On November 17, 2023, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “Service”) issued proposed regulations [REG-132569-17] regarding the definition of “energy property” and related rules applicable to the energy credit (the “Proposed Regulations”) available under section 48 of the Internal Revenue Code of 1986, as amended (the “Code”).1 Additionally, the Proposed Regulations withdrew certain proposed regulations under section 48 that were recently released on the prevailing wage and apprenticeship requirements (the “Labor Requirements”) and have restated them, with changes, in the Proposed Regulations.2 These Proposed Regulations are only in proposed form and will almost certainly be subject to some change before being made final.
As background, the Inflation Reduction Act of 2022 (the “IRA”) made significant revisions and expansions to the investment tax credit (the “ITC”) under section 48, for taxable years beginning after December 31, 2022.3 Generally, eligible taxpayers can claim the ITC for qualifying energy property and may be eligible to claim an increased ITC if the Labor Requirements are satisfied or requirements for certain “bonus” credits are met.
The Proposed Regulations are fairly comprehensive (over 120 pages in length) and provide detailed guidance on a host of topics, issues, and nuances raised in connection with Code section 48.4 A fulsome summary of these Proposed Regulations is beyond the scope of this alert, but a few notable items are highlighted below:
