What Is the 48C Advanced Energy Project Credit?

The Qualifying Advanced Energy Project Credit, or 48C credit, is a federal tax incentive designed to bolster the United States’ energy and industrial sectors. It provides funding for projects that expand clean energy manufacturing, reduce greenhouse gas emissions in industrial settings, and strengthen domestic supply chains. Unlike some tax credits that are broadly available, the 48C credit is allocation-based, meaning businesses must apply for a portion of a limited funding pool. The program is jointly administered by the Department of the Treasury, the Internal Revenue Service (IRS), and the Department of Energy (DOE), which evaluates projects on their technical and commercial merit.

Project and Taxpayer Eligibility

Eligibility for the 48C credit extends to taxpayers, including corporations and partnerships, who undertake a qualifying advanced energy project. The project must fall into one of three specific categories and must not have been placed in service before receiving a credit allocation letter from the IRS.

The first category involves establishing, expanding, or re-equipping a facility to produce or recycle specified advanced energy property. This includes property for renewable energy from sources like solar and wind, equipment for energy storage, electric vehicles, grid modernization, carbon capture, and technology for energy conservation.

A second project category focuses on industrial decarbonization. This involves re-equipping an industrial or manufacturing facility, such as those in cement, steel, and chemical manufacturing, with technology designed to reduce greenhouse gas emissions by at least 20 percent.

The third eligible category is for projects that establish, expand, or re-equip a facility to process, refine, or recycle critical materials. This part of the program seeks to build a more resilient domestic supply chain for the raw inputs necessary for batteries, electric motors, and other advanced energy components.

Calculating the Credit Amount

The value of the 48C credit is a percentage of the taxpayer’s qualified investment in an eligible project. The base credit amount is 6% of this investment, which includes the basis of eligible property, such as equipment and other tangible assets integral to the project.

A significantly higher credit rate of 30% is available for projects that meet prevailing wage and apprenticeship requirements. To qualify, all laborers and mechanics employed in the construction, alteration, or repair of the facility must be paid at least the prevailing local wages for similar work. The project must also meet specific requirements for using qualified apprentices from a registered apprenticeship program for a certain percentage of total labor hours.

Information Required for the Application

Applying for the 48C credit is a two-stage process requiring distinct information for each phase. The initial Concept Paper submitted to the Department of Energy should provide a high-level overview of the project, its location, the proposed technology, and its commercial viability. It must also include estimated costs, timelines, and projections for job creation and emissions reduction.

If the project advances, a full Section 48C Application is required with more comprehensive documents. These include:

• Detailed project management plans, financial models, and engineering specifications
• A workforce and community engagement plan
• A thorough analysis of the project’s supply chain
• Validated data supporting the project’s expected reduction in greenhouse gas emissions or its contribution to the clean energy supply chain

The Application and Allocation Process

The application process for the 48C credit is competitive and conducted in funding rounds. Of the program’s total $10 billion in credits, $4 billion is reserved for projects in designated energy communities—areas with a history of coal mine or power plant closures.

The process begins with the submission of a Concept Paper through the DOE’s dedicated 48C Portal. Following a review, the DOE sends the applicant either a letter of encouragement or discouragement. Upon receiving encouragement, the applicant can submit the full Section 48C Application.

This detailed application undergoes a technical and commercial review by the DOE, which then provides its recommendations to the IRS. The IRS holds the final authority and makes the ultimate decision on which projects receive an allocation. Successful applicants receive a formal allocation letter from the IRS specifying the credit amount.

Within two years of receiving this letter, the taxpayer must provide evidence that certification requirements, such as securing necessary permits, have been met. After the project is placed in service, the taxpayer can claim the credit on their federal tax return by filing Form 3468, Investment Credit.