In detail

Definitions

Notice 2023-18 defined the terms “qualifying advanced energy project,” “special advanced energy project,” “eligible property,” “placed in service,” “industrial facility,” “manufacturing facility,” and “recycling facility.” Notice 2023-44 defines the term “Section 48C facility” as the eligible property that constitutes the qualified investment in a qualifying advanced energy project.

Section 45X provides an advanced manufacturing production credit based on “eligible components” produced by a taxpayer and sold to an unrelated person. Property produced at a facility (Section 45X facility) for which any part of the basis is taken into account for the Section 48C credit after August 16, 2022, is not an eligible component. Notice 2023-44 provides that all tangible property that comprises an independently functioning production unit that produces one or more eligible components will be treated as a single Section 45X facility.

Observation:  Given the interaction between Sections 48C and 45X, taxpayers seeking to claim a Section 45X credit should review the definitions of “facility.” Facilities eligible for a credit under Section 48C are likely to engage in production that is eligible for a Section 45X credit. Taxpayers should conduct modeling to evaluate which credit would be most advantageous.

Appendix A of Notice 2023-44 further defines “qualifying advanced manufacturing facility” and identifies three categories of projects: clean energy manufacturing and recycling, greenhouse gas emission reduction, and critical materials.

Placed in service

Qualified investment for purposes of the Section 48C credit is the basis of eligible property a taxpayer places in service during a tax year that is part of a qualifying advanced energy project. Notice 2023-44 provides that property is placed in service in the earlier of (1) the tax year in which the property’s depreciable period begins or (2) the tax year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function. However, property placed in service before it has been awarded an allocation is not eligible for the Section 48C credit.

Concept papers and applications

A taxpayer that wants to apply for a Section 48C(e) allocation in the first round must first, between June 30 and July 31, 2023, submit a concept paper to DOE through an “eXCHANGE portal.” Appendix B of Notice 2023-44 describes the required information and format of a concept paper. DOE reviews the concept paper and issues a letter of encouragement or discouragement. The taxpayer then determines whether to submit a Section 48C(e) application through the portal.

Notice 2023-18 described the initial identifying information required on the application. Appendix B of Notice 2023-44 provides detailed information on the form and content of the application for each category of qualifying advanced energy project.

In reviewing the application, DOE will apply selection criteria specified in Section 48C: commercial viability, job creation, impact on reducing pollution, potential for technological innovation, cost of generating or storing energy and reducing pollution, and time from certification to completion. Notice 2023-44 advises that, in implementing these criteria, DOE will evaluate projects based on the technical review criteria of commercial viability, greenhouse gas emissions impact, strengthening US supply chains and domestic manufacturing, and workforce and community engagement.

Appendix B indicates that, in evaluating clean energy manufacturing and recycling projects, DOE will prioritize the following project areas: clean hydrogen, electric grid, electric heat pumps, electric vehicles, nuclear energy, solar energy, sustainable aviation fuels, and wind energy.

Observation: Taxpayers should evaluate the consistency of their projects with DOE’s review criteria and project priorities.

After reviewing an application, DOE will make a recommendation to the IRS, which makes the final decision and notifies the taxpayer. Notice 2023-44 reiterates, with some modifications, the Notice 2023-18 description of the post-approval certification process and requirements.

Notice 2023-18 describes requirements for taxpayers to provide notice of a significant change in plans after submitting a concept paper or application and the effect of these changes. Notice 2023-44 provides the procedures to provide this notification through the eXCHANGE portal.

Projects located in energy communities

Notice 2023-44 provides that a Section 48C facility is located within a coal closure energy community census tract if 50% or more of its square footage is located in the census tract. DOE will determine if a project is located in an energy community census tract and advise IRS in its approval recommendation. Notice 2023-44, Appendix C, identifies coal closure energy community census tracts.

Observation: Appendix C appears to be identical to Appendix C of Notice 2023-29, which provided interim guidance on energy communities. For additional information on energy communities, see the PwC Insight IRS provides preliminary guidance on energy community bonus credit.

Disclosure of taxpayer information

Notice 2023-18 advised that, as required by Section 48C, the IRS will publish the identity of taxpayers receiving a Section 48C credit allocation and the amount allocated to a certified project. Notice 2023-44 states that taxpayers will be asked for consent to disclosure of additional information, such as the location and a description of the Section 48C facility. Refusing consent will not affect the taxpayer’s allocation application.