On November 17, 2023, the Internal Revenue Service (“IRS”) and the U.S. Treasury Department (“Treasury”) issued Proposed Treasury Regulations (REG-132569-17) (the “Proposed Regulations”) providing guidance and amending existing regulations relating to the investment tax credit (the “ITC”) under Section 48 of the Internal Revenue Code of 1986, as amended (the “Code”). The ITC provides a tax credit for investments in energy producing property. The Inflation Reduction Act of 2022 (the “IRA”) significantly expanded the types of projects that may qualify for the ITC. The Proposed Regulations seek to provide clarity and certainty regarding eligibility for the ITC to facilitate investment decisions for clean energy projects.
Notably, the Proposed Regulations provide guidance on:
The Proposed Regulations further clarify applicability of the various bonus credits made available by the IRA, which can increase the 6% base credit to as much as 70% for projects that meet the criteria for all credit enhancements, including prevailing wage and apprenticeships, domestic content, and location in an energy community.
Taxpayers may generally rely on the Proposed Regulations at least until final regulations are promulgated (although the reliance period varies to some degree). The Proposed Regulations are scheduled to be published in the Federal Register on November 22, 2023, and a public hearing is scheduled for February 20, 2024 at 10:00 AM EST.
Locke Lord is analyzing the Proposed Regulations and will provide further QuickStudies on the material aspects of these Proposed Regulations in the coming weeks. For additional information and context, please contact one of the authors.
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