Unlike many of the tax credits in the Inflation Reduction Act of 2022, Section 48C Advanced Energy Credit (AEC) is a competitive tax credit program that requires manufacturers apply in order to receive an allocation. Program guidance released on Feb. 13, 2023 announced that manufacturers seeking this credit will be required to submit a concept paper describing their project. The application process for the first $4 billion in allocations will open May 31, 2023 and close on July 31, 2023. The remaining $6 billion of funds will be issued at a later date.
The Inflation Reduction Act of 2022 extended credits first offered through the American Recovery and Reinvestment Act of 2009, which was previously known as the Advanced Manufacturing Tax Credit (AMTC). The prior AMTC issued a 30% tax credit that was valued at $2.3 billion and was largely oversubscribed by manufacturers applications.
The current credit, Section 48C Advanced Energy Credit, includes $10 billion in new 30% investment tax credits, and also broadens what is deemed to be eligible energy property a company can invest in to earn the credit. The credit value is 30% of the project capital investment that is deemed to be eligible energy property. Examples include projects which re-equip, expand or establish a manufacturing facility in one of the following ways:
In addition, the credit covers infrastructure related to grid modernization, carbon capture, EV production and energy storage. Manufacturers in or adjacent to legacy Energy Communities have been allocated 40% of the AEC ($4 billion) that was set aside for new clean technology manufacturing facilities in these designated areas. To learn more about if your existing or proposed site falls in an energy community, or if you need assistance with site selection to locate a site in an Energy Community please contact us.
The tax credits awarded through Section 48C are significant. Manufacturers can seek up to 30% of the total amount invested in facilities that build or recycle renewable energy components.
Many manufacturers may be eligible to apply for the credit as part of a current or planned project, but manufacturers need to start working now to assess eligibility and prepare application materials. When these credits were introduced in 2009, applications exceeded the available funding by more than three to one.
Because Section 48C is a competitive tax credit program, manufacturers need to apply and receive certification from the IRS for the investment tax credit allocation for their project. This means it is vital to start assessing eligibility and preparing to apply now. To get started:
Since 2009, Baker Tilly has helped manufacturers earn millions in tax credits through prior energy and economic development tax credit programs. Our primary role in helping clients serves five main areas: