us-irs-revenue-rulings-irb-2024-32-pdf•Internal Revenue Bulletin 2024-32 (PDF rendition): IRS Revenue Rulings
Internal Revenue Bulletin 2024-32 (PDF rendition): IRS Revenue Rulings
us-irs-revenue-rulings-irb-2024-32-pdfInternal Revenue Bulletin 2024-32 (PDF rendition): IRS Revenue RulingsGuidance
Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.
Bulletin No. 2024–32 August 5, 2024 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. ADMINISTRATIVE TD 10003, page 342. This document contains final regulations relating to the excise tax imposed on certain sales by manufacturers, pro- ducers, or importers of designated drugs. Specifically, the final regulations set forth procedural provisions relating to how taxpayers must report liability for such tax. The final regulations also except such tax from semimonthly deposit requirements. The final regulations affect manufacturers, producers, or importers of designated drugs dispensed, furnished, or administered to individuals under the terms of Medicare during certain statutory periods. EMPLOYEE PLANS Notice 2024-59, page 348. This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for June 2024 used under § 417(e)(3)(D), the 24-month average segment rates applicable for July 2024, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv). INCOME TAX REG-119283-23, page 351. This document contains proposed regulations relating to the clean electricity production credit and the clean electricity investment credit established by the Inflation Reduction Act of 2022. The proposed regulations would provide rules for: determining greenhouse gas emissions rates resulting from the production of electricity; peti- tioning for provisional emissions rates; and determining eligibility for these credits in various circumstances. The proposed regulations would affect all taxpayers who produce clean electricity and claim the clean electricity production credit with respect to a facility or the clean electricity investment credit with respect to a facility or energy storage technology, as applicable, that is placed in service after 2024. Rev. Rul. 2024-15, page 340. Federal rates; adjusted federal rates; adjusted federal long- term rate, and the long-term tax exempt rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for August 2024. Finding Lists begin on page ii. The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing offi- cial rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless other- wise indicated. Procedures relating solely to matters of inter- nal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rul- ings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbar- ment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. August 5, 2024 Bulletin No. 2024–32 Part I Section 1274.— Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property (Also Sections 42, 280G, 382, 467, 468, 482, 483, 1288, 7520, 7872.) Rev. Rul. 2024-15 This revenue ruling provides various prescribed rates for federal income tax purposes for August 2024 (the current month). Table 1 contains the short- term, mid-term, and long-term applica- ble federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted fed- eral long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appro- priate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in ser- vice after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an inter- est for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. REV. RUL. 2024-15 TABLE 1 Applicable Federal Rates (AFR) for August 2024 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-term AFR4.95%4.89%4.86%4.84% 110% AFR5.45%5.38%5.34%5.32% 120% AFR5.96%5.87%5.83%5.80% 130% AFR6.46%6.36%6.31%6.28% Mid-term AFR4.34%4.29%4.27%4.25% 110% AFR 4.78%4.72%4.69%4.67% 120% AFR5.22%5.15%5.12%5.10% 130% AFR5.66%5.58%5.54%5.52% 150% AFR6.54%6.44%6.39%6.36% 175% AFR7.65%7.51%7.44%7.40% Long-term AFR4.52%4.47%4.45%4.43% 110% AFR4.98%4.92%4.89%4.87% 120% AFR5.43%5.36%5.32%5.30% 130% AFR5.89%5.81%5.77%5.74% REV. RUL. 2024-15 TABLE 2 Adjusted AFR for August 2024 Period for Compounding AnnualSemiannualQuarterlyMonthly Short-term adjusted AFR3.74%3.71%3.69%3.68% Mid-term adjusted AFR3.29%3.26%3.25%3.24% Long-term adjusted AFR3.42%3.39%3.38%3.37% August 5, 2024 340 Bulletin No. 2024–32 REV. RUL. 2024-15 TABLE 3 Rates Under Section 382 for August 2024 Adjusted federal long-term rate for the current month3.42% Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 3.62% REV. RUL. 2024-15 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for August 2024 Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Appropriate percentage for the 70% present value low-income housing credit8.03% Appropriate percentage for the 30% present value low-income housing credit 3.44% REV. RUL. 2024-15 TABLE 5 Rate Under Section 7520 for August 2024 Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 5.2% Section 42.—Low-Income Housing Credit The applicable federal short-term, mid-term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 280G.—Golden Parachute Payments The applicable federal short-term, mid-term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 382.—Limitation on Net Operating Loss Carryforwards and Certain Built-In Losses Following Ownership Change The adjusted applicable federal long-term rate is set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 467.—Certain Payments for the Use of Property or Services The applicable federal short-term, mid-term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 468.—Special Rules for Mining and Solid Waste Reclamation and Closing Costs The applicable federal short-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 482.—Allocation of Income and Deductions Among Taxpayers The applicable federal short-term, mid-term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 483.—Interest on Certain Deferred Payments The applicable federal short-term, mid-term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 1288.—Treatment of Original Issue Discount on Tax-Exempt Obligations The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 7520.—Valuation Tables The applicable federal mid-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Section 7872.—Treatment of Loans With Below- Market Interest Rates The applicable federal short-term, mid-term, and long-term rates are set forth for the month of August 2024. See Rev. Rul. 2024-15, page 340. Bulletin No. 2024–32 341 August 5, 2024 August 5, 2024 342 Bulletin No. 2024–32 26 CFR 40.0-1;26 CFR 40.6011(a)-1;26 CFR 40.6302(c)-1;26 CFR 47.5000D-0;26 CFR 47.5000D-1;26 CFR 47.5000D-2;26 CFR 47.5000D-3;26 CFR 47.5000D-4 TD 10003 Excise Tax on Designated Drugs; Procedural Requirements AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final rule. SUMMARY: This document contains final regulations relating to the excise tax imposed on certain sales by manufactur- ers, producers, or importers of designated drugs. Specifically, the final regulations set forth procedural provisions relating to how taxpayers must report liability for such tax. The final regulations also except such tax from semimonthly deposit requirements. The final regulations affect manufacturers, producers, or importers of designated drugs dispensed, furnished, or administered to individuals under the terms of Medicare during certain statutory periods. DATES: Effective date: These regulations are effective on August 5, 2024. Applicability dates: For dates of appli- cability, see §§40.0-1(e), 40.6011(a)-1(e), 40.6302(c)-1(f), and 47.5000D-1(b). FOR FURTHER INFORMATION CONTACT: Jacob W. Peeples or James S. Williford at (202) 317-6855 (not a toll- free number). SUPPLEMENTARY INFORMATION: Background This document amends the Excise Tax Procedural Regulations (26 CFR part 40) and adds new part 47 to 26 CFR chapter I to contain the “Designated Drugs Excise Tax Regulations” related to the excise tax imposed by section 5000D of the Internal Revenue Code (Code) on certain sales by manufacturers, producers, or importers of designated drugs (section 5000D tax). Sections 1191 through 1198 of the Social Security Act (SSA), added by sec- tions 11001 and 11002 of Public Law 117- 169, 136 Stat. 1818 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022 (IRA), require the Secretary of Health and Human Ser- vices to establish a Medicare prescription drug price negotiation program (Medicare Drug Price Negotiation Program) to nego- tiate maximum fair prices for certain high expenditure, single-source drugs covered under Medicare. Section 5000D, added to new chap- ter 50A of the Code by section 11003 of the IRA, imposes an excise tax on cer- tain sales by manufacturers, producers, or importers of designated drugs dispensed, furnished, or administered to individuals under the terms of Medicare during a day that falls within a period described in sec- tion 5000D(b). The periods described in section 5000D(b) relate to certain statuto- rily prescribed milestones in the Medicare Drug Price Negotiation Program. Because chapter 50A is a new chapter of the Code, the existing regulations that prescribe pro- cedural rules applicable to most Federal excise taxes do not apply to chapter 50A. Notice 2023-52 (2023-35 I.R.B. 650; August 28, 2023) announced that the Department of the Treasury (Treasury Department) and the IRS intended to pro- pose regulations addressing substantive and procedural issues related to the sec- tion 5000D tax. On October 2, 2023, a notice of pro- posed rulemaking (REG-115559-23) was published in the Federal Register (88 FR 67690) (proposed regulations). No public hearing was requested or held. The Trea- sury Department and the IRS received sev- eral comments in response to the proposed regulations. The comments addressing the proposed regulations are summarized in the Summary of Comments and Explana- tion of Revisions section of this preamble. Summary of Comments and Explanation of Revisions I. Overview As noted in the Background section of this preamble, the Treasury Department and the IRS received several public com- ment submissions in response to the pro- posed regulations. The public comments fall into six general categories: timing of the publication of the proposed regula- tions; the quarterly filing requirement in the proposed regulations; the proposed regulations’ retroactive applicability dates; the constitutionality of the section 5000D tax; technical issues and questions relating to the implementation of the sec- tion 5000D tax itself; and comments on the Special Analyses provided in the pro- posed regulations. Each of these catego- ries of comments is addressed in turn in parts II through VII of this Summary of Comments and Explanation of Revisions. All public comments were considered and are available at https://www.regulations.gov or upon request. After full consideration of the public comments received in response to the proposed regulations, this Treasury decision adopts the proposed regulations with three non-substantive modifications. Specifically, the final regulations mod- ify proposed §§40.0-1, 40.6011-1(d), and 40.6302(c)-1 by clarifying that the section 5000D tax is imposed on “the sale of” des- ignated drugs. The language, as modified, more closely tracks the language of section 5000D(a). II. Timing of the Publication of the Proposed Regulations A commenter stated that the Treasury Department and the IRS acted prema- turely when publishing proposed regu- lations related to procedural rules prior to publishing substantive rules for the section 5000D tax and requested that the Treasury Department and the IRS with- draw the proposed regulations until sub- stantive rules are published. The section 5000D tax is a self-ex- ecuting tax – that is, the section 5000D tax is effective and applicable regardless of whether implementing regulations are published by the Treasury Department and the IRS. See Sundance Helicopters, Inc. v. United States, 104 Fed. Cl. 1, 11 (2012) (in determining whether the issuance of regulations is a precondition to the appli- cation of a statute, the court followed Tax Court precedent in Estate of Neumann v. Comm’r, 106 T.C. 216 (1996) (setting out the rule that “a tax statute is self-executing if the regulation referred to in the statute deals only with how, not whether, the tax Bulletin No. 2024–32 343 August 5, 2024 is to be applied.”)). Further, under section 5000D(b)(1), the first date that a manu- facturer, producer, or importer could be liable for the section 5000D tax is Octo- ber 2, 2023. As a result, publication of the proposed regulations was not premature because liability can arise under section 5000D in the absence of substantive regu- latory guidance, and taxpayers needed this procedural guidance on how to meet their tax reporting and payment obligations for section 5000D tax liability incurred on and after October 2, 2023. Accordingly, the Treasury Department and the IRS are finalizing the proposed regulations with- out adopting this comment. III. Quarterly Filing Requirement A commenter expressed concern regarding the proposed regulations’ quar- terly filing and payment requirement. Spe- cifically, the commenter stated that – in the absence of substantive guidance such as clarification of what sales are subject to the section 5000D tax – it is “impossible” for the IRS to determine that a “quarterly cadence” for filing returns and paying the section 5000D tax is rational. Further, the commenter stated that the quarterly filing requirement will be overly burdensome on taxpayers. Generally, §40.6011(a)-1(a)(2)(i) re- quires that taxpayers subject to Federal excise tax must file a Form 720, Quar- terly Federal Excise Tax Return, begin- ning with the first calendar quarter during which their Federal excise tax liability arises. Once the first Form 720 is filed, a taxpayer is generally required to con- tinue filing Forms 720 for every calendar quarter thereafter – regardless of wheth- er additional Federal excise tax liabilities are incurred during a particular subse- quent calendar quarter – until the taxpay- er permanently ceases all operations with respect to which the Federal excise tax liability was incurred. See §§40.6011(a)- 1(a)(2)(i) and 40.6011(a)-2(a)(1). Failure to file subsequent quarterly returns after filing the first Form 720 may result in the assessment of penalties under section 6651(a) of the Code. In developing the proposed regula- tions, the Treasury Department and the IRS recognized that in the context of the section 5000D tax (under which a tax- payer may incur liability in a particular calendar quarter and then never incur lia- bility again in subsequent calendar quar- ters), to require a taxpayer to continue to file Form 720 for every calendar quarter following the filing of its first Form 720 even if no tax liability is incurred in sub- sequent calendar quarters would be both unnecessary for tax administration and unduly burdensome on the taxpayer. As a result, the proposed regulations exempted taxpayers that incur a section 5000D tax liability (section 5000D taxpayers) and report that tax liability on a timely filed Form 720 from the general requirement to file subsequent Forms 720 if no section 5000D tax liability is incurred during a subsequent calendar quarter. Specifically, proposed §40.6011(a)-1(d) required a tax- payer to file a subsequent Form 720 only if a new section 5000D tax liability arises during a particular calendar quarter. Regarding the requirement to pay a section 5000D tax liability quarterly with the taxpayer’s Form 720, gener- ally, §§40.6071(a)-1(a) and 40.6151(a)-1 require that Form 720 filers must pay the tax shown on the return at the same time the return is filed. Providing a different rule for section 5000D taxpayers would introduce unnecessary complexity into the excise tax filing and payment regime. An increase in complexity could lead to taxpayer confusion and likely result in a greater burden on both taxpayers and the IRS with little to no benefit accruing to stakeholders. The Treasury Depart- ment and the IRS also note that proposed §40.6302(c)-1 exempted the section 5000D tax from the semimonthly deposit requirements that apply to most other Federal excise taxpayers. By finalizing this proposed rule without this modifica- tion to the requirement to pay with the quarterly filing, the compliance burden on section 5000D taxpayers will be fur- ther reduced. For these reasons, as well as for rea- sons similar to those discussed in part II of this Summary of Comments and Expla- nation of Revisions (related to the neces- sity to timely provide section 5000D tax- payers with procedural guidance on how to meet their tax reporting and payment obligations), the Treasury Department and the IRS are finalizing the proposed regula- tions without adopting this comment. IV. Applicability Dates The proposed regulations provided that the Treasury decision finalizing the pro- posed regulations will apply to calendar quarters beginning on or after October 1, 2023; in other words, the proposed regu- lations provided that this Treasury deci- sion will not apply beginning on the date that it is published in the Federal Regis- ter, but rather it will retroactively apply as of the first day of the fourth calendar quarter of 2023. A commenter requested that the Treasury Department and the IRS reconsider the retroactive applicability dates provided in the proposed regulations because the section 5000D tax is new. As discussed in part II of this Summary of Comments and Explanation of Revi- sions, the Treasury Department and the IRS prioritized providing section 5000D taxpayers with procedural guidance on how to meet their tax reporting and pay- ment obligations by October 2, 2023, the first date when a taxpayer could incur a section 5000D tax liability. Because the first date when a taxpayer could incur lia- bility for the section 5000D tax is Octo- ber 2, 2023, which falls within the fourth calendar quarter of 2023, it is appropriate for the final regulations that provide rules relating to filing and payment of the sec- tion 5000D tax to relate back to the begin- ning of the fourth calendar quarter of 2023 (that is, October 1, 2023), which in accor- dance with section 7805(b)(1)(B), would be the first taxable period ending after October 2, 2023 (that is, the date the pro- posed regulations were published in the Federal Register). As a result, the Trea- sury Department and IRS are finalizing the proposed applicability dates without adopting this comment. V. Constitutionality Some commenters stated that the Medicare Drug Price Negotiation Pro- gram generally, and the section 5000D tax specifically, may be unconstitutional. These comments are outside the scope of the proposed regulations, which set forth proposed rules for administering a duly enacted tax law. Therefore, it is not appro- priate for the Treasury Department and the IRS to address these comments in the con- text of this rulemaking. August 5, 2024 344 Bulletin No. 2024–32 VI. Technical Comments A commenter requested that the Trea- sury Department and the IRS consider pro- viding sales-reporting and calculation “safe harbors” in these final regulations. Another commenter stated their belief that Notice 2023-52 requested clarification on how the Treasury Department and the IRS should define “sales” for purposes of the section 5000D tax. These comments are outside the scope of the proposed regulations, which related only to the procedures for reporting and paying the section 5000D tax. VII. Comments on the Special Analyses A. Paperwork Reduction Act A commenter requested that the Trea- sury Department and the IRS reconsider the paperwork burden estimate in the Paperwork Reduction Act (44 U.S.C. 3507(d)) (PRA) section of the proposed regulations because the commenter believes that the number of estimated hours is too low. In this request, the commenter suggested that it is possible that no taxpayers will ever incur a sec- tion 5000D tax liability. The commenter accepted that the Treasury Department and the IRS do not have historical data on the number of compliance hours affected taxpayers may experience if a section 5000D tax liability is incurred and did not offer a specific estimated number of hours it views as more accurate than the estimate provided in the proposed regu- lations. Similarly, the commenter did not offer an alternative calculation methodol- ogy that the Treasury Department and the IRS could use to provide a better burden estimate. The Treasury Department and the IRS calculated the estimated number of paper- work burden hours using the long-standing and established methodology outlined in Publication 5743, Taxpayer Compliance Burden, to arrive at the estimated total annual reporting burden of 1,380 hours stated in the proposed regulations. For these reasons, the Treasury Department and the IRS estimate that this Treasury decision will impose a total annual reporting burden of 1,380 hours, as discussed in part II of the Special Analyses section of this preamble. However, the Treasury Department and the IRS will regularly examine and, as nec- essary, update the estimated total annual reporting burden of this Treasury decision as required by the PRA. B. Regulatory Flexibility Act A commenter requested that the Treasury Department and the IRS conduct a Regu- latory Flexibility Act (5 U.S.C. chapter 6) (RFA) analysis because the commenter is concerned that this Treasury decision may have an indirect effect on small entities. An agency may properly certify that no RFA analysis is needed when it determines that a rule will not have a significant economic impact on a substantial number of small entities that are subject to the requirements of the proposed rule. See Mid-Tex Elec. Co-op., Inc. v. FERC, 773 F.2d 327, 342 (D.C. Cir. 1985) (holding that Congress did not intend to require consideration of every indirect effect that any regulation might have on small businesses). Accordingly, as discussed in part III of the Special Analy- ses section of this preamble, the Treasury Department and the IRS continue to certify that this Treasury decision will not create additional obligations for, or impose a sig- nificant economic impact on, small entities, and as a result, a regulatory flexibility anal- ysis under the RFA is not required. Special Analyses I. Regulatory Planning and Review— Economic Analysis Pursuant to the Memorandum of Agreement, Review of Treasury Regula- tions under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. II. Paperwork Reduction Act The collection of information con- tained in these final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the PRA under control number 1545- 0023. The collections of information in these regulations relate to reporting and recordkeeping requirements that will allow taxpayers to meet their tax report- ing obligations. The collections of infor- mation would generally be used by the IRS for tax compliance purposes and by taxpayers to facilitate proper tax report- ing and compliance. The reporting and recordkeeping requirements are covered within the form and instructions for Form 720. Because the section 5000D tax is a new tax that has never been reported to the IRS, the Treasury Department and the IRS do not have historical data on the number of affected taxpayers. The Cen- ters for Medicare and Medicaid Services (CMS) has selected 10 drugs for price negotiation for initial price applicability year 2026. CMS will select for negotia- tion a limited number of drugs for each initial price applicability year after that, as outlined in the IRA. Further, manufac- turers, producers, or importers of such drugs may or may not become subject to a section 5000D tax liability. Based on the foregoing, the IRS estimates that there will be between 0 and 50 taxpayers during the next 3 years. If a taxpayer has a section 5000D tax liability, it would be required to file Form 720 to report such liability. Form 720 is a quarterly return. A taxpayer would only be required to file Form 720 during cal- endar quarters in which the taxpayer has a section 5000D tax liability. Therefore, a taxpayer that has a section 5000D tax liability in one calendar quarter but not in subsequent calendar quarters would only be required to file one Form 720. The respondents with regard to the section 5000D tax are manufacturers, producers, or importers of certain drugs. The Treasury Department and the IRS estimate the annual burden of the collec- tions of information as follows (these esti- mates, which are for PRA purposes only, are based on the high end of the range of possible taxpayers and the high end of the range of the frequency of responses, in which a taxpayer would have tax liability in all four calendar quarters): Estimated frequency of responses: Quarterly. Estimated number of responses: 50. Bulletin No. 2024–32 345 August 5, 2024 Estimated burden time per respondent: 6.9 hours. Estimated total annual reporting bur- den: 1,380 hours. A Federal agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information dis- plays a valid control number assigned by OMB. Books or records relating to a collection of information must be retained if their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103. The Treasury Department and the IRS received a comment suggesting that the paperwork burden estimate provided in the proposed regulations was too low. However, for the reasons discussed in detail in the Summary of Comments and Explanation of Revisions section of this preamble and in this Special Analyses sec- tion, the Treasury Department and the IRS have not changed the estimates provided herein. III. Regulatory Flexibility Act For the reasons discussed in detail in the Summary of Comments and Explana- tion of Revisions section of this pream- ble and in this Special Analyses section, pursuant to the RFA, it is hereby certi- fied that these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the section 5000D tax is imposed only on certain sales by manufacturers, producers, or importers of designated drugs during periods described in sec- tion 5000D(b). The periods described in section 5000D(b) relate to milestones in the Medicare Drug Price Negotiation Pro- gram, which involve only certain drugs with high Medicare expenditures. Drugs with high Medicare expenditures that are not already excluded from the Medicare Drug Price Negotiation Program under an exception such as the SSA’s small biotech exception (sections 1192(b) and (d)(2) of the SSA) are likely to be manufactured, produced, or imported by large entities, so if any section 5000D tax liability arises, an insubstantial number of taxpayers will be small entities. As noted earlier, data is not available about the number of taxpay- ers affected, but the number is likely to be limited, in part due to the limited number of drugs selected for the Medicare Drug Price Negotiation Program in any partic- ular year. In addition, these final regula- tions will assist taxpayers in meeting their tax reporting obligations by providing clarity on how to report section 5000D tax liability, which will make it easier for taxpayers to comply with section 5000D. Therefore, these final regulations will not create additional obligations for, or impose a significant economic impact on, small entities, and a regulatory flexibility analysis under the RFA is not required. IV. Section 7805(f) Pursuant to section 7805(f) of the Code, the notice of proposed rulemak- ing preceding these final regulations was submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. No comments were received from the Chief Counsel for the Office of Advocacy of the Small Business Administration. V. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal man- date that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. These final regulations do not include any Federal mandate that may result in expen- ditures by State, local, or Tribal govern- ments, or by the private sector, in excess of that threshold. VI. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local gov- ernments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These final regulations do not have federalism implications, do not impose substantial direct compliance costs on State and local governments, and do not preempt State law within the meaning of the Executive order. Statement of Availability of IRS Documents The IRS Notice cited in this pream- ble is published in the Internal Revenue Bulletin and is available from the Super- intendent of Documents, U.S. Govern- ment Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov. Drafting Information The principal author of these regula- tions is Jacob W. Peeples of the Office of the Associate Chief Counsel (Passthroughs & Special Industries). However, other per- sonnel from the Treasury Department and the IRS participated in their development. List of Subjects 26 CFR Part 40 Excise taxes, Reporting and record- keeping requirements. 26 CFR Part 47 Excise taxes. Adoption of Amendments to the Regulations Accordingly, the Treasury Department and the IRS amend 26 CFR chapter I, sub- chapter D, as follows: PART 40—EXCISE TAX PROCEDURAL REGULATIONS Paragraph 1. The authority citation for part 40 continues to read in part as fol- lows: August 5, 2024 346 Bulletin No. 2024–32 Authority: 26 U.S.C. 7805. * * * * * Par. 2. Section 40.0-1 is amended by revising paragraphs (a) and (e) to read as follows: §40.0-1 Introduction. (a) In general. The regulations in this part are designated the Excise Tax Proce- dural Regulations. The regulations in this part set forth administrative provisions relating to the excise taxes imposed by chapters 31 through 34, 36, 38, 39, 49, and 50A of the Internal Revenue Code (Code) (except for the chapter 32 tax imposed by section 4181 (firearms tax) and the chap- ter 36 taxes imposed by sections 4461 (harbor maintenance tax) and 4481 (heavy vehicle use tax)), and to floor stocks taxes imposed on articles subject to any of these taxes. Chapter 31 relates to retail excise taxes; chapter 32 to manufacturers’ excise taxes; chapter 33 to taxes imposed on com- munications services and air transporta- tion services; chapter 34 to taxes imposed on certain insurance policies; chapter 36 to taxes imposed on transportation by water; chapter 38 to environmental taxes; chapter 39 to taxes imposed on registra- tion-required obligations; chapter 49 to taxes imposed on indoor tanning services; and chapter 50A to taxes imposed on the sale of designated drugs. References in this part to taxes also include references to the fees imposed by sections 4375 and 4376 of the Code. See parts 43, 46 through 49, and 52 of this chapter for regulations related to the imposition of tax. * * * * * (e) Applicability dates—(1) Paragraph (a). Paragraph (a) of this section applies to returns required to be filed under §40.6011(a)-1 for calendar quarters begin- ning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2024. (2) Paragraphs (b) and (c). Para- graphs (b) and (c) of this section apply to returns for calendar quarters beginning after March 31, 2013. For rules that apply before March 31, 2013, see 26 CFR part 40, revised as of April 1, 2012. (3) Paragraph (d). Paragraph (d) of this section applies to returns for calendar quarters beginning on or after January 19, 2021. For rules that apply before January 19, 2021, see 26 CFR part 40, revised as of April 1, 2020. Par. 3. Section 40.6011(a)-1 is amended by: 1. Revising the first sentence of para- graph (a)(2)(i). 2. Adding paragraphs (d) and (e). The revision and additions read as fol- lows: §40.6011(a)-1 Returns. (a) * * * (2) * * * (i) * * * Except as provided in para- graphs (b) through (d) of this section, the return must be made for a period of one calendar quarter. * * * * * * * * (d) Tax on the sale of designated drugs. A return that reports liability imposed by section 5000D of the Internal Revenue Code must be made for a period of one calendar quarter. A return must be filed for each calendar quarter in which liabil- ity for the tax imposed by section 5000D is incurred. There is no requirement that a return be filed for a calendar quarter in which there is no liability imposed by sec- tion 5000D. (e) Applicability dates—(1) Paragraph (a)(2)(i). Paragraph (a)(2)(i) of this sec- tion applies to returns filed for calendar quarters beginning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2024. (2) Paragraph (c). See paragraph (c)(2) of this section. (3) Paragraph (d). Paragraph (d) of this section applies to returns filed for calendar quarters beginning on and after October 1, 2023. Par. 4. Section 40.6302(c)-1 is amended by: 1. Revising paragraphs (e)(1)(iv) and (v). 2. Adding paragraph (e)(1)(vi). 3. Revising paragraph (f). The revisions and addition read as fol- lows: §40.6302(c)-1 Deposits. * * * * * (e) * * * (1) * * * (iv) Sections 4375 and 4376 (relating to fees on health insurance policies and self-insured insurance plans); (v) Section 5000B (relating to indoor tanning services); and (vi) Section 5000D (relating to the sale of designated drugs). * * * * * (f) Applicability dates—(1) Para- graphs (a) through (d). Paragraphs (a) through (d) of this section apply to depos- its and payments made after March 31, 2013. For rules that apply before March 31, 2013, see 26 CFR part 40, revised as of April 1, 2013. (2) Paragraph (e). Paragraph (e) of this section applies to calendar quarters beginning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2024. Par. 5. Add part 47 to read as follows: PART 47—DESIGNATED DRUGS EXCISE TAX REGULATIONS Sec. 47.5000D-0 Table of contents. 47.5000D-1 Introduction. 47.5000D-2 - 47.5000D-4 [Reserved] Authority: 26 U.S.C. 7805. Section 47.5000D-1 also issued under 26 U.S.C. 5000D. §47.5000D-0 Table of contents. This section lists the table of contents for §§47.5000D-1 through 47.5000D-4. §47.5000D-1 Introduction. (a) In general. (b) Applicability date. §§47.5000D-2 - 47.5000D-4 [Reserved] §47.5000D-1 Introduction. (a) In general. The regulations in this part are designated the Designated Drugs Excise Tax Regulations. The regulations in this part relate to the tax imposed by section 5000D of the Internal Revenue Code. See part 40 of this chapter for reg- Bulletin No. 2024–32 347 August 5, 2024 ulations relating to returns, payments, and other procedural rules applicable to this part. (b) Applicability date. This section applies to returns filed for calendar quar- ters beginning on or after October 1, 2023. §§47.5000D-2 - 47.5000D-4 [Reserved] Douglas W. O’Donnell, Deputy Commissioner. Approved: June 24, 2024. Aviva R. Aron-Dine, Acting Assistant Secretary of the Treasury (Tax Policy). (Filed by the Office of the Federal Register July 3, 2024, 8:45 a.m., and published in the issue of the Federal Register for July 5, 2024, 89 FR 55507) August 5, 2024 348 Bulletin No. 2024–32 Part III Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates Notice 2024-59 This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month aver- age segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the inter- est rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I). YIELD CURVE AND SEGMENT RATES Section 430 specifies the minimum funding requirements that apply to sin- gle-employer plans (except for CSEC plans under § 414(y)) pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during speci- fied periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. 1 However, an elec- tion may be made under § 430(h)(2)(D) (ii) to use the monthly yield curve in place of the segment rates. Section 1.430(h)(2)-1(d) provides rules for determining the monthly cor- porate bond yield curve, 2 and § 1.430(h) (2)-1(c) provides rules for determining the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Con- sistent with the methodology specified in § 1.430(h)(2)-1(d), the monthly corporate bond yield curve derived from June 2024 data is in Table 2024-6 at the end of this notice. The spot first, second, and third segment rates for the month of June 2024 are, respectively, 5.09, 5.28, and 5.52. The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applica- ble minimum and maximum percentages of the corresponding 25-year average seg- ment rates. For this purpose, any 25-year average segment rate that is less than 5% is deemed to be 5%. The 25-year average segment rates for plan years beginning in 2023 and 2024 were published in Notice 2022-40, 2022-40 I.R.B. 266 and Notice 2023-66, 2023-40 I.R.B. 992, respec- tively. The applicable minimum and max- imum percentages are 95% and 105% for plan years beginning in 2023 and 2024. 24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES The three 24-month average corporate bond segment rates applicable for July 2024 without adjustment for the 25-year average segment rate limits are as follows: 24-Month Average Segment Rates Without 25-Year Average Adjustment Applicable Month First Segment Second Segment Third Segment July 2024 4.99 5.29 5.29 The adjusted 24-month average seg- ment rates set forth in the chart below reflect § 430(h)(2)(C)(iv) of the Code. The 24-month averages applicable for July 2024, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average seg- ment rates in accordance with § 430(h)(2) (C)(iv) of the Code, are as follows: Adjusted 24-Month Average Segment Rates For Plan Years Beginning InApplicable MonthFirst SegmentSecond SegmentThird Segment 2023July 20244.995.295.74 2024July 20244.995.295.59 30-YEAR TREASURY SECURITIES INTEREST RATES Section 431 specifies the minimum funding requirements that apply to multi- employer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) pro- vides that the interest rate used to calcu- late current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year 1 Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)). 2 For months before February 2024, the monthly corporate bond yield curve was determined in accordance with Notice 2007-81, 2007-44 I.R.B. 899. Section 1.430(h)(2)-1(d) generally adopts the methodology for determining the monthly corporate bond yield curve under Notice 2007-81 but includes two enhancements to take into account subsequent changes in the bond market. Those enhancements are described in the preamble to TD 9986 (89 FR 2127). Bulletin No. 2024–32 349 August 5, 2024 Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Trea- sury securities for June 2024 is 4.45 per- cent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond matur- ing in May 2054. For plan years beginning in July 2024, the weighted average of the rates of interest on 30-year Treasury securi- ties and the permissible range of rates used to calculate current liability are as follows: Treasury Weighted Average Rates For Plan Years Beginning In30-Year Treasury Weighted AveragePermissible Range 90% to 105% July 20243.523.17 to 3.69 MINIMUM PRESENT VALUE SEGMENT RATES In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Section 1.417(e)-1(d)(3) and Notice 2007-81 provide guidelines for determining the minimum present value segment rates. Pursuant to those guidelines, the minimum present value segment rates determined for June 2024 are as follows: Minimum Present Value Segment Rates Month First Segment Second Segment Third Segment June 2024 5.09 5.28 5.52 DRAFTING INFORMATION The principal author of this notice is Tom Morgan of the Office of Associ- ate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 626-927-1475 (not toll-free number). August 5, 2024 350 Bulletin No. 2024–32 Table 2024-6 Monthly Yield Curve for June 2024 Derived from June 2024 Data MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield 0.55.5320.55.4940.55.5360.55.5680.55.57 1.05.3821.05.4941.05.5361.05.5681.05.57 1.55.2521.55.4941.55.5361.55.5681.55.57 2.05.1422.05.4942.05.5362.05.5682.05.57 2.55.0522.55.4942.55.5362.55.5682.55.57 3.04.9823.05.4943.05.5363.05.5683.05.57 3.54.9323.55.4943.55.5363.55.5683.55.57 4.04.9024.05.4944.05.5464.05.5684.05.57 4.54.8824.55.4944.55.5464.55.5684.55.57 5.04.8825.05.4945.05.5465.05.5685.05.57 5.54.8925.55.4945.55.5465.55.5685.55.57 6.04.9126.05.4946.05.5466.05.5686.05.57 6.54.9426.55.4946.55.5466.55.5686.55.57 7.04.9727.05.4947.05.5467.05.5687.05.57 7.55.0127.55.5047.55.5467.55.5687.55.57 8.05.0528.05.5048.05.5468.05.5688.05.57 8.55.0828.55.5048.55.5468.55.5688.55.57 9.05.1229.05.5049.05.5469.05.5689.05.57 9.55.1629.55.5049.55.5469.55.5689.55.57 10.05.1930.05.5050.05.5470.05.5690.05.57 10.55.2330.55.5050.55.5570.55.5690.55.57 11.05.2631.05.5051.05.5571.05.5691.05.57 11.55.2831.55.5151.55.5571.55.5691.55.57 12.05.3132.05.5152.05.5572.05.5692.05.57 12.55.3332.55.5152.55.5572.55.5792.55.58 13.05.3533.05.5153.05.5573.05.5793.05.58 13.55.3733.55.5153.55.5573.55.5793.55.58 14.05.3934.05.5154.05.5574.05.5794.05.58 14.55.4134.55.5154.55.5574.55.5794.55.58 15.05.4235.05.5255.05.5575.05.5795.05.58 15.55.4335.55.5255.55.5575.55.5795.55.58 16.05.4436.05.5256.05.5576.05.5796.05.58 16.55.4536.55.5256.55.5576.55.5796.55.58 17.05.4637.05.5257.05.5577.05.5797.05.58 17.55.4637.55.5257.55.5577.55.5797.55.58 18.05.4738.05.5258.05.5578.05.5798.05.58 18.55.4838.55.5258.55.5578.55.5798.55.58 19.05.4839.05.5359.05.5579.05.5799.05.58 19.55.4839.55.5359.55.5679.55.5799.55.58 20.05.4940.05.5360.05.5680.05.57100.05.58 Bulletin No. 2024–32 351 August 5, 2024 Part IV Notice of Proposed Rulemaking REG-119283-23 Section 45Y Clean Electricity Production Credit and Section 48E Clean Electricity Investment Credit AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemak- ing and notice of public hearing. SUMMARY: This document contains proposed regulations relating to the clean electricity production credit and the clean electricity investment credit established by the Inflation Reduction Act of 2022. The proposed regulations would provide rules for: determining greenhouse gas emis- sions rates resulting from the production of electricity; petitioning for provisional emissions rates; and determining eligi- bility for these credits in various circum- stances. The proposed regulations would affect all taxpayers who produce clean electricity and claim the clean electricity production credit with respect to a facility or the clean electricity investment credit with respect to a facility or energy storage technology, as applicable, that is placed in service after 2024. This document also provides notice of a public hearing on the proposed regulations. DATES: Written or electronic comments must be received by August 2, 2024. The public hearing on these proposed regula- tions is scheduled to be held on August 12, 2024, at 10 a.m. (ET) and August 13, 2024, at 10 a.m. (ET). On August 13, 2024, the public hearing will be held by telephone only. Requests to speak and outlines of topics to be discussed at the public hearing must be received by August 2, 2024. If no outlines are received by August 2, 2024, the public hearing will be cancelled. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemak- ing Portal at https://www.regulations. gov (indicate IRS and REG-119283-23) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, com- ments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submit- ted to the IRS’s public docket. Send paper submissions to: CC:PA:01:PR (REG- 119283-23), Room 5203, Internal Reve- nue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning these proposed regulations, the Office of Chief Counsel (Passthroughs and Special Industries) at (202) 317-6853 (not a toll-free number); concerning submissions of comments or the public hearing, Vivian Hayes at (202) 317-6901 (not a toll-free number) or by email to publichearings@irs.gov (pre- ferred). SUPPLEMENTARY INFORMATION: Background This notice of proposed rulemaking contains proposed amendments to the Income Tax Regulations (26 CFR part 1) to implement sections 45Y and 48E of the Internal Revenue Code (Code), which generally replace sections 45 and 48 of the Code with respect to qualified facili- ties, and for section 48E, with respect to energy storage technology, that is placed in service after December 31, 2024. The renewable electricity production credit determined under section 45 of the Code (section 45 credit) is generally available for qualified facilities described in section 45(d), which provides that the construction of the qualified facilities must begin before January 1, 2025. Simi- larly, other than for geothermal heat pump equipment (described in section 48(a)(3) (vii) 1 ), the energy credit determined under section 48 of the Code (section 48 credit), which is an investment credit under sec- tion 46 of the Code, is generally avail- able for energy property the construction of which begins before January 1, 2025. Therefore, as long as construction begins on the relevant qualified facility or energy property before January 1, 2025, a tax- payer may be able to claim a section 45 credit or section 48 credit, respectively, even if the taxpayer places the qualified facility or energy property in service after December 31, 2024. Sections 45Y and 48E were added to the Code, respectively, by sections 13701(a) and 13702(a) of Public Law 117-169, 136 Stat. 1818, 1982 (August 16, 2022), com- monly referred to as the Inflation Reduc- tion Act of 2022 (IRA). Section 13701(c) of the IRA provides that the clean elec- tricity production credit determined under section 45Y (section 45Y credit) applies to facilities placed in service after December 31, 2024. Similarly, section 13702(c) of the IRA provides that the clean electricity investment credit determined under sec- tion 48E (section 48E credit) applies to property placed in service after December 31, 2024. Thus, in some cases, if a taxpayer places in service a qualified facility or energy property after 2024, the construc- tion of which begins before 2025, the qualified facility or energy property may be eligible for more than one of the cred- its determined under section 45, 45Y, 48, or 48E, although a taxpayer can only claim one of these credits with respect to such qualified facility or energy prop- erty. Accordingly, a taxpayer must choose which one of these credits to claim with respect to such qualified facility or energy property. Once the taxpayer has claimed one of these credits with respect to a qual- ified facility or an energy property, the taxpayer cannot claim any other of these credits with respect to the same qualified facility or energy property. 