48-3 Election to apply the amendments made by sections 804 (a) and (b) of the Tax Reform Act of 1976 to property described in section 50(a) of the Code.

Amended 1964, 1966, 1967, 1976, 1978, 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1988, 1990, 2004

2004 Pub. L. 108-357 Pub. L. 108–357, § 322(d)(2)(B), struck out “; reforestation credit” after “Energy credit” in section catchline.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11813(a), amended section generally, substituting section catchline for one which read: “Definitions; special rules” and in text substituting present provisions for provisions defining section 38 property, new section 38 property, used section 38 property, provisions relating to certain leased property, estates and trusts, special rules for qualified rehabilitated buildings, credit for movie and television films, treatment of energy property, application of certain transitional rules, definitions of certain credits, definition of single purpose agricultural or horticultural structure, basis adjustment to section 38 property, certain section 501(d) organizations, special rules relating to sound recordings, and a cross reference to section 381 of this title.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(30), substituted “to which section 168 applies” for “which is recovery property (within the meaning of section 168)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1013(a)(41), substituted “a private activity bond (within the meaning of section 141)” for “an industrial development bond (within the meaning of section 103(b)(2))”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(20), redesignated subsec. (s), relating to cross reference, as (t).
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(16)(A), added par. (9).
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(20), redesignated subsec. (s), relating to cross reference, as (t).
1986 Pub. L. 99-514 Pub. L. 99–514, § 251(b), amended par. (1) generally, restating in subpars. (A) to (D) provisions relating to qualified rehabilitated buildings which had in subpar. (A) provided general definition of qualified rehabilitated building, in subpar. (B) directed that 30 years must have elapsed since construction, in subpar. (C) provided general definition of substantially rehabilitated with special rule for phased rehabilitation and application of provision to lessees, and in subpar. (D) provided that rehabilitation included reconstruction, and striking out former subpar. (E) which had provided an alternative test for definition of qualified rehabilitated building.
1986 Pub. L. 99-514 Pub. L. 99–514, § 251(b), amended par. (2) generally, in subpar. (A) striking out reference to amounts “incurred after December 31, 1981” in introductory provision, and in cl. (i) substituting subcls. (I) to (IV) for “for real property (or additions or improvements to real property) which have a recovery period (within the meaning of section 168) of 19 (15 years in the case of low-income housing) years,”, in subpar. (B), in cl. (i), substituting provision relating to use of straight line depreciation for provision relating to use of accelerated methods of depreciation, redesignating former cl. (vi) as (v) and substituting “section 168(h)” for “section 168(j)”, redesignating former cl. (v) as (vi) and substituting “less than the recovery period determined under section 168(c)” for “less than 19 years (15 years in the case of low-income housing”, restating subpar. (C) without change, and in subpar. (D) substituting provisions defining nonresidential real property, residential rental property and class life for provisions defining low-income housing.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1802(a)(9)(B), substituted “section 168(j)” for “section 168(j)(3)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 251(b), in amending par. (3) generally, inserted introductory phrase “For purposes of this subsection—”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 251(b), in amending subsec. (g) generally, reenacted par. (4) without change.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1847(b)(6), substituted “section 23(c)” for “section 44C(c)” and “section 23(c)(4)(A)(viii)” for “section 44C(c)(4)(A)(viii)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 251(c), struck out “other than a certified historic structure” after “qualified rehabilitated building”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1809(d)(2), renumbered par. (6), relating to special rule for qualified films, as (7).
1986 Pub. L. 99-514 Pub. L. 99–514, § 1879(j)(1), added subsec. (r). Former subsec. (r) redesignated (s).
1986 Pub. L. 99-514 Pub. L. 99–514, § 1879(j)(1), redesignated former subsec. (r) as (s).
1986 Pub. L. 99-514 Pub. L. 99–514, § 803(b)(2)(B), which directed the general amendment of par. (5) of subsec. (r), was executed by amending par. (5) of subsec. (s) to reflect the probable intent of Congress and the intervening redesignation of subsec. (r) as (s) by Pub. L. 99–514, § 1879(j)(1), see note above. Prior to amendment, par. (5) read as follows: “For purposes of this subsection, the term ‘sound recording’ means any sound recording described in section 280(c)(2).”
1985 Pub. L. 99-121 Pub. L. 99–121 substituted “19” for “18”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(12), struck out par. (3) which provided that the $25,000 amount specified under subparagraphs (A) and (B) of section 46(a)(3) applicable to an estate or trust be reduced to an amount which bore the same ratio to $25,000 as the amount of the qualified investment allocated to the estate or trust under paragraph (1) to the entire amount of the qualified investment.
1984 Pub. L. 98-369 Pub. L. 98–369, § 1043(a), added subpar. (E).
1984 Pub. L. 98-369 Pub. L. 98–369, § 111(e)(8)(A), (B), substituted “real property” for “property” in two places, and “18 (15 years in the case of low-income housing)” for “15”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 31(c)(2), inserted “The preceding sentence shall not apply to any expenditure to the extent subsection (f)(12) or (j) of section 168 applies to such expenditure.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 111(e)(8)(C), substituted “18 years (15 years in the case of low-income housing)” for “15 years”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 31(c)(1), added cl. (vi).
1984 Pub. L. 98-369 Pub. L. 98–369, § 111(e)(8)(D), added subpar. (D).
1984 Pub. L. 98-369 Pub. L. 98–369, § 113(b)(3)(B), inserted “or at-risk rules” after “test” in heading.
1984 Pub. L. 98-369 Pub. L. 98–369, § 113(b)(3)(A), inserted “, section 46(c)(8), or section 46(c)(9)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 113(b)(3)(C), substituted “used” for “issued”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 721(x)(1), substituted “S corporation” for “electing small business corporation”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(13), substituted “section 46(b)(2)” for “section 46(a)(2)(C)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 735(c)(1), substituted “the chassis of which is an automobile bus chassis and the body of which is an automobile bus body” for “the chassis and body of which is exempt under section 4063(a)(6) from the tax imposed by section 4061(a)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(14), substituted “subsection (b)” for “subsection (a)(2)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(15), repealed subsec. (n). For continuing applicability of par. (4) of subsec. (n), see section 474(o)(15) of Pub. L. 98–369, set out in Effective Date of 1984 Amendment note below.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(16), redesignated par. (8) as (3) and struck out former pars. (3) to (7) which defined “employee plan credit”, “basic employee plan credit”, “matching employee plan credit”, “basic employee plan percentage”, and “matching employee plan percentage”, respectively.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(17)(A), substituted “section 46(a)” for “section 46(a)(2)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(17), substituted “section 46(a)” for “section 46(a)(2)” and “section 46(b)(1)” for “section 46(a)(2)(B)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(17)(B), substituted “section 46(b)(1)” for “section 46(a)(2)(B)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 712(b), added par. (6) relating to adjustment in basis of interest in partnership or S corporation.
1984 Pub. L. 98-369 Pub. L. 98–369, § 113(b)(4), added par. (6) relating to special rule for qualified films.
1984 Pub. L. 98-369 Pub. L. 98–369, § 113(a)(1), added subsec. (r). Former subsec. (r) redesignated (s).
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(18), substituted “section 381(c)(26)” for “section 381(c)(23)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 113(a)(1), redesignated former subsec. (r) as (s).
1983 Pub. L. 97-448 Pub. L. 97–448, § 102(f)(2), (6), substituted “the 24-month period selected by the taxpayer (at the time and in the manner prescribed by regulation) and ending with or within the taxable year” for “the 24-month period ending on the last day of the taxable year” in provisions preceding subcl. (I), substituted “adjusted basis of such building (and its structural components)” for “adjusted basis of such property” both in subcl. (I) and in provision following subcl. (II), and, in provisions following subcl. (II), substituted “holding period of the building” for “holding period of the property” and inserted provision that, for purposes of the preceding sentence, the determination of the beginning of the holding period shall be made without regard to any reconstruction by the taxpayer in connection with the rehabilitation.
1983 Pub. L. 97-448 Pub. L. 97–448, § 102(f)(3), substituted “a credit is determined under section 46(a)(2)” for “a credit is allowed under this section” and “the credit so determined” for “the credit so allowed”. See 1982 Amendment note for subsec. (g)(5) below and see Effective Date of 1982 and 1983 Amendment notes set out under sections 1 and 196 of this title.
1983 Pub. L. 97-424 Pub. L. 97–424, § 546(a)(3), substituted reference to subpar. (N) for reference to subpar. (M) in provision following subparagraphs.
1983 Pub. L. 97-424 Pub. L. 97–424, § 546(a)(1), (2), added subpar. (M) and redesignated former subpar. (M) as (N).
