§48E — Title 26 Internal Revenue Code | U.S. Code

Summary

Businesses that invest in zero-emission power plants or energy storage can claim a tax credit based on the cost of the project. The base credit is 6 percent of the qualified investment. A higher rate applies to small projects under 1 megawatt and to projects that meet prevailing wage and apprenticeship rules. The credit grows by up to 10 percentage points for projects built in energy communities, and by another 10 or 20 points for small projects in low-income communities or on Indian land that receive a special capacity allocation from the IRS. Fuel cell projects get a flat 30 percent rate. The facility must be placed in service after December 31, 2024, and its expected greenhouse gas emissions must be zero or less. A 2025 law tightened the rules: wind and solar property placed in service after December 31, 2027 no longer qualifies (though energy storage at those sites still can), and projects that start construction after December 31, 2025 lose the credit if they get material help from a prohibited foreign entity. Specified foreign entities and foreign-influenced companies cannot claim the credit at all. These changes generally apply to tax years beginning after July 4, 2025.

Title 26, §48E

Internal Revenue Code — Source: USLM XML via OLRC

(a)(1)For purposes of section 46, the clean electricity investment credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to—

(A)any qualified facility, and

(B)any energy storage technology.

(2)(A)Subject to paragraph (3)—

(i)In the case of any qualified facility which is not described in subclause (I) or (II) of clause (ii) and does not satisfy the requirements described in subclause (III) of such clause, the applicable percentage shall be 6 percent.

(ii)In the case of any qualified facility—

(I)with a maximum net output of less than 1 megawatt (as measured in alternating current),

(II)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 (3) and (4) of subsection (d), or

(III)which—

(aa)satisfies the requirements of subsection (d)(3), and

(bb)with respect to the construction of such facility, satisfies the requirements of subsection (d)(4),

(B)Subject to paragraph (3)—

(i)In the case of any energy storage technology which is not described in subclause (I) or (II) of clause (ii) and does not satisfy the requirements described in subclause (III) of such clause, the applicable percentage shall be 6 percent.

(ii)In the case of any energy storage technology—

(I)with a capacity of less than 1 megawatt,

(II)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 (3) and (4) of subsection (d), or

(III)which—

(aa)satisfies the requirements of subsection (d)(3), and

(bb)with respect to the construction of such property, satisfies the requirements of subsection (d)(4),

(3)(A)(i)In the case of any qualified investment with respect to a qualified facility or with respect to energy storage technology which is placed in service within an energy community (as defined in section 45(b)(11)(B), as applied without regard to clause (iv) thereof), for purposes of applying paragraph (2) with respect to such property or investment, the applicable percentage shall be increased by the applicable credit rate increase.

(ii)For purposes of clause (i), the applicable credit rate increase shall be an amount equal to—

(I)in the case of any qualified investment with respect to a qualified facility described in paragraph (2)(A)(i) or with respect to energy storage technology described in paragraph (2)(B)(i), 2 percentage points, and

(II)in the case of any qualified investment with respect to a qualified facility described in paragraph (2)(A)(ii) or with respect to energy storage technology described in paragraph (2)(B)(ii), 10 percentage points.

(B)Rules similar to the rules of section 48(a)(12) shall apply, except that, for purposes of subparagraph (B) of such section and the application of rules similar to the rules of section 45(b)(9)(B), the adjusted percentage (as determined under section 45(b)(9)(C)) shall be determined as follows:

(i)In the case of any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins before June 16, 2025, 40 percent (or, in the case of a qualified facility which is an offshore wind facility, 20 percent).

(ii)In the case of any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins on or after June 16, 2025, and before January 1, 2026, 45 percent (or, in the case of a qualified facility which is an offshore wind facility, 27.5 percent).

(iii)In the case of any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during calendar year 2026, 50 percent (or, in the case of a qualified facility which is an offshore wind facility, 35 percent).

(iv)In the case of any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins after December 31, 2026, 55 percent.

(b)(1)For purposes of subsection (a), the qualified investment with respect to any qualified facility for any taxable year is the sum of—

(A)the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of a qualified facility, plus

(B)the amount of any expenditures which are—

(i)paid or incurred by the taxpayer for qualified interconnection property—

(I)in connection with a qualified facility which has a maximum net output of not greater than 5 megawatts (as measured in alternating current), and

(II)placed in service during the taxable year of the taxpayer, and

(ii)properly chargeable to capital account of the taxpayer.

(2)For purposes of this section, the term “qualified property” means property—

(A)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 facility,

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

(C)(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.

(3)(A)For purposes of this section, the term “qualified facility” means a facility—

(i)which is used for the generation of electricity,

(ii)which is placed in service after December 31, 2024, and

(iii)for which the anticipated greenhouse gas emissions rate (as determined under subparagraph (B)(ii)) is not greater than zero.

(B)(i)Rules similar to the rules of section 45Y(b)(1)(C) shall apply for purposes of this paragraph.