1 Section 48(a)(3)(vii) includes as energy property equipment that uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure (geothermal heat pump property), but only with respect to property the construction of which begins before January 1, 2035. August 5, 2024 352 Bulletin No. 2024–32 I. Overview of Section 45Y Section 45Y(a)(1) provides that for pur- poses of the general business credit under section 38 of the Code, the section 45Y credit for any taxable year is an amount equal to the product of the kilowatt hours (kWh) of eligible electricity produced by the taxpayer at a qualified facility, mul- tiplied by the applicable amount with respect to such qualified facility. For this purpose, eligible electricity is electricity that is either (1) sold by the taxpayer to an unrelated person during the taxable year or (2) in the case of a qualified facility that is equipped with a metering device that is owned and operated by an unrelated per- son, sold, consumed, or stored by the tax- payer during the taxable year. A. Amount of credit For purposes of the applicable amount used in calculating the section 45Y credit, section 45Y(a)(2) provides a base amount and a higher alternative amount. Section 45Y(a)(2)(A) provides that the applica- ble amount will be the base amount of 0.3 cents in the case of a qualified facil- ity that does not satisfy the requirements for the higher alternative amount. Section 45Y(a)(2)(B) provides that the alternative amount of 1.5 cents applies in the case of any qualified facility (1) with a maxi- mum net output of less than 1 megawatt (as measured in alternating current), (2) the construction of which begins prior to the date that is 60 days after the Secretary of the Treasury or her delegate (Secretary) publishes guidance on the requirements of section 45Y(g)(9) (wage requirements) and section 45Y(g)(10) (apprenticeship requirements), 2 or (3) that satisfies section 45Y(g)(9) and, with respect to the con- struction of such facility, satisfies section 45Y(g)(10). Section 45Y(c)(1) provides for an inflation adjustment for both the base and alternative amounts. Section 45Y(c)(1) provides that in the case of a calendar year beginning after 2024, the 0.3 cent amount in section 45Y(a)(2)(A) and the 1.5 cent amount in section 45Y(a)(2)(B) will each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale, consump- tion, or storage of the electricity occurs. Section 45Y(c)(1) also addresses the rounding rules to be applied to this com- putation. Section 45Y(c)(2) provides that the Secretary will, not later than April 1 of each calendar year, determine and pub- lish in the Federal Register the inflation adjustment factor for such calendar year in accordance with section 45Y(c). Section 45Y(g)(7) provides for an increase in the section 45Y credit amount for any qualified facility located in an energy community, and section 45Y(g) (11) provides for an increase in the section 45Y credit amount if the domestic content bonus requirement is satisfied. Section 45Y(g)(7) provides that in the case of any qualified facility that is located in an energy community (as defined in section 45(b)(11)(B)), for purposes of determining the amount of the credit under section 45Y(a) with respect to any electricity produced by the taxpayer at such facility during the taxable year, the applicable amount under section 45Y(a) (2) will be increased by an amount equal to 10 percent of the amount otherwise in effect under such paragraph. Section 45Y(g)(11) provides that in the case of any qualified facility that sat- isfies the domestic content bonus require- ment under section 45Y(g)(11)(B)(i), the amount of the credit determined under section 45Y(a) will be increased by an amount equal to 10 percent of the amount so determined (as determined without application of section 45Y(g)(7)). Section 45Y(g)(11)(B)(i) generally provides that the domestic content bonus requirement is satisfied with respect to any qualified facility if the taxpayer certifies to the Sec- retary (at such time, and in such form and manner, as the Secretary may prescribe) that any steel, iron, or manufactured prod- uct that is a component of such facility (upon completion of construction) was produced in the United States (as deter- mined under section 661 of title 49, Code of Federal Regulations). Section 45Y(g) (11)(B)(iii) provides that for purposes of the domestic content bonus requirement, the manufactured products that are com- ponents of a qualified facility upon com- pletion of construction will be deemed to have been produced in the United States if not less than the adjusted percentage (as determined under section 45Y(g)(11)(C)) of the total cost of all such manufactured products of such facility are attributable to manufactured products (including compo- nents) that are mined, produced, or manu- factured in the United States. B. Qualified facility Section 45Y(b) provides guidance on the meaning of a qualified facility for pur- poses of section 45Y. Subject to section 45Y(b)(1)(B) through (D), section 45Y(b) (1)(A) defines a qualified facility to mean a facility owned by the taxpayer that is used for the generation of electricity, that is placed in service after December 31, 2024, and for which the greenhouse gas emissions rate (as determined under sec- tion 45Y(b)(2)) is not greater than zero. Section 45Y(b)(1)(B) provides that for purposes of section 45Y, a facility will only be treated as a qualified facility during the 10-year period beginning on the date the facility was originally placed in service. Section 45Y(b)(1)(C) provides that a qualified facility will include a new unit or any additions of capacity that are placed in service after December 31, 2024, if in con- nection with a facility described in section 45Y(b)(1)(A) (without regard to section 45Y(b)(1)(A)(ii) describing the require- ment that the facility be placed in service after December 31, 2024) that was placed in service before January 1, 2025, but only to the extent of the increased amount of electricity produced at the facility due to the new unit or addition of capacity. Section 45Y(b)(1)(D) provides that a qualified facility will not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 48, 48A, or 48E of the Code is allowed under sec- tion 38 for the taxable year or any prior taxable year. Section 45Y(b)(2) describes the green- house gas emissions rate referenced in section 45Y(b)(1)(A)(iii). Section 45Y(b) (2)(A) defines greenhouse gas emissions 2 To meet this requirement, the construction of the qualified facility must begin prior to January 29, 2023. See proposed §1.45Y–3 as proposed in the notice of proposed rulemaking (REG– 100908–23) published in the Federal Register (88 FaR 60018) on August 30, 2023, and corrected at 88 FR 73807 on October 27, 2023. Bulletin No. 2024–32 353 August 5, 2024 rate for purposes of section 45Y to mean the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity, expressed as grams of CO 2 e per kWh. Section 45Y(e) (1) defines CO 2 e per kWh for purposes of section 45Y to mean, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on global warming potential) per kWh of electric- ity produced. Section 45Y(e)(2) defines greenhouse gas for purposes of section 45Y to have the same meaning given such term under section 211(o)(1)(G) of the Clean Air Act (CAA) (42 U.S.C. 7545(o) (1)(G)) as in effect on August 16, 2022. Section 45Y(b)(2)(B) provides that in the case of a facility that produces elec- tricity through combustion or gasifica- tion, the greenhouse gas emissions rate (GHG emissions rate) for such facility is equal to the net rate of greenhouse gases emitted into the atmosphere by such facility (taking into account lifecycle greenhouse gas emissions, as described in section 211(o)(1)(H) of the CAA (42 U.S.C. 7545(o)(1)(H))) in the production of electricity, expressed as grams of CO 2 e per kWh. Section 45Y(b)(2)(C) provides for the establishment of GHG emissions rates for facilities either through the publication of emissions rates described in section 45Y(b)(2)(C)(i) or a provisional emis- sions rate as described in section 45Y(b) (2)(C)(ii). Section 45Y(b)(2)(C)(i) states that the Secretary will annually publish a table that sets forth the GHG emissions rates for types or categories of facilities, that a taxpayer will use for purposes of section 45Y. Section 45Y(b)(2)(C)(ii) pro- vides that in the case of any facility for which a GHG emissions rate has not been established by the Secretary, a taxpayer that owns such facility may file a petition with the Secretary for determination of the GHG emissions rate with respect to such facility. Section 45Y(b)(2)(D) provides that for purposes of section 45Y(b) the amount of greenhouse gases emitted into the atmo- sphere by a facility in the production of electricity cannot include any qualified carbon dioxide that is captured by the taxpayer and either (1) disposed of by the taxpayer in secure geological storage pursuant to any regulations established under section 45Q(f)(2), or (2) utilized by the taxpayer in a manner described in sec- tion 45Q(f)(5). Section 45Y(e)(3) defines qualified carbon dioxide for purposes of section 45Y to mean carbon dioxide cap- tured from an industrial source that would otherwise be released into the atmosphere as industrial emission of greenhouse gas, is measured at the source of capture and verified at the point of disposal or utiliza- tion, and is captured and disposed or uti- lized within the United States (within the meaning of section 638(1) of the Code) or a United States territory, which for pur- poses of section 45Y and the section 45Y regulations has the meaning of the term “possession” of the United States (within the meaning of section 638(2)). C. Credit phase-out Section 45Y(d) describes the credit phase-out. Section 45Y(d)(1) provides generally that the amount of the clean electricity production credit under sec- tion 45Y(a) for any qualified facility the construction of which begins during a calendar year described in section 45Y(d) (2) is equal to the product of the amount of the credit determined under section 45Y(a) without regard to section 45Y(d), multiplied by the phase-out percentage under section 45Y(d)(2). Section 45Y(d) (2) provides that the phase-out percentage is 100 percent for a facility the construc- tion of which begins during the first cal- endar year following the applicable year; 75 percent for a facility the construction of which begins during the second cal- endar year following the applicable year; 50 percent for a facility the construction of which begins during the third calendar year following the applicable year; and 0 percent for a facility the construction of which begins during any calendar year subsequent to the calendar year described in section 45Y(d)(2)(C). Section 45Y(d) (3) defines the “applicable year” for pur- poses of section 45Y(d) to mean the later of the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of electric- ity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of elec- tricity in the United States for calendar year 2022, or 2032. D. Special rules Section 45Y(g) provides special rules for section 45Y. Section 45Y(g)(1) pro- vides that consumption, sales, or storage is taken into account under section 45Y only with respect to electricity the produc- tion of which is within the United States (within the meaning of section 638(1)), or a United States territory, which for pur- poses of section 45Y and the section 45Y regulations has the meaning of the term “possession” of the United States (within the meaning of section 638(2)). Section 45Y(g)(2) provides a rule for combined heat and power system (CHP) property. For purposes of section 45Y(a), section 45Y(g)(2)(A) generally provides that the kWh of electricity produced by a taxpayer at a qualified facility will include any production in the form of useful ther- mal energy by any CHP property within such facility, and the amount of green- house gases emitted into the atmosphere by such facility in the production of such useful thermal energy will be included for purposes of determining the GHG emissions rate for such facility. Section 45Y(g)(2)(B) defines CHP property for purposes of section 45Y(g)(2) to have the same meaning given such term by section 48(c)(3) (without regard to section 48(c) (3)(A)(iv), (B), and (D) thereof). Section 45Y(g)(2)(C) provides the necessary conversion from BTU to kWh for a tax- payer to calculate a section 45Y credit for useful thermal energy produced by a CHP property. Section 45Y(g)(3) provides that in the case of a qualified facility in which more than one person has an ownership inter- est, except to the extent provided in reg- ulations prescribed by the Secretary, pro- duction from the facility will be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility. Section 45Y(g)(4) provides that per- sons will be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation that is a member of an affiliated group of corporations filing a consolidated return, such corporation will be treated as selling electricity to an unre- lated person if such electricity is sold to August 5, 2024 354 Bulletin No. 2024–32 such a person by another member of such group. Section 45Y(g)(5) provides that under regulations prescribed by the Secretary, rules similar to the rules of section 52(d) will apply to a pass-thru in the case of estates and trusts. Section 45Y(g)(6) provides for the allocation of the credit to patrons of an agricultural cooperative. Section 45Y(g)(8) provides that rules similar to the rules of section 45(b)(3) will apply to a credit reduced for tax-exempt bonds. Section 45Y(g)(9) provides that rules similar to the rules of section 45(b)(7) apply with respect to wage requirements. Section 45Y(g)(10) provides rules similar to the rules of section 45(b)(8) apply with respect to apprenticeship requirements. II. Overview of Section 48E For purposes of the general business credit under section 38, which includes the investment credit under section 46, section 48E(a)(1) provides a credit for any taxable year in which a qualified invest- ment is made with respect to any qualified facility and any energy storage technology (EST). A. Amount of credit The amount of the section 48E credit is equal to the applicable percentage of the qualified investment in any qualified facil- ity and any EST. Section 48(E)(a)(2) pro- vides a base rate and a higher alternative rate for the applicable percentage. Section 48E(a)(2)(A)(i) provides that in the case of a qualified facility that does not satisfy the requirements for the higher alterna- tive rate, the base rate will be 6 percent. Section 48E(a)(2)(A)(ii) provides that the alternative rate of 30 percent applies in the case of any qualified facility (1) with a maximum net output of less than 1 mega- watt (as measured in alternating current), (2) the construction of which begins prior to the date that is 60 days after the Sec- retary publishes guidance on the prevail- ing wage requirements of section 48E(d) (3) and the apprenticeship requirements of section 48E(d)(4), 3 or (3) that satis- fies the prevailing wage requirements of section 48E(d)(3) and, with respect to the construction of such facility, satisfies the apprenticeship requirements of section 48E(d)(4). Similarly, section 48E(a)(2)(B)(ii) pro- vides that the alternative rate of 30 percent applies in the case of an EST (1) with a capacity of less than 1 megawatt, (2) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance on the requirements of section 48E(d)(3) and (4) 4 (prevailing wage and apprenticeship requirements, respectively), or (3) that satisfies section 48E(d)(3) and with respect to the construc- tion of such EST, satisfies section 48E(d) (4). Section 48E(a)(2)(B)(i) provides that in the case of an EST that does not satisfy the requirements for the alternative rate, the base rate will be 6 percent. Section 48E(a)(3)(A) provides for an increase in credit rate for a qualified facility or EST located in an energy com- munity (as defined in section 45(b)(11) (B)) and section 48E(a)(3)(B) similarly provides for an increase in credit rate for a qualified facility or EST that meets the domestic content bonus requirements. B. Qualified investment with respect to a qualified facility Section 48E(b) describes a qualified investment with respect to a qualified facility. Generally, for purposes of section 48E(a), section 48E(b)(1)(A) and (B)(i) provide that the qualified investment with respect to a qualified facility for any tax- able year is the sum of the basis of any qualified property placed in service by the taxpayer during such taxable year that is part of a qualified facility, plus the amount of expenditures that are paid or incurred by the taxpayer for qualified interconnec- tion property that is properly chargeable to capital account of the taxpayer. Section 48E(b)(2) provides that for purposes of section 48E, qualified prop- erty means property that is tangible per- sonal property, or other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified facility; with respect to which depreciation (or amortization in lieu of depreciation) is allowable; and the construction, recon- struction, or erection of which is com- pleted by the taxpayer, or that is acquired by the taxpayer provided the original use of such property commences with the tax- payer. Section 48E(b)(1)(B)(i)(I) and (II) pro- vide that qualified interconnection prop- erty must be in connection with a qualified facility that has a maximum net output of not greater than 5 megawatts (as measured in alternating current) and be placed in service during the taxable year of the tax- payer. Section 48E(b)(4) provides that the term “qualified interconnection property” has the meaning given such term in sec- tion 48(a)(8)(B). Section 48E(b)(3)(A) provides that for purposes of section 48E, the term “quali- fied facility” means a facility that is used for the generation of electricity, which is placed in service after December 31, 2024, and for which the anticipated GHG emissions rate (as determined under sec- tion 48E(b)(3)(B)(ii)) is not greater than zero. Section 48E(b)(3)(B) provides addi- tional rules for a qualified facility. Sec- tion 48E(b)(3)(B)(i) provides rules on an expansion of facility and incremental production stating that rules similar to the rules of section 45Y(b)(1)(C) apply for purposes of section 48E(b)(3). Section 48E(b)(3)(B)(ii) provides rules to deter- mine the GHG emissions rate of a qual- ified facility by stating that rules similar to the rules of section 45Y(b)(2) apply for purposes of section 48E(b)(3). Section 48E(b)(3)(C) provides that a qualified facility will not include any facility for which a renewable electricity production credit determined under sec- tion 45, an advanced nuclear power facil- ity production credit determined under section 45J, a carbon oxide sequestration 3 To meet this requirement, the construction of the qualified facility must begin prior to January 29, 2023. See proposed §1.48E–3 as proposed in the notice of proposed rulemaking (REG– 100908–23) published in the Federal Register (88 FR 60018) on August 30, 2023, and corrected at 88 FR 73807 on October 27, 2023. 4 To meet this requirement, the construction of the EST must begin prior to January 29, 2023. See proposed §1.48E–3 as proposed in the notice of proposed rulemaking (REG–100908–23) published in the Federal Register at 88 FR 60018 on August 30, 2023, and corrected at 88 FR 73807 on October 27, 2023. Bulletin No. 2024–32 355 August 5, 2024 credit determined under section 45Q, a zero-emission nuclear power production credit determined under section 45U, a clean electricity production credit deter- mined under section 45Y, an energy credit determined under section 48, or a quali- fying advanced coal project credit under section 48A, is allowed under section 38 for the taxable year or any prior taxable year. Section 48E(b)(5) provides a rule for coordination with the rehabilitation credit stating that the qualified investment with respect to any qualified facility for any taxable year will not include that portion of the basis of any property that is attrib- utable to qualified rehabilitation expendi- tures (as defined in section 47(c)(2) of the Code). Section 48E(b)(6) provides that for pur- poses of section 48E(b), the terms “CO 2 e per kWh” and “greenhouse gas emissions rate” have the same meaning given such terms under section 45Y. Section 48E(f) provides that, in section 48E, the term “greenhouse gas” has the same meaning given such term under section 45Y(e)(2). C. Qualified investment with respect to an energy storage technology Section 48E(c) describes a qualified investment with respect to EST. For pur- poses of section 48E(a), section 48E(c)(1) provides that the qualified investment with respect to EST for any taxable year is the basis of any EST placed in service by the taxpayer during such taxable year. Sec- tion 48E(c)(2) provides that for purposes of section 48E, the term “energy storage technology” has the meaning given such term in section 48(c)(6) (except that sec- tion 48(c)(6)(D) will not apply). Section 48(c)(6)(A)(i) defines “energy storage technology” to mean property (other than property primarily used in the transporta- tion of goods or individuals and not for the production of electricity) that receives, stores, and delivers energy for conversion to electricity (or, in the case of hydrogen, which stores energy), and has a nameplate capacity of not less than 5 kWh. Section 48(c)(6)(A)(ii) provides that the term “energy storage technology” also includes thermal energy storage property. Section 48(c)(6)(B) describes a rule for modifica- tions of certain property. Section 48(c)(6)(C)(i) defines “ther- mal energy storage property” to mean for purposes of section 48(c)(6), subject to section 48(c)(6)(C)(ii), property compris- ing a system that is directly connected to a heating, ventilation, or air conditioning system, removes heat from, or adds heat to, a storage medium for subsequent use, and provides energy for the heating or cooling of the interior of a residential or commercial building. Section 48(c)(6)(C) (ii) describes the exclusion that thermal energy storage property will not include a swimming pool, combined heat and power system property, or a building or its structural components. Section 48E(d) provides special rules for section 48E, all of which refer to other provisions. Section 48E(d)(1) provides a rule for qualified progress expenditures, stating that rules similar to the rules of former section 46(c)(4) and (d) (as in effect on the day before the date of the enactment of the Revenue Reconcilia- tion Act of 1990) apply for purposes of section 48E(a). 5 Section 48E(d)(2) pro- vides a special rule for property financed by subsidized energy financing or private activity bonds, stating that rules similar to the rules of section 45(b)(3) apply. Section 48E(d)(3) provides a rule for prevailing wage requirements, stating that rules sim- ilar to the rules of section 48(a)(10) apply. Likewise, section 48E(d)(4) provides a rule for apprenticeship requirements stat- ing that rules similar to the rules of section 45(b)(8) apply. Lastly, section 48E(d)(5) provides a rule for the domestic content requirement for elective payment stating that in the case of a taxpayer making an election under section 6417 with respect to a credit under section 48E, rules similar to the rules of section 45Y(g)(12) apply. D. Credit phase-out Section 48E(e) describes the credit phase-out. Section 48E(e)(1) provides generally that the amount of the clean electricity investment credit under section 48E(a) for any qualified investment with respect to any qualified facility or EST the construction of which begins during a cal- endar year described in section 48E(e)(2) is equal to the product of the amount of the credit determined under section 48E(a) without regard to section 48E(e), multi- plied by the phase-out percentage under section 48E(e)(2). Section 48E(e)(2) pro- vides that the phase-out percentage is 100 percent for any qualified investment with respect to any qualified facility or EST the construction of which begins during the first calendar year following the applicable year; 75 percent for any qualified invest- ment with respect to any qualified facility or EST the construction of which begins during the second calendar year follow- ing the applicable year; 50 percent for any qualified investment with respect to any qualified facility or EST the construction of which begins during the third calendar year following the applicable year; and 0 percent for any qualified investment with respect to any qualified facility or EST the construction of which begins during any calendar year subsequent to the calendar year described in section 48E(e)(2)(C). Section 48E(e)(3) defines the “applicable year” for purposes of section 48E(e) to have the same meaning given such term in section 45Y(d)(3). E. Recapture rules For purposes of the recapture rules under section 50(a), section 48E(g) pro- vides a special recapture rule applicable to qualified facilities. Specifically, sec- tion 48E(g) provides that, for purposes of section 50, if the Secretary determines that the GHG emissions rate for a qual- ified facility is greater than 10 grams of CO 2 e per kWh, any property for which a credit was allowed under section 48E with respect to such facility ceases to be invest- ment credit property in the taxable year in which the determination is made. III. Notice 2022-49 On October 24, 2022, the Treasury Department and the IRS published Notice 2022-49, 2022-43 I.R.B. 321. The notice requested general comments on issues arising under sections 45Y and 48E, as 5 The rules provided by §1.46-5 related to qualified progress expenditures apply for purposes of section 48E(a). August 5, 2024 356 Bulletin No. 2024–32 well as on issues relating to three other credits. For section 45Y, the notice spe- cifically requested comments concerning (1) industry standards for taxpayer eligi- bility for the credit, (2) what the Treasury Department and the IRS should consider, including around the scope and factors, for the annual GHG emissions rate table, (3) whether guidance is needed to clarify cases in which a metering device is owned and operated by an unrelated person or in which electricity produced at such a qual- ified facility with such a device is sold, consumed or stored by the taxpayer, and (4) what procedures the Treasury Depart- ment and the IRS should provide for a taxpayer whose facility does not have an emissions rate established by the annual rate table, and what should the Secretary consider in making such a determination. For section 48E, the notice specifically requested comments concerning what industry mechanisms currently exist for a taxpayer to demonstrate eligibility for the credit. The Treasury Department and the IRS received over 100 comments specifically addressing sections 45Y and 48E from industry participants and other stakehold- ers. The Treasury Department and the IRS appreciate the commentors’ interest and engagement on these issues. These com- ments have been carefully considered in the preparation of these proposed regula- tions. IV. Prior Guidance On August 30, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking and a notice of public hearing (REG-100908-23) in the Federal Register (88 FR 60018), provid- ing guidance on the prevailing wage and registered apprenticeship (PWA) require- ments under sections 45, 45Y, 48, 48E and several other sections of the Code (August Proposed Regulations). The August Pro- posed Regulations also proposed guidance on the one-megawatt exception under sec- tions 45, 45Y, 48, and 48E (One-Megawatt Exception). Under this exception, with respect to certain facilities with a max- imum net output (or capacity for energy storage technology under section 48E) of less than one megawatt, increased credit amounts are available. On November 22, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking and a notice of public hearing (REG- 132569-17) in the Federal Register (88 FR 82188), provid- ing guidance under section 48 of the Code. Among other matters, the proposed regu- lations under section 48 (Section 48 Pro- posed Regulations) withdrew and repro- posed the regulations in §1.48-13 from the August Proposed Regulations regarding the PWA requirements under section 48, the One-Megawatt Exception under sec- tion 48(a)(9)(B)(i), and the recapture rules under section 48(a)(10)(C). Explanation of Provisions I. Rules Applicable to the Clean Electricity Production Tax Credit The proposed regulations under section 45Y are organized in five sections, pro- posed §§1.45Y-1 through 1.45Y-5 (sec- tion 45Y regulations). Proposed §1.45Y-1 would provide an overview of the section 45Y regulations, generally applicable definitions, and general rules applicable to section 45Y, including a rule for calcu- lating the credit for a CHP property. Pro- posed §1.45Y-2 would provide rules relat- ing to qualified facilities for purposes of the section 45Y credit. Section 1.45Y-3 is reserved for rules relating to the increased credit amount for meeting the prevailing wage and apprenticeship requirements. A cross reference will be added to §1.45Y-3 in the final regulations after §1.45Y-3 is finalized. Proposed §1.45Y-4 would pro- vide the rules of general application under section 45Y, including rules that attribute production to the taxpayer, rules for the expansion of a facility and incremental production, and rules for retrofits of an existing facility. Proposed §1.45Y-5 would provide rules pertaining to the determina- tion of a GHG emissions rate for a facility under section 45Y. A. Amount of credit Proposed §1.45Y-1 would provide an overview of the section 45Y regulations and definitions of terms for purposes of the section 45Y regulations, including the terms “combined heat and power sys- tem (CHP) property,” “metering device,” “related person,” “unrelated person,” and “qualified facility.” Proposed §1.45Y-1(a)(5)(i) would define, for purposes of section 45Y(a)(1) (A)(ii)(II), the term “metering device” as equipment that is owned and operated by an unrelated person (as defined in para- graph (a)(11) of this section) for energy revenue metering to measure and register the continuous summation of an electric- ity quantity with respect to time. Further, proposed §1.45Y-1(a)(5)(ii) would pro- vide standards for maintaining and oper- ating a metering device for purposes of section 45Y(a)(1)(A)(ii)(II) and proposed §1.45Y-1(a)(5) by requiring a metering device to be maintained in proper work- ing order according to the instructions of its manufacturer. Proposed §1.45Y-1(a) (5)(ii) would also provide that a metering device should meet the requirements of the American National Standards Institute C12.1-2022 standard, or subsequent revi- sions, be revenue grade with a +/- 0.5% accuracy, and be properly calibrated. Pro- posed §1.45Y-1(a)(5)(iii) would provide that for purposes of monitoring the meter- ing device, the unrelated person may share network equipment, such as spare fiber optic cable owned by the taxpayer that produces the electricity, and may co-lo- cate network equipment in the taxpay- er’s facilities. Proposed §1.45Y-1(a)(5) (iv) would provide examples illustrating the proposed rules provided by proposed §1.45Y-1(a)(5). Proposed §1.45Y-1(a)(7)(i) would pro- vide that for purposes of section 45Y(a), the term “related person” means a per- son who is related to another person if such person would be treated as a single employer under the regulations in 26 CFR chapter 1 under section 52(b) of the Code. Proposed §1.45Y-1(a)(7)(ii) would pro- vide that in the case of a corporation that is a member of a consolidated group (as defined in §1.1502-1(h)), such corporation will be treated as selling electricity to an unrelated person if such electricity is sold to an unrelated person by another member of such group. Proposed §1.45Y-1(a)(11) would pro- vide that for purposes of section 45Y(a), the term “unrelated person” means a person who is not a related person as defined in section 45Y(g)(4) and proposed §1.45Y-1(a)(7). In the case of sales of Bulletin No. 2024–32 357 August 5, 2024 electricity to an individual consumer, such sales will be treated as sales to an unre- lated party for purposes of the section 45Y credit. Proposed §1.45Y-1(a)(11) provides an example illustrating the application of these rules. Proposed §1.45Y-1(b)(1) would describe the calculation of the section 45Y credit, providing that the credit is an amount equal to the product of the kWh of electricity that is produced by the tax- payer at a qualified facility (as defined in proposed §1.45Y-2(a)) and sold by the taxpayer to an unrelated person during the taxable year, multiplied by the applicable amount (as described in proposed §1.45Y- 1(b)) with respect to such qualified facil- ity. Proposed §1.45Y-1(b)(1) would fur- ther provide that in the case of a qualified facility that is equipped with a metering device that is owned and operated by an unrelated person, the section 45Y credit for any taxable year is an amount equal to the product of the kWh of electricity that is both produced at the qualified facility (as defined in proposed §1.45Y-2(a)) and sold, consumed, or stored by the taxpayer during the taxable year, multiplied by the applicable amount with respect to such qualified facility. Proposed §1.45Y-1(b) (1) would also provide that only one sec- tion 45Y credit may be claimed for each kWh of electricity produced by the tax- payer at a qualified facility. Proposed §1.45Y-1(b)(2)(i) would define the applicable amount as the base amount described in §1.45Y-1(b)(2)(ii) or the alternative amount described in §1.45Y-1(b)(2)(iii). Proposed §1.45Y- 1(b)(2)(i) would further provide that the applicable amount is subject to the infla- tion adjustment as provided in section 45Y(c)(1) and proposed §1.45Y-1(b) (3), and that the applicable amount may also be increased as provided in section 45Y(g)(7)) and proposed §1.45Y-1(b) (4), in the case of a qualified facility that is located in an energy community. Pro- posed §1.45Y-1(b)(2)(ii) would describe the base amount as 0.3 cents in the case of any qualified facility that does not sat- isfy the requirements provided in section 45Y(a)(2)(B). Proposed §1.45Y-1(b)(2) (iii) would describe the alternative amount as 1.5 cents if prevailing wage and appren- ticeship requirements are satisfied as pro- vided in section 45Y(a)(2)(B). Proposed §1.45Y-1(b)(3) would pro- vide the rules related to the inflation adjustment factor applicable to the sec- tion 45Y credit. Proposed §1.45Y-1(b) (4) would provide the rules applicable to the energy communities increase in credit. Proposed §1.45Y-1(b)(5) would provide the domestic content bonus credit amount. Proposed §1.45Y-1(c) would provide the credit phase-out rules. Generally, proposed §1.45Y-1(c)(1) would provide that the amount of the clean electricity production credit under section 45Y(a) for any qualified facility the construction of which begins during a calendar year described in section 45Y(d)(2) is equal to the product of the amount of the credit determined under section 45Y(a) without regard to the credit phaseout rules of sec- tion 45Y(d) (credit phase-out), multiplied by the phase-out percentage provided in section 45Y(d)(2). Proposed §1.45Y-1(c) (2) would provide that the phase-out per- centage is 100 percent for a facility the construction of which begins during the first calendar year following the appli- cable year; 75 percent for a facility the construction of which begins during the second calendar year following the appli- cable year; 50 percent for a facility the construction of which begins during the third calendar year following the applica- ble year; and 0 percent for a facility the construction of which begins during any calendar year subsequent to the calendar year described in section 45Y(d)(2)(C). Proposed §1.45Y-1(c)(3) would define the “applicable year” for purposes of pro- posed §1.45Y-1(c) to mean the later of the calendar year in which the Secretary makes the determination that the annual greenhouse gas emissions from the pro- duction of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or 2032. Proposed §1.45Y-1(c)(4) would provide that, for the purposes of determining the applicable year, the annual greenhouse gas emissions from the production of elec- tricity in the United States for any year must be assessed separately using both the Energy Information Administration’s (EIA) Electric Power Annual, using the sum of the annual carbon dioxide emis- sions data from conventional power plants and combined heat and power plants as currently listed in Table 9.1 and the Monthly Energy Review annual carbon dioxide emissions from the combustion of biomass to produce electricity in the electric power sector as currently listed in Table 11.7, and the U.S. Environmen- tal Protection Agency (EPA) Inventory of U.S. Greenhouse Gas Emissions and Sinks (GHGI) annual electric power-re- lated carbon dioxide, methane, and nitrous oxide emissions data including carbon dioxide emissions from the combustion of biomass to produce electricity. In the most current version of the GHGI, annual fossil and biogenic CO 2 from electricity production in the electric power sector is available in Table 2-11 and Tables 3-120 and 3-122, respectively; and CH 4 and N 2 O from electricity production in the electric power sector is available in Table 3-8 and Table 3-9, respectively. Based on current and publicly available data in the 2024 GHGI, the estimate for 2022 GHG emissions associated with the production of electricity is 1,613 million metric tons (MMT) CO 2 e. Currently, explicit data on industrial and commercial sector GHG emissions from the production of electric- ity is not disaggregated from overall sec- toral totals. See GHGI, https://www.epa. gov/ghgemissions/inventory-us-green- house-gas-emissions-and-sinks. For 2022, the EIA Electric Power Annual states that the annual carbon diox- ide emissions from conventional power plants and combined heat and power plants are 1,650 MMT, and the Monthly Energy Review annual carbon dioxide emissions from the combustion of biomass to produce electricity in the electric power sector are 35 MMT. Thus, the EIA’s data reflects a total of 1,685 MMT in 2022. See EIA Electric Power Annual (https://www. eia.gov/electricity/annual); MER (https:// eia.gov/totalenergy/monthly/). Proposed §1.45Y-1(c)(5) would pro- vide that, for the purposes of determin- ing the applicable year, the Secretary will make such determination only if the annual greenhouse gas emissions from the production of electricity in the United States, as determined separately under both of the data sources described in pro- posed §1.45Y-1(c)(4), for the year is equal to or less than 25 percent of the annual greenhouse gas emissions from the pro- August 5, 2024 358 Bulletin No. 2024–32 duction of electricity in the United States for calendar year 2022. Proposed §1.45Y- 1(c)(5) would provide that if a data source described in proposed §1.45Y-1(c)(4) becomes unavailable (for example, it is no longer published or it does not provide the specified data), the Secretary must desig- nate a similar data source to replace the unavailable data source. Requiring the applicable year to be determined using data from the EIA’s Electric Power Annual and Monthly Energy Review and the EPA’s GHGI ensures that this important deter- mination is made transparently and based on reliable information. Both well-estab- lished data sources are representative of the annual greenhouse gas emissions from the production of electricity in the United States, but there are slight differences in the greenhouse gases and the emissions sources covered by each data source. There are other United States Govern- ment greenhouse gas datasets that could serve as the basis for the Secretary’s determination as to whether the annual greenhouse gas emissions from the pro- duction of electricity in the United States are equal to or less than 25 percent com- pared to 2022. Two such datasets are the EPA Greenhouse Gas Reporting Program (GHGRP) and Emissions & Generation Resource Integrated Database (eGRID). The Treasury Department and the IRS request comment on which datasets are most appropriate to determine the applica- ble year and why. Proposed §1.45Y-1(d) would pro- vide requirements for CHP property and special rules for calculating the section 45Y credit for CHP property. Proposed §1.45Y-1(d)(1) would provide that CHP property must produce at least 20 percent of its total useful energy in the form of thermal energy that is not used to produce electrical or mechanical power (or com- bination thereof), and at least 20 percent of its total useful energy in the form of electrical or mechanical power (or com- bination thereof). Proposed §1.45Y-1(d) (1) would further provide that the energy efficiency percentage of CHP property must exceed 60 percent, and that these percentages are determined on a British thermal unit (Btu) basis. Section 45Y(g) (2)(B) incorporates these requirements by providing that the term “combined heat and power system property” has the same meaning given such term by section 48(c) (3) (without regard to section 48(c)(3)(A) (iv), (B), and (D)). Proposed §1.45Y-1(d)(2) would describe the energy efficiency percentage of a CHP property stating that it is the fraction the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and expected to be con- sumed in its normal application, and the denominator of which is the lower heating value of the fuel sources for the system, which is a measure of heat content based on the net energy content of a combustible fuel. Proposed §1.45Y-1(d)(3) would pro- vide a special rule for calculating elec- tricity produced by CHP property. For purposes of section 45Y(a) and proposed §1.45Y-1(b), the kWh of electricity pro- duced by a taxpayer at a qualified facility will include any production in the form of useful thermal energy by any CHP prop- erty within such facility, and the amount of greenhouse gases emitted into the atmosphere by such facility in the produc- tion of such useful thermal energy will be included for purposes of determining the GHG emissions rate for such facility. Proposed §1.45Y-1(d)(3)(ii)(A) would provide a conversion from Btu to kWh. Proposed §1.45Y-1(d)(3)(ii))(A) would provide that for purposes of section 45Y(g)(2)(A)(i) and §1.45Y-1(d)(3), the amount of kWh of electricity produced in the form of useful thermal energy is equal to the quotient of the total useful thermal energy produced by the CHP property within the qualified facility, divided by the heat rate for such facility. Proposed §1.45Y-1(d)(3)(ii)(B) would define the term “heat rate” to mean the amount of energy used by the qualified facility to generate 1 kWh of electricity, expressed as Btus per net kWh generated. In calculating the heat rate of a qualified facility that includes CHP property that uses combustion, a taxpayer must use the annual average heat rate, defined as the total annual fuel consumption of the CHP property (in Btus, using the lower heat- ing value of the fuel) during the taxable year for which the section 45Y credit is claimed, divided by the annual net elec- tricity generation (in kWh) of the CHP property during such taxable year. Section 45Y(g)(2), by cross refer- ence to section 48(c)(3), requires that the energy efficiency percentage of the CHP property must exceed 60 percent, cal- culated as (1) the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and expected to be consumed in its normal application, divided by (2) the lower heat- ing value (LHV) of the fuel sources for the system. The LHV is calculated based on combustion. Some CHP property may not involve combustion, such as nuclear cogeneration. In these scenarios, because there is no calculable LHV, the energy efficiency percentage of the CHP property cannot be determined using the calcula- tion provided in the statute. The Treasury Department and the IRS request comments regarding the applica- tion of the energy efficiency percentage requirements to CHP property for which there is no combustion. Relatedly, com- ment is requested on whether the existing definition of heat rate provided in section 45Y(g)(2)(C)(ii) for purposes of calculat- ing the section 45Y credit for CHP prop- erty that does not use combustion should be clarified. B. Qualified facility Proposed §1.45Y-2(a) would define a “qualified facility” to mean a facility owned by the taxpayer and used for the generation of electricity, that is placed in service after December 31, 2024, and has a GHG emissions rate of not greater than zero (as determined under rules provided in proposed §1.45Y-5). 1. Property Included in Qualified Facility Proposed §1.45Y-2(b) would provide a description of the property included in a qualified facility. Proposed §1.45Y-2(b) (1) would provide that a qualified facil- ity includes a unit of qualified facility (as defined in proposed §1.45Y-2(b)(2)(i)) that meets the requirements of proposed §1.45Y-2(b)(2)(ii). Proposed §1.45Y-2(b) (1) would provide that a qualified facility also includes qualified property owned by the taxpayer that is an integral part of a qualified facility (as defined in proposed §1.45Y-2(b)(3)). Section 45Y is silent regarding the credit eligibility of compo- Bulletin No. 2024–32 359 August 5, 2024 nents that are part of a qualified facility but located in different locations. Pro- posed §1.45Y-2(b)(1) would clarify that any property that meets the requirements of a qualified facility described in pro- posed §1.45Y-2(b) is part of a qualified facility, regardless of where such prop- erty is located. Proposed §1.45Y-2(b)(1) would provide that a qualified facility also generally does not include equipment that is an addition or modification to an exist- ing qualified facility, however, proposed §1.45Y-2(b)(1) would reference proposed §1.45Y-4(c) for rules regarding the expan- sion of a facility or incremental produc- tion and proposed §1.45Y-4(d) for rules regarding a retrofitted qualified facility (80/20 Rule). 2. Unit of Qualified Facility Proposed §1.45Y-2(b)(2)(i) would provide that for purposes of the section 45Y credit, the unit of qualified facility includes all functionally interdependent components of property (as defined in proposed §1.45Y-2(b)(2)(ii)) owned by the taxpayer that are operated together and that can operate apart from other property to produce electricity. Proposed §1.45Y- 2(b)(2)(i) would clarify that no provision of this section, §1.45Y-1, or §1.45Y-4 through §1.45Y-5 uses the term “unit” in respect of a qualified facility with any meaning other than that provided in pro- posed §1.45Y–2(b)(2)(i). A reference to §1.45Y-3 will also be added to the pre- vious sentence in proposed §1.45Y-2(b) (2)(i) when proposed §1.45Y-2(b)(2)(i) is finalized, but it cannot be added until §1.45Y-3 is finalized. Proposed §1.45Y-2(b)(2)(ii) would provide that components are functionally interdependent if placing in service each component is dependent upon placing in service other components to produce elec- tricity. See the discussion in section I.A. of the Explanation of Provisions regarding the special rule for CHP property. 