1983 Pub. L. 97-448 Pub. L. 97–448, § 306(a)(3), substituted “paragraphs (1) and (2) of this subsection and paragraph (5) of subsection (d)” for “paragraphs (1) and (2)”.
1982 Pub. L. 97-248 Pub. L. 97–248, § 205(a)(5)(A), struck out par. (5) which, as amended by § 102(f)(3) of Pub. L. 97–448, had provided that for purposes of this subtitle, if a credit were determined under section 46(a)(2) for any qualified rehabilitation expenditure in connection with a qualified rehabilitated building other than a certified historic structure, the increase in basis of such property which would (but for this paragraph) have resulted from such expenditure had to be reduced by the amount of the credit so determined, that if during any taxable year there was a recapture amount determined with respect to any qualified rehabilitated building the basis of which was reduced under subpar. (A), the basis of such building (immediately before the event resulting in such recapture), had to be increased by an amount equal to such recapture amount, and that for purposes of this paragraph “recapture amount” was defined as any increase in tax (or adjustment in carrybacks or carryovers) determined under section 47(a)(5). See 1983 Amendment note for subsec. (g)(5) above and see Effective Date of 1982 and 1983 Amendment notes set out under sections 1 and 196 of this title.
1982 Pub. L. 97-354 Pub. L. 97–354, § 5(a)(8), substituted “an S corporation” for “an electing small business corporation (within the meaning of section 1371)”.
1982 Pub. L. 97-362 Pub. L. 97–362, § 104(a), temporarily substituted the qualification that such term does not include equipment for hydrogenation, refining, or other process subsequent to retorting other than hydrogenation or other process which is applied in the vicinity of the property from which the shale was extracted and which is applied to bring the shale oil to a grade and quality suitable for transportation to and processing in a refinery, for the qualification that such equipment did not include equipment for hydrogenation, refining, or other processes subsequent to retorting. See Effective and Termination Dates of 1982 Amendment note below.
1982 Pub. L. 97-248 Pub. L. 97–248, § 205(a)(1), added subsec. (q) and redesignated former subsec. (q) as (r).
1981 Pub. L. 97-34 Pub. L. 97–34, § 212(b), in amending subsec. (c) generally incorporated the concept of “substantial rehabilitation” into par. (1)(A), substituted “30 years” for “20 years” as the requisite period in par. (1)(B), substituted a definition of “substantially rehabilitated” for former provisions that a major portion could be treated as a separate building in certain cases in par. (1)(C), reenacted par. (1)(D) without change, substituted “December 31, 1981” for “October 31, 1978” in provisions of par. (2)(A) preceding cl. (i), substituted provisions for a recovery period of 15 years for provisions that had provided for a useful life of 5 years or more in cl. (i) of par. (2)(A), reenacted cl. (ii) without change, substituted provisions that accelerated methods of depreciation may not be used for provisions relating to property otherwise section 38 property in cl. (i) of par. (2)(B), reenacted cls. (ii) and (iii) without change, revised the provisions of cl. (iv) relating to certified historic structures, and added cl. (v) relating to expenditures of lessees, added par. (3), redesignated former par. (3) as (4), and added par. (5).
1981 Pub. L. 97-34 Pub. L. 97–34, § 211(e)(3), inserted “or which is recovery property (within the meaning of section 168)” after “3 years or more”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 332(b), substituted “which does not exceed” for “equal to”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 212(a)(3), added par. (8).
1980 Pub. L. 96-222 Pub. L. 96–222, § 103(a)(4)(B), substituted “subsections (a)(1)(E) and (l)” for “subsection (a)(1)(E)”.
1980 Pub. L. 96-223 Pub. L. 96–223, § 221(b)(1), substituted “For any period for which the energy percentage determined under section 46(a)(2)(C) for any energy property is greater than zero” for “For the period beginning on October 1, 1978, and ending on December 31, 1982” in provisions preceding subpar. (A) and, in subpars. (A) and (B), substituted “such energy property” and “such property” for “any energy property”.
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(a), added cls. (vii), (viii), and (ix).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(b), (g)(2), struck out “(other than coke or coke gas)” after “solid fuel” in cl. (iii) and, in cl. (v), substituted provisions relating to equipment which converts coal into a substitute for a petroleum or natural gas derived feedstock for the manufacture of chemicals or other products and equipment which converts coal into methanol, ammonia, or hydroprocessed coal liquid or solid for provisions which had related simply to equipment which used coal as feedstock for the manufacture of chemicals or other products other than coke or coke gas, added cl. (ix), and, following cl. (ix), inserted provision that the equipment described in cl. (vii) includes equipment used for the storage of fuel derived from garbage at the site at which such fuel was produced from garbage.
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(i)(1)(A), redesignated subpar. (C) as (B). Former subpar. (B), which excluded public utility property from the terms “alternative energy property”, “solar or wind energy property”, or “recycling equipment”, was struck out.
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(i)(1)(A), (3), redesignated subpar. (D) as (C) and inserted following cl. (ii) provision that, for the purposes of the preceding sentence, in the case of property which is alternative energy property solely by reason of the amendments made by section 222(b) of the Crude Oil Windfall Profit Tax Act of 1980, “January 1, 1980” was to be substituted for “October 1, 1978”. Former subpar. (C) redesignated (B).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(c), added subpar. (C).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(d), added subpar. (L), redesignated former subpar. (L) as (M), and inserted provision that the Secretary shall not specify any property under subpar. (M) unless he determines that such specification meets the requirements of par. (9) of section 44C(c) for specification of items under section 44C(c)(4)(A)(viii).
1980 Pub. L. 96-223 Pub. L. 96–223, § 221(b)(2), substituted “one-half of the energy percentage determined under section 46(a)(2)(C)” for “5 percent”.
1980 Pub. L. 96-223 Pub. L. 96–223, § 223(c)(1), completely revised par. (11) to incorporate property financed by subsidized energy financing, effective with regard to periods after Dec. 31, 1982. Prior to the revision par. (11) read as follows: “In the case of property which is financed in whole or in part by the proceeds of an industrial development bond (within the meaning of section 103(b)(2)) the interest on which is exempt from tax under section 103, the energy percentage shall be one-half of the energy percentage determined under section 46(a)(2)(C).”
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(e)(1), added par. (13).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(f), added par. (14).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(g)(1), added par. (15).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(h), added par. (16).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(i)(1)(B), added par. (17).
1980 Pub. L. 96-222 Pub. L. 96–222, § 101(a)(7)(G), (H), (L)(i)(I)–(IV), (ii)(III)–(VI), (iii)(II), (v)(II)–(IV), (M)(ii), amended subsec. (n) generally to reflect the renaming of an investment tax credit ESOP to a tax credit employee stock ownership plan and a leveraged employee stock ownership plan (commonly referred to as an ESOP) to an employee stock ownership plan.
1980 Pub. L. 96-605 Pub. L. 96–605, § 223(a), substituted “the date on which the securities are contributed to the plan” for “the due date for filing the return for the taxable year (determined with regard to extensions)”.
1980 Pub. L. 96-222 Pub. L. 96–222, § 101(a)(7)(L)(iii)(III), (v)(IV), (V), (M)(iii), substituted “employee plan” for “ESOP” wherever appearing and inserted “percentage” after “attributable to the matching employee plan” in par. (5).
1978 Pub. L. 95-600 Pub. L. 95–600, § 315(b), added subsec. (g).
1978 Pub. L. 95-600 Pub. L. 95–600, § 312(c)(1), struck out subsec. (h) which related to suspension of investment credit.
1978 Pub. L. 95-600 Pub. L. 95–600, § 312(c)(1), struck out subsec. (i) which related to an exemption from suspension of $20,000 of investment.
1978 Pub. L. 95-600 Pub. L. 95–600, § 312(c)(1), struck out subsec. (j) which defined “suspension period”.
1978 Pub. L. 95-618 Pub. L. 95–618, § 301(b), added subsecs. (l) and (m) and redesignated former subsec. (l) as (n).
1978 Pub. L. 95-618 Pub. L. 95–618, § 301(b), redesignated former subsec. (l) as (n).
1978 Pub. L. 95-600 Pub. L. 95–600, § 141(b), added subsec. (n). Former subsec. (n) redesignated (p).
1978 Pub. L. 95-600 Pub. L. 95–600, § 141(b), added subsec. (o).
1978 Pub. L. 95-600 Pub. L. 95–600, §§ 141(b), 314(b), added subsec. (p). Former subsec. (n) redesignated (p) and subsequently as (q).
1976 Pub. L. 94-455 Pub. L. 94–455, § 802(b)(6), substituted “section 46(a)(3)” for “section 46(a)(2)”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 804(a), added subsec. (k) and redesignated former subsec. (k) as subsec. (l).
1967 Pub. L. 90-26 Pub. L. 90–26, § 2(a), limited definition of suspension period property to section 38 property where the physical construction, reconstruction or erection was begun before May 24, 1967, pursuant to an order placed during the suspension period, subject to the proviso that in applying the definition to property the physical construction, reconstruction or erection of which was begun before May 24, 1967, only that portion of the basis properly attributable to construction, reconstruction or erection before May 24, 1967 be taken into account.
1967 Pub. L. 90-26 Pub. L. 90–26, § 1, substituted “March 9, 1967” for “December 31, 1967”.
1966 Pub. L. 89-800 Pub. L. 89–800, § 1(a), added subsecs. (h) to (j) and redesignated former subsec. (h) as (k).
1964 Pub. L. 88-272 Pub. L. 88–272, § 203(a)(1), repealed subsec. (g) which required that the basis of section 38 property be reduced by 7 percent of the qualified investment.