(ii)Rules similar to the rules of section 45Y(b)(2) shall apply for purposes of this paragraph.

(C)The term “qualified facility” shall not include any facility for which—

(i)a renewable electricity production credit determined under section 45,

(ii)an advanced nuclear power facility production credit determined under section 45J,

(iii)a carbon oxide sequestration credit determined under section 45Q,

(iv)a zero-emission nuclear power production credit determined under section 45U,

(v)a clean electricity production credit determined under section 45Y,

(vi)an energy credit determined under section 48, or

(vii)a qualifying advanced coal project credit under section 48A,

(4)For purposes of this paragraph, the term “qualified interconnection property” has the meaning given such term in section 48(a)(8)(B).

(5)The qualified investment with respect to any qualified facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).

(6)The terms “qualified facility” and “qualified interconnection property” shall not include any facility or property the construction, reconstruction, or erection of which begins after December 31, 2025, if the construction, reconstruction, or erection of such facility or property includes any material assistance from a prohibited foreign entity (as defined in section 7701(a)(52)).

(7)For purposes of this subsection, the terms “CO2e per KWh” and “greenhouse gas emissions rate” have the same meaning given such terms under section 45Y.

(c)(1)For purposes of subsection (a), the qualified investment with respect to energy storage technology for any taxable year is the basis of any energy storage technology placed in service by the taxpayer during such taxable year.

(2)For purposes of this section, the term “energy storage technology” has the meaning given such term in section 48(c)(6) (except that subparagraph (D) of such section shall not apply).

(3)The term “energy storage technology” shall not include any property the construction of which begins after December 31, 2025, if the construction of such property includes any material assistance from a prohibited foreign entity (as defined in section 7701(a)(52)).

(d)(1)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).

(2)Rules similar to the rules of section 45(b)(3) shall apply.

(3)Rules similar to the rules of section 48(a)(10) shall apply.

(4)Rules similar to the rules of section 45(b)(8) shall apply.

(5)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 45Y(g)(12) shall apply.

(6)(A)No credit shall be determined under subsection (a) for any taxable year if the taxpayer is—

(i)a specified foreign entity (as defined in section 7701(a)(51)(B)), or

(ii)a foreign-influenced entity (as defined in section 7701(a)(51)(D), without regard to clause (i)(II) thereof).

(B)In the case of a taxpayer for which section 7701(a)(51)(D)(i)(II) is determined to apply for any taxable year, no credit shall be determined under subsection (a) for such taxable year if such determination relates to a qualified facility described in subsection (b)(3) or energy storage technology described in subsection (c)(2).

(e)(1)Subject to paragraph (4), the amount of the clean electricity investment credit under subsection (a) for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during a calendar year described in paragraph (2) shall be equal to the product of—

(A)the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by

(B)the phase-out percentage under paragraph (2).

(2)The phase-out percentage under this paragraph is equal to—

(A)for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during the first calendar year following the applicable year, 100 percent,

(B)for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during the second calendar year following the applicable year, 75 percent,

(C)for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during the third calendar year following the applicable year, 50 percent, and

(D)for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.

(3)For purposes of this subsection, the term “applicable year” has the same meaning given such term in section 45Y(d)(3).

(4)(A)This section shall not apply to any qualified property placed in service by the taxpayer after December 31, 2027, which is part of an applicable facility.

(B)For purposes of this paragraph, the term “applicable facility” means a qualified facility which—

(i)uses wind to produce electricity (within the meaning of such term as used in section 45(d)(1), as determined without regard to any requirement under such section with respect to the date on which construction of property begins), or

(ii)uses solar energy to produce electricity (within the meaning of such term as used in section 45(d)(4), as determined without regard to any requirement under such section with respect to the date on which construction of property begins).

(C)This paragraph shall not apply with respect to any energy storage technology which is placed in service at any applicable facility.

(f)In this section, the term “greenhouse gas” has the same meaning given such term under section 45Y(e)(2).

(g)For purposes of section 50, if the Secretary determines that the greenhouse gas emissions rate for a qualified facility is greater than 10 grams of CO2e per KWh, any property for which a credit was allowed under this section with respect to such facility shall cease to be investment credit property in the taxable year in which the determination is made.

(h)(1)In the case of any applicable facility with respect to which the Secretary makes an allocation of environmental justice capacity limitation under paragraph (4)—

(A)the applicable percentage otherwise determined under subsection (a)(2) 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 capacity limitation allocated to such facility, bears to

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

(2)For purposes of this subsection—

(A)The term “applicable facility” means any qualified facility—

(i)which is not described in section 45Y(b)(2)(B),

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

(iii)which—

(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

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

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

(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)),11 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

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

(C)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—

(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

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

(D)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)For purposes of this subsection, the term “eligible property” means a qualified investment with respect to any applicable facility.

(4)(A)Not later than January 1, 2025, the Secretary shall establish a program to allocate amounts of environmental justice capacity limitation to applicable 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.