3. Integral Part Proposed §1.45Y–2(b)(3)(i) would provide that for purposes of the section 45Y credit, a component of property owned by a taxpayer is an integral part of a facility if it is used directly in the intended function of the qualified facil- ity and is essential to the completeness of such function. Proposed §1.45Y–2(b)(3)(ii) would provide that components of property that are an integral part of a qualified facil- ity include power conditioning equip- ment and transfer equipment. Proposed §1.45Y–2(b)(3)(ii) would provide that power conditioning equipment includes equipment that modifies the characteris- tics of electricity into a form suitable for use or transmission or distribution. Pro- posed §1.45Y–2(b)(3)(ii) would provide that parts related to the functioning or pro- tection of power conditioning equipment are also treated as power conditioning equipment and includes examples. Proposed §1.45Y–2(b)(3)(ii) would provide that transfer equipment includes components that permit the aggregation of electricity generated by components of qualified facilities and components that alter voltage in order to permit transfer to a transmission or distribution line. Proposed §1.45Y–2(b)(3)(ii) would also clarify that transfer equipment does not include trans- mission or distribution lines. Proposed §1.45Y–2(b)(3)(ii) would provide that examples of transfer equipment include, but are not limited to, wires, cables, and combiner boxes that conduct electricity. Proposed §1.45Y–2(b)(3)(ii) would pro- vide that parts related to the functioning or protection of transfer equipment are also treated as transfer equipment and include examples. Proposed §1.45Y-2(b)(3)(iii) would provide that roads that are an integral part of a qualified facility are those roads inte- gral to the intended function of the quali- fied facility, such as onsite roads that are used to operate and maintain the qualified facility. Proposed §1.45Y–2(b)(3)(iii) would also clarify that roads used primar- ily for access to the site, or roads used primarily for employee or visitor vehicles, are not integral to the intended function of the qualified facility and thus are not an integral part of a qualified facility. Proposed §1.45Y–2(b)(3)(iv) and (v) would also provide that fences and build- ings (also referred to as structures) are generally not integral parts of a qualified facility because they are not integral to the intended function of the qualified facility. However, a building (or structure) may be an integral part of a qualified facility if it is essentially an item of machinery or equip- ment and a structure that houses compo- nents of property that are integral to the intended function of the qualified facility if the use of the structure is so closely related to the use of the housed compo- nents of property therein that the structure clearly can be expected to be replaced if the components of property it initially houses are replaced. Proposed §1.45Y-2(b)(3)(vi) would provide a rule for shared integral property by stating that multiple qualified facilities (whether owned directly by one or more taxpayers), including qualified facili- ties with respect to which a taxpayer has claimed a credit under section 45Y or sec- tion 48E, may include shared property that can be considered an integral part of each qualified facility. Proposed §1.45Y-2(b) (3)(vi) would also provide that a compo- nent of property that is shared by a quali- fied facility (as defined in section 45Y(b)) (45Y Qualified Facility) and a qualified facility (as defined in section 48E(b)(3)) (48E Qualified Facility) that is an integral part of both qualified facilities will not affect the eligibility of the section 45Y Qualified Facility to claim the section 45Y credit or the section 48E Qualified Facil- ity to claim a section 48E credit. Proposed §1.45Y-2(b)(3)(vii) would provide exam- ples illustrating proposed §1.45Y-2(b)(3). 4. Coordination with Other Credits Proposed §1.45Y-2(c)(1) would pro- vide that the term “qualified facility” (as defined in section 45Y(b)) will not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 48, 48A, or 48E is allowed under section 38 of the Code for the taxable year or any prior tax- able year. Proposed §1.45Y-2(c)(1) would further clarify that a taxpayer that directly owns a qualified facility (as defined in section 45Y(b)) that is eligible for both a section 45Y credit and another Federal income tax credit is eligible for the sec- tion 45Y credit only if the other Federal income tax credit was not allowed with respect to the qualified facility. Proposed §1.45Y-2(c)(1) would also add that noth- ing in §1.45Y-2(c) precludes a taxpayer from claiming a section 45Y credit with respect to a qualified facility (as defined August 5, 2024 360 Bulletin No. 2024–32 in section 45Y(b)) that is co-located with another facility for which a credit deter- mined under section 45, 45J, 45Q, 45U, 48, 48A, or 48E is allowed under section 38 for the taxable year or any prior taxable year. Proposed §1.45Y-2(c)(2) would clar- ify that for purposes of proposed §1.45Y- 2(c)(1), the term “allowed” only includes credits that taxpayers have claimed on a Federal income tax return or Federal return, as appropriate, and that the IRS has not challenged in terms of the taxpay- er’s eligibility. Proposed §1.45Y-2(c)(3) includes several examples illustrating the rules of §1.45Y-2(c). C. Rules of general application to section 45Y 1. Only Production in the United States Taken into Account Proposed §1.45Y-4(a) would provide that consumption, sales, or storage of elec- tricity are taken into account for purposes of the section 45Y credit only with respect to electricity produced within the United States (as defined in section 638(1)), or a United States territory, which for purposes of section 45Y and the section 45Y regu- lations has the meaning of the term “pos- session” of the United States (as defined in section 638(2)). 2. Production Attributable to the Taxpayer and Section 761(a) Elections Proposed §1.45Y-4(b)(1) would pro- vide that in the case of a qualified facil- ity in which more than one person has an ownership share (and such arrangement is not treated as a partnership for Federal tax purposes), production from the qualified facility is allocated among such persons in proportion to their respective owner- ship share in the gross sales from such qualified facility during the taxable year. The respective owners each determine their respective section 45Y credit under section 45Y(a) based on their respective ownership shares in the gross sales from such qualified facility. Proposed §1.45Y- 4(b)(2) would provide an example demon- strating the application of this rule. Proposed §1.45Y-4(b)(3) would pro- vide that if a qualified facility is owned through an unincorporated organization that has made a valid election under sec- tion 761(a) of the Code, each member’s undivided ownership share in the qualified facility will be treated as a separate quali- fied facility owned by such member. 3. Expansion of Facility; Incremental Production Proposed §1.45Y-4(c)(1) would pro- vide, solely for purposes of proposed §1.45Y-4(c), that the term “qualified facility” includes either a new unit or an addition of capacity placed in service after December 31, 2024, in connection with a facility described in section 45Y(b)(1)(A) (without regard to clause (ii) of such para- graph), which was placed in service before January 1, 2025, but only to the extent of the increased amount of electricity pro- duced at the facility by reason of such new unit or addition of capacity. Proposed §1.45Y-4(c)(1) would also provide that a new unit or an addition of capacity will be treated as a separate qualified facility. Pro- posed §1.45Y-4(c)(1) would provide for purposes of proposed §1.45Y-4(c), that a new unit or an addition of capacity require the addition or replacement of components of property, including any new or replace- ment integral property, added to a facility necessary to increase capacity. If applica- ble for purposes of proposed §1.45Y-4(c), taxpayers must use modified or amended facility operating licenses or the Interna- tional Standard Organization (ISO) condi- tions to measure the maximum electrical generating output of a facility to deter- mine its nameplate capacity. Additionally, proposed §1.45Y-4(c)(1) would provide that for purposes of section 45Y(a)(2)(B) (i) (that is, the One-Megawatt Exception), the capacity for a new unit or an addition of capacity is the sum of the nameplate capacity of the added qualified facility and the nameplate capacity of the facility to which the qualified facility was added. Proposed §1.45Y-4(c)(2) would pro- vide that solely for purposes of §1.45Y- 4(c), a facility that is decommissioned or in the process of decommissioning and restarts can be considered to have increased capacity if the following condi- tions are met: (1) the existing facility must have ceased operations; (2) the existing facility must have a shutdown period of at least one calendar year during which it is without a valid operating license from its respective Federal regulatory authority (that is, the Federal Energy Regulatory Commission (FERC) or the Nuclear Reg- ulatory Commission (NRC)); and (3) the increased capacity of the restarted facility must have a new, reinstated, or renewed operating license issued by either FERC or NRC. Proposed §1.45Y-4(c)(3) would describe how to compute the increased amount of electricity produced as a result of a new unit or an addition of capacity. Proposed §1.45Y-4(c)(3) would provide that to determine the increased amount of electricity produced by a facility by rea- son of a new unit or an addition of capac- ity, a taxpayer must multiply the amount of electricity that the facility produces during a taxable year after the new unit or addition of capacity is placed in service by a fraction, the numerator of which is the added nameplate capacity that results from the new unit or addition of capacity, and the denominator of which is the total nameplate capacity of the facility with the new unit or addition of capacity added. Proposed §1.45Y-4(c)(4) would illus- trate the application of these rules to deter- mine the increased amount of electricity attributable to a new unit or an addition of capacity described in §1.45Y-4(c). 4. Retrofit of an Existing Facility (80/20 Rule) Proposed §1.45Y-4(d)(1) would pro- vide that for purposes of section 45Y(b) (1)(B), a facility may qualify as originally placed in service even if it contains some used components of property within the unit of qualified facility, provided the fair market value of the used components of the unit of qualified facility is not more than 20 percent of the total value of the unit of qualified facility (that is, the cost of the new components of property plus the fair market value of the used components of property within the unit of qualified facility) (80/20 Rule). Proposed §1.45Y- 4(d)(1) would further provide that if a facility satisfies the requirements of the 80/20 Rule, then the date on which such qualified facility is considered originally placed in service for purposes of section 45Y(B)(1)(b) is the date on which the new components of property of the unit Bulletin No. 2024–32 361 August 5, 2024 of qualified facility are placed in service. Proposed §1.45Y-4(d)(2) would provide that, for purposes of this 80/20 Rule, the cost of new components of the unit of qualified facility includes all costs prop- erly included in the depreciable basis of the new components of property. Lastly, proposed §1.45Y-4(d)(3) would provide examples demonstrating the 80/20 Rule. D. Greenhouse gas emissions rates Section 45Y(b)(2) provides rules for determining GHG emissions rates. Pro- posed §1.45Y-5(a) would provide an over- view of the rules pertaining to GHG emis- sions rates for facilities under section 45Y. 1. Definitions Related to Greenhouse Gas Emissions Rates Proposed §1.45Y-5(b) would provide definitions of terms relevant to determin- ing GHG emissions rates. Section 45Y(e) (1) defines the term “CO 2 e per kWh” as, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on global warming potential) per kWh of electricity produced. Proposed §1.45Y-5(b)(1) would clarify that the term “CO 2 e per kWh” means with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on the 100- year time horizon global warming poten- tial (GWP-100)) per kWh of electricity produced. Proposed §1.45Y-5(b)(1) would also provide global warming potentials for certain greenhouse gases from the Inter- governmental Panel on Climate Change’s Fifth Assessment Report (AR5). Proposed §1.45Y-5(b)(8) would pro- vide that the term “fuel” means material directly used to produce electricity or energy inputs that are used to produce electricity. Proposed §1.45Y-5(b)(9) would provide that the term “feedstock” means any raw material used in a process for electricity generation or to produce an intermediate product or finished fuel used for electricity generation. Section 45Y(b)(2)(B) provides rules for determining a GHG emissions rate for a facility that produces electricity through combustion or gasification. Pro- posed §1.45Y-5(b)(2) would provide that the term “combustion” means a rapid exo- thermic chemical reaction, specifically the oxidation of a fuel, which liberates energy including heat and light. This proposed definition of “combustion” would include, for example, burning fossil fuels, but it would not include the reaction that pro- duces electricity inside a fuel cell. Gasification produces fuel but not elec- tricity. Proposed §1.45Y-5(b)(3) would provide that the term “gasification” means a thermochemical process that converts carbon-containing materials into syngas, a gaseous mixture that is composed primar- ily of carbon monoxide, carbon dioxide, and hydrogen. Because gasification does not produce electricity, the inclusion of the term “gasification” as a category sepa- rate from “combustion” in section 45Y(b) (2)(B) would have no independent signif- icance unless it is interpreted as applying to the production of an energy source that is ultimately used by the facility to gener- ate electricity (for example, syngas used to make electricity). Thus, proposed §1.45Y- 5(b)(4) would interpret the phrase “facil- ity which produces electricity through combustion or gasification” in section 45Y(b)(2)(B) as applying to facilities that produce electricity through combustion or use an input energy source to produce elec- tricity, which energy source was produced through a fundamental transformation, or multiple transformations, of one energy source into another using combustion or gasification. The Treasury Department and the IRS request comment on this pro- posed interpretation, including whether the application of this proposed interpre- tation should be clarified with respect to any type of fundamental transformation of an energy source and any related activities or operations. Comment is also requested on supply chain tracing requirements that the Treasury Department and the IRS may apply to verify whether or not a feedstock or fuel (including energy inputs) used by a facility to produce electricity was pro- duced using combustion or gasification. Section 45Y(b)(2)(B) provides that in the case of electricity produced through combustion or gasification, the GHG emissions rate for such facility is equal to the net rate of greenhouse gases emitted into the atmosphere by such facility (tak- ing into account lifecycle greenhouse gas emissions, as described in section 211(o) (1)(H) of the CAA (42 U.S.C. 7545(o)(1) (H)) in the production of electricity. Pro- posed §1.45Y-5(b)(4) would provide that a “facility that produces electricity through combustion or gasification” (C&G Facil- ity) means a facility that produces electric- ity through combustion or uses an input energy source to produce electricity, if the input energy source was produced through a fundamental transformation, or multiple transformations, of one energy source into another using combustion or gasification. Under proposed §1.45Y-5(b)(4), a facility that produces electricity using any fuel that was produced using electricity that had been produced, in whole or in part, from the combustion of fossil fuels would be considered a C&G Facility. For exam- ple, a hydrogen fuel cell would be consid- ered a C&G Facility if it produced elec- tricity using hydrogen that was produced by an electrolyzer powered, in whole or in part, by electricity from the grid because some of the electricity from the grid was produced through combustion or gasifi- cation. A fuel cell facility such as a solid oxide fuel cell, which uses methane as fuel, would be considered a C&G Facil- ity, because the methane reforming reac- tion that produces syngas within the fuel cell prior to the production of electricity would be considered a gasification reac- tion. In contrast, a hydrogen fuel cell facil- ity using hydrogen produced exclusively using electricity from a new solar array or wind farm co-located with the hydro- gen fuel cell facility would not be con- sidered a C&G Facility, because the input energy source was not produced through a transformation of one energy source into another using combustion or gasification. The Treasury Department and the IRS request comment on whether the proposed definitions of gasification, combustion, and C&G Facility would result in cer- tain types of fuel cells that use fossil or biogenic fuel inputs (via combustion or gasification) to produce electricity being unable to demonstrate a net rate of green- house gas emissions that is not greater than zero with a lifecycle analysis because they are not classified as a C&G Facility as defined in proposed §1.45Y-5(b)(4). Because the energy transformation that produces electricity in a fuel cell would not be considered combustion under the definition in proposed §1.45Y-5(b)(2), a fuel cell facility would only qualify as a C&G Facility if the fuel it used to produce August 5, 2024 362 Bulletin No. 2024–32 electricity was produced through combus- tion or gasification under these proposed regulations. Proposed §1.45Y-5(b)(7) would pro- vide that a “Non-C&G Facility” means a facility that produces electricity and is not described in proposed §1.45Y-5(b)(4). Proposed §1.45Y-5(b)(5) would pro- vide that, consistent with section 45Y(b) (2)(A), the term “greenhouse gas emis- sions rate” means the amount of green- house gases emitted into the atmosphere by a facility in the production of electric- ity, expressed as grams of CO 2 e per kWh. Proposed §1.45Y-5(b)(6) would pro- vide that, for the purposes of section 45Y(b)(2)(A), for both C&G Facilities and Non-C&G Facilities, the term “green- house gases emitted into the atmosphere by a facility in the production of elec- tricity” means emissions from a facility that directly occur from the process that transforms the input energy source into electricity. Proposed §1.45Y-5(b)(6)(i) through §1.45Y-5(b)(6)(vi) would exclude emissions that may relate to a facility but do not occur “in the production of elec- tricity” as specified in section 45Y(b)(2) (A). Proposed §1.45Y-5(c)(1) would pro- vide, for Non-C&G Facilities only, addi- tional types of excluded emissions under section 45Y(b)(2)(A). Proposed §1.45Y- 5(d)(2) would provide, for C&G Facili- ties only, that additional rules on included and excluded emissions apply in order to conduct a lifecycle analysis as required by section 45Y(b)(2)(B). Proposed §1.45Y-5(b)(6)(i) through §1.45Y-5(b)(6)(vi) would clarify that for the purposes of both Non-C&G and C&G Facilities this definition excludes: 1) emissions from back-up generators that are primarily used in maintaining critical systems in case of a power system outage or for supporting restart of a generator after an outage; 2) emissions from routine operational and maintenance activities that are integral to the production of elec- tricity, including, but not limited to, emis- sions from internal combustion vehicles used to access and perform maintenance on remote electricity generating facilities or emissions occurring from heating and cooling control rooms or dispatch centers; 3) emissions from a step-up transformer that conditions the electricity into a form suitable for productive use or sale; 4) emissions that occur before commercial operations commence or after commer- cial operations terminate, including, but not limited to, on-site emissions occur- ring from construction or manufacturing of the facility itself, emissions from the off-site manufacturing of facility compo- nents, or emissions occurring due to siting or decommissioning; 5) emissions from infrastructure associated with the facility, including, but not limited to, emissions from road construction for feedstock pro- duction; and 6) emissions from the distri- bution of electricity to consumers. 2. Greenhouse Gas Emissions Rates for Non-C&G Facilities Proposed §1.45Y-5(c) would pro- vide the rules for determining a GHG emissions rate for Non-C&G Facilities, including by the Secretary when publish- ing a table described in section 45Y(b) (2)(C)(i) or determining an emissions rate as provided in section 45Y(b)(2) (C)(ii). Proposed §1.45Y-5(c)(1) would provide that GHG emissions rates for Non-C&G Facilities must be determined under proposed §1.45Y-5(c) and (e). In addition, proposed §1.45Y-5(c)(1)(i) would provide that, with respect to Non- C&G Facilities only, greenhouse gases emitted into the atmosphere by a facility in the production of electricity excludes emissions of greenhouse gases that are not directly produced by the fundamental transformation of the input energy source into electricity, including, but not lim- ited to, the following: 1) emissions from hydropower reservoirs due to anoxic conditions; 2) ebullitive, diffuse, and degassing emissions from hydropower operations; 3) emissions of non-con- densable gases from underground reser- voirs during geothermal operations; 4) emissions from a step-up transformer that conditions the electricity into a form suitable for productive use or sale; and 5) emissions occurring due to activities and operations occurring off-site, includ- ing but not limited to, the production and transportation of fuels used by the facility, or land use change from siting or changes in demand. Proposed §1.45Y- 5(c)(1)(i) would thus exclude emissions that may relate to a Non-C&G Facility but do not occur “in the production of elec- tricity” as specified in section 45Y(b)(2) (A) because such emissions do not arise directly from the transformation of the input energy source into electricity. For example, emissions from land use change from siting or changes in demand would be excluded because such emissions do not occur “in the production of electric- ity” for Non-C&G Facilities under sec- tion 45Y(b)(2)(A), but this exclusion does not apply to C&G Facilities because section 45Y(b)(2)(B) requires a broader standard for assessing GHG emissions than section 45Y(b)(2)(A). Proposed §1.45Y-5(c)(1)(ii) would provide that, subject to proposed §1.45Y- 5(b)(6) and (c)(1), a GHG emissions rate for a Non-C&G Facility must be deter- mined through a technical and engineer- ing assessment of the fundamental energy transformation into electricity, and that such assessment must consider all input and output energy carriers and chemical reactions or mechanical processes taking place at the facility in the production of electricity. Proposed §1.45Y-5(c)(1)(iii) would provide an example of a GHG emissions rate determination for a Non- C&G Facility. Proposed §1.45Y-5(c)(2) would iden- tify certain types or categories of facilities that are categorically Non-C&G Facili- ties with a GHG emissions rate that is not greater than zero. Proposed §1.45Y-5(c) (2)(i) through (viii) would provide that these include wind facilities (including small wind properties), hydropower facil- ities (including retrofits adding power production to non-powered dams, con- duit hydropower, hydropower using new impoundments, and hydropower using diversions such as a penstock or chan- nel), marine and hydrokinetic facilities, solar facilities (including photovoltaic and concentrating solar power), geother- mal facilities (including flash and binary plants), nuclear fission facilities, nuclear fusion facilities, and waste energy recov- ery property (WERP) that derives energy from any of the energy sources described in proposed §1.45Y-5(c)(2)(i) through (vii) (including geothermal or solar waste heat recovery such as from a district geo- thermal heating system, and waste heat recovery such as from a nuclear reactor dedicated to heat production for an indus- trial facility). Bulletin No. 2024–32 363 August 5, 2024 WERP is property that generates elec- tricity solely from heat from buildings or equipment if the primary purpose of such building or equipment is not the generation of electricity. Examples of buildings or equipment the primary pur- pose of which is not the generation of electricity include, but are not limited to, manufacturing plants, medical care facil- ities, facilities on school campuses, pipe- line compressor stations, and associated equipment. The Treasury Department and the IRS request comment on whether this definition of WERP is appropriate. Comment is further requested on whether and why it would be appropriate to revise proposed §1.45Y-5(c)(2)(viii) to include additional energy sources (such as energy from exothermic chemical reactions or pressure drop technologies) that do not rely on combustion or gasification but could include equipment related to the transport of fossil fuels (for example, natural gas). For purposes of proposed §1.45Y-5(c) (2)(ii), hydropower includes retrofits that add electricity production to non-powered dams, conduit hydropower, hydropower using new impoundments, and hydro- power using diversions such as a penstock or channel. Greenhouse gas emissions are not created by the fundamental transfor- mation of electricity needed to produce electricity in a hydropower facility. A hydropower facility converts the poten- tial energy of flowing water into elec- tricity. The potential energy results from changes in gravitational potential energy from the flowing water, which the hydro- power facility captures with a turbine which spins a rotor within a generator to produce electricity. Hydropower facil- ities may release greenhouse gas emis- sions from the hydropower reservoir due to diffusion at the water surface or due to ebullition, and from degassing when water passes through a pump house or turbine. Such emissions from hydropower facilities would not be considered green- house gases emitted into the atmosphere by a Non-C&G Facility in the production of electricity under proposed §1.45Y-5(b) (6)(C), because emissions of greenhouse gasses are not created by the fundamen- tal transformation of potential energy in flowing water into electricity, but rather from processes that are not fundamental to the transformation of potential energy into electricity. Similarly, greenhouse gas emissions are not created by the fundamental trans- formation of energy from high-pressure hot water into electricity in a flash geo- thermal facility, which is included in pro- posed §1.45Y-5(c)(2)(v). A flash geother- mal facility uses high-pressure hot water from deep inside the earth and converts it directly to steam that drives a turbine and generator. After the steam passes through the turbine, it is released into the atmosphere and any non-condens- able gases including greenhouse gases dissolved in the steam are also released. Such emissions from flash geothermal facilities would not be considered green- house gases emitted into the atmosphere by a facility in the production of electric- ity under proposed §1.45Y-5(c)(1)(i)(C), because the greenhouse gases are already present in the underground water and are not created by the fundamental transfor- mation of the thermal energy in the water into electricity, but rather by processes that are not fundamental to the transfor- mation of the thermal energy into elec- tricity. This proposed treatment of flash geothermal facilities is supported by sur- veys indicating that underground carbon dioxide in certain geothermal reservoirs is emitted passively into the atmosphere even in the absence of geothermal elec- tricity generation. The Treasury Depart- ment and the IRS request comment on whether the identification of flash geo- thermal facilities as Non-C&G Facilities with a GHG emissions rate that is not greater than zero in proposed §1.45Y- 5(c)(2)(v) is appropriate. For purposes of proposed §1.45Y-5(c) (2)(iv), solar includes concentrated solar power. Concentrated solar power facil- ities may have auxiliary burners that in some cases use combustion exclusively for the purposes of cold starts or freeze protection of thermal working fluids, but in other cases, may also be used to gen- erate electricity in hybrid configurations. The Treasury Department and the IRS request comment on whether the existing definitions of C&G Facilities and Non- C&G Facilities is sufficient to distinguish between these two categories of facili- ties, or whether additional clarification is needed. 3. Greenhouse Gas Emissions Rates for C&G Facilities Section 45Y(b)(2)(B) provides that in the case of electricity produced through combustion or gasification, the GHG emissions rate for such facility is equal to the net rate of greenhouse gases emitted into the atmosphere by such facility (tak- ing into account lifecycle greenhouse gas emissions, as described in section 211(o) (1)(H) of the CAA) in the production of electricity. Section 211(o)(1)(H) of the CAA provides that “lifecycle greenhouse gas emissions” means the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes) related to the full fuel lifecycle, including all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished fuel to the ultimate consumer, if the mass values for all green- house gases are adjusted to account for their relative global warming potential. The EPA promulgated its interpretation of section 211(o)(1)(H) of the CAA in a 2010 notice-and-comment rulemaking establishing the regulatory framework for the updated renewable fuel standard (RFS2) program. The EPA interpreted section 211(o)(1)(H) of the CAA in the context of the facts and policy framework of the RFS program and based on infor- mation available at that time; however, the EPA’s analysis and implementation of the RFS2 rule offer relevant precedent for the Treasury Department’s and the IRS’s interpretation of section 45Y(b)(2)(B). In the RFS2 rulemaking, the EPA interpreted 211(o)(1)(H) of the CAA as requiring the agency to account for the real-world emis- sions consequences of increased produc- tion of biofuels. Thus, the EPA determined in the RFS2 context that the inclusion of direct emissions and significant indirect emissions such as significant emissions from land-use changes in section 211(o) (1)(H) of the CAA requires a consequen- tial approach to considering the real- world emissions associated with biofuel production. A “consequential” approach considers the real-world greenhouse gas emissions associated with biofuel produc- August 5, 2024 364 Bulletin No. 2024–32 tion, including secondary or indirect emis- sions resulting from market interactions induced by expanded biofuel production and use. Such an approach includes con- sideration of market interactions induced by expanded biofuel production and use that may result in secondary or indirect greenhouse gas emissions, domestically and globally. Proposed §1.45Y-5(d) would provide the rules applicable to determining a net rate of GHG emissions for C&G Facili- ties, including by the Secretary when pub- lishing a table described in section 45Y(b) (2)(C)(i) or determining an emissions rate as provided in section 45Y(b)(2)(C) (ii). Proposed §1.45Y-5(d)(1) would pro- vide that GHG emissions rates for C&G Facilities must be determined by a life- cycle analysis (LCA) that complies with proposed §1.45Y-5(d) and (e), and that such rate equals the net rate of greenhouse gases emitted into the atmosphere by such facility (taking into account lifecycle greenhouse gas emissions, as described in section 211(o)(1)(H) of the CAA) in the production of electricity, expressed as grams of CO 2 e per kWh. Proposed §1.45Y-5(d)(2) would pro- vide that an LCA used for determining the net rate of greenhouse gases emitted into the atmosphere by a facility must comply with the requirements provided in proposed §1.45Y-5(d)(2)(i) through (vii). Proposed §1.45Y-5(d)(2)(i) would provide that the starting boundary of the LCA for an LCA involving genera- tion-derived feedstocks (such as biogenic feedstocks) is feedstock generation, and the starting boundary of the LCA for an LCA involving extraction-derived feed- stocks (such as fossil fuel feedstocks) is feedstock extraction. Under proposed §1.45Y-5(d)(2)(i), the starting boundar- ies would include the processes necessary to produce and collect or extract the raw materials used to produce electricity from combustion or gasification technologies, including those used as energy inputs to electricity production. This includes the emissions effects of relevant land man- agement activities or changes related to or associated with feedstock production. The starting conditions are the material and energy flows, including associated direct and indirect greenhouse gas emis- sions, of the processes associated with the extraction or production of raw feedstock materials or fuel. Proposed §1.45Y-5(d)(2)(ii) would provide that the ending boundary of an LCA for electricity that is transmitted to the grid or electricity that is used on-site is the meter at the point of production of the C&G Facility. The distribution, trans- mission, and use of such electricity gener- ated by a C&G Facility (and other types of energy sources it may displace while in use) are outside of the LCA boundary; therefore, such emissions would not be taken into account because they do not occur in the “production of electricity” as described in section 45Y(b)(2)(B). Given the particular context of section 45Y(b)(2) (B) (that is, a tax credit for the production of clean electricity), proposed §1.45Y-5(d) (2)(ii) is consistent with section 45Y(b)(2) (B) of the Code (and the term “ultimate consumer” in section 211(o)(1)(H) of the CAA referenced therein) because it would treat the C&G Facility as the ultimate con- sumer of the fuel used to produce electric- ity. Proposed §1.45Y-5(d)(2)(iii) would provide that an LCA must be based on a future anticipated baseline, which proj- ects future status quo in the absence of the availability of the sections 45Y and 48E credits (taking into account anticipated changes in technology, policies, practices, and environmental and other socioeco- nomic conditions). Proposed §1.45Y-5(d)(2)(iv) would provide that offsets and offsetting activ- ities that are unrelated to the production of electricity by a C&G Facility, includ- ing the production and distribution of any input fuel, may not be taken into account in an LCA. Proposed §1.45Y-5(d)(2)(v) would interpret the reference to section 211(o) (1)(H) of the CAA as requiring that an LCA must take into account direct emis- sions, significant indirect emissions in the United States or other countries, emissions associated with market-mediated changes in related commodity markets, emissions associated with feedstock generation or extraction, emissions consequences of increased production of feedstocks, emis- sions at all stages of fuel and feedstock production and distribution, and emissions associated with distribution, delivery, and use of feedstocks to and by a C&G Facil- ity. Proposed §1.45Y-5(d)(2)(v) would interpret section 45Y(b)(2)(B) of the Code (and the term “ultimate consumer” in sec- tion 211(o)(1)(H) of the CAA referenced therein) as applying to the C&G Facility because it is the ultimate consumer of the fuel used to produce electricity. Proposed §1.45Y-5(d)(2)(v)(A) would provide that direct emissions include, but are not limited to: 1) emissions from feedstock generation, production, and extraction (including emissions from feed- stock and fuel harvesting and extraction and direct land use change and manage- ment, including emissions from fertilizers, and changes in carbon stocks); 2) emis- sions from feedstock and fuel transport (including emissions from transporting the raw or processed feedstock to the fuel pro- cessing facility); 3) emissions from trans- porting and distributing fuels to the elec- tricity production facility; 4) emissions from handling, processing, upgrading, and/or storing feedstocks, fuels and inter- mediate products (including emissions from on/offsite storage and preparation/ pre-treatment for use (for example, tor- refaction or pelletization) and emissions from process additives); and 5) emissions from combustion and gasification at the electricity generating facility (including emissions from the combustion and/or gasification process and emissions from gasification or combustion additives). Proposed §1.45Y-5(d)(2)(v)(B) would provide examples of significant indirect emissions including, but not limited to, emissions from indirect land use and land use change and other induced emissions associated with the increased use of the feedstock for electricity production. Sig- nificant indirect emissions may include positive or negative emissions. For bio- genic resources, significant indirect emis- sions may include emissions from growth and regrowth. Proposed §1.45Y-5(d)(2)(vi) would provide principles for excluded emissions by listing types of emissions that the LCA must not take into account. Proposed §1.45Y-5(d)(2)(vii) would provide that an LCA may consider alter- native fates and may account for avoided emissions. Alternative fate means a set of informed assumptions (for example, production processes, material outcomes, market-mediated effects) used to estimate Bulletin No. 2024–32 365 August 5, 2024 the emissions from the use of each feed- stock were it not for the feedstock’s new use due to the implementation of policy (that is, to produce electricity). Avoided emissions means the estimated emissions associated with the feedstock, includ- ing the feedstock’s production and use, that would have occurred in the alterna- tive fate (if such feedstock had not been diverted for electricity production) but are instead avoided with the feedstock’s use for electricity production. It is important to note that, while, in some circumstances, emissions may be avoided if compared to the alternative fate, in others the new use of the material (for example, for electric- ity production) may involve additional emissions that were not emitted in the alternative fate estimation. Relatedly, in some circumstances, emissions may be avoided in one part of the supply chain only to occur elsewhere along the supply chain due to the new use. 4. Additional Issues Regarding Greenhouse Gas Emissions Rates for C&G Facilities The determination of net GHG emis- sions rates for C&G Facilities raises a range of complex technical questions that are relevant to determining eligibility for the section 45Y and section 48E credits. The Treasury Department and the IRS request comment on the following topics: (1) the treatment of renewable natural gas (RNG) and fugitive sources of methane; (2) analytical LCA parameters, includ- ing spatial scales and time horizons; (3) whether and how to distinguish between co-products, byproducts, and waste prod- ucts and how emissions should be allo- cated to each in LCAs; (4) how to attribute emissions to the heat produced by facili- ties using combined heat and power sys- tems; (5) how to create and maintain LCA baselines; and (6) certain issues related to LCA modeling. a. Treatment of biogas, renewable natural gas (RNG), or fugitive sources of methane The Treasury Department and the IRS intend to provide rules addressing facili- ties that produce electricity using biogas, renewable natural gas (RNG), or fugi- tive sources of methane (for example, from coal mine operations) for purposes of the section 45Y credit or the section 48E credit, collectively referred to as the “Clean Electricity Tax Credits.” In the context of this guidance, the term “RNG” refers to biogas that has been upgraded to be equivalent in nature to fossil natural gas. Fugitive methane refers to the release of methane through, for example, equip- ment leaks during the extraction, process- ing, transformation, and delivery of fossil fuels to the point of final use, such as coal mine methane. Such rules would apply to all biogas, RNG, or fugitive methane used for the purposes of the Clean Electricity Tax Credits and would provide require- ments that must be met to account for any greenhouse gas emissions benefits from biogas, RNG, or fugitive methane in determining GHG emissions rates for pur- poses of the Clean Electricity Tax Cred- its. Such requirements would be designed to reflect the ways in which additional demand for biogas, RNG or fugitive meth- ane can impact greenhouse gas emissions outcomes. The Treasury Department and the IRS anticipate requiring that for purposes of the Clean Electricity Tax Credits, in order for biogas, biogas-based RNG, or fugitive methane to receive an emissions value consistent with such gases (and not standard natural gas), the biogas or RNG used to produce electricity or to produce a feedstock or fuel that is used to produce electricity must originate from the first productive use of the relevant methane. For any specific source of biogas, RNG, or fugitive methane, productive use is generally defined as any valuable appli- cation of the relevant methane (including to provide heat or cooling, generate elec- tricity, or upgraded to RNG in the case of biogas or fugitive methane), and specifi- cally excludes venting to the atmosphere or capture and flaring. The Treasury Department and the IRS further propose to define first productive use of the rele- vant methane as the time when a producer of that gas first begins using or selling it for productive use in the same taxable year as (or after) the electricity production facility was placed in service. The impli- cation of this proposal is that biogas, for example, from any source that had been productively used in a taxable year prior to the taxable year in which the relevant electricity production facility was placed in service would not include GHG emis- sions benefits that might otherwise be attributable to biogas-based RNG, but would instead receive a value consistent with natural gas. This proposal would limit emissions associated with the diver- sion of biogas, RNG, or fugitive methane from other pre-existing productive uses. For existing biogas sources that typi- cally productively use or sell a portion of the biogas and flare or vent the remaining excess, the flared or vented portion may be eligible for first productive use as defined above if the flaring or venting volume can be adequately demonstrated and verified. In such circumstances, the flared or vented volume may be determined based on the previous taxable year’s flared or vented volume as demonstrated via reported data to programs such as the Greenhouse Gas Reporting Program. Requirements would be established to reduce the risk that entities will deliberately generate addi- tional biogas for purposes of the Clean Electricity Tax Credits, above historic and expected future levels or an equiva- lent metric, for example by generating biogas through the intentional generation of waste, and to ensure that other factors affecting the emissions rate of electricity produced with biogas, biogas-based RNG or RNG procurement via RNG certifi- cates are taken into account. The Treasury Department and the IRS request comment on these and other potential conditions. Any fugitive sources of methane would be treated in the same fashion as biogas or RNG with respect to these requirements, albeit with different considerations in development of the counterfactual. The Treasury Department and the IRS also recognize that different sources of methane may have significantly differ- ent characteristics (for example, coun- terfactuals, alternative fates, baseline characteristics, upstream leakage rates, etc.) and therefore significantly differ- ent lifecycle emissions. For this reason, the Treasury Department and the IRS are considering requiring an LCA to be con- ducted for electricity produced by each category of feedstock, rather than across all feedstocks used for the production of electricity by a facility. The Treasury Department and the IRS request com- August 5, 2024 366 Bulletin No. 2024–32 ment on whether LCAs should be con- ducted on a feedstock-by-feedstock basis or averaged across feedstocks, and how to determine the appropriate categories of feedstock. For purposes of the Clean Electric- ity Tax Credits, producers using bio- gas, RNG, or fugitive methane would be required to acquire and retire correspond- ing energy attribute certificates (EACs) through a book-and-claim system that can verify in an electronic tracking system that all applicable requirements are met. Electricity producers would also be required to have a pipeline interconnec- tion and measurement capability using a revenue grade meter. These rules would apply to the use of EACs with both direct and non-direct claims of biogas, RNG, or fugitive methane use. Direct use would involve a direct exclusive pipeline con- nection to a facility that generates biogas or RNG or from which fugitive methane is being sourced, while non-direct use would involve production using biogas, RNG, or fugitive methane sourced from a commercial or common-carrier natu- ral gas or other specified pipeline. In all cases, EACs would need to document the biogas, RNG, or fugitive methane pro- curement use claims and that the energy attributes of the RNG or fugitive methane being used are not sold to other parties or used for compliance with other policies or programs. The Treasury Department and the IRS request comments on these and other approaches related to biogas, RNG and fugitive methane. Regarding these sources of methane, the Treasury Department and the IRS request comment on the appropri- ate LCA considerations associated with them, such as counterfactual scenarios (that is, appropriate baselines), to account for direct and significant indirect emis- sions, and also the manner in which to assess methane from these sources if the current practice is flaring. In particular, the Treasury Department and the IRS request comments on the following questions: (1) What data sources and peer reviewed studies provide information on fugitive methane, biogas, and RNG pro- duction systems (including biogas pro- duction and reforming systems), markets, monitoring, reporting, and verification processes, and greenhouse gas emissions associated with these production systems and markets? (2) What conditions for the use of bio- gas, RNG, and fugitive methane would ensure that emissions accounting for pur- poses of the Clean Electricity Tax Cred- its reflect and reduce the risk of indirect emissions effects from electricity produc- tion using biogas and RNG? How can taxpayers verify that they have met these requirements? (3) How broadly available and reliable are existing electronic tracking systems and verification protocols and practices for biogas, RNG, or fugitive methane cer- tificates in book and claim systems? What developments may be required, if any, before such systems are appropriate for use with biogas or RNG certificates used to claim the Clean Electricity Tax Credits? (4) How should biogas, RNG or fugi- tive methane resulting from the first pro- ductive use of methane be defined, docu- mented, and verified? What industry best practices or alternative methods would enable such verification to be reflected in a biogas, RNG or methane certificate or other documentation? What additional information should be included in such EACs to help certify compliance? (5) What are the emissions associated with different methods of transporting biogas, RNG or fugitive methane to elec- tricity producers (for example, vehicular transport, pipeline)? (6) How can the final regulations reflect and mitigate indirect emissions effects from the diversion of biogas, RNG, or fugitive methane from potential future productive uses? What other new uses of biogas, RNG, or fugitive methane could be affected in the future if more gas from new capture and productive use of meth- ane from these sources is used in the elec- tricity production process? (7) How can the potential for the gen- eration of additional emissions from the production of additional