Second Round of Section 48C Applications Have Opened
The Internal Revenue Services (IRS) has released Notice 2024-36, which provides taxpayers the timeline for beginning the second round of the Section 48C Advanced Energy Project Credit (Section 48C) allocations.
The Section 48C program is an allocation-based credit, funded with $10 billion of tax credit allocation by the Inflation Reduction Act (IRA). The tax credits were set to be awarded in two tranches with the first $4 billion being made available for concept paper review last summer and allocations made in March of this year.
The IRS has announced the second tranche of $6 billion of allocations will begin no later than May 28, 2024 with the opening of the Department of Energy Section 48C concept paper portal.This new notice clarifies that this year’s concept paper application window will be shorter than the previous one with a timeframe of only 30 calendar days.
Qualifying Section 48C Activities
The Section 48C tax credit applies to a broad range of potential taxpayers and industries. It applies to:
- Projects that re-equip, expand or establish an industrial facility for the processing, refining or recycling of critical minerals as defined in the Energy Act of 2020
- Projects that re-equip an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20% through the installation of:
- Low-or-zero-carbon process heat systems
- Carbon capture, transport, utilization and storage systems
- Energy efficiency and reduction in waste from industrial processes
- Other industrial technology designed to reduce greenhouse gas emissions, as determined by the U.S. Department of the Treasury (the Treasury)
- Projects to re-equip, expand or establish an industrial or manufacturing facility for the production or recycling of:
- Property designed to produce energy from the sun, water, wind, geothermal deposits or other renewable resources
- Fuel cells, microturbines or energy storage systems and components
- Grid modernization equipment or components
- Property designed to capture, remove, use or sequester carbon dioxide emissions
- Equipment designed to refine, electrolyze or blend any fuel, chemical or product that is renewable or low-carbon and low-emission
- Fuel cell or electric vehicles, and their components, materials and charging infrastructure
- Hybrid vehicles weighing less than 14,000 pounds and their components and materials
- Property designed to produce energy conservation technologies
- Other property designed to reduce greenhouse gas emissions, as determined by the Treasury
Once the allocations are made in this second round, the total amount of funding set aside in the IRA will have been used. Of the $6 billion dollars expected in Round Two, a total of $2.5 billion is slated to be allocated to projects in Energy Communities Census Tracts as defined in Notice 2023-18.
Benefits of Section 48C
The 48C credit amounts to 30% of eligible expenditures and represents a powerful incentive for clean and efficient business. The credits may also be monetized under the new transferability regime created by the IRA and Section 6418.
Your Guide Forward
It is imperative that taxpayers who are interested in applying for an allocation under Section 48C talk to their advisors immediately. Cherry Bekaert is taking urgent action to prepare its clients with eligible activities to draft and submit concept papers in anticipation of an allocation.
Related Insights
- Article: Highlights of Proposed Section 48 Investment Tax Credit Regulations
- Article: Factors to Consider When Seeking Cost Segregation and Section 179D Study Service Providers
- Article: Harnessing Tax Incentives for Advanced Manufacturing & Energy Projects: A Deep Dive into Section 48C and Section 45X