(B)The amount of environmental justice 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)For purposes of this paragraph, the term “annual capacity limitation” means 1.8 gigawatts of direct current capacity for each calendar year during the period beginning on January 1, 2025, and ending on December 31 of the applicable year (as defined in section 45Y(d)(3)), and zero thereafter.

(D)(i)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 the third calendar year following the applicable year (as defined in section 45Y(d)(3)).

(ii)If the annual capacity limitation for calendar year 2024 under section 48(e)(4)(D) exceeds the aggregate amount allocated for such year under such section, such excess amount may be carried over and applied to the annual capacity limitation under this subsection for calendar year 2025. The annual capacity limitation for calendar year 2025 shall be increased by the amount of such excess.

(E)(i)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.

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

(5)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.

(i)No credit shall be determined under this section for any qualified investment during the taxable year with respect to property described in paragraph (1) or (4) of section 25D(d) (as applied by substituting “lessee” for “taxpayer”) if the taxpayer rents or leases such property to a third party during such taxable year.

(j)For purposes of this section, in the case of any qualified fuel cell property (as defined in section 48(c)(1), as applied without regard to subparagraph (E) thereof)—

(1)subsection (b)(3)(A) shall be applied without regard to clause (iii) thereof,

(2)for purposes of subsection (a)(1), the applicable percentage shall be 30 percent and such percentage shall not be increased or otherwise adjusted by any other provision of this section, and

(3)subsection (g) shall not apply.

(k)Not later than January 1, 2025, the Secretary shall issue guidance regarding implementation of this section.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (d)(1), is the date of enactment of Pub. L. 101–508, which was approved Nov. 5, 1990. The Housing Act of 1949, referred to in subsec. (h)(2)(B)(i), is act July 15, 1949, ch. 338, 63 Stat. 413. Title V of the Act is classified generally to subchapter III (§ 1471 et seq.) of chapter 8A of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see

Short Title

note set out under section 1441 of Title 42 and Tables.

Amendments

2025—Subsec. (a)(3)(A)(i). Pub. L. 119–21, § 70512(f)(2), inserted “, as applied without regard to clause (iv) thereof” after “section 45(b)(11)(B)”. Subsec. (a)(3)(B). Pub. L. 119–21, § 70513(d), amended subpar. (B) generally. Prior to amendment, text read as follows: “Rules similar to the rules of section 48(a)(12) shall apply.” Subsec. (b)(6), (7). Pub. L. 119–21, § 70513(b)(1)(A), added par. (6) and redesignated former par. (6) as (7). Subsec. (c)(3). Pub. L. 119–21, § 70513(b)(1)(B), added par. (3). Subsec. (d)(6). Pub. L. 119–21, § 70513(b)(2), added par. (6). Subsec. (e)(1). Pub. L. 119–21, § 70513(a)(1), substituted “Subject to paragraph (4), the amount of” for “The amount of” in introductory provisions. Subsec. (e)(4). Pub. L. 119–21, § 70513(a)(2), added par. (4). Subsec. (i). Pub. L. 119–21, § 70513(c)(1)(B), added subsec. (i). Former subsec. (i) redesignated (j), then (k). Subsec. (j). Pub. L. 119–21, § 70513(f)(2), added subsec. (j). Pub. L. 119–21, § 70513(c)(1)(A), redesignated subsec. (i) as (j), which was subsequently redesignated (k). Subsec. (k). Pub. L. 119–21, § 70513(f)(1), redesignated subsec. (j), as redesignated by section 70513(c)(1)(A), as (k).

Statutory Notes and Related Subsidiaries

Effective Date

of 2025 AmendmentAmendment by section 70512(f)(2) of Pub. L. 119–21 applicable to taxable years beginning after

July 4, 2025, see section 70512(l)(1) of Pub. L. 119–21, set out in a note under section 45 of this title. Amendment by section 70513 of Pub. L. 119–21 applicable to taxable years beginning after

July 4, 2025, except that amendment by section 70513(a) of Pub. L. 119–21 applicable to facilities the

Construction

of which begins after the date which is 12 months after

July 4, 2025, amendment by section 70513(d) of Pub. L. 119–21 applicable on or after

June 16, 2025, and amendment by section 70513(f) of Pub. L. 119–21 applicable to property the

Construction

of which begins after Dec. 31, 2025, see section 70513(g)(1), (2), (4), (5) of Pub. L. 119–21, set out in a note under section 48 of this title.

Effective Date

Pub. L. 117–169, title I, § 13702(c), Aug. 16, 2022, 136 Stat. 1997, provided that: “The

Amendments

made by this section [enacting this section and amending section 46, 49, and 50 of this title] shall apply to property placed in service after December 31, 2024.”

§48E Clean Electricity Investment Credit

Summary

Title 26, §48E

Notes & Related Subsidiaries

Editorial Notes

References in Text

Short Title

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Construction

Construction

Effective Date

Amendments

Citations & Metadata