waste, waste diversion from lower-emitting disposal methods, and changes in waste manage- ment practices be limited through emis- sions accounting or rules for biogas and RNG use established for purposes of the Clean Electricity Tax Credits? (8) To limit the additional production of waste, should the final regulations limit eligibility to methane sources that existed as of a certain date or waste or waste streams that were produced before a certain date, such as the date that the IRA was enacted? If so, how can that be documented or verified? How should any changes in volumes of waste and waste capacity at existing methane sources be documented and treated for purposes of the Clean Electricity Tax Credits? How should additional capture of existing waste or waste streams be documented and treated? (9) Are geographic or temporal deliv- erability requirements needed to reflect and reduce the risk of indirect emissions effects from biogas, RNG, or fugitive methane use in the electricity production process? If so, what should these require- ments be and are electronic tracking sys- tems able to capture these details? (10) How should variation in methane leakage across the existing natural gas pipeline system be taken into account in estimating the emissions from the trans- portation of RNG or fugitive methane or establishing rules for RNG or fugitive methane use? How should methane leak- age rates be estimated based on factors such as the location where RNG or fugi- tive methane is injected and withdrawn, the distance between the locations where RNG or fugitive methane is injected and withdrawn, season of year, age of pipe- lines, or other factors? Are data or analysis available to support this? (11) What counterfactual assumptions and data should be used to assess the net greenhouse gas emissions of facilities that rely on biogas, RNG, or fugitive methane (for example, venting, flaring, or other practice)? Is venting an appropriate coun- terfactual assumption in some cases? If not, what other factors should be consid- ered? (12) What criteria should be used in assessing biogas, fugitive methane, or RNG-based provisional emissions rates? What practices should be put in place to reduce the risk of unintended conse- quences (for example, gaming)? Should conservative default parameters and coun- terfactuals be used unless proven other- wise by a third party? (13) What are the effects on green- house gas emissions of capturing methane emissions for use as biogas or RNG, such as on livestock farms? Bulletin No. 2024–32 367 August 5, 2024 The Treasury Department and the IRS recognize that sufficient tracking and ver- ification mechanisms for biogas, RNG, or fugitive methane are not yet avail- able, and existing systems have limited capabilities for tracking and verifying RNG pathways, especially in the part of the production process before the meth- ane has been reformed to RNG. Exist- ing tracking and verification systems do not clearly distinguish between inputs, verify or require verification of underly- ing practices claimed by biogas or RNG production sources, require proof of gen- erator interconnection or revenue-quality metering, provide validation of generation methodology, include exclusively United States based-generation, verify genera- tor registration, and track the vintage of generator interconnection. The Treasury Department and the IRS are considering providing rules to address whether or how book-and-claim systems with sufficient tracking and verification mechanisms may be used to attribute the environmental benefits of biogas, RNG, or fugitive meth- ane in the final regulations. The treatment of biogas, RNG, and fugitive methane presents a range of com- plex issues that the Treasury Department and the IRS will consider in the develop- ment of the final regulations. b. Analytical LCA parameters, including spatial scales and time horizons An LCA may require decisions on a wide range of analytical parameters that may have a meaningful impact on the accuracy and utility of its results. The Treasury Department and the IRS request comment on the analytical LCA param- eters that are most relevant to particular types of categories of facilities that may be eligible for the Clean Electricity Tax Credits. The Treasury Department and the IRS specifically request comment regarding spatial and temporal scales, including the factors that should be considered in set- ting the spatial and temporal scales for LCAs conducted for the Clean Electricity Tax Credits. Spatial scale involves defin- ing the area over which emissions impacts will be evaluated. Temporal scale involves defining the time period over which emis- sions impacts will be evaluated. The deci- sion of setting the spatial scale should be considered in conjunction with decisions on temporal scale, as the two can interact in ways that affect greenhouse gas assess- ment outcomes. In conducting a greenhouse gas assess- ment for biomass feedstocks, for exam- ple, carbon stocks or flows that have high variability at fine spatial or tempo- ral scales may have much less variability if averaged over larger areas or longer temporal scales. Averaging over long temporal scales may reduce the variabil- ity observed at small spatial scales, and averaging over large areas may reduce the variability observed over small temporal scales. However, it is not safe to assume that integrating over large areas and long timeframes is always preferable. Large spatial scales and long temporal scales are not necessarily the most accurate way to conduct specific policy or program assess- ments because the combination of the two may obscure important information (for example, biophysical differences in spe- cies or landscapes, or shorter time frames or subregional analysis needed for policy analysis) or may mask important small- er-scale impacts. It is important to note that utilizing a large spatial scale and a short temporal scale could yield the same result as a small spatial scale combined with a longer temporal scale. The Treasury Department and the IRS acknowledge that it may be appropriate to utilize different spatial and temporals scales for different feedstocks given their heterogeneity. The Treasury Department and the IRS request comment on the fol- lowing questions regarding spatial and temporal scale: (1) What factors should be considered in establishing the timeframe for the LCA analysis? What timeframe would provide confidence that significant emissions have been accounted for? (2) Should the LCA distinguish between an “emissions horizon” (the time- frame over which emissions effects from the feedstock use persist into the future) and an “assessment horizon” (the time- frame over which the emissions effects are included in the analysis), and how would that be reflected in the choice of temporal scale? What assessment horizon will pro- vide reasonable confidence that significant LCA emissions have been incorporated? Should the modeled future anticipated baseline include estimated emissions from electricity production to reflect the effects of the anticipated phase out of the Clean Electricity Tax Credits? (3) If the assessment horizon is shorter than the emissions horizon, should an esti- mate of the emissions beyond the assess- ment horizon be included in the LCA? (4) What considerations should be reflected in the choice(s) of spatial scale? For example, the increased use of some fuels/feedstocks may have global effects (for example, changes in commodity pro- duction and ensuing land use and green- house gas changes), though this may not be the case for all feedstocks or fuels. What factors should be considered to assess whether a global scale is necessary for certain feedstocks to ensure that signif- icant emissions are captured? Should all feedstock/fuels assessments be conducted with the same spatial scale to determine the extent to which increased use has esti- mated global ramifications? (5) The choice of spatial scale can be greatly influenced by the availability and accuracy of data and the precision with which one can measure and model feedstock production as well as market dynamics. What sources of data would be most important to consider for modeling? What strengths or weaknesses do these sources have? c. Distinguish between co-products, byproducts, and waste products and how emissions should be allocated to each in LCAs The categorization and assessment of products as co-products, byproducts, or waste products in an LCA may affect the LCA’s results. Products, co-products, byproducts, and wastes may all be pro- duced in the full fuel cycle or used as inputs to the same. A co-product is a prod- uct produced together with another prod- uct, both of which are economic drivers of the process. A byproduct is a product that is produced together with another product, and which has a productive use but is not the primary economic driver of the process from which it is produced. It is not solely or separately produced. A waste product is a substance or object that the holder intends or is required to dispose of. August 5, 2024 368 Bulletin No. 2024–32 See ISO:14040, “Environmental manage- ment – Life cycle assessment – Principles and framework. For biogenic sources, sci- entific literature often classifies byprod- ucts, wastes, and residues together in one category. The categorization of products as co-products, byproducts, and waste prod- ucts may be relevant to an LCA’s assess- ment of the greenhouse gas emissions related to the production of inputs to electricity generation or in the generation of electricity itself if the LCA modeling approach or approaches used for purposes of the Clean Electricity Tax Credits have the ability to distinguish between such categories. For example, in certain cir- cumstances, the use of a waste product as a feedstock or fuel for electricity produc- tion may generate more, less, or the same greenhouse gas emissions than relevant disposal practices for that waste material. The emissions released in the production process during which a waste product is created could be fully allocated to the main product, co-products, and byprod- ucts of that process meaning that the emissions associated with the production of the waste could be considered zero in the LCA assessment pending further anal- ysis, potentially reducing the overall LCA GHG emissions rates for the electricity production. Alternatively, if the waste product were considered to have a produc- tive use and therefore instead categorized as a co-product it would be considered as a driver of the production process and could have a positive emissions value. A material may initially have no economic value or useful purpose, but if that mate- rial later gains an economic value, its cat- egorization may shift to a byproduct or co-product. The Treasury Department and the IRS intend to clarify the principles for catego- rizing products as co-products, byprod- ucts, or waste input materials and prod- ucts and assessing the emissions impacts for such products in an LCA for C&G Facilities in the final regulations for the Clean Electricity Tax Credits if such cat- egorization is relevant to the LCA model or models used. Under such principles, if byproducts are produced concurrently with electricity production, then a portion of the process emissions may be allocated to those byproducts. If applying an ana- lytical approach that considers the con- sequences of the material being used for electricity production and byproducts are produced concurrent with electricity pro- duction, the LCA may consider the market impacts associated with the byproducts. In addition, if wastes are produced con- currently with electricity production, then no process emissions may be allocated to those wastes; all emissions must be associated with the electricity produced. Whether alternative productive uses of a byproduct-derived feedstock exist would be determined by expert analysis of the likely alternative uses of the byproduct, taking into account technological and economic capabilities and common prac- tice. The alternative fate of waste-derived feedstocks would be determined by expert analysis, literature review, and historical practice. To inform the development of these categorization principles for the final reg- ulations, the Treasury Department and the IRS request comment on the following: (1) What principles should be used to distinguish between co-products, byprod- ucts, and waste products for the purposes of the Clean Electricity Tax Credits? Are there common scientific or industry defi- nitions that can be relied upon to distin- guish between co-products, byproducts, and waste products? (2) What principles should be used to determine whether a product has sufficient value to be considered a co-product or byproduct? (3) The Clean Electricity Tax Credits may provide additional economic incen- tive for the consumption of a product cate- gorized as waste prior to the availability of the incentive provided by the Clean Elec- tricity Tax Credits. How should this addi- tional economic incentive be considered to determine if a product is a waste prod- uct, byproduct, or co-product? Should this categorization be reevaluated and, if so, how often? (4) To limit the additional production of waste, should the final regulations limit eligible waste sources that existed as of a certain date, or waste or waste streams that were produced before a certain date, such as the date that the IRA was enacted? If so, how could that be documented or verified? How should any changes in vol- umes of waste and waste capacity at exist- ing sources be documented and treated for purposes of the Clean Electricity Tax Credits? How should additional capture of existing waste or waste streams be docu- mented and treated? (5) More generally, how could the potential for the intentional generation of waste or co-products for the purposes of lowering the allocated process emissions to electricity be addressed? (6) Would the classification of feed- stocks as products, co-products, byprod- ucts, or waste change depending on the technology? For example, would prod- ucts, co-products, byproducts, and waste be described and accounted for differently if derived from biogenic sources, such as biogenic biomass? d. Attributing emissions to the heat produced by facilities using CHP property Section 45Y(g)(2)(A) provides that the kWh of electricity produced by a tax- payer at a qualified facility includes any production in the form of useful thermal energy by any CHP property within such facility, and the amount of greenhouse gases emitted into the atmosphere by such facility in the production of such useful thermal energy will be included for pur- poses of determining the GHG emissions rate for such facility. See Explanation of Provisions section I.A. for the definition of CHP property. The inclusion of thermal energy production-related emissions in an LCA for a CHP facility introduces addi- tional considerations, such as how to set an appropriate baseline for useful energy production-related emissions and what rules should govern the attribution of emissions for thermal energy production. The Treasury Department and the IRS intend to clarify the principles for assess- ing the emissions related to the generation of useful thermal energy by a CHP facility in an LCA in the final regulations for the Clean Electricity Tax Credits. Accord- ingly, the Treasury Department and the IRS request comment on the following: (1) To determine the amount of green- house gases emitted by a CHP facility, the LCA must include the greenhouse gas emissions emitted by that facility in the production of useful thermal energy. For purposes of the LCA of a CHP facility, Bulletin No. 2024–32 369 August 5, 2024 what principles should govern how emis- sions from the production of useful ther- mal energy are calculated? (2) What principles should be used to determine the baseline for useful ther- mal energy production by a CHP facility? For example, should the baseline for the heat production for a CHP facility be an alternative form of thermal energy pro- duction such as natural gas boilers, such that emissions from the production of thermal energy from the boilers would be subtracted from the facility’s emissions? Alternatively, is it more appropriate if the baseline for a CHP facility is no thermal energy production by the facility? (3) There may be scenarios in which a facility generates electricity that is used (a) by the electricity generation facility in the production of electricity or (b) in the production of fuel ultimately consumed by that facility to generate electricity. For example, a wastewater treatment plant’s post-processing materials are digested to produce biogas; this biogas is then used in a CHP facility that produces electricity; this electricity is consumed by the waste- water treatment facility. In such scenarios, what principles should be used to deter- mine how emissions from the consump- tion of electricity in the production of electricity or in the production of the fuel consumed by the facility are calculated? Similarly, there may be scenarios in which a facility self-consumes thermal energy that it produces, for example, if a facil- ity generates steam as a byproduct that is used (a) by the facility to turn a turbine that generates electricity or (b) to clean or compress fuel ultimately consumed by that facility to generate electricity. What principles should be used be used to deter- mine emissions from the self-consumption of thermal energy by the CHP facility? e. Certain issues related to LCA baselines and modeling The Treasury Department and the IRS intend to provide additional rules and principles addressing what factors must be considered to assess the emissions associ- ated with feedstocks used by C&G Facil- ities to produce electricity for purposes of the Clean Electricity Tax Credits. Such rules would apply to all feed- stocks used for the purposes of the Clean Electricity Tax Credits and would provide conditions that must be met in determin- ing GHG emissions rates for purposes of the Clean Electricity Tax Credits. The CAA explicitly defines the term “lifecy- cle greenhouse gas emissions” to include “the aggregate quantity of greenhouse gas emissions (including direct emis- sions and significant indirect emissions such as significant emissions from land use changes).” Given the highly intercon- nected economic, energy, and agricultural and other lands-based systems involved in electricity production, the Treasury Department and the IRS recognize that electricity production may have effects, including emissions effects, beyond the direct supply chain. The Treasury Depart- ment and the IRS think that the provision “including direct emissions and significant indirect emissions” requires any LCA for the Clean Electricity Tax Credits to adopt an approach that considers the conse- quential, or market-mediated, impacts of increased demand for the input feedstocks or fuels used in electricity production. The EPA interpreted CAA 211(o)(1)(H) as requiring the agency in the RFS context to account for the real-world emissions consequences of increased production of biofuels. Thus, the EPA determined that CAA section 211(o)(1)(H)’s inclusion of “direct emissions and significant indirect emissions such as significant emissions from land-use changes” requires a “con- sequential” approach to considering the real-world emissions associated with biofuel production. Such an approach includes consideration of market interac- tions induced by expanded biofuel pro- duction and use that may result in second- ary or indirect greenhouse gas emissions. The Treasury Department and the IRS propose to use a future anticipated base- line approach for analyzing the green- house gas emissions associated with the production of electricity by C&G Facili- ties and feedstocks used by such facilities. This approach would require generating a baseline projection of the future, which reflects estimated future conditions under a business-as-usual (BAU) trajectory that incorporates key drivers and trends informed by historical data and other considerations. This baseline would then serve as the “reference” against which another scenario in which specific condi- tions or changes, such as implementation of the policy embodied by the Clean Elec- tricity Tax Credits, can be projected. This construct would allow for the evaluation of the projected estimated change or dif- ference of emissions outcomes between the two scenarios. These scenarios would include (1) the baseline scenario (that is, without the Clean Electricity Tax Credits) and (2) a policy scenario (that is, with the Clean Electricity Tax Credits). These scenarios would require, to the extent possible, data on: (1) feedstock or fuel production systems (including fuel/ feedstock generation or extraction, etc.); (2) associated greenhouse gas emissions and, if applicable, carbon pool fluxes; (3) the feedstock or fuel’s sector details; (4) feedstock or fuel demand and prices; (5) energy market projections, including electricity demand and supply and prices, if applicable; (6) future macroeconomic factors (for example, EIA Annual Energy Outlook-derived population growth, gross domestic product projections, demand functions tied to population or income); (7) technological progress assumptions, especially if applicable to stationary sources for which efficiency improve- ments are possible and anticipated; and (8) other parameters (for example, represen- tation of current and anticipated, energy, environmental, or other policies including expected outcomes from other parts of the IRA or other policies, if relevant, that can inform or constrain BAU trajectories). For example, the list that follows iden- tifies proposed key modeling approach elements and considerations for simula- tion of a future anticipated baseline and policy scenarios specific to biomass-based feedstocks: (1) model function types and model dynamics (for example, economic optimization, intertemporal and/or recur- sive dynamic); (2) anticipated future con- ditions (for example, macroeconomic, biophysical, chemical); (3) greenhouse gas emissions representation, by includ- ing the different greenhouse gases and the relevant greenhouse gas emissions and sequestration sources (for example, how greenhouse gases and their effects on the environment are incorporated and repre- sented, such as what emissions sources and factors are reflected in the model or models); (4) forest sector representation (for example, how are forestry and forest August 5, 2024 370 Bulletin No. 2024–32 industries reflected in the model and how are they tied to the rest of the economy); (5) agricultural sector representation; (6) land use competition; (7) energy sector representation; and (8) the appropriate spatial scale (for example, international representation) for all of these consider- ations. There may be different ways to model or estimate greenhouse gas emissions associated with the production of elec- tricity by a C&G Facility. Consistent with the parameters in proposed §1.45Y-5(d), the Treasury Department and the IRS seek comment on general principles and factors to be considered to estimate net greenhouse gas emissions associated with electricity production by C&G Facilities, including the selection or creation of an assessment or modeling approach for the purposes of Clean Electricity Tax Credits. Comment is specifically requested on the following topics: (1) What factors should be considered in deciding how to create and maintain LCA baseline scenarios? (2) What factors should be considered in deciding how to create and maintain LCA scenarios other than the baseline? (3) What existing model or suite of models are capable of completing an LCA consistent with the section 45Y(b) (2)(B) and proposed §1.45Y-5(d) and (e)? Please explain whether any such model or models are open source or proprietary including what type of documentation is publicly available detailing the model design, data, inputs, and assumptions, as well as whether such models are able to link with external data sources or mod- els. Please also explain which entities own, manage, or update such models. Furthermore, because some LCA models may be used for only a certain aspect of the total required analysis (for example, a model may solely assess the agriculture sector) or only include certain feedstocks or technologies, please specify what tech- nologies, feedstocks, or type of impacts are included or are not included in the recommended model or models. Please also explain how widely and for what pur- poses the recommended model or models are used, including whether the model has previously been used by a Federal or State agency or national laboratory. Please explain whether and how the model has been peer-reviewed. Finally, please explain whether the recommended model or models would need to be updated or combined with another model in order to be fully consistent with section 45Y(b)(2) (B) and proposed §1.45Y-5(d) and (e). (4) What data sources and peer-re- viewed studies provide information on different feedstock production systems that would be most important to consider for gathering data for LCA modeling? These sources and studies should provide information on the feedstock produc- tion process (ideally, beginning with the extraction or generation of the feedstock and ending at the electrical meter) and on markets related to the feedstock pro- duction process. Appropriate sources and studies should also describe the green- house gas emissions associated with these production systems and markets, as well as any monitoring, reporting, and verifi- cation processes used in the creation of the source or study. If recommending data sources or peer-reviewed studies, please specify whether they are open source or proprietary; their temporal and spa- tial scale (for example, regional versus national studies); whether they are regu- larly updated and with what frequency; whether they are collected by a Federal or State agency or statistical agency or national laboratory; and whether they employ direct measurements or model- ing or use remote sensing data. Finally, please assess overall the strengths and weaknesses of the recommended sources or studies with respect to their usefulness as modeling data inputs. (5) The availability of the Clean Elec- tricity Tax Credits may create an incentive to use a given material differently than in the past (for example, a material that was not typically used for electricity produc- tion is initially used or used more broadly after the credits are available). How could an LCA or LCAs establish and account for whether the incentives created by the Clean Electricity Tax Credits have resulted in a reduction, removal of, or increase in greenhouse gas emissions beyond the emissions that would have occurred in the absence of the Clean Electricity Tax Cred- its? For example, consider a scenario in which, in the absence of the incentive pro- vided by the Clean Electricity Tax Cred- its, an amount of woody biomass would be either left standing or laying in a forest, pile burned, or used to create timber prod- ucts, such as charcoal or mulch, each an “alternative fate.” In the presence of the Clean Electricity Tax Credits, that amount of woody biomass is now being used to generate electricity. How should the pos- sible fates of the feedstock in the absence of the Clean Electricity Tax Credits (for example, left in standing or laying in a forest, pile burned, or used to create a tim- ber product, such as charcoal or mulch) be represented in an LCA, including the dif- ferent potential direct and indirect green- house gas effects of those fates? (6) How could an LCA account for alternative fates stemming from events such as potential future greenhouse gas emissions from wildfires that could be associated with woody biomass feed- stocks that may be left on the landscape in the absence of the incentive created by the Clean Electricity Tax Credits? How would these considerations be affected if, in the absence of the incentive provided by the Clean Electricity Tax Credits, a feedstock is used productively but not in electricity production? (7) Which feedstock classification cat- egories should be established for purposes of LCA analyses, if any? To what extent should the LCA or LCAs differentiate between the sources and subtypes of a given feedstock for electricity production or not (for example, all forest-derived materials as one category, or subcatego- ries such as logging residues)? If applied, should subcategories of feedstocks be aggregated in modeling, or should they be should they be separately modeled? How could the LCA or LCAs account for the emissions attributed to feedstocks that include a mixture of sub-types of feedstocks, such as products, coproducts, byproducts and residues? Should LCAs be standardized or provide average estimates for feedstocks and how could such stan- dardization best be done? (8) What factors should be considered to determine the appropriate scale(s) of feedstock demand changes or other shocks to evaluate the extent to which the produc- tion, processing, and use of the feedstocks used for electricity production results in net greenhouse gas emissions? (9) Should the shock reflect a small incremental increase in use of the feed- Bulletin No. 2024–32 371 August 5, 2024 stock to reflect the marginal impact, or a large increase to reflect the average effect of all potential users? (10) What could the general increment of the shock be? Should it be specified as an absolute or relative increase? (11) What factors should be considered to determine whether shocks for differ- ent feedstocks should be implemented in isolation (separate model runs), in aggre- gate (for example, as an across-the-board increase in biomass usage endogenously allocated by the model across feedstocks), or something in between (for example, separately model agriculture-derived and forest-derived feedstocks, but endoge- nously allocate within each category)? (12) How should variation and uncer- tainty be considered in evaluating model estimates of the GHG emissions asso- ciated with an increase in the use of a feedstock for electricity generation? Feedstock modeling will likely involve uncertainties and variabilities associated with data, parameterization, scenario, and model choices. For example, if the mod- eling reports a range of GHG emissions changes that are greater and less than zero, how should such a range of outcomes be evaluated under section 45Y(b)(2)(B)? f. Book and claim accounting The Treasury Department and the IRS are considering whether to allow and provide rules governing the use of book and claim accounting in the final regula- tions for the Clean Electricity Tax Cred- its. Under these proposed regulations, the methods used, and emissions associated with the production of fuels and feed- stocks used in the generation of electric- ity are essential to determining whether a facility is a C&G Facility and assessing its GHG emissions rate. See Explanation of Provisions sections I.D.1 and I.D.3 for dis- cussion of tracking fuel or feedstock pro- duction to determine whether a facility is a C&G Facility or Non-C&G Facility. EACs are a form of book-and-claim accounting that conveys information about the attri- butes associated with a unit of energy, including the fuel or feedstock used to create the energy. EACs may also include information about the location of the facil- ity that generated the unit of energy, when that facility began operations, and when the unit of energy was produced. Because EACs can serve as a system for tracking the attributes associated with the produc- tion of a unit of energy and as a means to avoid double-counting, the Treasury Department and the IRS are considering whether to provide rules that address the use of book-and-claim systems as a means of verifying the emissions profile of a facility’s use of fuel and electricity pro- duction. The Treasury Department and the IRS request comment on whether and how it may be appropriate for such systems to be used in determining GHG emissions rates in the final regulations for the Clean Electricity Tax Credits. In particular, com- ment is requested regarding what types of energy inputs, including fuels and feed- stocks, have or may develop sufficiently robust book-and-claim systems that may be suitable for use in substantiating and verifying claims of use of such energy inputs for purposes of the Clean Electric- ity Tax Credits. The Treasury Department and the IRS are considering providing rules that may permit the use of book and claim accounting in the final regulations if there are sufficient assurances that the energy attributes claimed under such sys- tem are verifiable and not susceptible to double counting. 5. Carbon Capture and Sequestration Proposed §1.45Y-5(e) would provide that, for purposes of proposed §1.45Y- 5(c) and (d), the GHG emissions rate for a Non-C&G Facility or C&G Facility must exclude any qualified carbon dioxide in such facility’s production of electric- ity that is captured by the taxpayer, and, pursuant to any regulations established under section 45Q(f)(2), disposed of by the taxpayer in secure geological storage, or utilized by the taxpayer in a manner described in section 45Q(f)(5) and any regulations established under such sec- tion. The Treasury Department and the IRS request comment on the following: (1) What requirements should apply to substantiate and verify that carbon diox- ide that is captured by the taxpayer is (a) disposed of by the taxpayer in secure geo- logical storage pursuant to any regulations established under section 45Q(f)(2), dis- posed of by the taxpayer in secure geolog- ical storage, or (b) utilized by the taxpayer in a manner described in section 45Q(f) (5)? For example, would it be appropriate to limit the carbon dioxide that may be considered to be qualified carbon diox- ide under section 45Y(e)(3), and thus excluded under section 45Y(b)(2)(D), to carbon dioxide that has been reported to the U.S. Greenhouse Gas Reporting Pro- gram (GHGRP)? If so, which GHGRP subpart or subparts should be used? (2) In the event that carbon dioxide that was captured and sequestered as required by section 45Y(e)(3) subsequently escapes into the atmosphere after such carbon dioxide was taken into account by a tax- payer that claimed a Clean Electricity Tax Credit, what enforcement mechanisms or regulatory regimes should be used to iden- tify when such emissions leakages have occurred? How should such emissions leakages be taken into account in deter- mining compliance with the GHG emis- sions rate requirements under sections 45Y and 48E? Are the existing recapture provisions under section 45Q sufficient for this purpose? (3) Should carbon capture and seques- tration that occurs in the production of fuel that is used by a facility to produce elec- tricity be taken into account under pro- posed §1.45Y-5(e) and section 45Y(e)(3)? If so, how should such use of carbon cap- ture and sequestration (for example, emis- sions from CO 2 capture, purification and compression, transportation, and CO 2 site injection) be assessed in an LCA? Should emissions that occur from carbon capture and sequestration be taken into account in determining the net rate of greenhouse gases emitted into the atmosphere by a C&G Facility in the production of elec- tricity? What verification and substantia- tion requirements would be appropriate to establish that carbon capture and seques- tration that met the requirements of pro- posed §1.45Y-5(e) and section 45Y(e)(3) were met in the production of a fuel or feedstock? Are the existing recapture pro- visions under section 45Q sufficient for this purpose? 6. Annual Table Proposed §1.45Y-5(f)(1) would pro- vide that, as required by section 45Y(b)(2) (C)(i), the Secretary will annually publish a table that sets forth the GHG emissions August 5, 2024 372 Bulletin No. 2024–32 rates for types or categories of facilities (Annual Table), which a taxpayer must use for purposes of section 45Y. Proposed §1.45Y-5(f)(1) would further provide that, except as provided in proposed §1.45Y- 5(h), a taxpayer that owns a facility that is described in the Annual Table on the first day of the taxpayer’s taxable year in which the section 45Y or section 48E credit is determined with respect to such facility must use the Annual Table as of such date to determine an emissions rate for such facility for such taxable year. Types or categories of facilities must be added or removed from the Annual Table consistent with, for Non-C&G Facilities, a technical assessment of the fundamen- tal energy transformation into electricity as provided in proposed §1.45Y-5(c)(1) (ii), and, for C&G Facilities, an LCA that complies with proposed §1.45Y-5(d) and (e). Proposed §1.45Y-5(f)(2) would also provide that in connection with the pub- lication of the Annual Table, the Secretary must publish an accompanying expert analysis that addresses any types or cat- egories of facilities added or removed from the Annual Table since its last pub- lication. Such analysis must be prepared by one or more of the National Labora- tories, in consultation with other agency experts, such as experts from DOE, the Treasury Department, the United States Department of Agriculture (USDA), and the EPA, as appropriate, and must address whether the addition or removal of types or categories of facilities from the Annual Table complies with section 45Y(b)(2) (A) and 45Y(b)(2)(B) (which refers to the definition of lifecycle greenhouse gas emissions in section 211(o)(1)(H) of the CAA) of the Code and proposed §1.45Y- 5. The Treasury Department and the IRS view the requirement to publish an expert analysis prepared by the National Labora- tories of changes to the Annual Table as essential to ensuring public accountability and adherence to sound scientific princi- ples. This requirement would also ensure that the Secretary has a robust record to inform any changes to the Annual Table. The Treasury Department and the IRS intend to include in the Annual Table the types or categories of facilities that are described in the final regulations as having a GHG emissions rate that is not greater than zero. The Treasury Depart- ment and the IRS intend to publish the first Annual Table after the publication of the final regulations. Until the first publi- cation of the Annual Table, taxpayers may treat the types or categories of facilities that are listed in proposed §1.45Y-5(c)(2) (i) through (viii) as being described in an Annual Table as having a GHG emissions rate that is not greater than zero. Further, any types or categories of facilities that are added or removed from this list in the first publication of the Annual Table must be accompanied by the publication of an expert analysis of such change as pro- vided in proposed §1.45Y-5(f)(2). 7. Provisional Emissions Rates Proposed §1.45Y-5(g) would pro- vide the rules applicable to provisional emissions rates. Proposed §1.45Y-5(g) (1) would provide that, in the case of any facility that is of a type or category for which an emissions rate has not been established by the Secretary under pro- posed §1.45Y-5(g), a taxpayer that owns such facility may file a petition with the Secretary for the determination of the emissions rate with respect to such facility (Provisional Emissions Rate or PER). Proposed §1.45Y-5(g)(2) would pro- vide that an emissions rate has not been established by the Secretary for a facil- ity for purposes of section 45Y(b)(2)(C) (ii) if such facility is not described in the Annual Table. Proposed §1.45Y-5(g)(2) would further provide that if a taxpayer’s request for an emissions value pursuant to proposed §1.45Y-5(g)(5) is pending at the time such facility is or becomes described in the Annual Table, the taxpayer’s request for an emissions value will be automati- cally denied. Proposed §1.45Y-5(g)(3) would pro- vide the process for filing a PER petition. Proposed §1.45Y-5(g)(3) would provide that to file a PER petition with the Secre- tary, a taxpayer must submit a PER peti- tion by attaching it to the taxpayer’s Fed- eral income tax return or Federal return, as appropriate, for the first taxable year in which the taxpayer claims the section 45Y credit with respect to the facility to which the PER petition applies. Proposed §1.45Y-5(g)(3) would further provide that a PER petition must contain an emissions value and, if applicable, the associated DOE letter. An emissions value may be obtained from DOE or by using the LCA model designated in proposed §1.45Y- 5(g)(6). An emission value obtained from DOE will be based on an analytical assess- ment of the emissions rate associated with the facility, performed by one or more National Laboratories, in consultation with other agency experts as appropriate, consistent with proposed §1.45Y-5. A tax- payer would be required to retain in its books and records the request to DOE for an emissions value, including any infor- mation provided by the taxpayer to DOE pursuant to the emissions value request process provided in proposed §1.45Y-5(g) (5). Alternatively, an emissions value can be determined by the taxpayer for a facil- ity using the most recent version of an LCA model or models, as of the time the PER petition is filed, that have been desig- nated by the Secretary for such use under proposed §1.45Y-5(g)(6). If an emissions value is determined using the designated model, a taxpayer is required to provide to the IRS information to support its deter- mination of the emissions value in the form and manner prescribed in IRS forms or instructions or in publications or guid- ance published in the Internal Revenue Bulletin. A taxpayer may not request an emissions value from DOE for a facility for which an emissions value can be deter- mined by using the most recent version of an LCA model or models that have been designated by the Secretary for such use under proposed §1.45Y-5(g)(6). Proposed §1.45Y-5(g)(4) would pro- vide that, upon the IRS’s acceptance of the taxpayer’s Federal income tax return or Federal return, as appropriate, containing a PER petition, the emissions value of the facility specified on such petition will be deemed accepted. Proposed §1.45Y-5(g) (4) would further provide that a taxpayer would be able to rely upon an emissions value provided by DOE for purposes of calculating and claiming a section 45Y credit, provided that any information, representations, or other data provided to DOE in support of the request for an emis- sions value are accurate. If applicable, a taxpayer may rely upon an emissions value determined for a facility using the most recent version of the LCA model or models that, as of the time the PER peti- tion is filed, have been designated by the Bulletin No. 2024–32 373 August 5, 2024 Secretary for such use under proposed §1.45Y-5(g)(6), provided that any infor- mation, representations, or other data used to obtain such emissions value are accurate. The IRS’s deemed acceptance of an emissions value is the Secretary’s determination of the PER. Finally, pro- posed §1.45Y-5(g)(4) would provide that the taxpayer must still comply with all applicable requirements for the section 45Y credit and any information, represen- tations, or other data supporting an emis- sions value are subject to later examina- tion by the IRS. Proposed §1.45Y-5(g)(5) would pro- vide the rules applicable to the emissions value request process. Proposed §1.45Y- 5(g)(5) would provide that an applicant that submits a request for an emissions value must follow the procedures spec- ified by DOE to request and obtain such emissions value, and that emissions val- ues will be determined consistent with the rules provided in proposed §1.45Y-5. Proposed §1.45Y-5(g)(5) would further provide that an applicant may request an emissions value from DOE only after a front-end engineering and design (FEED) study or similar indication of project maturity, as determined by DOE, such as the completion of a project specification and cost estimation sufficient to inform a final investment decision for the facility. Proposed §1.45Y-5(g)(5) would provide that DOE may decline to review appli- cations that are non-responsive and those applications that relate to a facility that is described in the Annual Table (consistent with proposed §1.45Y-5(g)(2)) or a facil- ity that can determine an emissions value using a designated LCA model under pro- posed §1.45Y-5(g)(6) (consistent with proposed §1.45Y-5(g)(3)), or applications that are incomplete. Proposed §1.45Y-5(g) (5) would also provide that applicants must follow DOE’s guidance and procedures for requesting and obtaining an emissions value from DOE. DOE will publish guid- ance and procedures that applicants must follow to request and obtain an emissions value from DOE. DOE’s guidance and procedure will include a process, under limited circumstances, for a taxpayer to request a revision to DOE’s initial assess- ment of an emissions value on the basis of revised technical information or facil- ity design and operation. The Treasury Department and the IRS anticipate that the emissions value request process will open after the publication of the final reg- ulations. Proposed §1.45Y-5(g)(6) would pro- vide that the Secretary may designate one or more LCA models for a taxpayer to determine an emissions value for C&G Facilities that are not described in the Annual Table. Proposed §1.45Y-5(g) (6) would further provide that a model may only be designated if it complies with section 45Y(b)(2)(B) and proposed §1.45Y-5(d) and (e). The Secretary may revoke the designation of an LCA model or models. In connection with the desig- nation or revocation of a designation of an LCA model or models, the Secretary would be required to publish an accom- panying expert analysis of the model prepared by one or more of the National Laboratories, in consultation with other agency experts as appropriate, and such analysis must address the model’s com- pliance with section 45Y(b)(2)(B) of the Code and proposed §1.45Y-5(d) and (e). The Treasury Department and the IRS view the requirement to publish an expert analysis prepared by the National Labora- tories of the designation or revocation of designation of an LCA model or models as essential to ensuring public accountability and adherence to sound scientific princi- ples. This requirement would also ensure that the Secretary has a robust record to inform any designations or revocations of an LCA model or models. Proposed §1.45Y-5(g)(7) would pro- vide the rules governing the effect of a PER. Proposed §1.45Y-5(g)(7) would provide that a taxpayer may use a PER determined by the Secretary to determine the section 45Y credit for the facility to which the PER applies, provided all other requirements of section 45Y are met. Pro- posed §1.45Y-5(g)(7) would further pro- vide that the Secretary’s PER determina- tion is not an examination or inspection of books of account for purposes of section 7605(b) of the Code and does not preclude or impede the IRS (under section 7605(b) or any administrative provisions adopted by the IRS) from later examining a return or inspecting books or records with respect to any taxable year for which the section 45Y credit is claimed. Finally, proposed §1.45Y-5(g)(7) would provide that a PER determination does not signify that the IRS has determined that the