Tax Equity News

Overview of Energy Tax Credits After the IRA

Posted by David Burton

April 10, 2023

Posted in Blog article Renewable energy

The New York Energy Summit, presented by Infocast, was held in Albany from April 4 to 6 where David Burton served as Summit Chair. 

He provided an overview of the IRA and presented the slides below.  

“Transferability” of Tax Credits

Transferability – selling tax credits to unrelated parties for cash

  • Seeing term sheets to buy tax credits in lower 90 cents for $1.00 of tax credit.
  • Only one sale allowed, no brokers acting as buyers to re-sell
  • Can be sold after close of tax year but before buyer files its tax return.
  • No taxable income to seller; no deduction for buyer.
  • Sale election is made at “partnership” level, not partner level.
  • Need guidance on whether buyer or seller suffers recapture from a transfer/casualty.
  • Need guidance on application of passive activity loss rules & at-risk rules to individual.

Direct Pay for Tax Credits

Direct Pay

  • Available for all owners claiming the manufacturers’ tax credits (45X and 48C), hydrogen tax credits (45V), or carbon capture tax credits (45Q).
  • For wind, solar, storage and other types of energy generation projects, direct pay is only available if the project is owned by tax-exempt entity (e.g., a solar project owned by a school district).
  • IRS pays 100 cents on the dollar.

Post-IRA Tax Credit Rates

ITC credit rate is 30% and the PTC rate is $27.50/MWh for:

  • Projects that start construction before January 29, 2023;
  • Projects that satisfy the wage and apprenticeship rules; or
  • Projects that are less than 1 MW (a/c).

ITC and PTC levels may be increased by domestic content , energy community and LMI bonuses, see ‘Credit Adders’ section.

Credit Adders

Domestic Content (starting in 2023) – ITC 10 percentage points or PTC 10% bonus

  • Must include 100% domestic iron and steel and 40% domestic content for manufactured products (increases after 2024).

Energy Communities (starting in 2023) – ITC 10 percentage points or PTC 10% bonus

  • Brownfield sites (as identified in CERCLA);
  • An area which has (or at any time after December 31, 1999, had) (i) (a) significant employment (>.17%) related to the extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary) or (b) 25% or greater local tax revenue from the foregoing activities, and (ii) higher unemployment than the national average for the “previous year”; or
  • A census tract in which (I) after December 31, 1999, a coal mine has closed, or after December 31, 2009, a coal-fired electric generating unit has been retired, or (II) which is directly adjoining to any census tract described in subclause (I).

Environmental justice credit (LMI) – 10 or 20 ITC percentage points (no PTC adder)

  • Only applies to solar & wind projects <5 MW of capacity.
  • IRS will start accepting applications in 3Q 2023. IRS saying can’t be in service before allocation granted.
  • Key concept of “benefiting” low-income communities and residents remains to be defined by IRS.

ITC for Standalone Storage

  • Standalone storage qualifies for an ITC for systems placed in service after December 31, 2022.
  • Same ITC rate, adders and requirements as solar.


Tax Equity News reports on issues where renewable energy meets tax policy in the United States.


Stay Connected

Subscribe by email