Cases: Yellow Freight System v. United States, 538 F.2d 790 (8th Cir. 1976); Comdisco v. United States, 756 F.2d 569 (7th Cir. 1985); A. C. Monk & Co. v. United States, 686 F.2d 1058 (4th Cir. 1982)

Forms: Form 3468; Form 3800; Form 7210

Final rules 10

(a) Energy credit

Cited by 23

(1) In general For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.

Amended 1964, 1971, 1978, 1980, 1981, 1983, 1988, 2005, 2008, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(20), substituted “and (3)(B)” for “(3)(B), and (4)(B)”.
2008 Pub. L. 110-343 Pub. L. 110–343, § 104(d), substituted “paragraphs (1)(B), (2)(B), (3)(B), and (4)(B)” for “paragraphs (1)(B), (2)(B), and (3)(B)”.
2008 Pub. L. 110-343 Pub. L. 110–343, § 103(c)(3), substituted “paragraphs (1)(B), (2)(B), and (3)(B)” for “paragraphs (1)(B) and (2)(B)”.
2005 Pub. L. 109-135 Pub. L. 109–135, § 412(m), substituted “paragraphs (1)(B) and (2)(B) of subsection (c)” for “paragraph (1)(B) or (2)(B) of subsection (d)”.
2005 Pub. L. 109-58 Pub. L. 109–58, § 1336(d), inserted “except as provided in paragraph (1)(B) or (2)(B) of subsection (d),” before “the energy credit”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(29), which directed amendment of par. (1) by substituting “property to which section 168 applies” for “recovery property (within the meaning of section 168)” in penultimate sentence, was executed by making the substitution for “recovery property (within the meaning of section 168”, which results in retaining remaining parenthetical material and closing parenthesis.
1983 Pub. L. 97-448 Pub. L. 97–448, § 102(e)(2)(A), inserted “(not including a building and its structural components) used in connection” after “storage facility”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 211(e)(4), in provisions following subpar. (G), substituted “Such term includes only recovery property (within the meaning of section 168 without regard to any useful life) and any other property” for “Such term includes only property”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 211(c), added subpar. (G).
1980 Pub. L. 96-451 Pub. L. 96–451 added subpar. (F) and provision for treatment of the useful life of subpar. (F) property as its normal growing period.
1978 Pub. L. 95-618 Pub. L. 95–618, § 301(d)(1), inserted “(other than an air conditioning or heating unit)” after “personal property”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 314(a), added par. (D).
1978 Pub. L. 95-600 Pub. L. 95–600, § 315(a), added par. (E).
1971 Pub. L. 92-178 Pub. L. 92–178, § 102(a)(2), substituted “3 years” for “4 years” in second sentence.
1971 Pub. L. 92-178 Pub. L. 92–178, § 104(a)(1), substituted “research facility” for “research or storage facility” in cl. (ii) and added cl. (iii).
1964 Pub. L. 88-272 Pub. L. 88–272, § 203(c)(2), added subpar. (C).

Cited by 40

(2) Energy percentage

Amended 1992

1992 Pub. L. 102-486 Pub. L. 102–486 substituted “The” for “Except as provided in subparagraph (B), the” in subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: “(B) Termination.—Effective with respect to periods after June 30, 1992, the energy percentage is zero. For purposes of the preceding sentence, rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply.”

Cited by 7

(A) In general Except as provided in paragraphs (6) and (7), the energy percentage is—

Amended 2005, 2015, 2018

2018 Pub. L. 115-123 Pub. L. 115–123, § 40411(b)(2), substituted “paragraphs (6) and (7)” for “paragraph (6)” in introductory provisions.
2015 Pub. L. 114-113 Pub. L. 114–113, § 303(c), substituted “Except as provided in paragraph (6), the energy percentage” for “The energy percentage” in introductory provisions.
2005 Pub. L. 109-58 Pub. L. 109–58, § 1337(a), reenacted heading without change and amended text of subpar. (A) generally. Prior to amendment, text read as follows: “The energy percentage is—
“(i) in the case of qualified fuel cell property, 30 percent, and
“(ii) in the case of any other energy property, 10 percent.”
2005 Pub. L. 109-58 Pub. L. 109–58, § 1336(c), reenacted heading without change and amended text of subpar. (A) generally. Prior to amendment, text read as follows: “The energy percentage is 10 percent.”

(i) 6 percent in the case of—

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(d)(1)(A)(i), substituted “6 percent” for “30 percent” in introductory provisions.

Cited by 1

(I) qualified fuel cell property,

(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,

Amended 2006, 2008, 2015, 2020, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(a)(1), (e) substituted “clause (i) or (iii) of paragraph (3)(A)” for “paragraph (3)(A)(i)” and “January 1, 2025” for “January 1, 2024”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(a)(1)(A), substituted “January 1, 2024” for “January 1, 2022”.
2015 Pub. L. 114-113 Pub. L. 114–113, § 303(a), substituted “property the construction of which begins before January 1, 2022” for “periods ending before January 1, 2017”.
2008 Pub. L. 110-343 Pub. L. 110–343, § 103(a)(1), substituted “January 1, 2017” for “January 1, 2009”.
2006 Pub. L. 109-432 Pub. L. 109–432, § 207(1), substituted “January 1, 2009” for “January 1, 2008”.

(III) energy property described in paragraph (3)(A)(ii),

(IV) qualified small wind energy property,

Amended 2008

2008 Pub. L. 110-343 Pub. L. 110–343, § 104(b), added subcl. (IV).

(V) waste energy recovery property,

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 203(b), added subcl. (V).

(VI) energy storage technology,

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(2), added subcls. (VI) to (IX).

(VII) qualified biogas property,

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(2), added subcls. (VI) to (IX).

(VIII) microgrid controllers, and

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(2), added subcls. (VI) to (IX).

(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(2), added subcls. (VI) to (IX).

(ii) in the case of any energy property to which clause (i) does not apply, 0 percent.

Amended 2022, 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70513(e)(1), substituted “0 percent” for “2 percent”.
2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(d)(1)(A)(ii), substituted “2 percent” for “10 percent”.

Cited by 1

(B) Coordination with rehabilitation credit The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.

Amended 1966, 1967, 1971, 1975, 1976, 1978, 1980, 1981, 1986, 1991

1991 Pub. L. 102-227 Pub. L. 102–227 substituted “June 30, 1992” for “December 31, 1991”.
1986 Pub. L. 99-514 Pub. L. 99–514, §§ 1272(d)(5), 1275(c)(5), struck out “932,” after “931,” and “or which is entitled to the benefits of section 934(b)” after “in effect under section 936”, and substituted “or 933” for “, 933, or 934(c)”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 211(h), designated existing provisions as subcl. (I) and added subcl. (II).
1980 Pub. L. 96-223 Pub. L. 96–223, § 222(i)(2), added cl. (xi).
1978 Pub. L. 95-473 Pub. L. 95–473, § 2(a)(2)(A), substituted “providing transportation subject to subchapter I of chapter 105 of title 49” for “subject to part I of the Interstate Commerce Act”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(5)(A), substituted “(43 U.S.C. 1331))” for “; 43 U.S.C., sec. 1331)”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1051(h)(1), substituted “(other than a corporation which has an election in effect under section 936 or which is entitled to the benefits of section 934(b))” for “(other than a corporation entitled to the benefits of section 931 or 934(b))”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(a)(5)(B), substituted “47 U.S.C. 702” for “47 U.S.C., sec. 702”.
1975 Pub. L. 94-12 Pub. L. 94–12, § 604(a), substituted “territorial waters within the northern portion of the Western Hemisphere” for “territorial waters” in cl. (x) and inserted definition of “northern portion of the Western Hemisphere” following cl. (x).
1971 Pub. L. 92-178 Pub. L. 92–178, § 104(c)(2), (3), (d), added cls. (viii) to (x), respectively.
1967 Pub. L. 90-26 Pub. L. 90–26, § 3, inserted “or is operated under contract with the United States” after “the United States”.
1966 Pub. L. 89-809 Pub. L. 89–809 added cl. (vii).

Cited by 6

(C) Nonapplication of increases to energy percentage For purposes of energy property described in subparagraph (A)(ii), the energy percentage applicable to such property pursuant to such subparagraph shall not be increased or otherwise adjusted by any provision of this section.

Amended 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70513(e)(2), added subpar. (C).

(3) Energy property For purposes of this subpart, the term “energy property” means any property—

Amended 2004, 2008

2008 Pub. L. 110-343 Pub. L. 110–343, § 103(e)(1), in concluding provisions, struck out “The term ‘energy property’ shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).” before “Such term”.
2004 Pub. L. 108-357 Pub. L. 108–357, § 710(e), inserted at end of concluding provisions “Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.”

Cited by 7

(A) which is—

Cited by 7

(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,

Amended 2005

2005 Pub. L. 109-58 Pub. L. 109–58, § 1337(c), inserted “excepting property used to generate energy for the purposes of heating a swimming pool,” after “solar process heat,”.

Cited by 4

(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, or electrochromic glass which uses electricity to change its light transmittance properties in order to heat or cool a structure, but only with respect to property the construction of which begins before January 1, 2025,

Amended 2005, 2006, 2008, 2018, 2020, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(h), inserted “, or electrochromic glass which uses electricity to change its light transmittance properties in order to heat or cool a structure,” after “sunlight”.
2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(a)(2), substituted “January 1, 2025” for “January 1, 2024”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(a)(1)(B), substituted “January 1, 2024” for “January 1, 2022”.
2018 Pub. L. 115-123 Pub. L. 115–123, § 40411(a), substituted “property the construction of which begins before January 1, 2022” for “periods ending before January 1, 2017”.
2008 Pub. L. 110-343 Pub. L. 110–343, § 103(a)(1), substituted “January 1, 2017” for “January 1, 2009”.
2006 Pub. L. 109-432 Pub. L. 109–432, § 207(1), substituted “January 1, 2009” for “January 1, 2008”.
2005 Pub. L. 109-135 Pub. L. 109–135, § 412(n)(2), struck out “or” at end.
2005 Pub. L. 109-58 Pub. L. 109–58, § 1337(b), added cl. (ii). Former cl. (ii) redesignated (iii) relating to equipment used to produce, distribute, or use energy derived from a geothermal deposit.

Cited by 2

(iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,

Amended 2005

2005 Pub. L. 109-58 Pub. L. 109–58, § 1337(b), redesignated cl. (ii) as (iii) relating to equipment used to produce, distribute, or use energy derived from a geothermal deposit.
2005 Pub. L. 109-58 Pub. L. 109–58, § 1336(a), added cl. (iii) relating to qualified fuel cell property or qualified microturbine property.

Cited by 2

(iv) qualified fuel cell property or qualified microturbine property,

Amended 2005

2005 Pub. L. 109-135 Pub. L. 109–135, § 412(n)(1), redesignated cl. (iii), relating to qualified fuel cell property or qualified microturbine property, as (iv).

(v) combined heat and power system property,

Amended 2008

2008 Pub. L. 110-343 Pub. L. 110–343, § 103(c)(1), added cl. (v).

Cited by 1

(vi) qualified small wind energy property,

Amended 2008

2008 Pub. L. 110-343 Pub. L. 110–343, § 104(a), added cl. (vi).

Cited by 3

(vii) equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property the construction of which begins before January 1, 2035,

Amended 2008, 2018, 2020, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(b), substituted “January 1, 2035” for “January 1, 2024”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(a)(1)(B), substituted “January 1, 2024” for “January 1, 2022”.
2018 Pub. L. 115-123 Pub. L. 115–123, § 40411(a), substituted “property the construction of which begins before January 1, 2022” for “periods ending before January 1, 2017”.
2008 Pub. L. 110-343 Pub. L. 110–343, § 105(a), added cl. (vii).

Cited by 4

(viii) waste energy recovery property,

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 203(a), added cl. (viii).

(ix) energy storage technology,

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(1), added cls. (ix) to (xi).

Cited by 2

(x) qualified biogas property, or

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(1), added cls. (ix) to (xi).

(xi) microgrid controllers,

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(f)(1), added cls. (ix) to (xi).

(B)

(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,

Cited by 1

Amended 1971

1971 Pub. L. 92-178 Pub. L. 92–178, § 104(b), added subpar. (C).

(D) which meets the performance and quality standards (if any) which—

Amended 1981

1981 Pub. L. 97-34 Pub. L. 97–34, § 212(c), added subpar. (D).

(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and

(ii) are in effect at the time of the acquisition of the property.

Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.

(4) Special rule for property financed by tax-exempt bonds Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.

Amended 1969, 1981, 1986, 2009, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(m), amended par. (4) generally. Prior to amendment, par. (4) related to special rule for property financed by subsidized energy financing or industrial development bonds.
2009 Pub. L. 111-5 Pub. L. 111–5, § 1103(b)(1), added subpar. (D).
1986 Pub. L. 99-514 Pub. L. 99–514, § 1802(a)(9)(A), substituted “514(b)” for “514(c)” and “514(a)” for “514(b)”.
1981 Pub. L. 97-34 Pub. L. 97–34, § 214(a), inserted provision that, if any qualified rehabilitated building is used by the tax-exempt organization pursuant to a lease, this paragraph shall not apply to that portion of the basis of such building which is attributable to qualified rehabilitation expenditures.
1969 Pub. L. 91-172 Pub. L. 91–172, § 121(d)(2)(A), inserted provision relating to the percentage of the basis or cost of debt-financed property that may be considered in computing qualified investment under section 46(c) of this title.

Cited by 5

(5) Election to treat qualified facilities as energy property

Amended 1971, 1980, 1981, 1984, 2004, 2009

2009 Pub. L. 111-5 Pub. L. 111–5, § 1102(a), added par. (5).
2004 Pub. L. 108-357 Pub. L. 108–357, § 322(d)(2)(A)(iii), redesignated subsec. (a)(5) as (b).
2004 Pub. L. 108-357 Pub. L. 108–357, § 322(d)(2)(A)(ii), substituted “subsection (a)” for “this subsection”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 31(b), amended par. (5) generally, to extend its scope to encompass property used by foreign persons or entities and to create an exception for short-term leases by substituting provisions covered by subpars. (A) to (D) for former provisions which had directed that property used by the United States, any State or political subdivision thereof, any international organization, or any agency or instrumentality of any of the foregoing not be treated as section 38 property, that for purposes of that prohibition the International Telecommunications Satellite Consortium, the International Maritime Satellite Organization, and any successor organization of such Consortium or Organization not be treated as an international organization, and that if any qualified rehabilitated building were used by the governmental unit pursuant to a lease, this paragraph would not apply to that portion of the basis of such building attributable to qualified rehabilitation expenditures.
1981 Pub. L. 97-34 Pub. L. 97–34, § 214(b), inserted provision that, if any qualified rehabilitated building is used by the governmental unit pursuant to a lease, this paragraph shall not apply to that portion of the basis of such building which is attributable to qualified rehabilitation expenditures.
1980 Pub. L. 96-605 Pub. L. 96–605, § 109(a), included the International Maritime Satellite Organization or any successor organization within organizations not to be treated as international organizations.
1971 Pub. L. 92-178 Pub. L. 92–178, § 104(c)(1), inserted “(other than the International Telecommunications Satellite Consortium or any successor organization)” after “international organization”.

Cited by 12

(A) In general In the case of any qualified property which is part of a qualified investment credit facility—

(i) such property shall be treated as energy property for purposes of this section, and

(ii) the energy percentage with respect to such property shall be 6 percent.

Amended 1988, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(d)(1)(B), substituted “6 percent” for “30 percent”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(14)(A)–(C), substituted “168(h)(2)(C)” for “168(j)(4)(C)”, “168(h)(2)(A)(iii)” for “168(j)(4)(A)(iii)”, and “168(h)(2)(B)” for “168(j)(4)(B)”.

(B) Denial of production credit No credit shall be allowed under section 45 for any taxable year with respect to any qualified investment credit facility.

Amended 1986, 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(14)(D), substituted “168(i)(3)” for “168(j)(6)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(14)(E), substituted “168(h)(1)(C)(ii)” for “168(j)(3)(C)(ii)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1802(a)(5)(B), struck out cl. (iii) which provided that (I) in the case of any aircraft used under a qualifying lease (as defined in section 47(a)(7)(C)) and which is leased to a foreign person or entity before January 1, 1990, clause (i) shall be applied by substituting “3 years” for “6 months” and that (II) for purposes of applying section 47(a)(1) and (5)(B) there shall not be taken into account any period of a lease to which subclause (I) applies.

(C) Qualified investment credit facility For purposes of this paragraph, the term “qualified investment credit facility” means any facility—

Amended 2013

2013 Pub. L. 112-240 Pub. L. 112–240, § 407(b), amended subpar. (C) generally. Prior to amendment, text read as follows: “For purposes of this paragraph, the term ‘qualified investment credit facility’ means any of the following facilities if no credit has been allowed under section 45 with respect to such facility and the taxpayer makes an irrevocable election to have this paragraph apply to such facility:
“(i) Wind facilities.—Any qualified facility (within the meaning of section 45) described in paragraph (1) of section 45(d) if such facility is placed in service in 2009, 2010, 2011, or 2012.
“(ii) Other facilities.—Any qualified facility (within the meaning of section 45) described in paragraph (2), (3), (4), (6), (7), (9), or (11) of section 45(d) if such facility is placed in service in 2009, 2010, 2011, 2012, or 2013.”

Cited by 1

(i) which is a qualified facility (within the meaning of section 45) described in paragraph (1), (2), (3), (4), (6), (7), (9), or (11) of section 45(d),

(ii) which is placed in service after 2008 and the construction of which begins before January 1, 2025, and

Amended 2014, 2015, 2018, 2019, 2020, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13101(d), substituted “January 1, 2025” for “January 1, 2022”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 131(b), substituted “January 1, 2022” for “January 1, 2021”.
2019 Pub. L. 116-94 Pub. L. 116–94, § 127(b), substituted “January 1, 2021” for “January 1, 2018 (January 1, 2020, in the case of any facility which is described in paragraph (1) of section 45(d))”.
2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(350)(A), made technical amendment to directory language of Pub. L. 114–113, § 302(a). See 2015 Amendment note below.
2018 Pub. L. 115-123 Pub. L. 115–123, § 40409(b), substituted “January 1, 2018” for “January 1, 2017”.
2015 Pub. L. 114-113 Pub. L. 114–113, § 187(b), substituted “January 1, 2017” for “January 1, 2015”.
2015 Pub. L. 114-113 Pub. L. 114–113, § 302(a), as amended by Pub. L. 115–141, § 401(a)(350)(A), inserted “(January 1, 2020, in the case of any facility which is described in paragraph (1) of section 45(d))” before “, and”.
2014 Pub. L. 113-295 Pub. L. 113–295, § 155(b), substituted “January 1, 2015” for “January 1, 2014”.

(iii) with respect to which—

Textual readingALL OF= clause (iii) requirement met for facility

(I) no credit has been allowed under section 45, and

(II) the taxpayer makes an irrevocable election to have this paragraph apply.

(D) Qualified property For purposes of this paragraph, the term “qualified property” means property—

Amended 1986, 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(14)(F), substituted “paragraphs (5) and (6) of section 168(h)” for “paragraphs (8) and (9) of section 168(j)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1802(a)(4)(C), added subpar. (D) and redesignated former subpar. (D) as (E).

Cited by 2

(i) which is—

(I) tangible personal property, or

(II) other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment credit facility,

(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

(iii) which is constructed, reconstructed, erected, or acquired by the taxpayer, and

Amended 2013

2013 Pub. L. 112-240 Pub. L. 112–240, § 407(c)(1), added cls. (iii) and (iv).

(iv) the original use of which commences with the taxpayer.

Amended 2013

2013 Pub. L. 112-240 Pub. L. 112–240, § 407(c)(1), added cls. (iii) and (iv).

(E) Phaseout of credit for wind facilities In the case of any facility using wind to produce electricity which is placed in service before January 1, 2022, and treated as energy property by reason of this paragraph, the amount of the credit determined under this section (determined after the application of paragraphs (1) and (2) and without regard to this subparagraph) shall be reduced by—

Amended 1986, 1988, 2015, 2018, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13101(e)(2)(B), inserted “placed in service before January 1, 2022, and” before “treated as energy property” in introductory provisions.
2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(350)(B), made technical amendment to directory language of Pub. L. 114–113, § 302(b). See 2015 Amendment note below.
2018 Pub. L. 115-123 Pub. L. 115–123, § 40411(b)(3), inserted “which is treated as energy property by reason of this paragraph” after “using wind to produce electricity” in introductory provisions.
2015 Pub. L. 114-113 Pub. L. 114–113, § 302(b), as amended by Pub. L. 115–141, § 401(a)(350)(B), added subpar. (E).
1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(14)(G), amended subpar. (E) generally, substituting “provision” for “provisions” and “168(h)” for “168(j)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1802(a)(4)(C), added subpar. (D) and redesignated former subpar. (D) as (E).

Cited by 1

(i) in the case of any facility the construction of which begins after December 31, 2016, and before January 1, 2018, 20 percent,

(ii) in the case of any facility the construction of which begins after December 31, 2017, and before January 1, 2019, 40 percent,

(iii) in the case of any facility the construction of which begins after December 31, 2018, and before January 1, 2020, 60 percent, and

(iv) in the case of any facility the construction of which begins after December 31, 2019, and before January 1, 2022, 40 percent.

Amended 2019, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 131(c)(2), substituted “January 1, 2022” for “January 1, 2021”.
2019 Pub. L. 116-94 Pub. L. 116–94, § 127(c)(2)(B), added cl. (iv).

(F) Qualified offshore wind facilities

Amended 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 204(a), added subpar. (F).

(i) In general In the case of any qualified offshore wind facility, subparagraph (E) shall not apply.

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13101(e)(3), substituted “offshore wind facility, subparagraph (E) shall not apply.” for “offshore wind facility—
“(I) subparagraph (C)(ii) shall be applied by substituting ‘January 1, 2026’ for ‘January 1, 2022’,
“(II) subparagraph (E) shall not apply, and
“(III) for purposes of this paragraph, section 45(d)(1) shall be applied by substituting ‘January 1, 2026’ for ‘January 1, 2022’.”

(ii) Qualified offshore wind facility For purposes of this subparagraph, the term “qualified offshore wind facility” means a qualified facility (within the meaning of section 45) described in paragraph (1) of section 45(d) (determined without regard to any date by which the construction of the facility is required to begin) which is located in the inland navigable waters of the United States or in the coastal waters of the United States.

(6) Phaseout for certain energy property In the case of any qualified fuel cell property, qualified small wind property, or energy property described in clause (i) or clause (ii) of paragraph (3)(A) the construction of which begins after December 31, 2019, and which is placed in service before January 1, 2022, the energy percentage determined under paragraph (2) shall be equal to 26 percent.

Amended 1971, 2015, 2018, 2020, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(c), added par. (6) and struck out former par. (6) which related to phaseout for solar energy property the construction of which began before Jan. 1, 2024.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(1)(A)(i), substituted “January 1, 2024, the energy percentage” for “January 1, 2022, the energy percentage” in introductory provisions.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(1)(A)(ii), substituted “January 1, 2023” for “January 1, 2021”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(1)(A)(iii), substituted “after December 31, 2022, and before January 1, 2024” for “after December 31, 2020, and before January 1, 2022”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(1)(B), substituted “begins before January 1, 2024, and which is not placed in service before January 1, 2026” for “begins before January 1, 2022, and which is not placed in service before January 1, 2024”.
2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(21), substituted “energy property” for “property energy property”.
2015 Pub. L. 114-113 Pub. L. 114–113, § 303(b), added par. (6).
1971 Pub. L. 92-178 Pub. L. 92–178, § 104(e), substituted provisions for treatment of livestock (other than horses) acquired by the taxpayer as section 38 property, with exception provision for reduction of acquisition cost by amount equal to amount realized on sale or other disposition under certain circumstances, and for nontreatment of horses as section 38 property for former provision that livestock shall not be treated as section 38 property.

Cited by 1

(7) Phaseout for certain energy property In the case of any energy property described in clause (vii) of paragraph (3)(A), the energy percentage determined under paragraph (2) shall be equal to—

Amended 1971, 2018, 2020, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(d)(2), added par. (7).
2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(c), struck out par. (7) which related to phaseout for any qualified fuel cell property, qualified small wind property, waste energy recovery property, and certain other energy property.
2020 Pub. L. 116-260 Pub. L. 116–260, § 203(c)(2), substituted “certain other” for “fiber-optic solar, qualified fuel cell, and qualified small wind” in heading.
2018 Pub. L. 115-123 Pub. L. 115–123, § 40411(b)(1), added par. (7).
1971 Pub. L. 92-178 Pub. L. 92–178, §§ 103, 104(f)(1), (g), added pars. (7) to (9), respectively.

Cited by 1

(A) in the case of any property the construction of which begins before January 1, 2033, and which is placed in service after December 31, 2021, 6 percent,

Amended 1978, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 203(c)(1), inserted “waste energy recovery property,” after “qualified small wind property,” in introductory provisions.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(2)(A)(i), substituted “January 1, 2023” for “January 1, 2021”.
2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(2)(A)(ii), substituted “after December 31, 2022, and before January 1, 2024” for “after December 31, 2020, and before January 1, 2022”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 312(c)(3), struck out “(other than pretermination property)” after “Property”.

(B) in the case of any property the construction of which begins after December 31, 2032, and before January 1, 2034, 5.2 percent, and

Amended 1978, 1980, 2020

2020 Pub. L. 116-260 Pub. L. 116–260, § 132(b)(2)(B), substituted “January 1, 2026” for “January 1, 2024”.
1980 Pub. L. 95-600 Pub. L. 95–600, § 312(c)(2), as amended by Pub. L. 96–222, § 103(a)(2)(A), substituted “ ‘described in section 50 (as in effect before its repeal by the Revenue Act of 1978’ ” for “ ‘described in section 50’ ”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 312(c)(2), struck out “described in section 50” after “with respect to property”. See 1980 Amendment note above.

(C) in the case of any property the construction of which begins after December 31, 2033, and before January 1, 2035, 4.4 percent.

(8) Interconnection property

Amended 1971, 1976, 1978, 1981, 1990, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(j), added par. (8).
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(6)(A), struck out par. (8) “Amortized property” which read as follows: “Any property with respect to which an election under section 167(k), 184, or 188 applies shall not be treated as section 38 property.”
1981 Pub. L. 97-34 Pub. L. 97–34, § 212(d)(2)(A), substituted “or 188” for “188, or 191”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 315(c), substituted “188, or 191” for “or 188”.
1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1901(b)(11)(A), 2112(a)(1), struck out “169,” after “section 167(k),”, “187,” before “or 188 applies”, and provisions relating to the limitation of the applicability of this paragraph on property to which section 169 applies.
1971 Pub. L. 92-178 Pub. L. 92–178, §§ 103, 104(f)(1), (g), added pars. (7) to (9), respectively.

Cited by 2

(A) In general For purposes of determining the credit under subsection (a), energy property shall include amounts paid or incurred by the taxpayer for qualified interconnection property in connection with the installation of energy property (as defined in paragraph (3)) which has a maximum net output of not greater than 5 megawatts (as measured in alternating current), to provide for the transmission or distribution of the electricity produced or stored by such property, and which are properly chargeable to the capital account of the taxpayer.

Cited by 1

(B) Qualified interconnection property The term “qualified interconnection property” means, with respect to an energy project which is not a microgrid controller, any tangible property—

Cited by 1

(i) which is part of an addition, modification, or upgrade to a transmission or distribution system which is required at or beyond the point at which the energy project interconnects to such transmission or distribution system in order to accommodate such interconnection,

(ii) either—

(I) which is constructed, reconstructed, or erected by the taxpayer, or

(II) for which the cost with respect to the construction, reconstruction, or erection of such property is paid or incurred by such taxpayer, and

(iii) the original use of which, pursuant to an interconnection agreement, commences with a utility.

(C) Interconnection agreement The term “interconnection agreement” means an agreement with a utility for the purposes of interconnecting the energy property owned by such taxpayer to the transmission or distribution system of such utility.

(D) Utility For purposes of this paragraph, the term “utility” means the owner or operator of an electrical transmission or distribution system which is subject to the regulatory authority of a State or political subdivision thereof, any agency or instrumentality of the United States, a public service or public utility commission or other similar body of any State or political subdivision thereof, or the governing or ratemaking body of an electric cooperative.

Textual readingALL OF= a utility

“the owner or operator of an electrical transmission or distribution system”

“which is subject to the regulatory authority of a State or political subdivision thereof, any agency or instrumentality of the United States, a public service or public utility commission or other similar body of any State or political subdivision thereof, or the governing or ratemaking body of an electric cooperative”

(E) Special rule for interconnection property In the case of expenses paid or incurred for interconnection property, amounts otherwise chargeable to capital account with respect to such expenses shall be reduced under rules similar to the rules of section 50(c).

(9) Increased credit amount for energy projects

Amended 1971, 1981, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(k), added par. (9).
1981 Pub. L. 97-34 Pub. L. 97–34, § 211(a)(2), struck out par. (9) which set out a special rule for the depreciation of railroad track.
1971 Pub. L. 92-178 Pub. L. 92–178, §§ 103, 104(f)(1), (g), added pars. (7) to (9), respectively.

Cited by 3

(A) In general

(i) Rule In the case of any energy project which satisfies the requirements of subparagraph (B), the amount of the credit determined under this subsection (determined after the application of paragraphs (1) through (8) and paragraph (15) and without regard to this clause) shall be equal to such amount multiplied by 5.

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13204(c)(2), inserted “and paragraph (15)” after “paragraphs (1) through (8)”.

Cited by 1

(ii) Energy project defined For purposes of this subsection, the term “energy project” means a project consisting of one or more energy properties that are part of a single project.

Cited by 2

(B) Project requirements A project meets the requirements of this subparagraph if it is one of the following:

Cited by 5

(i) A project with a maximum net output of less than 1 megawatt of electrical (as measured in alternating current) or thermal energy.

(ii) A project the construction of which begins before the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (10)(A) and (11).

(iii) A project which satisfies the requirements of paragraphs (10)(A) and (11).

Cited by 3

(10) Prevailing wage requirements

Amended 1978, 1983, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(k), added pars. (10) and (11).
1983 Pub. L. 97-448 Pub. L. 97–448, § 202(c), amended directory language of Pub. L. 96–223, § 223(a)(1), to correct an error, and did not involve any change in text. See 1980 Amendment note below.
1978 Pub. L. 95-618 Pub. L. 95–618, § 301(d)(2), added par. (10).

Cited by 2

(A) In general The requirements described in this subparagraph with respect to any energy project are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—

Amended 1980

1980 Pub. L. 96-223 Pub. L. 96–223, § 223(a)(1), as amended by Pub. L. 97–448, § 202(c), provided that “petroleum or petroleum products” does not include petroleum coke or petroleum pitch.

Cited by 6

(i) the construction of such energy project, and

(ii) for the 5-year period beginning on the date such project is originally placed in service, the alteration or repair of such project,

Cited by 3

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 project 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. Subject to subparagraph (C), for purposes of any determination under paragraph (9)(A)(i) for the taxable year in which the energy project is placed in service, the taxpayer shall be deemed to satisfy the requirement under clause (ii) at the time such project is placed in service.

(B) Correction and penalty related to failure to satisfy wage requirements Rules similar to the rules of section 45(b)(7)(B) shall apply.