requirements of section 45Y have been satisfied for any taxable year. 8. Reliance on Annual Table or Provisional Emissions Rate Proposed §1.45Y-5(h) would provide that taxpayers may rely on the Annual Table in effect as of the date a facility began construction or the provisional emissions rate that has been determined by the Secretary for the taxpayer’s facility under proposed §1.45Y-5(g)(4) to deter- mine the facility’s GHG emissions rate for that facility for any taxable year that is within the 10-year period described in section 45Y(b)(1)(B), provided that the facility continues to operate as a type of facility that is described in the Annual Table or the facility’s emissions value request, as applicable, for the entire tax- able year. 9. Substantiation Taxpayers have a general obligation to substantiate and verify that they have met the requirements of any tax credits claimed on their tax returns. Section 6001 of the Code provides that every person liable for any tax imposed by the Code, or for the collection thereof, must keep such records as the Secretary may from time to time prescribe. Section 1.6001- 1(a) provides that any person subject to income tax must keep such permanent books of account or records as are suf- ficient to establish the amount of gross income, deductions, credits, or other mat- ters required to be shown by such person in any return of such tax. Section 1.6001- 1(e) provides that the books and records required by §1.6001-1 must be retained so long as the contents thereof may become material in the administration of any inter- nal revenue law. In addition to this general obligation to substantiate eligibility for a claimed tax credit, taxpayers may also be required to keep specific records as prescribed by the Secretary. This may be appropriate for purposes of the section 45Y credit because certain types of facilities may depend on operational choices, such as the use of certain types of feedstocks August 5, 2024 374 Bulletin No. 2024–32 or fuels or engaging in carbon capture and sequestration, to achieve a net GHG emissions rate that is not greater than zero for a taxable year, and these oper- ational choices may vary by year. Pro- posed §1.45Y-5(i)(1) would provide that a taxpayer must maintain in its books and records documentation regarding the design, operation, and if applicable, feedstock or fuel source used by the facil- ity that establishes that such facility had a GHG emissions rate, as determined under §1.45Y-5, that is not greater than zero for the taxable year. The Treasury Department and the IRS intend to require in the final regulations that taxpayers maintain specific types of documentation to substantiate that a facility for which a section 45Y credit is claimed has a net GHG emissions rate that is not greater than zero. The Treasury Department and the IRS request comment on the types of documentation taxpayers should be required to maintain to substantiate eligi- bility for the section 45Y credit. Proposed §1.45Y-5(i)(2) would further provide that documentation that is suffi- cient to substantiate that a facility had a GHG emissions rate of not greater than zero includes documentation or a report prepared by an unrelated party that veri- fies that a facility had such an emissions rate. Proposed §1.45Y-5(i)(2) would also provide that facilities described in §1.45Y-5(c)(2) can maintain sufficient documentation to demonstrate a GHG emissions rate showing that the facility is described in §1.45Y-5(c)(2). Finally, proposed §1.45Y-5(i)(2) would provide that future guidance may describe suffi- cient documentation to substantiate that certain facilities have a GHG emissions rate of not greater than zero. Because certain types or categories of facilities may have emissions rates that are highly variable and dependent on complex inter- actions between design choices, oper- ational choices, and fuel and feedstock sourcing choices, the Treasury Depart- ment and the IRS seek comment on the relative risk of inadvertently crediting above-zero-emissions electricity genera- tion for types or categories of facilities that may potentially be ineligible for the section 45Y credit. In addition, comment is also requested on supply chain tracing and substantiation requirements that the Treasury Department and the IRS may require in the final regulations to demon- strate whether a facility used a specific fuel to produce electricity and that such fuel has the emissions attributes claimed by the taxpayer. Specifically, to inform the development of the substantiation rules for the Clean Electricity Tax Cred- its, comment is requested on the follow- ing topics: (1) What types of documentation or substantiation should a taxpayer maintain to establish that an input in the supply chain of a fuel/feedstock used for electric- ity production has the energy attributes or other relevant characteristics (for exam- ple, source and production process) that were taken into account in determining a GHG emissions rate? (2) What existing systems, industry standards, or practices may be used to substantiate that a facility’s operations and the supply chain for the inputs it used to produce electricity resulted in a GHG emissions rate that is not greater than zero for a taxable year? If existing systems, standards, or practices are currently not sufficiently developed to serve as a form of substantiation, how should such track- ing and verification systems be developed and how long might such development take? (3) What supply chain tracing systems or verification bodies address fuels or feedstocks that may be commonly used by facilities that may be eligible for the Clean Electricity Tax Credits? What fuels or feedstocks could these systems or bod- ies address and for what purpose? E. One-Megawatt Exception for section 45Y The Treasury Department and the IRS intend to provide a more detailed defi- nition for the One-Megawatt Exception in section 45Y(a)(2)(B)(i) by expanding upon the definition provided in the August Proposed Regulations. The final regula- tions would provide that, for purposes of section 45Y(a)(2)(B)(i), the determination of whether a qualified facility has a maxi- mum net output of less than one megawatt of electricity (as measured in alternating current) is determined based on the name- plate capacity. If applicable, taxpayers must use the International Standard Orga- nization (ISO) conditions to measure the maximum electrical generating output of a qualified facility. For purposes of this measurement, the nameplate capacity is the maximum electrical generating out- put in MW (as measured in alternating current) that the qualified facility is capa- ble of producing on a steady state basis and during continuous operation under standard conditions, as measured by the manufacturer and consistent with the defi- nition of nameplate capacity provided in 40 CFR 96.202. The Treasury Department and the IRS request comment on this pro- posed definition. This rule is proposed to apply to qualified facilities placed in ser- vice after December 31, 2024, and during taxable years ending on or after the date of publication of the final regulations in the Federal Register. II. Rules Applicable to the Clean Electricity Investment Tax Credit These proposed regulations are orga- nized in five sections, proposed §§1.48E-1 through 1.48E-5 (section 48E regula- tions). Proposed §1.48E-1 would provide an overview of the section 48E regula- tions, generally applicable definitions, and the rules applicable to the calculation of the section 48E credit. Proposed §1.48E-2 would provide rules relating to a qualified facility, a qualified investment, a qualified property, and an energy storage technol- ogy (EST). Section 1.48E-3 is reserved for rules relating to the increased credit amount for meeting the prevailing wage and apprenticeship requirements. A cross reference will be added to §1.48E-3 in the final regulations when §1.48E-3 is final- ized. Proposed §1.48E-4 would provide the rules of general application under section 48E, including the rules regarding the inclusion of qualified interconnection costs in the basis of a low-output associ- ated qualified facility, rules for expansion of a facility and incremental production, rules for retrofitting an existing facility, rules for the ownership of a qualified facility or an EST, rules regarding the coordination of the section 48E credit with other Federal income tax credits, and rules for credit recapture. Proposed §1.48E-5 would provide rules pertaining to the determination of a GHG emissions rate for a facility under section 48E. Bulletin No. 2024–32 375 August 5, 2024 A. Amount of credit Proposed §1.48E-1(a) would provide an overview of the section 48E regula- tions and provide definitions of terms for purposes of the section 48E regulations. Proposed §1.48E-1(b) would explain how to calculate the amount of the section 48E credit for any taxable year. Proposed §1.48E-1(b)(1) would pro- vide that the credit is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to any qualified facility (as defined in proposed §1.48E-2(a)) and any EST (as defined in proposed §1.48E-2(g)). Pro- posed §1.48E-1(b)(2) would define the applicable percentage as the base rate in proposed §1.48E-1(b)(3) or the alterna- tive rate in proposed §1.48E-1(b)(4). Pro- posed §1.48E-1(b)(2) would also propose that the applicable percentage may be increased as provided in section 48E(a) (3)(A) and proposed §1.48E-1(b)(5) in the case of a qualified facility that is located in an energy community. Similarly, §1.48E- 1(b)(2) would propose that the applicable percentage may be increased as provided in section 48E(a)(3)(B) and proposed §1.48E-1(b)(6) in the case of a qualified facility that satisfies the domestic content requirements. Proposed §1.48E-1(b)(3) would describe the base rate as 6 percent. Pro- posed §1.48E-1(b)(4) would describe the alternative rate as 30 percent if cer- tain prevailing wage and apprenticeship requirements are satisfied. Proposed §1.48E-1(b)(5) would pro- vide rules applicable to the energy com- munities increase in credit rate. Proposed §1.48E-1(b)(6) would provide rules appli- cable to the domestic content increase in credit rate. Proposed §1.48E-1(c) would provide the credit phase-out rules. Generally, pro- posed §1.48E-1(c)(1) would provide that the amount of the clean electricity invest- ment credit under section 48E for any qualified facility or EST the construction of which begins during a calendar year described in section 48E(e)(2) is equal to the product of the amount of the credit determined under section 48E(a) and proposed §1.48E-1(b) without regard to section 48E(e), multiplied by the phase- out percentage under section 48E(e)(2) and proposed §1.48E-1(c)(2). Proposed §1.48E-1(c)(2) would provide that the phase-out percentage is 100 percent for any qualified investment with respect to any qualified facility or EST the con- struction of which begins during the first calendar year following the applicable year; 75 percent for any qualified invest- ment with respect to any qualified facility or EST the construction of which begins during the second calendar year follow- ing the applicable year; 50 percent for any qualified investment with respect to any qualified facility or EST the construction of which begins during the third calendar year following the applicable year; and 0 percent for any qualified investment with respect to any qualified facility or EST the construction of which begins during any calendar year subsequent to the cal- endar year described in section 48E(e) (2)(C). Proposed §1.48E-1(c)(3) would define “applicable year” for purposes of proposed §1.48E-1(c) as having the same meaning as provided in proposed §1.45Y- 1(c)(3). B. Qualified facility Proposed §1.48E-2(a) would define a “qualified facility” to mean a facility that is used for the generation of electric- ity; is placed in service by the taxpayer after December 31, 2024; and has a GHG emissions rate of not greater than zero (as determined under rules provided in §1.45Y-5). 1. Property included in Qualified Facility Proposed §1.48E-2(b) would provide that a qualified facility includes a unit of qualified facility (as defined in proposed §1.48E-2(b)(2)(i)) and property owned by the same taxpayer that is integral to the unit of qualified facility (as described in proposed §1.48E-2(b)(3)). Proposed §1.48E-2(b)(1) would provide that any component of property that meets the requirements of proposed §1.48E-2(b) is part of a qualified facility regardless of where such component of property is located. Proposed §1.48E-2(b)(1) would provide that a qualified facility does not include any electrical transmission equipment, such as transmission lines and towers, or any equipment beyond the electrical transmission stage. Proposed §1.48E-2(b)(1) would also provide that a qualified facility generally does not include equipment that is an addition or modification to an existing qualified facility. However, proposed §1.48E-2(b) (1) would reference proposed §1.48E- 4(b) regarding the expansion of a facility or incremental production and proposed §1.48E-4(c) for rules regarding retrofit- ted facilities (80/20 Rule). 2. Functionally Interdependent Proposed §1.48E-2(b)(2)(i) would provide that the unit of a qualified facil- ity includes functionally interdependent components of a property (as defined in §1.48E-2(b)(2)(ii) owned by the tax- payer that are operated together and that can operate apart from other property to produce electricity. Proposed §1.48E- 2(b)(2)(i) would further provide that no provision of this section, §1.48E-1, or §1.48E-4 through 1.48E-5 uses the term “unit” in respect of a qualified facility with any meaning other than that pro- vided in §1.48E-2(b)(2)(ii). A reference to §1.48E-3 will also be added to the previ- ous sentence in proposed §1.48E-2(b)(2) (i) when that regulation is finalized, but it cannot be added until §1.48E-3 is final- ized. Proposed §1.48E-2(b)(2)(ii) would define components as “functionally inter- dependent” if the placing in service of each of the components is dependent upon the placing in service of each of the other components to produce electricity. 3. Integral Part Proposed §1.48E-2(b)(3)(i) would pro- vide that property owned by a taxpayer is an integral part of a qualified facility owned by the same taxpayer if it is used directly in the intended function of the qualified facility and is essential to the completeness of the intended function. Proposed §1.48E–2(b)(3)(i) would also clarify that property that is an integral part of a qualified facility is part of the quali- fied facility. Lastly, proposed §1.48E–2(b) (3)(i) would explain that a taxpayer may not claim the section 48E credit for any property that is an integral part of a qual- ified facility that is not owned by the tax- payer. August 5, 2024 376 Bulletin No. 2024–32 Proposed §1.48E–2(b)(3)(ii) would describe power conditioning equipment and transfer equipment as integral parts of a qualified facility. Proposed §1.48E–2(b) (3)(ii) would further provide that power conditioning equipment includes equip- ment that modifies the characteristics of electricity into a form suitable for use or transmission or distribution. Proposed §1.48E–2(b)(3)(ii) would also provide that parts related to the functioning or pro- tection of power conditioning equipment are also treated as power conditioning equipment and include examples. Proposed §1.48E–2(b)(3)(ii) would further provide that transfer equipment includes components that permit the aggregation of electricity generated by components of qualified facilities and components that alter voltage to permit transfer to a transmission or distribution line and would clarify that transfer equip- ment does not include transmission or distribution lines. Proposed §1.45Y–2(b) (3)(ii) would provide examples of transfer equipment that include, but are not limited to, wires, cables, and combiner boxes that conduct electricity. Proposed §1.45Y– 2(b)(3)(ii) would provide that parts related to the functioning or protection of trans- fer equipment are also treated as transfer equipment and include examples. Proposed §1.48E-2(b)(3)(iii) would provide that roads that are an integral part of a qualified facility are those roads inte- gral to the intended function of the quali- fied facility such as onsite roads that are used to operate and maintain the qualified facility. Proposed §1.48E–2(b)(3)(iii) would also clarify that roads primarily for access to the site, or roads used primarily for employee or visitor vehicles, are not integral to the intended function of the qualified facility, and thus are not an inte- gral part of a qualified facility. Proposed §1.48E-2(b)(3)(iv) and (v) would provide that fences and buildings (also referred to as structures) are gener- ally not integral parts of a qualified facil- ity because they are not integral to the intended function of the qualified facility. However, a building (or structure) may be an integral part of a qualified facility if it is essentially an item of machinery or equipment and a structure that houses property that is integral to the intended function of the qualified facility, if the use of the structure is so closely related to the use of the housed components of property therein that the structure clearly can be expected to be replaced if the components of property it initially houses are replaced. Proposed §1.48E-2(b)(3)(vi) would provide a rule for shared integral property stating that multiple qualified facilities (whether owned by one or more taxpayers), including qualified facilities with respect to which a taxpayer has claimed a credit under section 48E or another Federal income tax credit, may include shared property that may be considered an integral part of each qualified facility so long as the cost basis for the shared property is properly allocated to each qualified facility and the taxpayer only claims a section 48E credit with respect to the portion of the cost basis properly allocable to a facility for which the taxpayer is claiming a section 48E credit. Proposed §1.48E-2(b)(3)(vi) would further clarify that the total cost basis of such shared property divided among the qualified facilities may not exceed 100 percent of the cost of such shared property. Lastly, proposed §1.48E-2(b)(3)(vi) speci- fies that property that is shared by a qual- ified facility (as defined in section 48E(b) (3)) (48E Qualified Facility) and a qualified facility (as defined by section 45Y(b) (45Y Qualified Facility) that is an integral part of both qualified facilities will not affect the eligibility of the 48E Qualified Facility for the section 48E credit or the 45Y Qualified Facility for the section 45Y credit. 4. Coordination with Other Credits Proposed §1.48E-2(c)(1) would pro- vide that the term “qualified facility” (as defined in section 48E(b)(3)) will not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 45Y, 48, or 48A is allowed under section 38 for the taxable year or any prior taxable year. Proposed §1.48E-2(c) (1) would further clarify that a taxpayer that directly owns a qualified facility (as defined in section 48E(b)(3)) that is eli- gible for both a section 48E credit and another Federal income tax credit is eli- gible for the section 48E credit only if the other Federal income tax credit was not allowed with respect to the qualified facility. Proposed §1.48E-2(c)(1) would provide that nothing in proposed §1.48E- 2(c) precludes a taxpayer from claiming a section 48E credit with respect to a qual- ified facility (as defined in section 48E(b) (3)) that is co-located with another facility for which a credit determined under sec- tion 45, 45J, 45Q, 45U, 45Y, 48, or 48A is allowed under section 38 for the taxable year or any prior taxable year. Proposed §1.48E-2(c)(2) would clar- ify that for purposes of proposed §1.48E- 2(c)(1), the term “allowed” only includes credits that taxpayers have claimed on a Federal income tax return or Federal return, as appropriate, and that the IRS has not challenged in terms of the taxpayer’s eligibility. Proposed §1.48E-2(c)(3) would include several examples that illustrate the application of the rules provided in pro- posed §1.48E-2(c). 5. Qualified Investment with Respect to a Qualified Facility Proposed §1.48E-2(d) would describe a qualified investment with respect to any qualified facility for any taxable year as the sum of the basis of any qualified property (as defined in proposed §1.48E-2(e)(1)) placed in service by the taxpayer during such taxable year that is part of a qualified facility (as defined in proposed §1.48E- 2(a)) and the amount of any expenditures paid or incurred by the taxpayer for qual- ified interconnection property (as defined in proposed §1.48E-4(a)(2)). 6. Qualified Property a. Generally Proposed §1.48E-2(e) would define “qualified property” for purposes of pro- posed §1.48E-2(a) to mean property that meets three requirements. First, proposed §1.48E-2(e)(1)(i) would require that the property is tangible personal property (as defined in proposed §1.48E-2(f)(1)) or other tangible property (not including a building or its structural components) (as defined in proposed §1.48E-2(f)(2)), but only if such other tangible property is used as an integral part (as defined in proposed §1.48E-2(b)(3)) of the qualified facility (as defined in proposed §1.48E-2(a)). Second, proposed §1.48E-2(e)(1)(ii) would require that depreciation (or amor- Bulletin No. 2024–32 377 August 5, 2024 tization in lieu of depreciation) be allow- able (as defined in proposed §1.48E-2(f) (6)) with respect to the property. Third, proposed §1.48E-2(e)(1)(iii) would require that the taxpayer either con- structs, reconstructs, or erects the property (as defined in proposed §1.48E-2(f)(3)) or acquires the property (as defined in pro- posed §1.48E-2(f)(4)) if the original use of the property (as defined in proposed §1.48E-2(f)(5)) commences with the tax- payer. Proposed §1.48E-2(e)(2) would pro- vide that any component of a qualified property that meets the requirements of proposed §1.48E-2(e) is part of a qualified facility regardless of where such compo- nent of property is located. b. Definitions related to qualified property Tangible personal property Proposed §1.48E-2(f)(1) would define the term “tangible personal property” for purposes of section 48E and pro- posed §1.48E-2(b) to mean any tangible property except land and improvements thereto, such as buildings or other inher- ently permanent structures (including items that are structural components of such buildings or structures). Proposed §1.48E-2(f)(1) would further provide that tangible personal property includes all property (other than structural compo- nents) that is contained in or attached to a building and that all property that is in the nature of machinery (other than structural components of a building or other inher- ently permanent structure) is considered tangible personal property even though located outside a building. Finally, pro- posed §1.48E-2(f)(1) would clarify that local law is not controlling for purposes of determining whether property is or is not tangible property or tangible personal property. Therefore, proposed §1.48E-2(f) (1) would explain that tangible property may be personal property for purposes of the section 48E credit even though under local law the property is considered a fix- ture and therefore real property. Other tangible property Proposed §1.48E-2(f)(2) would define the term “other tangible property” to mean tangible property other than tangible per- sonal property (not including a building and its structural components), that is used as an integral part of furnishing electricity by a person engaged in a trade or business of furnishing any such service. Construction, reconstruction, or erection of qualified property Proposed §1.48E-2(f)(3) would define the term “construction, reconstruction, or erection of qualified property” to mean work performed to construct, reconstruct, or erect qualified property either by the taxpayer or for the taxpayer in accordance with the taxpayer’s specifications. Acquisition of qualified property Proposed §1.48E-2(f)(4) would define the term “acquisition of qualified prop- erty” to mean a transaction by which a taxpayer obtains rights and obligations with respect to qualified property includ- ing title to the qualified property under the law of the jurisdiction in which the qualified property is placed in service, unless the qualified property is possessed or controlled by the taxpayer as a lessee, and physical possession or control of the qualified property. Original use of qualified property Proposed §1.48E-2(f)(5)(i) would pro- vide that the term “original use of quali- fied property” means the first use to which qualified property is put, whether or not such use is by the taxpayer. Proposed §1.48E-2(f)(5)(ii) would clarify that a retrofitted qualified facility acquired by the taxpayer will not be treated as being put to original use by the taxpayer unless the rules in proposed §1.48E–4(c) regard- ing retrofitted qualified facilities (80/20 Rule) apply. Proposed §1.48E-2(f)(5)(ii) explains that the question of whether a qualified facility meets the 80/20 Rule is a facts and circumstances determination. Depreciation allowable Proposed §1.48E-2(f)(6)(i) would provide a general rule for purposes of applying proposed §1.48E-2(b), that depreciation (or amortization in lieu of depreciation) is allowable with respect to qualified property if such property is of a character subject to the allowance for depreciation under section 167 of the Code and the basis or cost of such property is recovered using a method of depreciation (for example, the straight line method), which includes any additional first year depreciation deduction method of depre- ciation (for example, under section 168(k) of the Code). Proposed §1.48E-2(f)(6) (i) would further clarify that if an adjust- ment with respect to the Federal income tax or Federal return for such taxable year requires the basis or cost of such qualified property to be recovered using a method of depreciation, depreciation is allowable to the taxpayer with respect to the quali- fied property. Proposed §1.48E-2(f)(6)(ii) would describe exclusions from allowable depreciation stating that for purposes of proposed §1.48E-2(b), depreciation is not allowable with respect to a qualified facil- ity if the basis or cost of such qualified facility is not recovered through a method of depreciation but, instead, such basis or cost is recovered through a deduction of the full basis or cost of the qualified facil- ity in one taxable year (for example, under section 179 of the Code). Placed in service Proposed §1.48E-2(f)(7)(i) would provide the general rule for determining when a qualified facility has been placed in service for purposes of the section 48E credit. Proposed §1.48E-2(f)(7)(ii) would provide that notwithstanding the general placed in service rules provided in pro- posed §1.48E-2(f)(7)(i), a qualified facil- ity with respect to which an election is made under §1.48-4 to treat the lessee as having purchased such qualified facility is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee. Claim Proposed §1.48E-2(f)(8) would pro- vide that with respect to a section 48E credit determined with respect to qualified facility of a taxpayer, the term “claim” would be defined to mean filing a com- pleted Form 3468, Investment Credit, or any successor form(s), with the taxpayer’s August 5, 2024 378 Bulletin No. 2024–32 timely filed (including extensions) Federal income tax return or Federal return, as appropriate, for the taxable year in which the qualified facility is placed in service, and includes making an election under section 6417 or 6418 of the Code and corresponding regulations with respect to such section 48E credit and made on the taxpayer’s filed return. C. Energy storage technology 1. General Rule Proposed §1.48E-2(g)(1) would pro- vide that an EST includes a unit of EST that meets the requirements of proposed §1.48E-2(g)(2)(i). An EST also would include property owned by the taxpayer that is an integral part (as defined in pro- posed §1.48E-2(g)(3)) of the unit of EST. Proposed §1.48E-2(g)(1) would provide that equipment that is an addition or mod- ification to an existing EST is not eligi- ble for the section 48E credit. Proposed §1.48E-2(g)(1) would further provide that, an EST would include electrical energy storage property described in pro- posed §1.48E-2(g)(6)(i), thermal energy storage property described in proposed §1.48E-2(g)(6)(ii), and hydrogen energy storage property described in proposed §1.48E-2(g)(6)(iii). Proposed §1.48E-2(g)(2) would pro- vide that a unit of EST includes all func- tionally interdependent components of property (as defined in proposed §1.48E- 2(g)(2)(ii)), owned by the taxpayer that are operated together and that can operate apart from other property to perform the intended function of the EST. 2. Functionally Interdependent Proposed §1.48E-2(g)(2)(i) would pro- vide that for purposes of the section 48E credit, a unit of EST includes all function- ally interdependent components of prop- erty (as defined in proposed §1.48E-2(g) (2)(ii)) owned by the taxpayer that are operated together and that can operate apart from other property to perform the intended function of the EST. Proposed §1.48E-2(g)(2)(i) would also provide that no provision of this section, §1.48E-1, or §1.48E-4 through 1.48E-5 uses the term unit in respect of an EST with any mean- ing other than that provided in §1.48E-2(g) (2)(i). Proposed §1.48E-2(g)(2)(ii) would provide that components are functionally interdependent if the placing in service of each of the components is dependent upon the placing in service of each of the other components to perform the intended func- tion of the EST. 3. Integral Part Proposed §1.48E-2(g)(3) would pro- vide that property owned by a taxpayer is an integral part of EST owned by the same taxpayer if it is used directly in the intended function of the EST and is essen- tial to the completeness of such function. Proposed §1.48E-2(g)(3) would also pro- vide that property that is an integral part of an EST is part of an EST. Lastly, proposed §1.48E-2(g)(3) would provide that a tax- payer may not claim the section 48E credit for any property that is an integral part of an EST that is not owned by the taxpayer. 4. Qualified Investment with Respect to Energy Storage Technology Proposed §1.48E-2(g)(4) would describe the qualified investment with respect to any EST for any taxpayer year as the basis of any EST placed in service by the taxpayer during such taxable year. 5. Placed in Service Proposed §1.48E-2(g)(5)(i) would pro- vide rules for determining when an EST has been placed in service for purposes of the section 48E credit. Proposed §1.48E- 2(g)(5)(ii) also would provide that not- withstanding the general placed in service rules provided in proposed §1.48E-2(g) (5)(i), an EST with respect to which an election is made under §1.48-4 to treat the lessee as having purchased such EST is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee. 6. Types of Energy Storage Technologies Proposed §1.48E-2(g)(6)(i) would describe electrical energy storage property as property (other than property primar- ily used in the transportation of goods or individuals and not for the production of electricity) that receives, stores, and deliv- ers energy for conversion to electricity and has a nameplate capacity of not less than 5 kWh. See subsection C of Overview of Section 48E. Proposed §1.48E-2(g)(6)(i) also would provide examples of such elec- trical energy storage property, subject to the exclusion for property primarily used in the transportation of goods or individuals. The Treasury Department and the IRS understand that this exclusion for prop- erty primarily used in the transportation of goods or individuals, at a minimum, would apply to batteries and other EST that are incorporated into or otherwise physically integrated within motor vehicles and other modes of transportation of goods or indi- viduals and from which an electric motor of such vehicle or other mode of transpor- tation draws electricity for propulsion. Proposed §1.48E-2(g)(6)(ii) would describe thermal energy storage property as property comprising a system that is directly connected to a heating, ventila- tion, or air conditioning (HVAC) system; removes heat from, or adds heat to, a stor- age medium for subsequent use; and pro- vides energy for the heating or cooling of the interior of a residential or commercial building. See section C of Overview of Section 48E. Proposed §1.48E-2(g)(6)(ii) would also provide that thermal energy storage property includes equipment and materials, and parts related to the func- tioning of such equipment, to store ther- mal energy for later use to heat or cool, or to provide hot water for use in heat- ing a residential or commercial building. In addition, proposed §1.48E-2(g)(6)(ii) would provide that thermal energy stor- age property does not include a swimming pool, CHP property, or a building or its structural components. Lastly, proposed §1.48E-2(g)(6)(ii) would provide exam- ples of thermal energy storage property. Proposed §1.48E-2(g)(6)(iii) would provide that hydrogen energy storage prop- erty is property (other than property pri- marily used in the transportation of goods or individuals and not for the production of electricity) that stores hydrogen and has a nameplate capacity of not less than 5 kWh, equivalent to 0.127 kg of hydrogen or 52.7 standard cubic feet (scf) of hydrogen. Pro- posed §1.48E-2(g)(6)(iii) would also pro- vide that hydrogen energy storage property must store hydrogen that is solely used as Bulletin No. 2024–32 379 August 5, 2024 energy and not for other purposes such as for the production of end products such as fertilizer. Proposed §1.48E-2(g)(6)(iii) would also provide examples of hydrogen energy storage property. Although the list of examples of energy storage technologies that pro- posed §1.48E–2(g)(6) would provide is nonexclusive, and therefore many other technologies that are not addressed would meet these functional definitions, there are some examples that do not meet the functional definition. For example, some technologies are marketed as “virtual bat- teries,” which are aggregations of control- lable electricity demand providing similar electrical grid services to an electrical grid battery. Such “virtual batteries” receive energy in the form of electricity, but they do not store it for later discharge as elec- tricity. The function of “virtual batteries” is to shift demand to different points in time. Because such demand shifting is not a storage activity for purposes of section 48(c)(6) (and thus for purposes of section 48E(c)(2)), this technology is not an EST. There are other technologies for which the determination of whether they meet the statutory requirements is less clear. 7. Modification of Energy Storage Technology Proposed §1.48E-2(g)(7) would pro- vide rules for modification of EST. Based on the rules in section 48(c)(6)(B), pro- posed §1.48E-2(g)(7) would provide that with respect to electrical energy storage property and hydrogen energy storage property, modified as set forth in pro- posed §1.48E-2(g)(7), such property will be will be treated as an electrical energy storage property (as described in proposed §1.48E-2(g)(6)(i)) or a hydrogen energy storage property (as described in proposed §1.48E-2(g)(6)(iii)), except that the basis of any existing electrical energy storage property or hydrogen energy storage prop- erty prior to such modification is not taken into account for purposes of proposed §1.48E-2(g)(7) and section 48E. 8. Claim Proposed §1.48E-2(g)(8) would pro- vide that with respect to a section 48E credit determined with respect to an EST of a taxpayer, the term “claim” means fil- ing a completed Form 3468, Investment Credit, or any successor form(s), with the taxpayer’s timely filed (including exten- sions) Federal income tax return or Fed- eral return, as appropriate, for the taxable year in which the EST is placed in service, and includes making an election under section 6417 or 6418 and corresponding regulations with respect to such section 48E credit and made on the taxpayer’s filed return. D. Rules of general application to section 48E 1. Rules for Certain Lower-Output Qualified Facilities Proposed §1.48E-4(a)(1) would pro- vide rules for qualified facilities with a maximum net output of not greater than 5 megawatts to include qualified inter- connection costs in the basis of an asso- ciated qualified facility. Proposed §1.48E- 4(a)(1) would provide that the qualified investment for a qualified facility includes amounts paid or incurred by the taxpayer for qualified interconnection property in connection with the installation of a quali- fied facility that has a maximum net output of not greater than 5 MW (as measured in alternating current) (Five-Megawatt Lim- itation). Proposed §1.48E-4(a)(1) would provide that the qualified interconnection property must provide for the transmis- sion or distribution of the electricity pro- duced by a qualified facility and must be properly chargeable to the capital account of the taxpayer as reduced by proposed §1.48E-4(a)(6). Proposed §1.48E-4(a)(2) would define the term “qualified intercon- nection property.” Proposed §1.48E-4(a) (2) would further provide that qualified interconnection property is not taken into account to determine if a qualified facility meets the requirements for the increase in credit rate for energy communities or domestic content because qualified inter- connection property is not part of a qual- ified facility. Proposed §1.48E-4(a)(3) would describe the Five-Megawatt Limitation as a measurement taken at the qualified facility level. Proposed §1.48E-4(a)(3) (i) would provide that the maximum net output of a qualified facility is measured only by the nameplate generating capac- ity of the unit of qualified facility, which does not include the nameplate capacity of any integral property, at the time that the qualified facility is placed in service. Fur- ther, proposed §1.48E-4(a)(3)(i) would also provide that the nameplate generating capacity of the unit of qualified facility is measured independently from any other qualified facilities that share the same integral property. Proposed §1.48E-4(a)(4) would define the term “interconnection agreement.” and proposed §1.48E-4(a)(5) would define the term “utility.” Proposed §1.48E-4(a)(6) would pro- vide that expenses paid or incurred for qualified interconnection property and amounts otherwise chargeable to capital account with respect to such expenses must be reduced under rules similar to the rules contained in section 50(c). The taxpayer must pay or incur the intercon- nection property costs, and therefore, any reimbursement, including by a utility, must be accounted for by reducing the taxpayer’s expenditure to determine eligi- ble costs. A taxpayer that is reimbursed for these costs may not include such reimbursed costs in the amount paid or incurred by the taxpayer for qualified interconnection property. Proposed §1.48E-4(a)(6) would adopt this rule. In the case of a utility reimbursing a taxpayer for costs the tax- payer pays or incurs for qualified inter- connection property, the utility should provide the taxpayer with information regarding such costs by the date on which the project is placed in service. The Treasury Department and the IRS are aware of common situations in which a taxpayer could ultimately receive a payment, credit, or service from another entity, including a utility, related to the costs the taxpayer pays or incurs for qual- ified interconnection property. For exam- ple, one taxpayer may place in service a qualified facility and make payments to a utility with respect to qualified intercon- nection property involving the addition, modification, or upgrade to the utility’s transmission system related to such quali- fied facility. Subsequently, a different tax- payer may, at a later date, place in service a qualified facility and make payments to the same utility related to the same addi- August 5, 2024 380 Bulletin No. 2024–32 tions, modifications, or upgrades to the utility’s transmission system that were made in response to the first taxpayer’s interconnection. The utility may pay, credit, or provide services to the first tax- payer in an amount related to the costs paid by the second taxpayer. The likely amount or timing of any such payment, credit, or service would not be known at the time the first taxpayer interconnects to the utility’s transmission system. The Treasury Department and the IRS request comment on whether such pay- ment, credit, or service received by the first taxpayer, as the result of subsequent payments made to a utility by other par- ties, should be treated as a reimbursement to the first taxpayer and impact the amount of the costs of qualified interconnection property that the first taxpayer may include in its basis for purposes of the section 48E credit. The Treasury Department and the IRS also request comment on whether the costs paid by the second taxpayer should be treated as amounts paid or incurred for qualified interconnection property in con- nection with the installation of the second taxpayer’s qualified facility. The Treasury Department and the IRS request com- ment on industry practices relevant to the determination of costs paid or incurred for qualified interconnection property, includ- ing the accounting treatment of costs paid or incurred for qualified interconnection property. The Treasury Department and the IRS also request comment on whether any clarifications are needed regarding the tax treatment of amounts paid or incurred for qualified interconnection property, including reimbursement of costs paid or incurred by a taxpayer for qualified inter- connection costs. In section 3.02(1)(b)(ii) of Notice 2022-49, the Treasury Department and the IRS requested comments concerning what type of documentation, in addition to interconnection agreements and cost cer- tification reports, is readily available for a taxpayer to demonstrate that they have paid or incurred interconnection costs in the context of the section 48 credit. Tax- payers must retain documentation in com- pliance with section 6001. The proposed regulations do not provide any specific type of required documentation, and any documentation that satisfies section 6001 will suffice to substantiate that a taxpayer has paid or incurred qualified interconnec- tion costs. Commenters to Notice 2022-49 provided feedback on the documentation that taxpayers may use to substantiate costs paid or incurred for qualified inter- connection property in the context of the section 48 credit. The Treasury Depart- ment and the IRS request comments on this same question in the context of the section 48E credit. Qualified interconnection property is either constructed, reconstructed, or erected by the taxpayer, or the taxpayer pays or incurs the cost with respect to the construction, reconstruction, or erection of such property; and the original use of which, pursuant to an interconnection agreement, commences with a utility. Therefore, in some cases, taxpayers will have the necessary information and doc- umentation on these costs. In other cases, the taxpayers will need to receive this information from the utility, which, the Treasury Department and the IRS under- stand, will be a common scenario. For sit- uations in which property is constructed, reconstructed, or erected by a party other than the taxpayer, final information with conclusive details such as a true-up report with the actual costs, final invoices, proof of payment or reimbursement, and per- mission to operate documentation or any other final project accounting docu- mentation should be maintained. Other examples of cost documentation records include, but are not limited to, the inter- connection agreement, interconnection study, signed customer contracts, and cost certification reports. 2. Expansion of Facility; Incremental Production Proposed §1.48E-4(b) would provide rules related to the expansion of capacity of a qualified facility by the addition of a new unit or an addition of capacity. Pro- posed §1.48E-4(b)(1) would provide, that solely for purposes of §1.48E-4(b), the term “qualified facility” includes either a new unit or an addition of capacity placed in service after December 31, 2024, in con- nection with a facility described in section 48E(b)(3)(A) (without regard to clause (ii) of such paragraph), which was placed in service before January 1, 2025, but only to the extent of the increased amount of elec- tricity produced at the facility by reason of such new unit or addition of capacity. Proposed §1.48E-4(b)(1) further provides that a new unit or an addition of capacity that meets the requirements of proposed §1.48E-4(b) will be treated as a separate qualified facility. Proposed §1.48E-4(b) provides that a new unit or addition of capacity requires the addition or replace- ment of qualified property (as defined in §1.48E-2(e)), including any new or replacement integral property added to the facility necessary to increase capacity. If applicable, taxpayers must use modified or amended facility operating licenses or the International Standard Organization (ISO) conditions to measure the maximum electrical generating output of a facility to determine nameplate capacity. Addition- ally, §1.48E-4(b)(1) would provide that for purposes of section 48E(a)(2)()(ii)(I) (that is, the One-Megawatt Exception), the capacity for a new unit or an addition of capacity is the sum of the nameplate capacity of the added qualified facility and the nameplate capacity of the facility to which the qualified facility was added. Proposed §1.48E-4(b)(2) would pro- vide that solely for purposes of §1.48E- 4(b), a facility that is decommissioned or in the process of decommissioning and restarts can be considered to have increased capacity if the following condi- tions are met: (1) the existing facility must have ceased operations; (2) the existing facility must have a period of at least one calendar year during which it is without a valid operating license from its respective Federal regulatory authority (that is, the Federal Energy Regulatory Commission (FERC) or the Nuclear Regulatory Com- mission (NRC)); and (3) the increased capacity of the restarted facility must have a new, reinstated, or renewed operating license issued by either FERC or NRC. Proposed §1.48E-4(b)(3) would describe two different methods for a tax- payer to compute the qualified investment that increased the amount of electricity produced by either a new unit or an addi- tion of capacity described in §1.48E-4(b) (1). Proposed §1.48E-4(b)(3)(i) would provide that the term “new unit” means components of property including any new or replacement integral property added to a facility necessary to increase the capac- ity of the facility but do not replace the Bulletin No. 2024–32 381 August 5, 2024 existing capacity of the facility. Further, proposed §1.48E-4(b)(3)(i) would provide that the taxpayer’s qualified investment in the new unit during the taxable year that results in an increase in capacity is eligible for the section 48E credit. Proposed §1.48E-4(b)(3)(ii) would address the application of the rule to an addition of capacity by providing that the term “addition of capacity” means com- ponents of property, including any new or replacement integral property added to a facility necessary to increase the capacity of the facility by replacing, in whole or in part, the existing capacity of the facility. Proposed §1.48E-4(b)(3)(ii) would pro- vide that to determine a taxpayer’s qual- ified investment during the taxable year that resulted in an increased capacity of a facility by reason of an addition of capac- ity not described in proposed §1.48E-4(b) (3)(i), a taxpayer must multiply its total qualified investment during the taxable year with respect to the facility, by a frac- tion, the numerator of which is the increase in nameplate capacity that results from the addition of capacity, and the denominator of which is the total nameplate capacity associated with the components of prop- erty that result in the addition of capacity. Proposed §1.48E-4(b)(4) would pro- vide examples to illustrate the application of both methods to determine the increased amount of electricity attributable to a new unit or an addition of capacity described in §1.48E-4(b)(1). 