The IRS released three notices in late October asking for comments on the guidance it should issue on renewable energy-related provisions of the Inflation Reduction Act. This act expands and extends a number of tax credits that encourage the use of renewable energy sources.
Notice 2022-56 Commercial Clean Vehicles and Alternative Fuel Vehicles: This notice requests general comments on the qualified commercial clean vehicles credit, which is effective for vehicles acquired after December 31, 2022, and before January 1, 2033. A taxpayer may claim the credit for purchasing and placing a qualified commercial clean vehicle in service during the taxable year. The amount of the credit is either 15% of the taxpayer’s basis in the vehicle, 30% if the vehicle is not powered by gasoline or diesel, or the incremental cost of the vehicle, whichever is lower. However, the credit is limited to $7,500 for a vehicle with a gross weight rating of less than 14,000 pounds and $40,000 for all other vehicles. Also, the taxpayer must include the vehicle identification number (VIN) on the tax return for the taxable year to receive the credit.
The notice also asks for comments regarding the amendments to the alternative fuel vehicle refueling property credit. Initially, this credit was enacted by the Energy Policy Act of 2005 to provide a credit for the cost of qualified alternative fuel vehicle refueling property. The most recent amendment talks of the qualified alternative fuel vehicle refueling property placed in service after December 31, 2022, and on or before December 31, 2032. An eligible property will be able to get the credit for 30% of the cost of the property or 6% if the property is subject to depreciation. However, the credit amount received is limited to $100,000 for depreciation properties and $1,000 for all other properties.
Notice 2022-57 Carbon Capture Credit: This notice asks for comments on the credit for carbon oxide sequestration, which was enacted in the Energy Improvement and Extension Act of 2008 and amended recently by the IRA. The modification adjusts credit amounts, extends the deadline for beginning construction of a qualified facility from January 1, 2026, to January 1, 2033, broadens the definition of a qualified facility, modifies rules to direct air capture facilities and electric generating units, and provides a new election to restart the credit period for qualified facilities in which carbon capture equipment is placed in areas affected by federally declared disasters.
Notice 2022-58 Clean Hydrogen and Fuel Production Credit: This notice asks for comments on credits for clean hydrogen production produced after 2022 at qualified clean hydrogen production facilities during a 10-year period beginning on the date the facility is originally placed in service. Qualified clean hydrogen is defined as hydrogen that is produced through a process that results in a lifecycle greenhouse gas emissions rate no greater than 4 kilograms of carbon dioxide equivalent per kilogram of hydrogen. Also, the clean hydrogen must be produced in the United States, and an unrelated party must verify the production and sale or use by the taxpayer. Additionally, a taxpayer may not claim the credit for qualified clean hydrogen produced at any facility, including carbon capture equipment.
The notice also asks for comments on the clean fuel credit, which applies to transportation fuel produced and sold after December 31, 2024, and before January 1, 2028. The credit is equal to the “applicable amount” per gallon, or gallon equivalent, with respect to any transportation fuel produced by the taxpayer at a qualified facility and sold by the taxpayer during the taxable year. As well as the emissions factor for such fuel, the notices state that the “applicable amount” for any transportation fuel produced at a qualified facility is 20 cents in the case of a facility that does not satisfy certain prevailing wage and apprenticeship requirements or $1.00 in the case of a facility that meets such requirements. The amounts increase to 35 cents and $1.75 in the case of a transportation fuel that is sustainable aviation fuel.
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