26 USC 45 - Clean electricity production credit

View all text of Subpart D [§ 38 - § 45AA]

§ 45Y. Clean electricity production credit

(a) Amount of credit

(1) In generalFor purposes of section 38, the clean electricity production credit for any taxable year is an amount equal to the product of—

(A) the kilowatt hours of electricity—

(i) produced by the taxpayer at a qualified facility, and

(ii)(I) sold by the taxpayer to an unrelated person during the taxable year, or(II) in the case of a qualified facility which is equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year, multiplied by

(B) the applicable amount with respect to such qualified facility.

(2) Applicable amount

(A) Base amount

(B) Alternative amountSubject to subsection (g)(7), 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 (9) and (10) of subsection (g), or

(iii) which—(I) satisfies the requirements under paragraph (9) of subsection (g), and(II) with respect to the construction of such facility, satisfies the requirements under paragraph (10) of subsection (g),

the applicable amount shall be 1.5 cents.

(b) Qualified facility

(1) In general

(A) DefinitionSubject to subparagraphs (B), (C), and (D), the term “qualified facility” means a facility owned by the taxpayer—

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

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

(iii) for which the greenhouse gas emissions rate (as determined under paragraph (2)) is not greater than zero.

(B) 10-year production credit

(C) Expansion of facility; incremental productionThe term “qualified facility” shall include either of the following in connection with a facility described in subparagraph (A) (without regard to clause (ii) of such subparagraph) which was placed in service before January 1, 2025, but only to the extent of the increased amount of electricity produced at the facility by reason of the following:

(i) A new unit which is placed in service after December 31, 2024.

(ii) Any additions of capacity which are placed in service after December 31, 2024.

(D) Coordination with other credits

(2) Greenhouse gas emissions rate

(A) In general

(B) Fuel combustion and gasification

(i) Publishing emissions rates

(ii) Provisional emissions rate

(D) Carbon capture and sequestration equipmentFor purposes of this subsection, the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity shall not include any qualified carbon dioxide that is captured by the taxpayer and—

(i) pursuant to any regulations established under paragraph (2) of section 45Q(f), disposed of by the taxpayer in secure geological storage, or

(ii) utilized by the taxpayer in a manner described in paragraph (5) of such section.

(1) In general

(2) Annual computation

(3) Inflation adjustment factor

(d) Credit phase-out

(1) In generalThe amount of the clean electricity production credit under subsection (a) for any qualified facility 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) Phase-out percentageThe phase-out percentage under this paragraph is equal to—

(A) for a facility the construction of which begins during the first calendar year following the applicable year, 100 percent,

(B) for a facility the construction of which begins during the second calendar year following the applicable year, 75 percent,

(C) for a facility the construction of which begins during the third calendar year following the applicable year, 50 percent, and

(D) for a facility the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.

(3) Applicable yearFor purposes of this subsection, the term “applicable year” means the later of—

(A) the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or

(B) 2032.

(e) DefinitionsFor purposes of this section:

(1) CO2e per KWh

(2) Greenhouse gas

(3) Qualified carbon dioxideThe term “qualified carbon dioxide” means carbon dioxide captured from an industrial source which—

(A) would otherwise be released into the atmosphere as industrial emission of greenhouse gas,

(B) is measured at the source of capture and verified at the point of disposal or utilization, and

(C) is captured and disposed or utilized within the United States (within the meaning of section 638(1)) or a possession of the United States (within the meaning of section 638(2)).

(f) Guidance

(g) Special rules

(1) Only production in the United States taken into accountConsumption, sales, or storage shall be taken into account under this section only with respect to electricity the production of which is within—

(A) the United States (within the meaning of section 638(1)), or

(B) a possession of the United States (within the meaning of section 638(2)).

(2) Combined heat and power system property

(A) In generalFor purposes of subsection (a)—

(i) the kilowatt hours of electricity produced by a taxpayer at a qualified facility shall include any production in the form of useful thermal energy by any combined heat and power system property within such facility, and

(ii) the amount of greenhouse gases emitted into the atmosphere by such facility in the production of such useful thermal energy shall be included for purposes of determining the greenhouse gas emissions rate for such facility.

(B) Combined heat and power system property

(i) In generalFor purposes of subparagraph (A)(i), the amount of kilowatt hours of electricity produced in the form of useful thermal energy shall be equal to the quotient of—(I) the total useful thermal energy produced by the combined heat and power system property within the qualified facility, divided by(II) the heat rate for such facility.

(ii) Heat rate

(3)

(4) Related persons

(5) Pass-thru in the case of estates and trusts

(6) Allocation of credit to patrons of agricultural cooperative

(A) Election to allocate

(i) In general

(ii) Form and effect of election

(B) Treatment of organizations and patronsThe amount of the credit apportioned to any patrons under subparagraph (A)—

(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and

(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

(C) Special rules for decrease in credits for taxable yearIf the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—

(i) such reduction, over

(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,

shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.

(D) Eligible cooperative defined

(7) Increase in credit in energy communities

(8) Credit reduced for tax-exempt bonds

(9) Wage requirements

(10) Apprenticeship requirements

(11) Domestic span bonus credit amount

(A) In general

(B) Requirement

(i) In general

(ii) Steel and iron

(iii) Manufactured product

(i) In generalSubject to subclause (ii), for purposes of subparagraph (B)(iii), the adjusted percentage shall be—(I) in the case of a facility the construction of which begins before January 1, 2025, 40 percent,(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 45 percent,(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 50 percent, and(IV) in the case of a facility the construction of which begins after December 31, 2026, 55 percent.

(ii) Offshore wind facilityFor purposes of subparagraph (B)(iii), in the case of a qualified facility which is an offshore wind facility, the adjusted percentage shall be—(I) in the case of a facility the construction of which begins before January 1, 2025, 20 percent,(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 27.5 percent,(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 35 percent,(IV) in the case of a facility the construction of which begins after December 31, 2026, and before January 1, 2028, 45 percent, and(V) in the case of a facility the construction of which begins after December 31, 2027, 55 percent.

(12) Phaseout for elective payment

(A) In generalIn the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with—

(i) the value of such credit (determined without regard to this paragraph), multiplied by

(ii) the applicable percentage.

(B) 100 percent applicable percentage for certain qualified facilitiesIn the case of any qualified facility—

(i) which satisfies the requirements under paragraph (11)(B), or

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

the applicable percentage shall be 100 percent.

(C) Phased domestic span requirementSubject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be—

(i) if construction of such facility began before January 1, 2024, 100 percent,

(ii) if construction of such facility began in calendar year 2024, 90 percent,

(iii) if construction of such facility began in calendar year 2025, 85 percent, and

(iv) if construction of such facility began after December 31, 2025, 0 percent.

(D) Exception

(i) In generalFor purposes of this paragraph, the Secretary shall provide exceptions to the requirements under this paragraph if—(I) the inclusion of steel, iron, or manufactured products which are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or(II) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.

(ii) Applicable percentage

(Added Pub. L. 117–169, title I, § 13701(a), Aug. 16, 2022, 136 Stat. 1982.)