3. Retrofit of an Existing Facility (80/20 Rule) Proposed §1.48E-4(c) would provide rules related to the retrofit of an existing qualified facility. Proposed §1.48E-4(c) (1) would provide that for purposes of section 48E(b)(3)(A)(ii), a facility may qualify as originally placed in service even if it contains some used compo- nents of property within the unit of quali- fied facility, provided that the fair market value of the used components of the unit of qualified facility is not more than 20 percent of the unit of qualified facility’s total value (that is, the cost of the new components of property plus the value of the used components of property within the unit of qualified facility) (80/20 Rule). Proposed §1.48E-4(c)(2) would pro- vide that only expenditures paid or incurred that related to the new compo- nents of the unit of qualified facility are taken into account for computing the sec- tion 48E credit with respect to the unit of qualified facility. Proposed §1.48E-4(c)(3) would pro- vide that the cost of new components of the unit of qualified facility includes all costs properly included in the depreciable basis of the new components. Proposed §1.48E-4(c)(4) would pro- vide that if the taxpayer satisfies the 80/20 Rule with regard to a unit of qual- ified facility, and the taxpayer incurs new costs for property that is an integral part of the qualified facility, the taxpayer may include these new costs paid or incurred for property that is an integral part of the qualified facility in the basis of the quali- fied facility for purposes of calculating the section 48E credit. Proposed §1.48E-4(c)(5) would pro- vide that costs incurred for new compo- nents of property added to used compo- nents of a unit of qualified facility may not be taken into account for purposes of the section 48E credit unless the taxpayer satisfies the 80/20 Rule. Proposed §1.48E- 4(c)(6) would provide examples. 4. Special Rules Regarding Ownership Proposed §1.48E-4(d) would provide rules related to the ownership of a qual- ified facility or EST. Proposed §1.48E- 4(d)(1) would provide that a taxpayer that owns a qualified investment with respect to a qualified facility or EST is eligible for the section 48E credit only to the extent of the taxpayer’s eligible investment in the qualified facility or EST. In the case of multiple taxpayers holding direct own- ership through their qualified investments in a single qualified facility or EST, each taxpayer determines its eligible invest- ment based on the taxpayer’s fractional ownership interest in the qualified facility or EST. Proposed §1.48E-4(d)(2) would provide that a taxpayer must directly own at least a fractional interest in the entire unit of quali- fied facility (as defined in §1.48E-2(b)(2) or unit of EST (as defined in §1.48E-2(g)(2)) for a section 48E credit to be determined with respect to such taxpayer’s interest. Proposed §1.48E-4(d)(2) also provides that no section 48E credit may be determined with respect to a taxpayer’s ownership of one or more separate components of a qual- ified facility or EST if the components do not constitute a unit of qualified facility (as defined in proposed §1.48E-2(b)(2)) or unit of EST (as defined in proposed §1.48E- 2(g)(2)). However, proposed §1.48E-4(d) (2) provides that the use of the components of property owned by one taxpayer that is an integral part of a qualified facility or EST owned by another taxpayer will not prevent a section 48E credit from being determined with respect to the second tax- payer’s qualified investment in a qualified facility or EST. Proposed §1.48E-4(d)(3) would pro- vide that if a qualified facility or EST is owned through an unincorporated organi- zation that has made a valid election under section 761(a), each member’s undivided ownership share in the facility or EST will be treated as a separate qualified facility or EST owned by such member. Proposed §1.48E-4(d)(4)(i) would define the term “related taxpayers” and proposed §1.48E-4(d)(4)(ii) would pro- vide a related taxpayer rule, that related taxpayers are treated as one taxpayer in determining whether a taxpayer has made an investment in a qualified facility or EST with respect to which a section 48E credit may be determined. Proposed §1.48E-4(d) (5) would provide examples illustrating these ownership rules. 5. Coordination Rule for Section 42 and 48E Credits Proposed §1.48E-4(e) would provide that as provided under section 50(c)(3) (C), in the case of a taxpayer determin- ing eligible basis for purposes of cal- culating a credit under section 42 of the Code (section 42 credit), a taxpayer is not required to reduce its basis in a qualified facility or EST by the amount of the sec- tion 48E credit determined with respect to the qualified investment with respect to such qualified facility or EST. Further, proposed §1.48E-4(e) would provide that the qualified investment with respect to a qualified facility or EST may be used to determine a section 48E credit and may also be included in eligible basis to deter- mine a section 42 credit. August 5, 2024 382 Bulletin No. 2024–32 6. Credit Recapture Proposed §1.48E-4(f)(1) would provide recapture rules for the section 48E credit that incorporate the recapture provisions of section 50(a). Proposed §1.48E-4(f) (1) would further provide that the credit calculated under proposed §1.48E-1(b) is subject to recapture for any qualified facility that has a GHG emissions rate (as determined under proposed §1.48E-5) that exceeds 10 grams of CO 2 e per kWh during the five-year period beginning on the date such qualified facility is originally placed in service (five-year recapture period). Recapture Event Proposed §1.48E-4(f)(2)(i) would pro- vide that any failure of the qualified facil- ity to not exceed a GHG emissions rate of 10 grams per CO 2 e per kWh during the five-year recapture period is a recapture event. If a qualified facility’s GHG emis- sions rate exceeds 10 grams of CO 2 e per kWh averaged over the taxable year, the section 48E credit is subject to recapture. Proposed §1.48E-4(f)(2)(ii) would pro- vide that a change to the GHG emissions rate for a type or category of facility that is published in the Annual Table (as defined in proposed §1.45Y-5(f)) after the facility is placed in service does not result in a recapture event. Proposed §1.48E-4(f)(2)(iii) would provide that a determination of whether a recapture event has occurred must be made for each taxable year (or portion thereof) occurring within the five-year recapture period, beginning with the tax- able year ending after the date the quali- fied facility is placed in service. For each taxable year that begins or ends within the five-year recapture period, the tax- payer must determine, for any qualified facility for which it has claimed the sec- tion 48E credit, whether such facility has maintained a GHG emissions rate of not greater than 10 grams of CO 2 e per kWh. A taxpayer that has claimed the section 48E credit amount under proposed §1.48E-1 or transferred a specified credit portion under section 6418 of the Code is required to provide to the IRS information on the GHG emissions rate of the qualified facil- ity during the recapture period at the time and in the form and manner prescribed in IRS forms or instructions or in publica- tions or guidance published in the Internal Revenue Bulletin. Proposed §1.48E-4(f)(2)(iv) would provide that in the case of any recapture event, the carrybacks and carryforwards under section 39 must be adjusted by rea- son of such recapture event. Proposed §1.48E-4(f)(3)(i) would pro- vide that if a recapture event has occurred, the tax under chapter 1 of the Code for the taxable year in which the recapture event occurs is increased by an amount equal to the applicable recapture percent- age multiplied by the credit amount that was claimed by the taxpayer under pro- posed §1.48E-1. Proposed §1.48E-4(f)(3) (ii) provides the applicable recapture per- centage for each year during the five-year recapture period. Proposed §1.48E-4(f)(4) would pro- vide that the five-year recapture period begins on the date the qualified facility is placed in service and ends on the date that is five full years after the placed-in-ser- vice date. Each 365-day period (366-day period in the case of a leap year) within the five-year recapture period is a separate recapture year for recapture purposes. Proposed §1.48E-4(f)(5) would pro- vide that the increased tax under chapter 1 of the Code for the recapture of the credit amount under proposed §1.48E-1 occurs in the year of the recapture event. E. Greenhouse gas emissions rates Section 48E(b)(3)(B)(ii) provides that rules similar to the rules of section 45Y(b) (2) regarding greenhouse emissions rates apply for purposes of section 48E. Pro- posed §1.48E-5(a) would provide an overview of the rules pertaining to GHG emissions rates for qualified facilities under section 48E. Proposed §1.48E-5(b) through (f) would clarify that the defini- tions of certain terms, rules for determin- ing GHG emissions rates for Non-C&G Facilities, the rules for determining net GHG emissions rates for C&G Facili- ties, rules regarding carbon capture and sequestration, and requirement to publish the Annual Table provided in proposed §1.45Y-5(b) through (f) also apply for purposes of section 48E and this section. Proposed §1.48E-5(g) would pro- vide the rules applicable to provisional emissions rates. Proposed §1.48E-5(g) (1) would provide that, in the case of any facility for which an emissions rate has not been established by the Secretary, a taxpayer that owns such facility may file a petition with the Secretary for determina- tion of the emissions rate with respect to such facility (Provisional Emissions Rate or PER). Proposed §1.48E-5(g)(2) would pro- vide that an emissions rate has not been established by the Secretary for a facil- ity if such facility is not described in the Annual Table. Proposed §1.48E-5(g)(2) would further provide that if a taxpayer’s request for an emissions value pursuant to proposed §1.48E-5(g)(5) is pending at the time such facility is or becomes described in the Annual Table, the taxpayer’s request for an emissions value would be automat- ically denied. Proposed §1.48E-5(g)(3) would pro- vide the process for filing a PER petition. Proposed §1.48E-5(g)(3) would provide that to file a PER petition with the Secre- tary, a taxpayer must submit a PER peti- tion attached to the taxpayer’s Federal income tax return or Federal return, as appropriate, for the taxable year in which the taxpayer claims the section 48E credit with respect to the facility. Proposed §1.48E-5(g)(3) would further provide that a PER petition must contain an emissions value and, if applicable, include as an attachment the DOE letter. An emissions value obtained from DOE will be based on an analytical assessment of the emissions rate associated with the facility performed by one or more of the National Labora- tories, in consultation with other agency experts as appropriate, consistent with proposed §1.48E-5. A taxpayer would be required to retain its books and records a copy of the taxpayer’s request to DOE for an emissions value, including any infor- mation provided by the taxpayer to DOE pursuant to the emissions value request process provided in proposed §1.48E-5(g) (5). Alternatively, an emissions value can be determined for a facility by using the most recent version of an LCA model, as of the time the PER petition is filed, that has been designated by the Secretary for such use under paragraph (g)(6) of this section. If an emissions value is deter- mined using a designated LCA model or models, the taxpayer would be required Bulletin No. 2024–32 383 August 5, 2024 to provide to the IRS information to sup- port its use of the model or models in the form and manner prescribed in IRS forms or instructions or in publications or guid- ance published in the Internal Revenue Bulletin. A taxpayer may not request an emissions value from DOE for a facility for which an emissions value can be deter- mined by using the most recent version of an LCA model or models that have been designated by the Secretary for such use under proposed §1.48E-5(g)(6). Proposed §1.48E-5(g)(4) would pro- vide that, upon the IRS’s acceptance of the taxpayer’s Federal income tax return or Federal return, as appropriate, containing a PER petition, the emissions value of the facility specified on such petition will be deemed accepted. Proposed §1.48E-5(g) (4) would further provide that a taxpayer would be able to rely upon an emissions value provided by DOE for purposes of claiming a section 48E credit, provided that any information, representations, or other data provided to DOE in support of the request for an emissions value are accurate. If applicable, a taxpayer may rely upon an emissions value determined for a facility using an LCA model or models that have been designated by the Secretary for such use under proposed §1.48E-5(g)(6), provided that any infor- mation, representations, or other data used to obtain such emissions value are accurate. The IRS’s deemed acceptance of an emissions value would be the Sec- retary’s determination of the PER. Finally, proposed §1.48E-5(g)(4) would provide that the taxpayer must also comply with all applicable requirements for the section 48E credit, and any information, repre- sentations, or other data provided to DOE in support of the request for an emissions value would be subject to later examina- tion by the IRS. Proposed §1.48E-5(g)(5) would pro- vide the rules applicable to the emissions value request process. Proposed §1.48E- 5(g)(5) would provide that an applicant that submits a request for an emissions value must follow the procedures spec- ified by DOE to request and obtain such emissions value, and that emissions val- ues will be determined consistent with the rules provided in proposed §1.48E-5. Proposed §1.48E-5(g)(5) would further provide that an applicant may request an emissions value from DOE only after a front-end engineering and design (FEED) study or similar indication of project maturity, as determined by DOE, such as the completion of a project specification and cost estimation sufficient to inform a final investment decision for the facility. Proposed §1.48E-5(g)(5) would provide that DOE may decline to review applica- tions that are non-responsive, and those applications that relate to a facility that is described in the Annual Table (consistent with proposed §1.48E-5(g)(2)) or a facil- ity that can determine an emissions value using a designated LCA model under proposed §1.48E-5(g)(6) (consistent with proposed §1.48E-5(g)(3)), or applications that are incomplete. Proposed §1.45Y-5(g) (5) would also provide that applicants must follow DOE’s guidance and procedures for requesting and obtaining an emissions value from DOE. DOE will publish guid- ance and procedures that applicants must follow to request and obtain an emissions value from DOE. DOE’s guidance and procedures will include a process that, under limited circumstances, a taxpayer may request a revision to DOE’s initial assessment of an emissions value on the basis of revised technical information or facility design and operation. The Trea- sury Department and the IRS anticipate that the emissions value request process will open after the publication of the final regulations. Proposed §1.48E-5(g)(6) would pro- vide that the rules provided in proposed §1.45Y-5(g)(6) regarding the designation of an LCA model or models for determin- ing an emissions value for C&G Facilities apply for purposes of section 48E and this section. Proposed §1.48E-5(g)(7) would pro- vide rules governing the effect of a PER. Proposed §1.48E-5(g)(7) would provide that a taxpayer may use a PER deter- mined by the Secretary to determine the eligibility for the section 48E credit for a taxable year for the facility to which the PER relates, provided all other require- ments of section 48E are met, unless the emissions rate for such type or category of facility is provided in the Annual Table for any portion of the taxable year. Proposed §1.48E-5(g)(7) would further provide that the Secretary’s PER determination is not an examination or inspection of books of account for purposes of section 7605(b) of the Code and does not preclude or impede the IRS (under section 7605(b) or any administrative provisions adopted by the IRS) from later examining a return or inspecting books or records with respect to any taxable year for which the section 48E credit is claimed. Finally, proposed §1.48E-5(g)(7) would provide that a PER determination does not signify that the IRS has determined that the requirements of section 48E have been satisfied for any taxable year. Proposed §1.48E-5(h) would provide the rules applicable to determining an anticipated GHG emissions rate. Proposed §1.48E-5(h)(1) would provide that a facil- ity’s anticipated GHG emissions rate must be objectively determined based on an examination of all the facts and circum- stances. Proposed §1.48E-5(h)(1) would further provide that certain Non-C&G Facilities, such as the facilities described in proposed §1.45Y-5(c)(2), may have an anticipated GHG emissions rate that is not greater than zero based on the technology and practices they rely upon to generate electricity. Finally, proposed §1.48E-5(h) (1) would provide that for facilities that require the use of certain feedstocks or carbon capture and sequestration, which may vary, to generate electricity with a GHG emissions rate that is not greater than zero, objective indicia that such facil- ities will operate with a GHG emissions rate that is not greater than zero for at least 10 years beginning from the date the facility is placed in service are required to establish that its anticipated GHG emis- sions rate is not greater than zero. Proposed §1.48E-5(h)(2) would pro- vide a non-exhaustive list of examples of objective indicia that may establish an anticipated GHG emissions rate that is not greater than zero. Proposed §1.48E- 5(h)(2)(i) through (iv) would provide that these examples include co-location of the facility with a fuel source for which the combination of fuel, type of facility, and practice is reasonably expected to result in a GHG emissions rate that is not greater than zero; a 10-year contract to purchase fuels for which the combination of fuel, type of facility, and practice is reasonably expected to result in a GHG emissions rate that is not greater than zero; a facility type that only accommodates one type of August 5, 2024 384 Bulletin No. 2024–32 fuel or a small range of fuels for which the combination of fuel, type of facil- ity, and practice is reasonably expected to result in a GHG emissions rate that is not greater than zero; or a 10-year con- tract for the capture, disposal, or utiliza- tion of qualified carbon dioxide from the facility for which the combination of fuel, type of facility, and practice is reasonably expected to result in a GHG emissions rate that is not greater than zero. The Treasury Department and the IRS interpret the reference in section 48E(b) (3)(A)(iii) to an “anticipated greenhouse gas emissions rate” that is not greater than zero to require a reasonable expec- tation that a facility will operate with a rate or net rate of greenhouse gas emis- sions that is not greater than zero over a specified period of time (for example, the anticipated lifetime of the facility). The Treasury Department and the IRS request comment on what evidence or substan- tiation taxpayers should be required to maintain to establish an anticipated GHG emissions rate for a facility. In addition, comment is requested on the appropriate period of time for which taxpayers should be required to demonstrate that there is a reasonable expectation that a facility will operate with a GHG emissions rate that is not greater than zero. Proposed §1.48E-5(i) would provide that taxpayers may rely on the Annual Table in effect as of the date a facility began construction or the provisional emissions rate determined by the Secretary for the taxpayer’s facility to determine the facility’s GHG emissions rate, provided that the facility continues to operate as a type of facility that is described in the Annual Table or the facility’s emissions value request, as applicable, for the entire taxable year. Proposed §1.48E-5(j)(1) would pro- vide that a taxpayer must maintain in its books and records documentation regard- ing the design and operation of a facility that establishes that such facility had an anticipated GHG emissions rate that is not greater than zero in the year in which the section 48E credit is determined and operated with a GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period that applies for purposes of section 48E(g). Proposed §1.48E-5(j)(2) would fur- ther provide that documentation suffi- cient to substantiate that a facility had a GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period includes documentation or a report prepared by an unrelated party that verifies the facility’s actual emissions rate. Proposed §1.48E- 5(j)(2) would also provide that facilities described in §1.45Y-5(c)(2) can maintain sufficient documentation to demonstrate a GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period by show- ing that the facility is described in §1.45Y- 5(c)(2). Finally, proposed §1.48E-5(j)(2) would provide that future guidance may describe sufficient documentation to sub- stantiate that certain other types of facili- ties have a GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period. Proposed Applicability Dates These regulations are proposed to apply to qualified facilities (and for §1.48E-1 through 1.48E-4, energy storage technolo- gies) placed in service after December 31, 2024, and during taxable years ending on or after the date of publication of the final regulations in the Federal Register. Special Analyses I. Regulatory Planning and Review— Economic Analysis Pursuant to the Memorandum of Agreement, Review of Treasury Regula- tions under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. II. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) generally requires that a Federal agency obtain the approval of the Office of Management and Budget (OMB) before collecting infor- mation from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. The collections of information in these proposed regulations contain recordkeep- ing and reporting requirements that are required to substantiate eligibility to claim a section 45Y or section 48E credit. These collections of information would gener- ally be used by the IRS for tax compliance purposes and by taxpayers to facilitate proper reporting and compliance. The general recordkeeping requirements men- tioned within these proposed regulations are considered general tax records under §1.6001-1(e). The recordkeeping requirements in these proposed regulations with respect to section 45Y would include the require- ment in proposed §1.45Y-5(i)(1) that tax- payers claiming the section 45Y credit must maintain in its books and records documentation regarding the design and operation of a facility that establishes that such facility had a GHG emissions rate that is not greater than zero for the taxable year. Included in proposed §1.45Y-5(i)(2) are examples of documentation that suf- ficiently substantiates that a facility has a GHG emissions rate that is not greater than zero for the taxable year, which includes documentation, or a report pre- pared by an unrelated party that verifies that a facility had such an emissions rate. A facility described in proposed §1.45Y-5(c) (2) can maintain sufficient documentation to demonstrate a GHG emissions rate that is not greater than zero for the taxable year by showing that it is a type of facil- ity described in proposed §1.45Y-5(c)(2). Proposed §1.45Y-5(i)(2) would provide that Secretary may determine that other types of facilities can sufficiently substan- tiate a GHG emissions rate, as determined under this section, that is not greater than zero with certain documentation and will describe such facilities and documentation in IRS forms or instructions or in publica- tions or guidance published in the Inter- nal Revenue Bulletin. For PRA purposes, these general tax records are already approved by OMB under 1545–0074 for individuals, 1545–0123 for business enti- ties, 1545–0092 for trust and estate filers, and 1545–0047 for tax-exempt organiza- tions. The recordkeeping requirements in these proposed regulations with respect to Bulletin No. 2024–32 385 August 5, 2024 section 48E would include the requirement in proposed §1.48E-5(i)(1) that a taxpayer must maintain in its books and records documentation regarding the design and operation of a facility that establishes that such facility had an anticipated GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period that applies for purposes of section 48E(g). Included in proposed §1.48E-5(i)(2) are examples of documentation that sufficiently substanti- ates that a facility has a GHG emissions rate that is not greater 10 grams of CO 2 e per kWh during each year of the recap- ture period, which includes documenta- tion, or a report prepared by an unrelated party that verifies that a facility had such an emissions rate. A facility described in proposed §1.45Y-5(c)(2) can maintain sufficient documentation to demonstrate a GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh by show- ing that it is a type of facility described in proposed §1.45Y-5(c)(2). The Secretary may determine that other types of facili- ties can sufficiently substantiate a GHG emissions rate that is not greater than 10 grams of CO 2 e per kWh with certain doc- umentation and will describe such facil- ities and documentation in IRS forms or instructions or in publications or guidance published in the Internal Revenue Bulle- tin. For PRA purposes, these general tax records are already approved by OMB under 1545–0074 for individuals, 1545– 0123 for business entities, 1545–0092 for trust and estate filers, and 1545–0047 for tax-exempt organizations. The reporting requirements in these proposed regulations are in proposed §§ 1.45Y–5 and 1.48E-5, which provide the process for applicants to file a peti- tion with the Secretary for a PER deter- mination. To file a PER petition with the Secretary, a taxpayer must submit the PER petition attached to the taxpay- er’s Federal income tax return or Federal return, as appropriate, for the taxable year in which the taxpayer claims the section 45Y credit or the section 48E credit with respect to the facility to which the PER petition relates. A PER petition must con- tain an emissions value. If the applicant obtained an emissions value from DOE, the PER petition made to the IRS must include and emissions value letter from DOE. This emission value letter process will be approved by OMB under the DOE Control Number 1910-####. A taxpayer must retain in its books and records a copy of the taxpayer’s request to DOE for an emissions value, including the supporting documentation provided to DOE with the request. Alternatively, if applicable, a PER petition may contain an emissions value determined for a facility using the most recent version of an LCA model, as of the time the PER petition is filed, that has been designated by the Secretary for such use. If an emissions value is determined using a designated model, a taxpayer is required to provide to the IRS information to support its determination of the emis- sions value in the form and manner pre- scribed in IRS forms or instructions or in publications or guidance published in the Internal Revenue Bulletin. The burden for these requirements will be included within the forms and instructions applicable to sections 45Y and 48E. For section 45Y, the burden for these requirements will be associated the form and instructions appli- cable to claiming this credit and will be approved by OMB, in accordance with 5 CFR 1320.10, under the following OMB control numbers: 1545–0074 for indi- viduals/sole proprietors, 1545–0123 for business entities, 1545–0047 for tax-ex- empt organizations, and 1545–0092 for trust and estate filers. For section 48E, the burden for these requirements will be associated with Form 3468, Investment Credit, and will be approved by OMB, in accordance with 5 CFR 1320.10, under the following OMB control numbers: 1545–0074 for individuals/sole propri- etors, 1545–0123 for business entities, 1545–0047 for tax-exempt organizations, and 1545–0092 for trust and estate filers. III. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes certain requirements with respect to Federal rules that are subject to the notice and comment requirements of section 553(b) of the Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely to have a significant economic impact on a sub- stantial number of small entities. Unless an agency determines that a proposal is not likely to have a significant economic impact on a substantial number of small entities, section 603 of the RFA requires the agency to present an initial regulatory flexibility analysis (IRFA) of the proposed rule. The Treasury Department and the IRS have not determined whether the proposed rule, when finalized, will likely have a sig- nificant economic impact on a substantial number of small entities. This determi- nation requires further study. However, because there is a possibility of significant economic impact on a substantial number of small entities, an IRFA is provided in these proposed regulations. The Treasury Department and the IRS invite comments on both the number of entities affected and the economic impact on small entities. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel of the Office of Advocacy of the Small Business Administration for comment on its impact on small business. A. Need for and objectives of the rule The proposed regulations would pro- vide greater clarity to taxpayers for pur- poses of claiming the section 45Y credit or the section 48E credit. The proposed regulations would provide necessary defi- nitions and rules regarding the determina- tion of credit amounts and the procedure for requesting a provisional emissions rate. The proposed regulations will pro- vide greater clarity to taxpayers for pur- poses of claiming the section 45Y credit and the section 48E credit and encour- age taxpayers to produce clean energy or invest in clean energy facilities and energy storage technologies. Thus, the Treasury Department and the IRS intend and expect that the proposed rules will deliver bene- fits across the economy that will benefi- cially impact various industries. B. Affected small entities The RFA directs agencies to provide a description of, and if feasible, an esti- mate of, the number of small entities that may be affected by the proposed rules, if adopted. The Small Business Admin- istration’s Office of Advocacy estimates in its 2023 Frequently Asked Questions that 99.9 percent of American businesses meet its definition of a small business. August 5, 2024 386 Bulletin No. 2024–32 The applicability of these proposed regu- lations does not depend on the size of the business, as defined by the Small Business Administration. As described more fully in the preamble to this proposed regulation and in this IRFA, the section 45Y credit and the section 48E credit incentivize the production of clean energy and the investment in clean energy facilities and energy storage technologies. Because the potential credit claimants can vary widely, it is difficult to estimate at this time the impact of these proposed regula- tions, if any, on small businesses. The Treasury Department and the IRS expect to receive more information on the impact on small businesses through com- ments on these proposed rules and again once taxpayers start to claim the section 45Y credit or the section 48E credit using the guidance and procedures provided in these proposed regulations. C. Impact of the rules The proposed regulations will allow tax- payers to plan investments and transactions based on the ability to claim the section 45Y production credit and/or the section 48E investment credit. The increased use of these credits will incentivize increased production and use of clean energy as well as the development of new methods and technologies for generating clean energy. The use of the credits will also incentivize additional investment in facilities that pro- duce and develop clean energy. Because recordkeeping and reporting requirements relating to the section 45Y and 48E credits will not materially differ from the requirements relating to exist- ing energy production and investment tax credits, the recordkeeping and report- ing requirements should not materially increase for taxpayers that already claim existing credits. To claim the section 45Y credit or the 48E credit, taxpayers will continue to need to execute the relevant form (or successor form, or pursuant to instructions and other guidance) and file such form with the taxpayer’s timely filed return (including extensions) for the tax- able year in which the property is placed in service. Although the Treasury Department and the IRS do not have sufficient data to precisely determine the likely extent of the increased costs of compliance, the estimated burden of complying with the recordkeeping and reporting requirements are described in the Paperwork Reduction Act section of this preamble. D. Alternatives considered The Treasury Department and the IRS considered alternatives to the proposed reg- ulations. For example, the Treasury Depart- ment and the IRS considered whether to impose different rules for determining if a section 48E qualified facility had a recap- ture event, and how and when a taxpayer was required to notify the Secretary that the emissions rate at a qualified facility was greater than 10 grams of CO 2 e per kWh. The proposed regulations were designed to minimize burdens on taxpayers while ensuring that the IRS has sufficient infor- mation to determine if a section 48E qual- ified facility’s emissions rate exceeded the recapture threshold. The proposed guid- ance requires that a taxpayer that claimed the section 48E credit to annually report to the IRS its GHG emissions rate in the form and manner prescribed in IRS forms or instructions or in published guidance as published in the Internal Revenue Bulletin. An additional example is that the Trea- sury Department and the IRS considered alternatives to how a taxpayer should com- pute any increase in capacity at a qualified facility that for purposes of section 45Y and 48E was a qualified facility due to an increase in capacity. The proposed regula- tions were designed to provide a rule that was administrable for the IRS and taxpay- ers. Thus, the proposed regulations adopt a rule for taxpayers to compute the increase in capacity by multiplying the amount of electricity that the facility produces during a taxable year after the new unit or an addition of capacity is placed in service by a fraction, the numerator of which is the nameplate capacity that results from the new unit or an addition of capacity, and the denominator of which is the total nameplate capacity of the facility with the new unit or an addition of capacity Comments are requested on the require- ments in the proposed regulations, includ- ing specifically, whether there are less burdensome alternatives that ensure the IRS has sufficient information to adminis- ter the Clean Electricity Tax Credits. E. Duplicative, overlapping, or conflicting Federal rules The proposed rules would not dupli- cate, overlap, or conflict with any relevant Federal rules. As discussed above, the pro- posed regulations would provide guidance relating to the section 45Y tax credit and the section 48E tax credit. The Treasury Department and the IRS invite input from interested members of the public about identifying and avoiding overlapping, duplicative, or conflicting requirements. IV. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Indian Tribal government, in the aggregate, or by the private sector, of $100 million (updated annually for inflation). This proposed rule does not include any Federal mandate that may result in expen- ditures by State, local, or Indian Tribal governments, or by the private sector in excess of that threshold. V. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local gov- ernments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Execu- tive order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order. VI. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments Executive Order 13175 (Consulta- tion and Coordination With Indian Tribal Governments) prohibits an agency from Bulletin No. 2024–32 387 August 5, 2024 publishing any rule that has Tribal impli- cations if the rule either imposes substan- tial, direct compliance costs on Indian Tribal governments, and is not required by statute, or preempts Tribal law, unless the agency meets the consultation and funding requirements of section 5 of the Executive order. This proposed rule does not have substantial direct effects on one or more federally recognized Indian tribes and does not impose substantial direct compliance costs on Indian Tribal govern- ments within the meaning of the Execu- tive order. Comments and Public Hearing Before these proposed amendments to the regulations are adopted as final regula- tions, consideration will be given to com- ments regarding the notice of proposed rulemaking that are submitted timely to the IRS as prescribed in the preamble under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. All comments will be made available at https://www.regulations.gov. Once submitted to the Federal eRulemak- ing Portal, comments cannot be edited or withdrawn. A public hearing with respect to this notice of proposed rulemaking has been scheduled for August 12, 2024, beginning at 10 a.m. (ET) and August 13, 2024, at 10 a.m. (ET). The hearing scheduled for August 12, 2024, will be held in the Audi- torium at the Internal Revenue Building, 1111 Constitution Avenue, NW., Wash- ington, D.C. Due to building security procedures, visitors must enter at the Con- stitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. Participants may alternatively attend the public hearing on August 12, 2024, by telephone. On August 13, 2024, the public hearing will be by telephone only. The rules of 26 CFR 601.601(a)(3) apply to the public hearing. Persons who wish to present oral comments at the pub- lic hearing must submit an outline of the topics to be discussed and the time to be devoted to each topic by August 2, 2024. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the dead- line for receiving outlines has passed. Copies of the agenda will be available free of charge at the public hearing. If no outline of the topics to be discussed at the public hearing is received by August 2, 2024, the public hearing will be cancelled. If the public hearing is cancelled, a notice of cancellation of the public hearing will be published in the Federal Register. Individuals who want to testify in per- son at the public hearing must send an email to publichearings@irs.gov to have your name added to the building access list. The subject line of the email must contain the regulation number REG- 119283-23 and the language TESTIFY In Person. For example, the subject line may say: Request to TESTIFY In Person at Hearing for REG-119283-23. Individuals who want to testify by telephone at the public hearing must send an email to publichearings@irs.gov to receive the telephone number and access code for the public hearing. The subject line of the email must contain the regu- lation number REG-119283-23 and the language TESTIFY Telephonically. For example, the subject line may say: Request to TESTIFY Telephonically at Hearing for REG-119283-23. Individuals who want to attend the public hearing in person without testify- ing must also send an email to publichear- ings@irs.gov to have your name added to the building access list. The subject line of the email must contain the regulation number REG-119283-23 and the language ATTEND In Person. For example, the subject line may say: Request to ATTEND Hearing In Person for REG-119283-23. Requests to attend the public hearing must be received by 5 p.m. ET on August 8, 2024. Individuals who want to attend the pub- lic hearing by telephone without testifying must also send an email to publichear- ings@irs.gov to receive the telephone number and access code for the public hearing. The subject line of the email must contain the regulation number REG- 119283-23 and the language ATTEND Hearing Telephonically. For example, the subject line may say: Request to ATTEND Hearing Telephonically for REG-119283- 23. Requests to attend the public hearing must be received by 5 p.m. ET on August 8, 2024. Public hearings will be made accessi- ble to people with disabilities. To request special assistance during a public hearing please contact the Publications and Regu- lations Branch of the Office of Associate Chief Counsel (Procedure and Adminis- tration) by sending an email to publichear- ings@irs.gov (preferred) or by telephone at (202) 317-6901 (not a toll-free number) and must be received by 5 p.m. ET on August 7, 2024. Statement of Availability of IRS Documents Guidance cited in this preamble is pub- lished in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Publish- ing Office, Washington, DC 20402, or by visiting the IRS website at https://www. irs.gov. Drafting Information The principal author of these proposed regulations is the Office of the Associate Chief Counsel (Passthroughs and Spe- cial Industries). However other personnel from the Treasury Department, the DOE, the EPA, the USDA, and the IRS partici- pated in the development of the proposed regulations. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and record- keeping requirements. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order for §§1.45Y-1 through 1.45Y-5 and 1.48E-1 through 1.48E-5 to read in part as follows: August 5, 2024 388 Bulletin No. 2024–32 Authority: 26 U.S.C. 7805 * * * * * * * * Section 1.45Y-1 also issued under 26 U.S.C. 45Y(a), (c), (d), and (g). Section 1.45Y-2 also issued under 26 U.S.C. 45Y(b) and (e). Section 1.45Y-3 also issued under 26 U.S.C. 45Y(a) and (g). Section 1.45Y-4 also issued under 26 U.S.C. 45Y(b) and (g). Section 1.45Y-5 also issued under 26 U.S.C. 45Y(b). * * * * * Section 1.48E-1 also issued under 26 U.S.C. 48E(a) and (c). Section 1.48E-2 also issued under 26 U.S.C. 48E(b) and (c). Section 1.48E-3 also issued under 26 U.S.C. 48E(a) and (b). Section 1.48E-4 also issued under 26 U.S.C. 48E(b), (d), and (g). Section 1.48E-5 also issued under 26 U.S.C. 48E(b). * * * * * Par. 2. An undesignated center heading is added immediately following §1.37-3 to read as follows: General Business Credits * * * * * Par. 3. Sections 1.45Y-0 through 1.45Y-5 are added to read as follows: Sec. * * * * * 1.45Y-0 Table of contents. 1.45Y-1 Clean electricity production credit. 1.45Y-2 Qualified facility for purposes of section 45Y. 1.45Y-3 [Reserved] 1.45Y-4 Rules of general application. 