February 14, 2023

Treasury Department Releases Section 48C Guidance with Billions in Tax Credits Up for Grabs

Holland & Knight Alert
Brad M. Seltzer | Nicole M. Elliott | Mary Kate Nicholson | Rachel T. Provencher | Amish Shah | Joshua David Odintz | Roger David Aksamit | James Dawson | Kenneth W. Parsons | Daniel Graham Strickland


  • Section 48C of the Internal Revenue Code provides $10 billion in credit for qualifying advanced energy products – $4 billion of which must go to projects in energy communities.
  • To qualify for the credit, a project must re-equip an industrial or manufacturing facility for the production or recycling of numerous energy types, among other criteria.
  • The first round of funding opens May 31, 2023, and initial concept papers are due July 31, 2023.

Reinstated by the Inflation Reduction Act of 2022 (IRA), Section 48C of the Internal Revenue Code provides $10 billion in credits for qualifying advanced energy projects, $4 billion of which must be allocated to projects located in energy communities.1 The amount of the credit equals 30 percent of the qualified investment for such taxable year with respect to any qualifying advanced energy project placed in service in the taxable year.2 The credit is reduced to one-fifth of the otherwise available amount if prevailing wage and apprenticeship requirements are not satisfied. For more about the prevailing wage and apprenticeship requirements, see Holland & Knight's previous alert, "60-Day Clock Is Ticking on Prevailing Wage, Apprenticeship Requirements," Dec. 21, 2022.

To prevent "double-dipping," taxpayers are ineligible for the Section 48C credit if a credit for the project is allowed under Sections 48B (qualifying gasification project credit), 48E (clean electricity investment credit), 45Q (carbon oxide sequestration credit) or 45V (clean hydrogen production credit). Similarly, property is ineligible for the Section 45X (advanced manufacturing credit) if it is produced at a facility and the basis of any property included in such facility is taken into account for purposes of Section 48C.

Taxpayers must apply for a certification of potentially qualified investments eligible for Section 48C credits. Notice 2023-18, released on Feb. 13, 2023, provides initial program guidance for implementation of the Section 48C program. The IRS has indicated that additional guidance is expected by May 31, 2023.

What Projects Are Eligible for the Credit?

A qualifying advanced energy project includes a project that:

1. Re-equips, expands or establishes an industrial or manufacturing facility for the production or recycling of:

a. property designed to be used to produce energy from the sun, water, wind, geothermal deposits (within the meaning of Section 613(e)(2)) or other renewable resources

b. fuel cells, microturbines or an energy storage systems and components

c. grid modernization equipment or components

d. property designed to capture, remove, use or sequester carbon dioxide emissions

e. equipment designed to refine, electrolyze or blend any fuel, chemical or product that is renewable or low-carbon and low-emission

f. property designed to produce energy conservation technologies

g. other advanced energy property designed to reduce greenhouse gas (GHG) emissions, as may be determined by the U.S. Secretary of the Treasury

Qualifying projects include those that re-equip, expand or establish an industrial or manufacturing facility for the production or recycling of include solar panels and their specialized support structures; wind turbines, towers, floating offshore platforms and related equipment; stationary batteries; microturbines for combined heat and power systems; grid equipment for electricity delivery; carbon capture equipment necessary to compress, treat, process, liquefy, pump or perform some other physical action to capture carbon oxides, including solvents; electrolyzers; battery electric and plug-in hybrid electric vehicles; specialized components and equipment for nuclear power reactors or their fuels; and equipment used to reduce the emissions of industrial processes.

2. Re-equips an industrial or manufacturing facility with equipment designed to reduce GHG emissions by at least 20 percent through the installation of:

a. low- or zero-carbon process heat systems

b. carbon capture, transport, utilization and storage systems

c. energy efficiency and reduction in waste from industrial processes, or

d. any other industrial technology designed to reduce GHG emissions, as determined by the U.S. Secretary of the Treasury

Qualifying projects that re-equip industrial or manufacturing facility include: electric heat pumps, combined heat and power (CHP) systems; technologies that reduce direct fuel use, electricity use or waste in industrial applications; and electrification of direct fuel use processes, adoption of renewable or low-emissions fuels and feedstock. 