Amended 1980

1980 Pub. L. 96-222 Pub. L. 96–222, § 108(c)(6), substituted “5” for “51”.

Cited by 1

(C) Recapture The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under this subsection by reason of this paragraph with respect to any project which does not satisfy the requirements under subparagraph (A) (after application of subparagraph (B)) for the period described in clause (ii) of subparagraph (A) (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a).

Cited by 8

(11) Apprenticeship requirements Rules similar to the rules of section 45(b)(8) shall apply.

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(k), added pars. (10) and (11).

Cited by 2

(12) Domestic content bonus credit amount

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(l), added pars. (12) and (13).

Cited by 4

(A) In general In the case of any energy project which satisfies the requirement under subparagraph (B), for purposes of applying paragraph (2) with respect to such property, the energy percentage shall be increased by the applicable credit rate increase.

Cited by 1

(B) Requirement Rules similar to the rules of section 45(b)(9)(B) shall apply.

Cited by 1

(i) in the case of an energy project which does not satisfy the requirements of paragraph (9)(B), 2 percentage points, and

(ii) in the case of an energy project which satisfies the requirements of paragraph (9)(B), 10 percentage points.

(13) Phaseout for elective payment In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, rules similar to the rules of section 45(b)(10) shall apply.

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(l), added pars. (12) and (13).

(14) Increase in credit rate for energy communities

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(o), added par. (14).

Cited by 2

(A) In general In the case of any energy project that is placed in service within an energy community (as defined in section 45(b)(11)(B), as applied by substituting “energy project” for “qualified facility” each place it appears), for purposes of applying paragraph (2) with respect to energy property which is part of such project, the energy percentage shall be increased by the applicable credit rate increase.

Cited by 1

(B) Applicable credit rate increase For purposes of subparagraph (A), the applicable credit rate increase shall be equal to—

(i) in the case of any energy project which does not satisfy the requirements of paragraph (9)(B), 2 percentage points, and

(ii) in the case of any energy project which satisfies the requirements of paragraph (9)(B), 10 percentage points.

(15) Election to treat clean hydrogen production facilities as energy property

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13204(c)(1), added par. (15). Former par. (15) redesignated (16).
2022 Pub. L. 117-169 Pub. L. 117–169, § 13102(p), added par. (15).

Cited by 7

(A) In general In the case of any qualified property (as defined in paragraph (5)(D)) which is part of a specified clean hydrogen production facility—

(i) such property shall be treated as energy property for purposes of this section, and

(ii) the energy percentage with respect to such property is—

Cited by 3

(I) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (A) of section 45V(b)(2), 1.2 percent,

(II) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (B) of such section, 1.5 percent,

(III) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (C) of such section, 2 percent, and

(IV) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in subparagraph (D) of such section, 6 percent.

(B) Denial of production credit No credit shall be allowed under section 45V or section 45Q for any taxable year with respect to any specified clean hydrogen production facility or any carbon capture equipment included at such facility.

(C) Specified clean hydrogen production facility For purposes of this paragraph, the term “specified clean hydrogen production facility” means any qualified clean hydrogen production facility (as defined in section 45V(c)(3))—

“any qualified clean hydrogen production facility (as defined in section 45V(c)(3))—” Opening words

Textual readingALL OF= a specified clean hydrogen production facility

(i) which is placed in service after December 31, 2022,

(ii) with respect to which—

Textual readingALL OF= facility meets clause (ii)

(I) no credit has been allowed under section 45V or 45Q, and

(II) the taxpayer makes an irrevocable election to have this paragraph apply, and

Cited by 8

(iii) for which an unrelated third party has verified (in such form or manner as the Secretary may prescribe) that such facility produces hydrogen through a process which results in lifecycle greenhouse gas emissions which are consistent with the hydrogen that such facility was designed and expected to produce under subparagraph (A)(ii).

“As the Secretary may prescribe” leaves this to Treasury. Cited by Reg. § 1.48-15(d)(6)(v)

Cited by 1

Cited by 3

(D) Qualified clean hydrogen For purposes of this paragraph, the term “qualified clean hydrogen” has the meaning given such term by section 45V(c)(2).

(E) Regulations The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance which recaptures so much of any credit allowed under this section as exceeds the amount of the credit which would have been allowed if the expected production were consistent with the actual verified production (or all of the credit so allowed in the absence of such verification).

Cited by 2

(16) Regulations and guidance The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.

Amended 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13204(c)(1), redesignated par. (15) as (16).

(b) Certain progress expenditure rules made applicable Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).

Amended 1982, 1984, 1986, 2004

2004 Pub. L. 108-357 Pub. L. 108–357, § 322(d)(2)(A)(iii), redesignated subsec. (a)(5) as (b).
2004 Pub. L. 108-357 Pub. L. 108–357, § 322(d)(2)(A)(i), struck out heading and text of subsec. (b). Text read as follows:
2004 “(1) In general.—For purposes of section 46, the reforestation credit for any taxable year is 10 percent of the portion of the amortizable basis of any qualified timber property which was acquired during such taxable year and which is taken into account under section 194 (after the application of section 194(b)(1)).
2004 “(2) Definitions.—For purposes of this subpart, the terms ‘amortizable basis’ and ‘qualified timber property’ have the respective meanings given to such terms by section 194.”
1986 Pub. L. 99-514 Pub. L. 99–514, § 1809(e)(1), inserted “Such term includes any section 38 property the reconstruction of which is completed by the taxpayer, but only with respect to that portion of the basis which is properly attributable to such reconstruction.”
1986 Pub. L. 99-514 Pub. L. 99–514, § 1809(e)(2), in introductory provisions substituted “the first sentence of paragraph (1)” for “paragraph (1)”, in subpar. (B) substituted “3 months after” for “3 months of”, in closing provisions substituted “used under the leaseback (or lease) referred to in subparagraph (B)” for “used under the lease” and inserted “The preceding sentence shall not apply to any property if the lessee and lessor of such property make an election under this sentence. Such an election, once made, may be revoked only with the consent of the Secretary.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 114(a), amended subsec. (b) generally, substituting a general definition of “new section 38 property” for definitions which made reference to property constructed, reconstructed or erected after December 31, 1961, and adding pars. (2) and (3).
1982 Pub. L. 97-248 Pub. L. 97–248, § 209(c), inserted provision that for purposes of determining whether section 38 property subject to a lease is new section 38 property, such property shall be treated as originally placed in service not earlier than the date such property is used under the lease, but only if such property is leased within 3 months after such property is placed in service.

Cited by 6

(d) Coordination with Department of Treasury grants In the case of any property with respect to which the Secretary makes a grant under section 1603 of the American Recovery and Reinvestment Tax Act of 2009—

Amended 1964, 1966, 1971, 1978, 1982, 1984, 1986, 2009

2009 Pub. L. 111-5 Pub. L. 111–5, § 1104, added subsec. (d).
1986 Pub. L. 99-514 Pub. L. 99–514, § 701(e)(4)(C), inserted “(as in effect on the day before the date of the enactment of the Tax Reform Act of 1986)”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1511(c)(3), substituted “the underpayment rate” for “the rate” in closing provisions.
1984 Pub. L. 98-369 Pub. L. 98–369, § 431(c), added par. (6).
1982 Pub. L. 97-248 Pub. L. 97–248, § 205(a)(4), added par. (5).
1978 Pub. L. 95-600 Pub. L. 95–600, § 703(a)(4), substituted “section 57(c)(1)(B)” for “section 57(c)(2)”.
1971 Pub. L. 92-178 Pub. L. 92–178, § 108(b) and (c), substituted “section 46(d)(1)” for “section 46(d)”; and designated as par. (1) the present first sentence, redesignated as subpars. (A) and (B) provisions formerly designated cls. (1) and (2), again substituted “section 46(d)(1)” for “section 46(d)” in par. (1) and inserted “(other than property described in paragraph (4))” in par. (1), added pars. (2) and (4), incorporated provisions of former second, third, and fourth sentences in provisions designated as par. (3), substituted in par. (3) “the lessee shall be treated for all purposes of this subpart as having acquired a fractional portion of such property equal to the fraction determined under paragraph (2)(B) with respect to such property” for “the lessee shall be treated for all purposes of this subpart as having acquired such property”, and struck out former fifth and sixth sentences respecting election regarding treatment of leases of suspension period property and section 38 property. See Effective Date of 1971 Amendment note below.
1966 Pub. L. 89-800 Pub. L. 89–800, § 1(b), inserted provisions covering the treatment of suspension period property, and the elections to be deemed made in connection therewith.
1964 Pub. L. 88-272 Pub. L. 88–272, § 203(a)(3)(A), (b), substituted “except as provided in paragraph (2)” for “if such property was constructed by the lessor (or by a corporation which controls or is controlled by the lessor within the meaning of section 368(c))” in par. (1), “if such property is leased by a corporation which is a member of an affiliated group (within the meaning of section 46(a)(5) to another corporation which is a member of the same affiliated group” for “if paragraph (1) does not apply” in par. (2), and deleted provisions which stated that if a lessor made an election under this subsection, subsec. (g) would not apply with respect to such property, and deductions otherwise allowable under section 162 to the lessee for amounts paid the lessor would be adjusted consistent with subsec. (g).