1.45Y-5 Greenhouse gas emissions rates for qualified facilities under section 45Y. * * * * * §1.45Y-0 Table of contents. This section lists the captions con- tained in §§1.45Y-1 through 1.45Y-5. §1.45Y-1 Clean electricity production credit. (a) Overview. (1) In general. (2) CHP property. (i) In general. (ii) Components excluded. (iii) Unit of qualified facility. (3) Code. (4) kWh. (5) Metering device. (i) In general. (ii) Standards for maintaining and operating a metering device. (iii) Network equipment. (iv) Examples. (6) Qualified facility. (7) Related person. (i) In general. (ii) Member of a consolidated group. (8) Secretary. (9) Section 45Y credit. (10) Section 45Y regulations. (11) Unrelated person. (b) Credit amount. (1) In general. (2) Applicable amount. (i) In general. (ii) Base amount. (iii) Alternative amount. (3) Inflation adjustment. (i) In general. (ii) Annual computation. (iii) Inflation adjustment factor. (iv) GDP implicit price deflator. (4) Energy communities increase in credit. (5) Domestic content bonus credit amount. (c) Credit phase-out. (1) In general. (2) Phase-out percentage. (3) Applicable year. (4) Phase-out data. (5) Determination of phase-out. (d) Requirements for CHP property. (1) In general. (2) Energy efficiency percentage. (3) Special rule for calculating electric- ity produced by CHP property. (i) In general. (ii) Conversion from Btu to kWh. (e) Applicability date. §1.45Y-2 Qualified facility for purposes of section 45Y. (a) Qualified facility. (b) Property included in qualified facil- ity. (1) In general. (2) Unit of qualified facility. (i) In general. (ii) Functionally interdependent. (3) Integral part. (i) In general. (ii) Power conditioning and transfer equipment. (iii) Roads. (iv) Fences. (v) Buildings. (vi) Shared integral property. (vii) Examples. (c) Coordination with other credits. (1) In general. (2) Allowed. (3) Examples. (d) Applicability date. §1.45Y-3 [Reserved] §1.45Y-4 Rules of general application. (a) Only production in the United States taken into account. (b) Production attributable to the tax- payer. (1) In general. (2) Example of gross sales. (3) Section 761(a) election. (c) Expansion of facility; Incremental production. (1) In general. (2) Special rule for restarted facilities. (3) Computation of increased amount of electricity produced. (4) Examples. (d) Retrofit of an existing facility (80/20 Rule). (1) In general. (2) Cost of new components of prop- erty. (3) Examples. (e) Applicability date. §1.45Y-5 Greenhouse gas emissions rates for qualified facilities under section 45Y. (a) In general. (b) Definitions. (1) CO 2 e per kWh. (2) Combustion. (3) Gasification. (4) Facility that produces electricity through combustion or gasification. (5) Greenhouse gas emissions rate. Bulletin No. 2024–32 389 August 5, 2024 (6) Greenhouse gases emitted into the atmosphere by a facility in the production of electricity. (7) Non-C&G Facility. (8) Fuel. (9) Feedstock. (c) Non-C&G Facilities. (1) Determining a greenhouse gas emissions rate for Non-C&G Facilities. (i) Excluded emissions. (ii) Emissions assessment process. (iii) Example of greenhouse gas emis- sions rate determination for a Non-C&G Facility. (2) Non-C&G Facilities with a green- house gas emissions rate that is not greater than zero. (d) C&G Facilities. (1) Determining a greenhouse gas emissions rate for C&G Facilities. (2) LCA requirements. (i) Starting boundary. (ii) Ending boundary. (iii) Baseline. (iv) Offsets and offsetting activities. (v) Principles for included emissions. (vi) Principles for excluded emissions. (vii) Alternative fates and avoided emissions. (e) Carbon capture and sequestration. (f) Annual publication of emissions rates. (1) In general. (2) Publication of analysis required for changes to the Annual Table. (g) Provisional emissions rates. (1) In general. (2) Rate not established. (3) Process for filing a PER petition. (4) PER determination. (5) Emissions value request process. (6) LCA model for determining an emissions value for C&G Facilities. (7) Effect of PER. (h) Reliance on Annual Table or Provi- sional Emissions Rate. (i) Substantiation. (1) In general. (2) Sufficient substantiation. (j) Applicability date. §1.45Y-1 Clean electricity production credit. (a) Overview—(1) In general. For purposes of section 38 of the Code, the section 45Y credit is determined under section 45Y of the Code and the section 45Y regulations (as defined in paragraph (a)(10) of this section). This paragraph (a) provides definitions of terms that, unless otherwise specified, apply for purposes of section 45Y, the section 45Y regulations, and any provision of the Code or this chapter that expressly refers to any provision of section 45Y or the section 45Y regulations. Paragraph (b) of this section provides rules for determining the amount of the section 45Y credit for any taxable year. Para- graph (c) of this section provides rules regarding the phase-out of the section 45Y credit. Paragraph (d) of this section provides rules regarding combined heat and power system (CHP) property. See §1.45Y–2 for rules relating to qualified facilities for purposes of the section 45Y credit. See §1.45Y–4 for rules of general application for the section 45Y credit. See §1.45Y–5 for rules to determine greenhouse gas emissions rates for qual- ified facilities. (2) CHP property—(i) In general. For purposes of section 45Y(g)(2)(B) and paragraph (d) of this section, the term CHP property means property comprising a system that uses the same energy source for the simultaneous or sequential genera- tion of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of use- ful thermal energy (including for heating and cooling applications). (ii) Components excluded. CHP prop- erty does not include property used to transport the energy source to the gener- ating facility or to distribute energy pro- duced by the facility. (iii) Unit of qualified facility. For pur- poses of §1.45Y-2(a), a unit of qualified facility includes all functionally interde- pendent components of property owned by the taxpayer that are operated together and that can operate apart from other property to produce useful thermal energy and electricity. (3) Code. The term Code means the Internal Revenue Code. (4) kWh. The term kWh means kilowatt hours. (5) Metering device—(i) In general. For purposes of section 45Y(a)(1)(A) (ii)(II), the term metering device, means equipment that is owned and operated by an unrelated person (as defined in para- graph (a)(11) of this section) for energy revenue metering to measure and register the continuous summation of an electric- ity quantity with respect to time. (ii) Standards for maintaining and operating a metering device. For pur- poses of section 45Y(a)(1)(A)(ii)(II) and this section, a metering device must be maintained in proper working order in accordance with the instructions of its manufacturer, meet the requirements of the American National Standards Institute C12.1-2022 standard, or subsequent revi- sions, be revenue grade with a +/- 0.5% accuracy and be properly calibrated. (iii) Network equipment. For pur- poses of operating the metering device, the unrelated person may share network equipment, such as spare fiber optic cable owned by the taxpayer that produces the electricity and co-locate network equip- ment in the taxpayer’s facilities. (iv) Examples. This paragraph (a)(5) (iv) provides examples illustrating the application of this paragraph (a)(5). (A) Example 1. Qualified facility equipped with a metering device owned and operated by an unrelated person. X owns a qualified facility equipped with a metering device that is owned and operated by Y, an unrelated person. The metering device meets the requirements of paragraphs (a)(5)(i) through (iii). X sells electricity produced at the qualified facility to Z, a related person during the taxable year. Because the qualified facility is equipped with a metering device that is owned and operated by an unrelated person and meets the requirements of paragraphs (a) (5)(i) through (iii), X may claim a section 45Y credit based on the electricity produced by X and sold to Z during the taxable year. (B) Example 2. Electricity produced by the tax- payer at a qualified facility sold, consumed, or stored by the taxpayer during the taxable year. X owns a qualified facility equipped with a metering device that is owned and operated by an unrelated person, Y. The metering device meets the requirements of paragraphs (a)(5)(i) through (iii). Because the qual- ified facility is equipped with a metering device that is owned and operated by an unrelated person and that meets the requirements of paragraphs (a)(5)(i) through (iii), X may sell electricity produced at the qualified facility during the taxable year to a related or unrelated person. X may also consume the elec- tricity produced at the qualified facility during the taxable year onsite. Additionally, X may store the electricity produced at the qualified facility during the taxable year in EST owned by X. In any of these three situations, X may claim a section 45Y credit for the taxable year for the kWh of electricity produced at the qualified facility and sold, consumed, or stored by X during the taxable year. (6) Qualified facility. The term qual- ified facility for purposes of the section August 5, 2024 390 Bulletin No. 2024–32 45Y credit has the meaning provided in §1.45Y-2(a). (7) Related person—(i) In general. For purposes of the section 45Y credit, the term related person means a person that is related to another person if such persons would be treated as a single employer under the regulations in this chapter under section 52(b) of the Code. (ii) Member of a consolidated group. In the case of a corporation that is a mem- ber of a consolidated group (as defined in §1.1502-1(h)), such member will be treated as selling electricity to an unre- lated person if such electricity is sold to an unrelated person by another member of such group. (8) Secretary. The term Secretary means the Secretary of the Treasury or her delegate. (9) Section 45Y credit. The term sec- tion 45Y credit means the clean electricity production credit determined under sec- tion 45Y of the Code and the section 45Y regulations. (10) Section 45Y regulations. The term section 45Y regulations means this section and §§ 1.45Y–2 through 1.45Y-5. (11) Unrelated person. For purposes of section 45Y(a), the term unrelated person means a person who is not a related person as defined in section 45Y(g)(4) and para- graph (a)(7) of this section. In the case of sales of electricity to an individual con- sumer, such sales will be treated as sales to an unrelated party for purposes of the section 45Y credit. For example, assume Taxpayer X produces electricity at a qual- ified facility and sells it to Consumer Y. Consumer Y is an individual consumer and is not subject to aggregation under the regulations prescribed under section 52(b). Therefore, Consumer Y is not treated as a single employer with Taxpayer X under section 52(b), and a sale to Consumer Y is treated as a sale to an unrelated person. The result is the same if Consumer Y is an individual consumer who is a member of a cooperative or Indian tribe that owns or controls, directly or indirectly, Taxpayer X. The result is also the same if Consumer Y is an individual consumer who is a res- ident of a State or municipality that owns or controls, directly or indirectly, Tax- payer X. (b) Credit amount—(1) In general. For purposes of section 38 of the Code, the section 45Y credit for any taxable year is an amount equal to the product of the kWh of electricity that is produced at a qualified facility and sold by the taxpayer to an unrelated person during the taxable year, multiplied by the applicable amount with respect to such qualified facility. In the case of a qualified facility equipped with a metering device that is owned and operated by an unrelated person, the sec- tion 45Y credit for any taxable year is an amount equal to the product of the kWh of electricity that is produced at a quali- fied facility and sold, consumed, or stored by the taxpayer during the taxable year, multiplied by the applicable amount with respect to such qualified facility. Only one section 45Y credit can be claimed for each kWh of electricity produced by the tax- payer at a qualified facility. (2) Applicable amount—(i) In general. The term applicable amount means the base amount described in paragraph (b) (2)(ii) of this section or the alternative amount described in paragraph (b)(2)(iii) of this section. The applicable amount is subject to the inflation adjustment as pro- vided in section 45Y(c)(1) and paragraph (b)(3) of this section. The applicable amount may also be increased as provided in section 45Y(g)(7) and paragraph (b)(4) of this section in the case of a qualified facility that is located in an energy com- munity. (ii) Base amount. In the case of any qualified facility that does not satisfy the requirements provided in section 45Y(a) (2)(B), the term base amount means 0.3 cents. (iii) Alternative amount. In the case of any qualified facility that satisfies the pre- vailing wage and apprenticeship require- ments provided in section 45Y(a)(2)(B), the term alternative amount means 1.5 cents. (3) Inflation adjustment—(i) In gen- eral. In the case of a calendar year begin- ning after 2024, the base amount and the alternative amount will each be adjusted by multiplying such amount by the infla- tion adjustment factor for the calendar year in which the sale, consumption, or storage of the electricity occurs. If the base amount as adjusted under this para- graph (b)(3)(i) is not a multiple of 0.05 cent, such amount will be rounded to the nearest multiple of 0.05 cent. If the alternative amount as adjusted under this paragraph (b)(3)(i) is not a multiple of 0.1 cent, such amount will be rounded to the nearest multiple of 0.1 cent. (ii) Annual computation. The inflation adjustment factor for each calendar year will be published in the Federal Regis- ter not later than April 1 of that calendar year. The base amount and the alternative amount, as adjusted under paragraph (b) (3)(i) of this section, will also be pub- lished in the Federal Register not later than April 1 of each calendar year. (iii) Inflation adjustment factor. The term inflation adjustment factor means, with respect to a calendar year, a frac- tion— (A) The numerator of which is the GDP implicit price deflator for the preceding calendar year, and (B) The denominator of which is the GDP implicit price deflator for the calen- dar year 1992. (iv) GDP implicit price deflator. The term GDP implicit price deflator means the most recent revision of the implicit price deflator for the gross domestic prod- uct as computed and published by the Department of Commerce before March 15 of the calendar year. (4) Energy communities increase in credit. In the case of any qualified facil- ity that is located in an energy commu- nity (as defined in section 45(b)(11)(B)), for purposes of determining the amount of the section 45Y credit with respect to any electricity produced by the taxpayer at such facility during the taxable year, the applicable amount will be increased by an amount equal to 10 percent of the appli- cable amount. The 10 percent increase under this paragraph (b)(4) applies after the inflation adjustment under paragraph (b)(3) of this section. (5) Domestic content bonus credit amount. In the case of any qualified facil- ity that satisfies the requirements of sec- tion 45Y(g)(11)(B)(i) (domestic content requirement), for purposes of determining the amount of the section 45Y credit with respect to any electricity produced by the taxpayer at such facility during the taxable year, the amount of the credit otherwise determined under this paragraph (b), with- out application of paragraph (b)(4) of this section (related to energy communities), is increased by 10 percent. Bulletin No. 2024–32 391 August 5, 2024 (c) Credit phase-out—(1) In general. The amount of the section 45Y credit for any qualified facility, the construction of which begins during a calendar year pro- vided in section 45Y(d)(2) and described in paragraph (c)(2) of this section, is equal to the product of— (i) The amount of the credit deter- mined under section 45Y(a) and described in paragraph (b) of this section, without regard to section 45Y(d) and this para- graph (c), multiplied by (ii) The phase-out percentage provided under section 45Y(d)(2) and described in paragraph (c)(2) of this section. (2) Phase-out percentage. The phase- out percentage described in this paragraph (c)(2) is equal to— (i) For a facility the construction of which begins during the first calendar year following the applicable year, 100 percent, (ii) For a facility the construction of which begins during the second calendar year following the applicable year, 75 per- cent, (iii) For a facility the construction of which begins during the third calendar year following the applicable year, 50 per- cent, and (iv) For a facility the construction of which begins during any calendar year subsequent to the calendar year described in paragraph (c)(2)(iii) of this section, 0 percent. (3) Applicable year. For purposes of this paragraph (c), the term applicable year means the later of— (i) The calendar year in which the Sec- retary makes the determination that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or (ii) 2032. (4) Phase-out data. For purposes of paragraph (c)(3)(i) of this section, the annual greenhouse gas emissions from the production of electricity in the United States for any calendar year must be assessed separately using both of the fol- lowing data sources: (i) The U.S. Energy Information Administration’s Electric Power Annual, summing the annual carbon dioxide emis- sions data from conventional power plants and combined heat and power plants and the Monthly Energy Review annual car- bon dioxide emissions from the combus- tion of biomass to produce electricity in the Electric Power Sector; and (ii) The U.S. Environmental Protection Agency (EPA) Inventory of U.S. Green- house Gas Emissions and Sinks (GHGI) annual electric power-related carbon diox- ide, methane, and nitrous oxide emissions data including carbon dioxide emissions from the combustion of biomass to pro- duce electricity. (5) Determination of phase-out. For purposes of paragraph (c)(3)(i) of this section, the Secretary will determine that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022 only if, the annual greenhouse gas emissions from the production of electricity in the United States, as determined separately under both of the data sources described in paragraph (c)(4) of this section, are each equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022. If a data source described in paragraph (c)(4) of this section becomes unavailable (for example, it is no longer published or does not provide the specified data), the Secre- tary must designate a similar data source to replace the unavailable data source. (d) Requirements for CHP property— (1) In general. To be eligible for the sec- tion 45Y credit, a CHP property must produce at least 20 percent of its total use- ful energy in the form of useful thermal energy that is not used to produce elec- trical or mechanical power (or combina- tion thereof), and at least 20 percent of its total useful energy in the form of electri- cal or mechanical power (or combination thereof). The energy efficiency percentage of CHP property must exceed 60 percent. These percentages are determined on a British thermal unit (Btu) basis. (2) Energy efficiency percentage. The energy efficiency percentage of a CHP property is the fraction the numerator of which is the total useful electrical, ther- mal, and mechanical power produced by the system at normal operating rates, and expected to be consumed in its nor- mal application, and the denominator of which is the lower heating value of the fuel sources for the system. (3) Special rule for calculating elec- tricity produced by CHP property—(i) In general. For purposes of section 45Y(a) and paragraph (b) of this section, the kWh of electricity produced by a taxpayer at a qualified facility includes any production in the form of useful thermal energy by any CHP property within such facility, and the amount of greenhouse gases emit- ted into the atmosphere by such facility in the production of such useful thermal energy is included for purposes of deter- mining the greenhouse gas emissions rate for such facility. (ii) Conversion from Btu to kWh—(A) In general. For purposes of section 45Y(g) (2)(A)(i) and this paragraph (d)(3), the amount of kWh of electricity produced in the form of useful thermal energy is equal to the quotient of the total useful thermal energy produced by the CHP property within the qualified facility, divided by the heat rate for such facility. (B) Heat rate. For purposes of this paragraph (d)(3), the term heat rate means the amount of energy used by the qualified facility to generate 1 kWh of electricity, expressed as Btus per net kWh generated. In calculating the heat rate of a qualified facility that includes CHP property that uses combustion, a taxpayer must use the annual average heat rate, defined as the total annual fuel consumption of the CHP property (in Btus, using the lower heat- ing value of the fuel) during the taxable year for which the section 45Y credit is claimed, divided by the annual net elec- tricity generation (in kWh) of the CHP property during such taxable year. (e) Applicability date. This section applies to qualified facilities placed in ser- vice after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER]. §1.45Y-2 Qualified facility for purposes of section 45Y. (a) Qualified facility. For purposes of the section 45Y credit, the term qualified August 5, 2024 392 Bulletin No. 2024–32 facility means a facility owned by the tax- payer that meets the following require- ments: (1) The facility is used for the genera- tion of electricity, (2) The facility is placed in service after December 31, 2024, and (3) The facility has a greenhouse gas emissions rate of not greater than zero (as determined under rules provided in §1.45Y-5). (b) Property included in qualified facil- ity—(1) In general. A qualified facility includes a unit of qualified facility (as defined in paragraph (b)(2) of this section) that meets the requirements of paragraph (b)(2) of this section. A qualified facility also includes qualified property owned by the taxpayer that is an integral part (as defined in paragraph (b)(3) of this section) of the qualified facility. Any component of property that meets the requirements of this paragraph (b) is part of a qualified facility regardless of where such compo- nent of property is located. A qualified facility generally does not include equip- ment that is an addition or modification to an existing qualified facility. However, see § 1.45Y-4(c) for rules regarding the expan- sion of a facility or incremental produc- tion and §1.45Y-4(d) for rules regarding a retrofitted qualified facility (80/20 Rule). (2) Unit of qualified facility—(i) In general. For purposes of the section 45Y credit, the unit of qualified facil- ity includes all functionally interdepen- dent components of property (as defined in paragraph (b)(2)(ii)) of this section) owned by the taxpayer that are operated together and that can operate apart from other property to produce electricity. No provision of this section, §1.45Y-1, or §1.45Y-4 through 1.45Y-5 uses the term unit in respect of a qualified facility with any meaning other than that provided in this paragraph (b)(2)(i). (ii) Functionally interdependent. Com- ponents of property are functionally inter- dependent if the placing in service of each of the components is dependent upon the placing in service of each of the other components to produce electricity. (3) Integral part—(i) In general. For purposes of the section 45Y credit, a com- ponent of property owned by a taxpayer is an integral part of a qualified facility if it is used directly in the intended function of the qualified facility and is essential to the completeness of such function. Property that is an integral part of a qualified facil- ity is part of the qualified facility. (ii) Power conditioning and transfer equipment. Power conditioning equipment and transfer equipment are integral parts of a qualified facility. Power conditioning equipment includes equipment that mod- ifies the characteristics of electricity into a form suitable for use, transmission, or distribution. Parts related to the function- ing or protection of power conditioning equipment are also treated as power con- ditioning equipment and include, but are not limited to, switches, circuit breakers, arrestors, and hardware and software used to monitor, operate, and protect power conditioning equipment. Transfer equip- ment includes components of property that allow for the aggregation of electric- ity generated by a qualified facility and components of property that alter voltage to permit electricity to be transferred to a transmission or distribution line. Transfer equipment does not include transmission or distribution lines. Examples of trans- fer equipment include, but are not limited to, wires, cables, and combiner boxes that conduct electricity. Parts related to the functioning or protection of trans- fer equipment are also treated as transfer equipment and may include items such as current transformers used for meter- ing, electrical interrupters (such as circuit breakers, fuses, and other switches), and hardware and software used to monitor, operate, and protect transfer equipment. (iii) Roads. Roads that are an inte- gral part of a qualified facility are those roads integral to the intended function of the qualified facility such as onsite roads that are used to operate and maintain the qualified facility. Roads used primarily for access to the site, or roads used primarily for employee or visitor vehicles, are not integral to the intended function of the qualified facility and thus are not an inte- gral part of a qualified facility. (iv) Fences. Fencing is not an integral part of a qualified facility because it is not integral to the intended function of the qualified facility. (v) Buildings. Generally, buildings are not integral parts of a qualified facil- ity because they are not integral to the intended function of the qualified facility. However, the following structures are not treated as buildings for this purpose: (A) A structure that is essentially an item of machinery or equipment; and (B) A structure that houses components of property that are integral to the intended function of a qualified facility if the use of the structure is so closely related to the use of the housed components of property therein that the structure clearly can be expected to be replaced if the components of property it initially houses are replaced. (vi) Shared integral property. Multiple qualified facilities (whether owned by one or more taxpayers), including qualified facilities with respect to which a taxpayer has claimed a credit under section 48E or another Federal income tax credit, may include shared property that may be con- sidered an integral part of each qualified facility. In addition, a component of prop- erty that is shared by a qualified facility (as defined in section 45Y(b)) (45Y Qual- ified Facility) and a qualified facility (as defined by section 48E(b)(3)) (48E Qual- ified Facility) that is an integral part of both qualified facilities will not affect the eligibility of the 45Y Qualified Facility for the section 45Y credit or the 48E Quali- fied Facility for the section 48E credit. (vii) Examples. This paragraph (b)(3) (vii) provides examples illustrating the rules of paragraphs (b)(3)(i) through (vi) of this section. (A) Example 1. Co-located qualified facilities owned by the same taxpayer that share integral property. X constructs a solar farm (Solar Qualified Facility) and nearby also constructs a wind facil- ity (Wind Qualified Facility) that are each a quali- fied facility (as defined in §1.45Y-2(a)). The Solar Qualified Facility and Wind Qualified Facility each connect to a transformer that steps up the electricity produced by each qualified facility to electrical grid voltage before it is transmitted to the electrical grid through an intertie. The fact that the Solar Qualified Facility and Wind Qualified Facility share property that is integral to both does not impact the ability of X to claim a section 45Y credit for both qualified facilities. (B) Example 2. Co-located qualified facilities owned by different taxpayers that share integral property. X constructs a solar farm (Solar Qualified Facility), and nearby Y constructs a wind facility (Wind Qualified Facility) that are each a qualified facility (as defined in §1.45Y-2(a)). X’s Solar Qual- ified Facility and Y’s Wind Qualified Facility each connect to a transformer that steps up the electricity produced by both qualified facilities to electrical grid voltage before it is transmitted to the electrical grid through an intertie. The fact that the Solar Qualified Facility and Wind Qualified Facility share property that is integral to both does not impact the ability of Bulletin No. 2024–32 393 August 5, 2024 X or Y to claim a section 45Y credit for the electric- ity produced by their respective qualified facilities. (C) Example 3. Co-located qualified facility and Energy Storage Technology owned by the same tax- payer that share integral property. X constructs a wind facility that is a qualified facility (as defined in §1.45Y-2(a)) (Wind Qualified Facility) that is co-located with an EST (as defined in §1.48E-2(g)) (Energy Storage). The Wind Qualified Facility and Energy Storage share transfer equipment that is inte- gral to both. The fact that the Wind Qualified Facility and Energy Storage share property that is integral to both does not impact the ability of X to claim a sec- tion 45Y credit for the electricity produced by the Wind Qualified Facility or to claim a section 48E credit for the Energy Storage. (D) Example 4. Co-located wind qualified facility and Energy Storage Technology owned by different taxpayers that share integral property. X constructs a solar farm that is a qualified facility (as defined in §1.45Y-2(a)) (Solar Qualified Facil- ity) that is co-located with an EST (as defined in §1.48E-2(g)) (Energy Storage) owned by Y. The Wind Qualified Facility and Energy Storage share transfer equipment that is integral to both. The fact that the Wind Qualified Facility and Energy Storage share property that is integral to both does not impact the ability of X to claim a section 45Y credit for the electricity produced by the Wind Qualified Facility or the ability of Y to claim a section 48E credit for the Energy Storage. (c) Coordination with other credits—(1) In general. The term qualified facility (as defined in section 45Y(b)) does not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 48, 48A, or 48E is allowed under section 38 of the Code for the taxable year or any prior tax- able year. A taxpayer that directly owns a qualified facility (as defined in section 45Y(b)) that is eligible for both a section 45Y credit and another Federal income tax credit is eligible for the section 45Y credit only if the other Federal income tax credit was not allowed with respect to the qual- ified facility. Nothing in this paragraph (c) precludes a taxpayer from claiming a section 45Y credit with respect to a qual- ified facility (as defined in section 45Y(b)) that is co-located with another facility for which a credit determined under section 45, 45J, 45Q, 45U, 48, 48A, or 48E is allowed under section 38 for the taxable year or any prior taxable year. (2) Allowed. For purposes of paragraph (c)(1) of this section, the term allowed only includes credits that taxpayers have claimed on a Federal income tax return or Federal return, as appropriate, and that the Internal Revenue Service (IRS) has not challenged in terms of the taxpayer’s eli- gibility. (3) Examples. This paragraph (c)(3) provides examples illustrating the rules of paragraph (c) of this section. (i) Example 1. Taxpayer claims a section 45Y credit on a solar farm and section 48E credit on co-located EST. X owns a solar farm that is a qual- ifying facility (as defined in §1.45Y-2(a)) (Solar Qualified Facility), and X owns a co-located EST (as defined in §1.48E-2(g)) (Energy Storage). The Energy Storage is not part of the Solar Qualified Facility, and, therefore, X may claim the section 45Y credit based on the kWh of electricity produced by the Solar Qualified Facility, and X may also claim the section 48E credit based on its qualified invest- ment in the Energy Storage. (ii) Example 2. Different taxpayers claim section 45Y credit for a solar farm and a section 48E credit for co-located Energy Storage Technology. X owns a solar farm that is a qualifying facility (as defined in §1.45Y-2(a)) (Solar Qualified Facility), and Y owns a co-located EST (as defined in §1.48E-2(g)) (Energy Storage). The Energy Storage is not part of the Solar Qualified Facility, and therefore, X may claim the section 45Y credit based on the kWh of electricity produced by the Solar Qualified Facility, and Y may claim the section 48E credit based on its qualified investment in the Energy Storage. (iii) Example 3. Taxpayer claiming a section 45Y credit; another credit is not allowed to the Taxpayer. X owns a wind facility that satisfies the requirements of a qualified facility (as defined in §1.45Y-2(a)) as well as the requirements of a qualified facility (as defined in §1.48E-2(a)). X claims a section 45Y credit with respect to the wind facility. While a credit may be available with regard to the wind facility under section 48E, because X has claimed a section 45Y credit with respect to the wind facility, a section 48E credit is not allowed. (iv) Example 4. Interaction of section 45Y and section 45Q credits. X owns a qualified facility (as defined in §1.45Y-2(a)) (45Y Facility) that includes carbon capture equipment, which is functionally interdependent to the production of electricity by the 45Y Facility. X used the carbon capture equipment to capture and utilize (as described in section 45Q(f) (5)) qualified carbon dioxide and claimed a section 45Q credit in a prior taxable year. As a result, X can- not claim a credit for its 45Y Facility because a qual- ified facility does not include a facility for which a credit determined under section 45Q is allowed. (d) Applicability date. This section applies to qualified facilities placed in ser- vice after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER]. §1.45Y-3 [Reserved] §1.45Y-4 Rules of general application. (a) Only production in the United States taken into account. Consumption, sales, or storage are taken into account for pur- poses of the section 45Y credit only with respect to electricity the production of which is within the United States (within the meaning of section 638(1) of the Code), or a United States territory, which for purposes of section 45Y and the sec- tion 45Y regulations has the meaning of the term a possession of the United States (within the meaning of section 638(2)). (b) Production attributable to the tax- payer—(1) In general. In the case of a qualified facility in which more than one person has an ownership share (and the arrangement is not treated as a partnership for Federal tax purposes) production from the qualified facility is allocated among such persons in proportion to their respec- tive ownership shares in the gross sales from such qualified facility. The respec- tive owners each determine their respec- tive section 45Y credit under section 45Y(a) and based on their respective own- ership shares in the gross sales from such qualified facility during the taxable year. (2) Example of gross sales. A, B and C, all calendar year taxpayers, each own an interest in Facility, which is a quali- fied facility (as defined in §1.45Y-2(a)). A owns 45 percent, B owns 35 percent, and C owns 20 percent, and each are allocated gross sales from Facility in proportion to their ownership interest. Facility produced 1000 kWh of electricity during the taxable year. A, B, and C will each determine their respective section 45Y credit under section 45Y(a) and §1.45Y-1(b) based on their allocable share of the gross sales from the 1000 kWh of electricity pro- duced at Facility during the taxable year. (3) Section 761(a) election. If a qual- ified facility is owned through an unin- corporated organization that has made a valid election under section 761(a) of the Code, each member’s undivided own- ership share in the qualified facility will be treated as a separate qualified facility owned by such member. (c) Expansion of facility; Incremental production—(1) In general. Solely for purposes of this paragraph (c), the term qualified facility includes either a new unit or an addition of capacity placed in service after December 31, 2024, in con- nection with a facility described in section 45Y(b)(1)(A) (without regard to clause (ii) of such paragraph), which was placed in service before January 1, 2025, but only to August 5, 2024 394 Bulletin No. 2024–32 the extent of the increased amount of elec- tricity produced at the facility by reason of such new unit or addition of capacity. A new unit or an addition of capacity that meets the requirements of this paragraph (c) will be treated as a separate qualified facility. For purposes of this paragraph (c), a new addition or an addition of capacity requires the addition or replacement of components of property, including any new or replacement integral property added to a facility necessary to increase capacity. If applicable for purposes of this paragraph (c), taxpayers must use modi- fied or amended facility operating licenses or the International Standard Organization (ISO) conditions to measure the maximum electrical generating output of a facility to determine its nameplate capacity. For purposes of assessing the One-Megawatt Exception provided in section 45Y(a)(2) (B)(i), the capacity for a new unit or an addition of capacity is the sum of the nameplate capacity of the added qualified facility and the nameplate capacity of the facility to which the qualified facility was added. (2) Special rule for restarted facilities. Solely for purposes of this paragraph (c), a facility that is decommissioned or in the process of decommissioning and restarts can be considered to have increased capac- ity if the following conditions are met: (i) The existing facility must have ceased operations; (ii) The existing facility must have a shutdown period of at least one calendar year during which it is without a valid operating license from its respective Federal regulatory authority (that is, the Federal Energy Regulatory Commission (FERC) or the Nuclear Regulatory Com- mission (NRC); and (iii) The increased capacity of the restarted facility must have a new, rein- stated, or renewed operating license issued by either FERC or NRC. (3) Computation of increased amount of electricity produced. To determine the increased amount of electricity produced by a facility by reason of a new unit or an addition of capacity, a taxpayer must multiply the amount of electricity that the facility produces during a taxable year after the new unit or addition of capacity is placed in service by a fraction, the numer- ator of which is the added nameplate capacity that results from the new unit or addition of capacity, and the denominator of which is the total nameplate capacity of the facility with the new unit or addition of capacity added. (4) Examples. This paragraph (c)(4) provides examples illustrating the rules of paragraph (c) of this section. (i) Example 1. New Unit. X owns a hydropower facility (Facility H) that was originally placed in service in 2020, with a nameplate capacity of 600 megawatts. During taxable years 2020 through 2024, X claimed a section 45 credit for the electricity pro- duced by Facility H. On July 1, 2025, X places in service components of property comprising a new unit that results in Facility H having an increased nameplate capacity of 900 megawatts in 2025. For purposes of paragraph (c) of this section, this new unit will be treated as a separate facility (Facility J). X may claim a section 45Y credit during the 10-year credit period starting on July 1, 2025, based on the increased amount of electricity generated as a result of the new unit, which is determined by multiplying the electricity that Facility H produces by one-third (equal to the 300-megawatt increase in nameplate capacity that results from the addition of Facility J divided by the 900 megawatt nameplate capacity of Facility H with Facility J). Even though X claimed a section 45 credit for the existing capacity of Facility H in taxable years 2020 through 2024, X can claim a section 45Y credit for the production of electricity associated with Facility J. X may also continue to claim the section 45 credit through taxable year 2030 for electricity gener- ated by Facility H (excluding the incremental electric- ity generation related to Facility J). (ii) Example 2. Addition of Capacity. Y owns a nuclear facility (Facility N) that was originally placed in service on January 1, 2000, with a name- plate capacity of 800 megawatts. Y claimed a sec- tion 45U credit in taxable years 2024 and 2025 for the electricity generated by Facility N. On January 15, 2026, Y removed components of property with a nameplate capacity of 200 megawatts and placed in service components of property with a name- plate capacity of 400 megawatts. For purposes of this paragraph (c), Facility N’s addition of capacity is treated as a new separate qualified facility placed in service on January 15, 2026 (Facility P). Y may claim a section 45Y credit during the 10-year credit period starting on January 15, 2026, based on the increased amount of electricity produced at Facil- ity N that is attributable to the addition of capacity (Facility P), which is determined by multiplying the electricity that Facility N produces by 1/5 (equal to the 200-megawatt increase in nameplate capacity divided by Facility N’s new total nameplate capac- ity of 1,000 megawatts). Even though Y claimed a section 45U credit in taxable years 2024 and 2025 for the existing capacity of Facility N, Y can claim a section 45Y credit for the production of electric- ity associated with Facility P. Y may also continue to claim the section 45U credit through taxable year 2032 for electricity generated by Facility N (exclud- ing the incremental electricity generation related to Facility P). (d) Retrofit of an existing facility (80/20 Rule)—(1) In general. For purposes of section 45Y(b)(1)(B), a facility may qual- ify as originally placed in service even if it contains some used components of property within the unit of qualified facil- ity, provided the fair market value of the used components of the unit of qualified facility is not more than 20 percent of the total value of the unit of qualified facility (that is, the cost of the new components of property plus the fair market value of the used components of property within the unit of qualified facility) (80/20 Rule). If a facility satisfies the requirements of the 80/20 Rule, then the date on which such qualified facility is considered originally placed in service for purposes of section 45Y(b)(1)(B) is the date on which the new components of property of the unit of qualified facility are placed in service. (2) Cost of new components of prop- erty. For purposes of this 80/20 Rule, the cost of new components of the unit of qualified facility includes all costs prop- erly included in the depreciable basis of the new components of property of the unit of qualified facility. (3) Examples. The following examples illustrate the rules of this paragraph (d). (i) Example 1. Retrofitted facility that meets the 80/20 Rule. A owns an existing wind facility. On February 1, 2026, A replaces used components of the wind facility with new components at a cost of $2 million. The fair market value of the remaining original components of the wind facility is $400,000, which is not more than 20 percent of the retrofitted wind facility’s total fair market value of $2.4 million (the cost of the new components ($2 million) + the fair market value of the remaining original compo- nents ($400,000)). Thus, the retrofitted wind facility will be considered newly placed in service for pur- poses of section 45Y, and the section 45Y credit is allowable for electricity produced by A at the wind qualified facility and sold, consumed, or stored, during the 10-year period beginning on February 1, 2026, assuming all the other requirements of section 45Y are met. (ii) Example 2. Retrofit of an existing facility that meets the 80/20 Rule. Facility Z, a facility that was originally placed in service on January 1, 2026, was not a qualified facility (as described in §1.45Y- 2(a)) when it was placed in service because it did not meet the greenhouse gas emissions rate requirements (as determined under rules provided in §1.45Y-5). On January 1, 2027, Facility Z was retrofitted and now meets the requirements to be a qualified facility under §1.45Y-2(a). After the retrofit, the cost of the new property included in Facility Z is greater than 80 percent of Facility Z’s total fair market value. Because Facility Z meets the 80/20 Rule, Facility Z is deemed to be originally placed in service on January 1, 2027. Therefore, a section 45Y credit is allowable for electricity produced by Facility Z and sold, consumed, or stored during the 10-year period Bulletin No. 2024–32 395 August 5, 2024 beginning on January 1, 2027, assuming all the other requirements of section 45Y are met. (iii) Example 3. Retrofitted nuclear facility that satisfied the 80/20 Rule. T owns a nuclear facility (Facility N) that was originally placed in service on March 1, 1982, and was decommissioned on September 20, 2010. T replaces used components of property at Facility N with new components at a cost of $200 million, and then places Facility N in service on July 15, 2026. The fair market value of the remaining original components of the Facility N, after being decommissioned and prior to restart, is $30 million, which is not more than 20 percent of Facility N’s total fair market value of $230 million (the cost of the new components ($200 million) + the fair market value of the remaining original com- ponents ($30 million)). Thus, Facility N will be con- sidered newly placed in service on July 15, 2026, for purposes of section 45Y, and T will be able to claim a section 45Y credit based on the electricity generated at Facility N, assuming all the other requirements of section 45Y are met. (iv) Example 4. Capital improvements to an existing qualified facility that do not satisfy the 80/20 Rule. X owns an existing facility, Facility C, that was originally placed in service on January 1, 2023. X makes capital improvements to Facility C that are placed in service on June 1, 2026. The cost of the capital improvements is $500,000 and the fair mar- ket value of Facility C after the improvements is $2 million. The value of the old components of prop- erty is $1,500,000 out of $2.0 million, or 75 percent of the total fair market value of Facility C after the improvements. Because the fair market value of the new property included in Facility C is less than 80 percent of Facility C’s total fair market value, Facil- ity C does not meet the 80/20 Rule. Facility C will not be considered a qualified facility (as defined in §1.45Y-2(a)) eligible for the section 45Y credit. (e) Applicability date. This section applies to qualified facilities placed in ser- vice after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER]. §1.45Y-5 Greenhouse gas emissions rates for qualified facilities under section 45Y. (a) In general. This section provides rules and definitions for determining emissions rates for purposes of section 45Y. Section 1.45Y-5(b)(4) provides a definition for a facility that produces elec- tricity through combustion or gasification and §1.45Y-5(b)(7) defines a facility that does not produce electricity through com- bustion or gasification. Section 1.45Y-5(c) through (e) provide rules for determin- ing the greenhouse gas emissions rates for facilities for purposes of section 45Y. Section 1.45Y-5(f) provides rules for the annual publication of emissions rates. Section 1.45Y-5(g) provides rules related to provisional emissions rates. Section §1.45Y-5(h) provides rules regarding reli- ance on the annual publication of emis- sions rates and provisional emissions rates. Finally, §1.45Y-5(i) provides rules regarding substantiation requirements. (b) Definitions. The following defini- tions apply for purposes of this section. (1) CO 2 e per kWh. The term CO 2 e per kWh means with respect to any green- house gas, the equivalent carbon dioxide (as determined based on global warming potential) per kWh of electricity produced. The 100-year time horizon global warm- ing potentials (GWP-100) from the Inter- governmental Panel on Climate Change’s Fifth Assessment Report (AR5) must be used to convert emissions to equivalent carbon dioxide emissions. For purposes of this definition, the GWP-100 from AR5 (as shown in Table 1) excludes cli- mate-carbon feedbacks. Table 1 provides GWP-100 amounts for certain greenhouse gases applicable to this section. Table 1 to paragraph (b)(1): 100 Year Global Warming Potentials for Greenhouse Gases Greenhouse GasGWP CO 2 1 CH 4 28 N 2 O265 SF 6 23,500 HydrofluorocarbonsVaries by gas PerfluorocarbonsVaries by gas (2) Combustion. The term combustion means a rapid exothermic chemical reac- tion, specifically the oxidation of a fuel, which liberates energy including heat and light. (3) Gasification. The term gasifica- tion means a thermochemical process that converts carbon-containing materials into syngas, a gaseous mixture that is com- posed primarily of carbon monoxide, car- bon dioxide, and hydrogen. (4) Facility that produces electricity through combustion or gasification. The term facility that produces electricity through combustion or gasification (C&G Facility) means a facility that produces electricity through combustion or uses an input energy source to produce electricity, if the input energy source was produced through a fundamental transformation, or multiple transformations, of one energy source into another using combustion or gasification. (5) Greenhouse