3. Re-equips, expands or establishes an industrial facility for the processing, refining or recycling of critical materials

Critical materials include critical minerals as determined by the U.S. Geological Survey and any additional critical materials as determined and posted by the U.S. Secretary of Energy by May 31, 2023. 

Eligible property must be depreciable tangible personal or other tangible property (not including a building or its structural components) that is used as an integral part of the qualifying advanced energy project.

An industrial facility produces, processes or refines materials or products from raw or manufactured inputs. A manufacturing facility makes or processes raw materials into finished products (or accomplishes any intermediate stage in that process). A recycling facility is a facility that: 1) reclaims, recovers or otherwise processes waste materials (including, but not limited to, property and components of property at end-of-service), the result of which is a useful product or material for use in the manufacture of a useful product; or 2) performs an activity or series of activities in the processes described in Example 1.

How Can Taxpayers Apply for an Allocation of the Credit?

At least two rounds of credit allocation will be conducted. Credits may be reallocated if any certification is later revoked for failure to place the project into service. Taxpayers interested in applying for an allocation of Section 48C should make note of the important following deadlines:

  • Round 1 of funding opens May 31, 2023
  • Round 1 concept papers due July 31, 2023

The U.S. Department of Energy (DOE) will review concept papers and provide applicants a letter of encouragement or discouragement for submissions of a full application for credit allocation. Applicants will be expected to provide information regarding board membership, ownership structure and foreign relationships, as well as sources of, and any plans to export, critical minerals. After review of the full application, DOE will provide a recommendation and ranking only if it determines that the project has a reasonable expectation of commercial viability and merits a recommendation to the IRS.

In addition to the technical criteria under Section 48C, DOE may consider one or more policy factors in determining which Round 1 applications merit a DOE recommendation to the IRS for certification:

  • To achieve maximum benefits to strengthen U.S. industrial competitiveness and clean energy supply chains, as well as to promote high-quality jobs and community benefits, DOE may consider giving priority to qualifying advanced energy projects not eligible for support from other DOE financial assistance programs funded by the Infrastructure Investment and Jobs Act or IRA.
  • To help build more resilient, diverse and secure U.S. clean energy supply chains, DOE may consider whether proposed projects address specific gaps, vulnerabilities or risks in the domestic production of clean energy products. Additional guidance will specify priority technologies that would address these gaps, vulnerabilities and risks to relevant domestic supply chains.

Each applicant has two years from the date of acceptance by the Secretary of Energy during which to provide to the Secretary evidence that the requirements of the certification have been met. An applicant that receives a certification has two years from the date of issuance of the certification in order to place the project in service, and if such project is not placed in service by that time period, then the certification is no longer valid.


Holland & Knight Insight: Though Notice 2023-18 provides taxpayers with key deadlines for application of an allocation of credit and helpful preliminary background information regarding eligible projects, further guidance from Treasury and IRS is critically needed, particularly since the launch of the Round 1 begins in three months.

Section 48C is unique in that it requires substantial DOE input. Further guidance expanding on the role of DOE and its collaboration with the Treasury Department and IRS would assist taxpayers in drafting well-crafted concept papers. Prior Section 48C program guidance3 provided taxpayers full content requirements for concept papers and full applications, as well as subjective and objective criteria to be used by DOE in scoring projects. Such criteria was notably absent from the initial guidance provided in Notice 2023-18. If the Treasury Department and IRS plan to use similar DOE review criteria for current Section 48C allocations, it will require detailed analysis of the criteria for, and scoring of, applications and a well-drafted application to optimize the chances of obtaining a credit allocation.


1 DOE will determine which projects are in Section 48C(e) Energy Communities Census Tracts and are therefore eligible for an allocation of the $4 billion of Section 48C credits that are available only for projects located in those census tracts. Energy communities include any census tract (or adjoining tract) that had either a coal mine close after 1999 or coal-fired electric generating unit retired after 2009.

2 A project is placed in service at the earlier of 1) the taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such eligible property begins; or 2) the taxable year in which the eligible property is placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business or in the production of income.

3 See Notice 2013-12, Notice 2009-72.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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