Cited by 12

(1) Denial of production and investment credits No credit shall be determined under this section or section 45 with respect to such property for the taxable year in which such grant is made or any subsequent taxable year.

Amended 1975, 1976, 1978, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 474(o)(11), substituted “section 38(c)(3)(B)” for “section 46(a)(6)”.
1978 Pub. L. 95-600 Pub. L. 95–600, § 703(a)(3), substituted “section 46(a)(6)” for “section 46(a)(5)”.
1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
1975 Pub. L. 94-12 Pub. L. 94–12, § 302(c)(3), substituted “section 46(e)(1)” for “section 46(d)(1)”.

(2) Recapture of credits for progress expenditures made before grant If a credit was determined under this section with respect to such property for any taxable year ending before such grant is made—

Amended 1969

1969 Pub. L. 91-172 Pub. L. 91–172, § 401(e)(4), substituted reference to a component member of a controlled group for reference to a member of an affiliated group.

(A) the tax imposed under subtitle A on the taxpayer for the taxable year in which such grant is made shall be increased by so much of such credit as was allowed under section 38,

Amended 1975, 1976

1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
1975 Pub. L. 94-12 Pub. L. 94–12, § 302(c)(3), substituted “section 46(e)(1)” for “section 46(d)(1)”.

(B) the general business carryforwards under section 39 shall be adjusted so as to recapture the portion of such credit which was not so allowed, and

(C) the amount of such grant shall be determined without regard to any reduction in the basis of such property by reason of such credit.

(3) Treatment of grants Any such grant—

Amended 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(23)(A), struck out “shall” after “grant” in introductory provisions.

(A) shall not be includible in the gross income or alternative minimum taxable income of the taxpayer, but

Amended 2014, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(23)(B), inserted “shall” before “not”.
2014 Pub. L. 113-295 Pub. L. 113–295, § 209(d), inserted “or alternative minimum taxable income” after “includible in the gross income”.

(B) shall be taken into account in determining the basis of the property to which such grant relates, except that the basis of such property shall be reduced under section 50(c) in the same manner as a credit allowed under subsection (a).

(e) Special rules for certain solar and wind facilities placed in service in connection with low-income communities

§ 1.48(e)-0 Table of contents.§ 1.48(e)-1 Low-Income Communities Bonus Credit Program.

Amended 1982, 2022

2022 Pub. L. 117-169 Pub. L. 117–169, § 13103(a), added subsec. (e).
1982 Pub. L. 97-354 Pub. L. 97–354, § 5(a)(7), struck out subsec. (e) relating to apportionment among shareholders of qualified investments by an electing small business corporation.

Cited by 6

(1) In general In the case of any qualified solar and wind facility with respect to which the Secretary makes an allocation of environmental justice solar and wind capacity limitation under paragraph (4)—

Cited by 3

(A) the energy percentage otherwise determined under paragraph (2) or (5) of subsection (a) with respect to any eligible property which is part of such facility shall be increased by—

(i) in the case of a facility described in subclause (I) of paragraph (2)(A)(iii) and not described in subclause (II) of such paragraph, 10 percentage points, and

(ii) in the case of a facility described in subclause (II) of paragraph (2)(A)(iii), 20 percentage points, and

(B) the increase in the credit determined under subsection (a) by reason of this subsection for any taxable year with respect to all property which is part of such facility shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this subparagraph) as—

(i) the environmental justice solar and wind capacity limitation allocated to such facility, bears to

(ii) the total megawatt nameplate capacity of such facility, as measured in direct current.

(2) Qualified solar and wind facility For purposes of this subsection—

(A) In general The term “qualified solar and wind facility” means any facility—

“any facility—” Opening words

Textual readingALL OF= a qualified solar and wind facility

(i) which generates electricity solely from property described in section 45(d)(1) or in clause (i) or (vi) of subsection (a)(3)(A),

(ii) which has a maximum net output of less than 5 megawatts (as measured in alternating current), and

Cited by 1

(iii) which—

Textual readingANY OF= meets clause (iii) location or project test

(I) is located in a low-income community (as defined in section 45D(e)) or on Indian land (as defined in section 2601(2) of the Energy Policy Act of 1992 (25 U.S.C. 3501(2))), or

Cited by 3

(II) is part of a qualified low-income residential building project or a qualified low-income economic benefit project.

Cited by 2

Cited by 4

Cited by 2

(B) Qualified low-income residential building project A facility shall be treated as part of a qualified low-income residential building project if—

Cited by 5

(i) such facility is installed on a residential rental building which participates in a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (34 U.S.C. 12491(a)(3)), [OLRC note: So in original. Another closing parenthesis probably should precede the comma.] a housing assistance program administered by the Department of Agriculture under title V of the Housing Act of 1949, a housing program administered by a tribally designated housing entity (as defined in section 4(22) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(22))) or such other affordable housing programs as the Secretary may provide, and

Cited by 3

(ii) the financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building.

Cited by 1

(C) Qualified low-income economic benefit project A facility shall be treated as part of a qualified low-income economic benefit project if at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of—

Cited by 4

(i) less than 200 percent of the poverty line (as defined in section 36B(d)(3)(A)) applicable to a family of the size involved, or

Cited by 2

(ii) less than 80 percent of area median gross income (as determined under section 142(d)(2)(B)).

(D) Financial benefit For purposes of subparagraphs (B) and (C), electricity acquired at a below-market rate shall not fail to be taken into account as a financial benefit.

(3) Eligible property For purposes of this section, the term “eligible property” means energy property which—

(A) is part of a facility described in section 45(d)(1) for which an election was made under subsection (a)(5), or

(B) is described in clause (i) or (vi) of subsection (a)(3)(A),

including energy storage technology (as described in subsection (a)(3)(A)(ix)) installed in connection with such energy property.

(4) Allocations

Cited by 2

(A) In general Not later than 180 days after the date of enactment of this subsection, the Secretary shall establish a program to allocate amounts of environmental justice solar and wind capacity limitation to qualified solar and wind facilities. In establishing such program and to carry out the purposes of this subsection, the Secretary shall provide procedures to allow for an efficient allocation process, including, when determined appropriate, consideration of multiple projects in a single application if such projects will be placed in service by a single taxpayer.

Cited by 1

(B) Limitation The amount of environmental justice solar and wind capacity limitation allocated by the Secretary under subparagraph (A) during any calendar year shall not exceed the annual capacity limitation with respect to such year.

(C) Annual capacity limitation For purposes of this paragraph, the term “annual capacity limitation” means 1.8 gigawatts of direct current capacity for each of calendar years 2023 and 2024, and zero thereafter.

Cited by 1

(D) Carryover of unused limitation If the annual capacity limitation for any calendar year exceeds the aggregate amount allocated for such year under this paragraph, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2024 except as provided in section 48E(h)(4)(D)(ii).

Cited by 2

(E) Placed in service deadline

(i) In general Paragraph (1) shall not apply with respect to any property which is placed in service after the date that is 4 years after the date of the allocation with respect to the facility of which such property is a part.

Cited by 1

(ii) Application of carryover Any amount of environmental justice solar and wind capacity limitation which expires under clause (i) during any calendar year shall be taken into account as an excess described in subparagraph (D) (or as an increase in such excess) for such calendar year, subject to the limitation imposed by the last sentence of such subparagraph.

(5) Recapture The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under subsection (a) by reason of this subsection with respect to any property which ceases to be property eligible for such increase (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a). To the extent provided by the Secretary, such recapture may not apply with respect to any property if, within 12 months after the date the taxpayer becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such increase, the eligibility of such property for such increase is restored. The preceding sentence shall not apply more than once with respect to any facility.