gas emissions rate. Consistent with section 45Y(b)(2)(A), the term greenhouse gas emissions rate means the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity, expressed as grams of CO 2 e per kWh. (6) Greenhouse gases emitted into the atmosphere by a facility in the produc- tion of electricity. For purposes of section 45Y(b)(2)(A), for both C&G and Non- C&G Facilities, the term greenhouse gases emitted into the atmosphere by a facility in the production of electricity means emis- sions from a facility that directly occur from the process that transforms the input energy source into electricity. This defini- tion excludes the following: (i) Emissions from electricity produc- tion by back-up generators that are pri- marily used in maintaining critical sys- tems in case of a power system outage or for supporting restart of a generator after an outage. (ii) Emissions from routine opera- tional and maintenance activities that are integral to the production of electricity, including, but not limited to, emissions from internal combustion vehicles used to access and perform maintenance on remote electricity generating facilities or emissions occurring from heating and cooling control rooms or dispatch centers. (iii) Emissions from a step-up trans- former that conditions the electricity into a form suitable for productive use or sale. (iv) Emissions that occur before com- mercial operations commence or after commercial operations terminate, includ- ing, but not limited to, on-site emissions occurring from construction or manufac- turing of the facility itself, emissions from the off-site manufacturing of facility com- ponents, or emissions occurring due to sit- ing or decommissioning. (v) Emissions from infrastructure asso- ciated with the facility, including, but not limited to, emissions from road construc- tion for feedstock production. August 5, 2024 396 Bulletin No. 2024–32 (vi) Emissions from the distribution of electricity to consumers. (7) Non-C&G Facility. The term Non- C&G Facility means a facility that pro- duces electricity and is not described in §1.45Y-5(b)(4). (8) Fuel. The term fuel means mate- rial directly used to produce electricity or energy inputs that are used to produce electricity. (9) Feedstock. The term feedstock means any raw material used in a process for electricity generation or to produce an intermediate product or finished fuel used for electricity generation. (c) Non-C&G Facilities—(1) Deter- mining a greenhouse gas emissions rate for Non-C&G Facilities. Greenhouse gas emissions rates for Non-C&G Facilities must be determined under this paragraph (c) and paragraph (e) of this section. (i) Excluded emissions. With respect to Non-C&G Facilities only, greenhouse gases emitted into the atmosphere by a facility in the production of electricity excludes emissions of greenhouse gases that are not directly produced by the fundamental transformation of the input energy source into electricity, including, but not limited to, the following: (A) Emissions from hydropower reser- voirs due to anoxic conditions; (B) Ebullitive, diffuse, and degassing emissions from hydropower operations; (C) Emissions of non-condensable gases from underground reservoirs during geothermal operations; and (D) Emissions occurring due to activ- ities and operations occurring off-site, including but not limited to, the produc- tion and transportation of fuels used by the facility, or land use change from siting or changes in demand. (ii) Emissions assessment process. Subject to §1.45Y-5(b)(6) and (c)(1), a greenhouse gas emissions rate for a Non- C&G Facility must be determined through a technical and engineering assessment of the fundamental energy transforma- tion into electricity. This assessment must consider all input and output energy carri- ers and chemical reactions or mechanical processes taking place at the facility in the production of electricity. (iii) Example of greenhouse gas emis- sions rate determination for a Non-C&G Facility. (A) Facts. A facility uses solar photovoltaic technologies to convert light directly into electricity through use of the photovoltaic effect. This is a phys- ical phenomenon in which certain semiconducting materials upon exposure to light, absorb the light and transform the energy contained in the light directly into an electric current. There are many materials that may be used to generate electricity through this method, including crystalline silicon, amorphous silicon, cadmium telluride, copper indium gallium diselenide, perovskites, quantum dots, and car- bon-based materials known as organic photovoltaics. The smallest unit of photovoltaic materials is a cell. Multiple cells are typically assembled into a panel or module and electrically connected. Multiple mod- ules or panels are generally connected to comprise a solar system or installation. Solar photovoltaic tech- nologies produce direct current electricity that can be used as is or, more typically, can be fed into inverters to transform it into alternating current. Solar panels can be ground mounted at a fixed angle or can be mounted with tracking systems that move the panels to track the location of the sun over the course of the day and season in order to maximize electricity production. Solar panels may also be mounted on buildings (for example, on roofs), or solar photovol- taic materials can be integrated into other building components such as roofing tiles. (B) Analysis. For solar photovoltaic technolo- gies, the fundamental transformation of input energy (solar electromagnetic radiation) into electricity using the photovoltaic effect involves no mechanical energy or chemical reactions. Academic studies on the lifecycle greenhouse gas emissions from solar photovoltaic power indicate that there is a small but non-zero amount of emissions associated with the operational phase of these technologies. However, these emissions exclusively occur due to ongoing maintenance (for example, the washing of solar panels), preventative maintenance (for example, the periodic replacement of electrical equipment such as inverters), and a minimal amount of project manage- ment (for example, inverter standby mode at night). These emissions do not occur directly due to the production of electricity. Therefore, consistent with §1.45Y-5(c)(1)(ii), the greenhouse gas emissions rate for facilities that produce electricity by solar photo- voltaic properties is not greater than zero. (2) Non-C&G Facilities with a green- house gas emissions rate that is not greater than zero. The following types or categories of facilities are Non-C&G Facilities with a greenhouse gas emissions rate that is not greater than zero: (i) Wind (including small wind proper- ties); (ii) Hydropower (including retro- fits that add electricity production to non-powered dams, conduit hydropower, hydropower using new impoundments, and hydropower using diversions such as a penstock or channel); (iii) Marine and hydrokinetic; (iv) Solar (including photovoltaic and concentrated solar power); (v) Geothermal (including flash and binary plants); (vi) Nuclear fission; (vii) Nuclear fusion; and (viii) Waste energy recovery prop- erty that derives energy from a source described in paragraphs (c)(2)(i) through (vii) of this section. (d) C&G Facilities—(1) Determining a greenhouse gas emissions rate for C&G Facilities. Greenhouse gas emissions rates for C&G Facilities must be determined by a lifecycle analysis (LCA) that complies with this paragraph (d) and paragraph (e) of this section. The greenhouse gas emis- sions rate for a C&G Facility equals the net rate of greenhouse gases emitted into the atmosphere by such facility (taking into account lifecycle greenhouse gas emissions, as described in section 211(o) (1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H))) in the production of elec- tricity, expressed as grams of CO 2 e per kWh. (2) LCA requirements. For purposes of this paragraph (d), an LCA must comply with the following requirements: (i) Starting boundary. The starting boundary of the LCA for an LCA involv- ing generation-derived feedstocks (such as biogenic feedstocks) is feedstock gen- eration. The starting boundary of the LCA for an LCA involving extraction-derived feedstocks (such as fossil fuel feedstocks) is feedstock extraction. The starting boundaries include the processes neces- sary to produce and collect or extract the raw materials used to produce electricity from combustion or gasification technolo- gies, including those used as energy inputs to electricity production. This includes the emissions effects of relevant land man- agement activities or changes related to or associated with feedstock production. The starting conditions are the material and energy flows, including associated direct and indirect greenhouse gas emis- sions, of the processes associated with the extraction or production of raw feedstock materials or fuel. (ii) Ending boundary. The ending boundary of the LCA for electricity that is transmitted to the grid or electricity that is used on-site is the meter at the point of production of the C&G Facility. The use of such electricity generated by the C&G Facility (and what other types of energy Bulletin No. 2024–32 397 August 5, 2024 sources it displaces), including emissions from transmission and distribution, are outside of the LCA boundary. (iii) Baseline. The LCA must be based on a future anticipated baseline, which projects future status quo in the absence of the availability of the sections 45Y and 48E credits (taking into account antic- ipated changes in technology, policies, practices, and environmental and other socioeconomic conditions). (iv) Offsets and offsetting activities. Offsets and offsetting activities that are unrelated to the production of electricity by the C&G Facility, including the pro- duction and distribution of any input fuel, may not be taken into account in the LCA. (v) Principles for included emissions. The LCA must take into account direct emissions, significant indirect emissions in the United States or other countries, emissions associated with market-medi- ated changes in related commodity mar- kets, emissions associated with feedstock generation or extraction, emissions conse- quences of increased production of feed- stocks, emissions at all stages of fuel and feedstock production and distribution, and emissions associated with distribution, delivery, and use of feedstocks to and by a C&G Facility. (A) Direct emissions. For purposes of paragraph this paragraph (d)(2)(v), direct emissions include, but are not limited to: (1) Emissions from feedstock genera- tion, production, and extraction (includ- ing emissions from feedstock and fuel harvesting and extraction and direct land use change and management, including emissions from fertilizers, and changes in carbon stocks); (2) Emissions from feedstock and fuel transport (including emissions from trans- porting the raw or processed feedstock to the fuel processing facility); (3) Emissions from transporting and distributing fuels to electricity production facility; (4) Emissions from handling, process- ing, upgrading, and/or storing feedstocks, fuels and intermediate products (includ- ing emissions from on/offsite storage and preparation/pre-treatment for use (for example, torrefaction or pelletization) and emissions from process additives); and (5) Emissions from combustion and gasification at the electricity generating facility (including emissions from the combustion and/or gasification process and emission from gasification or com- bustion additives). (B) Significant indirect emissions. For purposes of this paragraph (d)(2)(v), examples of significant indirect emissions include, but are not limited to, emissions from indirect land use and land use change and induced emissions associated with the increased use of the feedstock for energy production. (vi) Principles for excluded emissions. The LCA must not take into account the following types of emissions: (A) Emissions from facility construc- tion, siting or decommissioning (includ- ing on-site emissions occurring from con- struction or manufacturing of the facility itself); (B) Emissions from facility mainte- nance (including emissions from the on and offsite construction or maintenance of the facility; emissions from vehicles used to access and perform maintenance on electricity generating facilities; emissions from back-up generators that do not pro- vide additional firm power and are used in maintaining critical systems in case of a power system outage or for supporting restart of a generator after an outage; and emissions occurring from heating and cooling control rooms or dispatch cen- ters); (C) Emissions from infrastructure asso- ciated with the facility (including emis- sions from road construction for feedstock production and emissions from onsite backup or emergency generators used in an emergency or unplanned outage); and (D) Emissions from the distribution of electricity to consumers. (vii) Alternative fates and avoided emissions. The LCA may consider alter- native fates and account for avoided emis- sions. (e) Carbon capture and sequestration. For purposes of paragraphs (c) and (d) of this section, a greenhouse gas emissions rate for a Non-C&G Facility or C&G Facility must exclude any qualified car- bon dioxide (as defined in section 45Y(c) (3)) that is produced in such facility’s production of electricity, captured by the taxpayer, and pursuant to any regulations established under section 45Q(f)(2), dis- posed of by the taxpayer in secure geo- logical storage, or utilized by the taxpayer in a manner described in section 45Q(f) (5) and any regulations established under such section. (f) Annual publication of emissions rates—(1) In general. As required by sec- tion 45Y(b)(2)(C)(i), the Secretary will annually publish a table that sets forth the greenhouse gas emissions rates for types or categories of facilities (Annual Table), which a taxpayer must use for purposes of section 45Y. Except as provided in para- graph (h) of this section, a taxpayer that owns a facility that is described in the Annual Table on the first day of the tax- payer’s taxable year in which the section 45Y credit or section 48E credit is deter- mined with respect to such facility must use the Annual Table as of such date to determine an emissions rate for such facil- ity for such taxable year. (2) Publication of analysis required for changes to the Annual Table. In connection with the publication of the Annual Table, the Secretary must pub- lish an accompanying expert analysis that addresses any types or categories of facil- ities added or removed from the Annual Table since its last publication. Types or categories of facilities will be added or removed from the Annual Table consistent with, for Non-C&G Facilities, a technical assessment of the fundamental energy transformation into electricity as provided in paragraph (c)(1)(ii) of this section, and, for C&G Facilities, an LCA that complies with paragraphs (d) and (e) of this section. Such expert analysis must be prepared by one or more of the National Laboratories, in consultation with other agency experts as appropriate, and must address whether the addition or removal of types or cate- gories of facilities from the Annual Table complies with section 45Y(b)(2)(A) and (B) of the Internal Revenue Code and this section. (g) Provisional emissions rates—(1) In general. In the case of any facility that is of a type or category for which an emis- sions rate has not been established by the Secretary under this paragraph (g), a tax- payer that owns such facility may file a petition with the Secretary for the determi- nation of the emissions rate with respect to such facility (Provisional Emissions Rate or PER). A PER must be determined and obtained under the rules of this section. August 5, 2024 398 Bulletin No. 2024–32 (2) Rate not established. An emissions rate has not been established by the Sec- retary for a facility for purposes of sec- tion 45Y(b)(2)(C)(ii) if such facility is not described in the Annual Table. If a taxpayer’s request for an emissions value pursuant to paragraph (g)(5) of this sec- tion is pending at the time such facility is or becomes described in the Annual Table, the taxpayer’s request for an emissions value will be automatically denied. (3) Process for filing a PER petition. To file a PER petition with the Secretary, a taxpayer must submit a PER petition by attaching it to the taxpayer’s Federal income tax return or Federal return, as appropriate, for the first taxable year in which the taxpayer claims the section 45Y credit with respect to the facility to which the PER petition applies. The PER peti- tion must contain an emissions value, and, if applicable, the associated letter from DOE. An emissions value may be obtained from the Department of Energy (DOE) or by using an LCA model in accordance with paragraph (g)(6) of this section. An emission value obtained from DOE will be based on an analytical assessment of the emissions rate associated with the facility, performed by one or more National Labo- ratories, in consultation with other agency experts as appropriate, consistent with this section. A taxpayer must retain in its books and records a copy of the applica- tion and correspondence to and from DOE including a copy of the taxpayer’s request to DOE for an emissions value, including any information provided by the taxpayer to DOE pursuant to the emissions value request process provided in paragraph (g) (5) of this section. Alternatively, an emis- sions value can be determined by the tax- payer for a facility using the most recent version of an LCA model, as of the time the PER petition is filed, that has been designated by the Secretary for such use under paragraph (g)(6) of this section. If an emissions value is determined using the most recent version of the model or models, the taxpayer is required to pro- vide to the IRS information to support its determination in the form and manner pre- scribed in IRS forms or instructions or in publications or guidance published in the Internal Revenue Bulletin. See §601.601 of this chapter. A taxpayer may not request an emissions value from DOE for a facil- ity for which an emissions value can be determined by using the most recent ver- sion of an LCA model or models that have been designated by the Secretary for such use under paragraph (g)(6) of this section. (4) PER determination. Upon the IRS’s acceptance of the taxpayer’s Federal income tax return or Federal return, as appropriate, containing a PER petition, the emissions value of the facility specified on such petition will be deemed accepted. A taxpayer may rely upon an emissions value provided by DOE for purposes of claim- ing a section 45Y credit, provided that any information, representations, or other data provided to DOE in support of the request for an emissions value are accurate. If applicable, a taxpayer may rely upon an emissions value determined for a facility using the most recent version of the spe- cific LCA model or models that, as of the time the PER petition is filed, have been designated by the Secretary for such use under paragraph (g)(6) of this section, provided that any information, represen- tations, or other data used to obtain such emissions value are accurate. The IRS’s deemed acceptance of an emissions value is the Secretary’s determination of the PER. However, the taxpayer must still comply with all applicable requirements for the section 45Y credit and any infor- mation, representations, or other data sup- porting an emissions value are subject to later examination by the IRS. (5) Emissions value request process. An applicant that submits a request for an emissions value must follow the pro- cedures specified by DOE to request and obtain such emissions value. Emissions values will be determined consistent with the rules provided in this section. An appli- cant may request an emissions value from DOE only after a front-end engineering and design (FEED) study or similar indi- cation of project maturity, as determined by DOE, such as completion of a project specification and cost estimation sufficient to inform a final investment decision for the facility. DOE may decline to review applications that are not responsive, including those applications that relate to a facility described in the Annual Table (consistent with paragraph (g)(2) of this section) or a facility for which an emis- sions value can be determined by an LCA model designated under paragraph (g)(6) of this section (consistent with paragraph (g)(3) of this section), or applications that are incomplete. DOE will publish guid- ance and procedures that applicants must follow to request and obtain an emissions value from DOE. DOE’s guidance and procedures will include a process for, under limited circumstances, requesting a revision to DOE’s initial assessment of an emissions value based on revised tech- nical information or facility design and operation. (6) LCA model for determining an emissions value for C&G Facilities. The Secretary may designate one or more LCA models for determining an emis- sions value for C&G Facilities that are not described in the Annual Table. The Sec- retary may only designate a model under this paragraph (g)(6) if the model com- plies with section 45Y(b)(2)(B) and para- graphs (d) and (e) of this section. The Sec- retary may revoke the designation of an LCA model or models. In connection with the designation or revocation of a desig- nation of an LCA model or models, the Secretary is required to publish an accom- panying expert analysis of the model that is prepared by one or more of the National Laboratories, in consultation with other agency experts as appropriate, and such analysis must address the model’s com- pliance with section 45Y(b)(2)(B) of the Internal Revenue Code and paragraphs (d) and (e) of this section. (7) Effect of PER. A taxpayer may use a PER determined by the Secretary to deter- mine eligibility for the section 45Y credit for the facility to which the PER applies, provided all other requirements of section 45Y are met. The Secretary’s PER deter- mination is not an examination or inspec- tion of books of account for purposes of section 7605(b) of the Code and does not preclude or impede the IRS (under section 7605(b) or any administrative provisions adopted by the IRS) from later examining a return or inspecting books or records with respect to any taxable year for which the section 45Y credit is claimed. Further, a PER determination does not signify that the IRS has determined that the require- ments of section 45Y have been satisfied for any taxable year. (h) Reliance on Annual Table or Pro- visional Emissions Rate. Taxpayers may rely on the Annual Table in effect as of Bulletin No. 2024–32 399 August 5, 2024 the date a facility began construction or the provisional emissions rate determined by the Secretary for the taxpayer’s facil- ity under paragraph (g)(4) of this section to determine the facility’s greenhouse gas emissions rate for any taxable year that is within the 10-year period described in sec- tion 45Y(b)(1)(B), provided that the facil- ity continues to operate as a type of facil- ity that is described in the Annual Table or the facility’s emissions value request, as applicable, for the entire taxable year. (i) Substantiation—(1) In general. A taxpayer must maintain in its books and records documentation regarding the design, operation, and, if applica- ble, feedstock or fuel source used by the facility that establishes that such facility had a greenhouse gas emissions rate, as determined under this section, that is not greater than zero for the taxable year. (2) Sufficient substantiation. Documen- tation sufficient to substantiate that a facil- ity had a greenhouse gas emissions rate, as determined under this section, that is not greater than zero for the taxable year includes documentation or a report pre- pared by an unrelated party that verifies that a facility had such an emissions rate. A facility described in paragraph (c)(2) of this section can maintain sufficient docu- mentation to demonstrate a greenhouse gas emissions rate that is not greater than zero for the taxable year by showing that it is the type of facility described in paragraph (c)(2) of this section. The Secretary may determine that other types of facilities can sufficiently substantiate a greenhouse gas emissions rate, as determined under this section, that is not greater than zero with certain documentation and will describe such facilities and documentation in IRS forms or instructions or in publications or guidance published in the Internal Revenue Bulletin. See §601.601 of this chapter. (j) Applicability date. This section applies to qualified facilities placed in ser- vice after December 31, 2024, and during a taxable year ending on or after [the date of publication of the final regulations in the Federal Register]. Par. 4. Sections 1.48E-0 through 1.48E-5 are added to read as follows: Sec. * * * * * §1.48E-0 Table of contents. §1.48E-1 Clean electricity investment credit. §1.48E-2 Qualified investments in qual- ified facilities and EST for purposes of section 48E. §1.48E-3 [Reserved] §1.48E-4 Rules of general application. §1.48E-5 Greenhouse gas emissions rates for qualified facilities under section 48E. * * * * * §1.48E-0 Table of contents. This section lists the captions con- tained in §§1.48E-1 through 1.48E-5. §1.48E-1 Clean electricity investment credit. (a) Overview. (1) In general. (2) Code. (3) EST. (4) kWh. (5) Qualified facility. (6) Qualified investment with respect to a qualified facility. (7) Qualified investment with respect to EST. (8) Secretary. (9) Section 48E credit. (10) Section 48E regulations. (b) Credit amount. (1) In general. (2) Applicable percentage. (3) Base rate. (4) Alternative rate. (5) Energy communities increase in credit rate. (i) In general. (ii) Applicable credit rate increase. (6) Domestic content increase in credit rate. (i) In general. (ii) Applicable credit rate increase. (c) Credit phase-out. (1) In general. (2) Phase-out percentage. (3) Applicable year. (d) Applicability date. §1.48E-2 Qualified investments in qualified facilities and EST for purposes of section 48E. (a) Qualified facility. (b) Property included in qualified facil- ity. (1) In general. (2) Unit of qualified facility. (i) In general. (ii) Functionally interdependent. (3) Integral part. (i) In general. (ii) Power conditioning and transfer equipment. (iii) Roads. (iv) Fences. (v) Buildings. (vi) Shared integral property. (vii) Examples. (c) Coordination with other credits. (1) In general. (2) Allowed. (3) Examples. (d) Qualified investment with respect to a qualified facility. (e) Qualified property. (1) In general. (2) Location of qualified property. (f) Definitions related to requirements for qualified property. (1) Tangible personal property. (2) Other tangible property. (3) Construction, reconstruction, or erection of qualified property. (4) Acquisition of qualified property. (5) Original use of qualified property. (i) In general. (ii) Retrofitted qualified facility. (6) Depreciation allowable. (i) In general. (ii) Exclusions from allowable. (7) Placed in service. (i) In general. (ii) Qualified facility subject to §1.48-4 election to treat lessee as purchaser. (8) Claim. (g) EST. (1) Property included in EST. (2) Unit of EST. (i) In general. (ii) Functionally interdependent. (3) Integral part. (4) Qualified investment with respect to EST. (5) Placed in service. (i) In general. (ii) EST subject to §1.48-4 election to treat lessee as purchaser. (6) Types of EST. (i) Electrical energy storage property. (ii) Thermal energy storage property. August 5, 2024 400 Bulletin No. 2024–32 (iii) Hydrogen energy storage property. (7) Modification of EST. (8) Claim. (h) Applicability date. §1.48E-3 [Reserved] §1.48E-4 Rules of general application. (a) Rules for certain lower-output qual- ified facilities to include qualified inter- connection costs in the basis of associated qualified facility. (1) In general. (2) Qualified interconnection property. (3) Five-Megawatt Limitation. (i) In general. (ii) Nameplate capacity for purposes of the Five-Megawatt Limitation. (4) Interconnection agreement. (5) Utility. (6) Reduction to amounts chargeable to capital account. (7) Examples. (b) Expansion of facility; Incremental production. (1) In general. (2) Special rule for restarted facilities. (3) Computation of qualified invest- ment for a new unit or an addition of capacity. (i) New unit. (ii) Addition of capacity. (4) Examples. (c) Retrofit of an existing facility (80/20 Rule). (1) In general. (2) Expenditures taken into account. (3) Cost of new components. (4) New costs. (5) Excluded costs. (6) Examples. (d) Special rules regarding ownership. (1) Qualified investment with respect to a qualified facility or EST. (2) Multiple owners. (3) Section 761(a) election. (4) Related taxpayers. (i) Definition. (ii) Related taxpayer rule. (5) Examples. (e) Coordination rule for section 42 credits and section 48E credits. (f) Recapture. (1) In general. (2) Recapture event. (i) In general. (ii) Changes to the Annual Table. (iii) Yearly determination. (iv) Carryback and carryforward adjustments. (3) Recapture amount. (i) In general. (ii) Applicable recapture percentage. (4) Recapture period. (5) Increase in tax for recapture. (g) Cross references. (h) Applicability date. §1.48E-5 Greenhouse gas emissions rates for qualified facilities under section 48E. (a) In general. (b) Definitions. (c) Non-C&G Facilities. (d) C&G Facilities. (e) Carbon capture and sequestration. (f) Annual publication of emissions rates. (g) Provisional emissions rates. (1) In general. (2) Rate not established. (3) Process for filing a PER petition. (4) PER determination. (5) Emissions value request process. (6) LCA model for determining an emissions value for C&G Facilities. (7) Effect of PER. (h) Determining anticipated green- house gas emissions rate. (1) In general. (2) Examples of objective indicia. (i) Reliance on Annual Table or Provi- sional Emissions Rate. (j) Substantiation. (1) In general. (2) Sufficient substantiation. (k) Applicability date. §1.48E-1 Clean electricity investment credit (a) Overview—(1) In general. For purposes of section 46 of the Code, the section 48E credit is determined under section 48E of the Code and the section 48E regulations (as defined in paragraph (a)(10) of this section). This paragraph (a) provides definitions of terms that, unless otherwise specified, apply for purposes of section 48E, the section 48E regulations, and any provision of the Code or this chapter that expressly refers to any pro- vision of section 48E or the section 48E regulations. Paragraph (b) of this section provides rules for determining the amount of the section 48E credit for any taxable year. Paragraph (c) of this section pro- vides rules regarding the phase-out of the section 48E credit. See §1.48E–2 for rules relating to qualified investments in quali- fied facilities and energy storage technol- ogy (EST) for purposes of the section 48E credit. See §1.48E–4 for rules of general application for the section 48E credit. See §1.48E–5 for rules to determine green- house gas emissions rates for qualified facilities under section 48E. (2) Code. The term Code means the Internal Revenue Code. (3) EST. The term EST for purposes of the section 48E credit means energy stor- age technology as defined in §1.48E-2(g). (4) kWh. The term kWh means kilowatt hours. (5) Qualified facility. The term qual- ified facility for purposes of the section 48E credit has the meaning provided in §1.48E-2(a). (6) Qualified investment with respect to a qualified facility. The term qualified investment with respect to a qualified facil- ity for purposes of the section 48E credit has the meaning provided in §1.48E-2(d). (7) Qualified investment with respect to EST. The term qualified investment with respect to EST for purposes of the section 48E credit has the meaning provided in §1.48E-2(g)(4). (8) Secretary. The term Secretary means the Secretary of the Treasury or her delegate. (9) Section 48E credit. The term sec- tion 48E credit means the clean electricity investment credit determined under sec- tion 48E of the Code and the section 48E regulations. (10) Section 48E regulations. The term section 48E regulations means this section and §§ 1.48E–2 through 1.48E-5. (b) Credit amount—(1) In general. For purposes of section 46 of the Code, the section 48E credit for any taxable year is an amount equal to the applicable percent- age of the qualified investment for such taxable year with respect to any qualified facility and any EST. (2) Applicable percentage. The term applicable percentage means the base rate described in paragraph (b)(3) of this Bulletin No. 2024–32 401 August 5, 2024 section or the alternative rate described in paragraph (b)(4) of this section. The applicable percentage may be increased as provided in section 48E(a)(3)(A) and paragraph (b)(5) of this section in the case of a qualified facility that is located in an energy community. Similarly, the applica- ble percentage may be increased as pro- vided in section 48E(a)(3)(B) and para- graph (b)(6) of this section in the case of a qualified facility that satisfies the domes- tic content requirements. (3) Base rate. In the case of any qual- ified facility or EST that does not satisfy the requirements provided in section 48E(a)(2)(A)(ii) or (B)(ii), the term base rate means 6 percent. (4) Alternative rate. In the case of any qualified facility or EST that satisfies the prevailing wage and apprenticeship requirements provided in section 48E(a) (2)(A)(ii) or (B)(ii), the term alternative rate means 30 percent. (5) Energy communities increase in credit rate—(i) In general. In the case of any qualified facility or EST that is placed in service within an energy com- munity (as defined in section 45(b)(11) (B)), the applicable percentage under section 48E(a)(2) and paragraph (b)(2) of this section will be increased by the applicable credit rate increase described in section 48E(a)(3)(A)(ii) and paragraph (b)(5)(ii) of this section. (ii) Applicable credit rate increase. In the case of any qualified investment with respect to a qualified facility or EST to which the base rate is applicable, the applicable credit rate increase is 2 percent- age points, and with respect to any quali- fied investment with respect to a qualified facility or EST to which the alternative rate is applicable, the applicable credit rate increase is 10 percentage points. (6) Domestic content increase in credit rate—(i) In general. In the case of any qualified facility or EST that satisfies the requirements of section 45(b)(9)(B) (domestic content requirement), the appli- cable percentage under section 48E(a)(2) and paragraph (b)(2) of this section will be increased by the applicable credit rate increase described in paragraph (b)(6)(ii) of this section. (ii) Applicable credit rate increase. In the case of any qualified investment with respect to a qualified facility or EST to which the base rate is applicable, 2 per- centage points, and with respect to any qualified investment with respect to a qualified facility or EST to which the alternative rate is applicable, 10 percent- age points. (c) Credit phase-out—(1) In general. The amount of the credit as determined under section 48E(a) and paragraph (b) of this section for any qualified facility or EST, the construction of which begins during a calendar year described in sec- tion 48E(e)(2) and paragraph (c)(2) of this section is equal to the product of— (i) The amount of the credit determined under section 48E(a) and paragraph (b) of this section without regard to section 48E(e) and paragraph (c) of this section, multiplied by (ii) The phase-out percentage under section 48E(e)(2) and paragraph (c)(2) of this section. (2) Phase-out percentage. The phase- out percentage under this paragraph (c)(2) is equal to— (i) For any qualified investment with respect to any qualified facility or EST the construction of which begins during the first calendar year following the applica- ble year, 100 percent, (ii) For any qualified investment with respect to any qualified facility or EST the construction of which begins during the second calendar year following the appli- cable year, 75 percent, (iii) For any qualified investment with respect to any qualified facility or EST the construction of which begins during the third calendar year following the applica- ble year, 50 percent, and (iv) For any qualified investment with respect to any qualified facility or EST the construction of which begins during any calendar year subsequent to the calendar year described in paragraph (c)(2)(iii) of this section, 0 percent. (3) Applicable year. For purposes of this paragraph (c), the term applica- ble year has the same meaning provided under §1.45Y-1(c)(3). (d) Applicability date. This section applies to qualified facilities and ESTs placed in service after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER]. §1.48E-2 Qualified investments in qualified facilities and EST for purposes of section 48E. (a) Qualified facility. For purposes of the section 48E credit, the term qualified facility means a facility that meets all the following requirements: (1) The facility is used for the genera- tion of electricity; (2) The facility is placed in service by the taxpayer after December 31, 2024; and (3) The facility has a greenhouse gas emissions rate of not greater than zero (as determined under rules provided in §1.45Y-5). (b) Property included in qualified facil- ity—(1) In general. A qualified facility includes a unit of qualified facility (as defined in paragraph (b)(2) of this sec- tion). A qualified facility also includes components of property owned by the tax- payer that are an integral part (as defined in paragraph (b)(3) of this section) of the qualified facility. Any component of prop- erty that meets the requirements of this paragraph (b) is part of a qualified facil- ity regardless of where such component of property is located. A qualified facility does not include any electrical transmis- sion equipment, such as transmission lines and towers, or any equipment beyond the electrical transmission stage. A qualified facility also generally does not include equipment that is an addition or modi- fication to an existing qualified facility. However, see §1.48E-4(b) regarding the expansion of a facility or incremental pro- duction and §1.48E-4(c) for rules regard- ing a retrofitted qualified facility (80/20 Rule). (2) Unit of qualified facility—(i) In general. For purposes of the section 48E credit, the unit of qualified facil- ity includes all functionally interdepen- dent components of property (as defined in paragraph (b)(2)(ii) of this section) owned by the taxpayer that are operated together and that can operate apart from other property to produce electricity. No provision of this section, §1.48E-1, or §1.48E-4 through 1.48E-5 uses the term unit in respect of a qualified facility with any meaning other than that provided in this paragraph (b)(2)(i). (ii) Functionally interdependent. Com- ponents of property are functionally inter- August 5, 2024 402 Bulletin No. 2024–32 dependent if the placing in service of each of the components is dependent upon the placing in service of each of the other components to produce electricity. (3) Integral part—(i) In general. For purposes of the section 48E credit, a com- ponent of property owned by a taxpayer is an integral part of a qualified facility if it is used directly in the intended function of the qualified facility and is essential to the completeness of such function. Prop- erty that is an integral part of a qualified facility is part of the qualified facility. A taxpayer may not claim the section 48E credit for any property that is an integral part of the taxpayer’s qualified facility that is not owned by the taxpayer. (ii) Power conditioning and transfer equipment. Power conditioning equip- ment and transfer equipment are integral parts of a qualified facility. Power con- ditioning equipment includes equipment that modifies the characteristics of elec- tricity into a form suitable for use, trans- mission, or distribution. Parts related to the functioning or protection of power conditioning equipment are also treated as power conditioning equipment and include, but are not limited to, switches, circuit breakers, arrestors, and hardware and software used to monitor, operate, and protect power conditioning equip- ment. Transfer equipment includes com- ponents of property that allow for the aggregation of electricity generated by a qualified facility and components of property that alter voltage to permit elec- tricity to be transferred to a transmission or distribution line. Transfer equipment does not include transmission or dis- tribution lines. Examples of transfer equipment include, but are not limited to, wires, cables, and combiner boxes that conduct electricity. Parts related to the functioning or protection of transfer equipment are also treated as transfer equipment and may include items such as current transformers used for meter- ing, electrical interrupters (such as cir- cuit breakers, fuses, and other switches), and hardware and software used to mon- itor, operate, and protect transfer equip- ment. (iii) Roads. Roads that are an inte- gral part of a qualified facility are those roads integral to the intended function of the qualified facility such as onsite roads that are used to operate and maintain the qualified facility. Roads used primarily for access to the site, or roads used primarily for employee or visitor vehicles, are not integral to the intended function of the qualified facility, and thus are not an inte- gral part of a qualified facility. (iv) Fences. Fencing is not an integral part of a qualified facility because it is not integral to intended function of the quali- fied facility. (v) Buildings. Generally, buildings are not integral parts of a qualified facil- ity because they are not integral to the intended function of the qualified facility. However, the following structures are not treated as buildings for this purpose: (A) A structure that is essentially an item of machinery or equipment; and (B) A structure that houses components of property that is integral to the intended function of the qualified facility if the use of the structure is so closely related to the use of the housed components of property therein that the structure clearly can be expected to be replaced if the components of property it initially houses are replaced. (vi) Shared integral property. Multi- ple qualified facilities (whether owned by one or more taxpayers), including quali- fied facilities with respect to which a tax- payer has claimed a credit under section 48E or another Federal income tax credit, may include shared property that may be considered an integral part of each qual- ified facility so long as the cost basis for the shared property is properly allocated to each qualified facility and the taxpayer only claims a section 48E credit with respect to the portion of the cost basis properly allocable to a qualified facility for which the taxpayer is claiming a sec- tion 48E credit. The total cost basis of such shared property divided among the qualified facilities may not exceed 100 percent of the cost of such shared prop- erty. In addition, a component of prop- erty that is shared by a qualified facility (as defined by section 48E(b)(3)) (48E Qualified Facility) and a qualified facil- ity (as defined in section 45Y(b)) (45Y Qualified Facility) that is an integral part of both qualified facilities will not affect the eligibility of the 48E Qualified Facility to claim a section 48E credit or the 45Y Qualified Facility to claim the section 45Y credit. (vii) Examples. This paragraph (b)(3) (vii) provides examples illustrating the rules of this paragraph (b)(3). (A) Example 1. Co-located qualified facilities owned by the same taxpayer that share integral property. X constructs a solar farm (Solar Qualified Facility) and nearby also constructs a wind facil- ity (Wind Qualified Facility) that are each a quali- fied facility (as defined in §1.48E-2(a)). The Solar Qualified Facility and Wind Qualified Facility each connect to a transformer that steps up the electricity produced by each qualified facilities to electrical grid voltage before it is transmitted to the electrical grid through an intertie. X assigns 50% of the cost of the shared transformer to the Solar Qualified Facility and the Wind Qualified Facility, respectively. The fact that the Solar Qualified Facility and Wind Qualified Facility share property that is integral to both does not impact the ability of X to claim a section 48E credit for both qualified facilities. When X places the qualified facilities in service, 50% of the cost of the transformer is included in X’s basis in each of the qualified facilities for purposes of computing the section 48E credit. (B) Example 2. Co-located qualified facilities owned by different taxpayers that share integral property. X constructs a solar farm (Solar Qualified Facility), and nearby Y constructs a wind facility (Wind Qualified Facility) that are each a qualified facility (as defined in §1.48E-2(a)). The Solar Qual- ified Facility and the Wind Qualified Facility both connect to a transformer that steps up the electric- ity produced by both qualified facilities to electrical grid voltage before it is transmitted to the electrical grid through an intertie. X and Y each pay 50% of the cost of the transformer. The fact that the Solar Qualified Facility and Wind Qualified Facility share property that is integral to both does not impact the ability of X or Y to claim a section 48E credit for their respective qualified facilities. When X and Y place their respective qualified facilities in service, 50% of the cost of the transformer is included in X’s and Y’s basis in their respective qualified facilities for purposes of computing the section 48E credit. (C) Example 3. Co-located qualified facility and Energy Storage Technology owned by the same taxpayer. X constructs a wind qualified facility (as defined in §1.48E-2(a)) (Wind Qualified Facility) that is co-located with an EST (as defined in §1.48E- 2(g)) (Energy Storage). The Wind Qualified Facility and Energy Storage share transfer equipment that is integral to both. X assigns 50% of the cost of the shared transfer equipment to the Wind Qualified Facility and 50% of the cost to the Energy Storage. The fact that the Wind Qualified Facility and Energy Storage share property that is integral to both does not impact the ability of X to claim a section 48E credit for the Wind Qualified Facility and the Energy Storage. X may include 50% of the cost of the trans- fer equipment in its basis to determine a section 48E credit for the Wind Qualified Facility and the Energy Storage. (D) Example 4. Co-located qualified facility and Energy Storage Technology owned by dif- ferent taxpayers. X constructs a solar farm that is a qualified facility (as defined in §1.48E-2(a)) (Solar Qualified Facility) and is co-located with an EST (as defined in §1.48E-2(g)) (Energy Stor- Bulletin No. 2024–32 403 August 5, 2024 age) owned by Y. The Solar Qualified Facility and Energy Storage share transfer equipment that is integral to both. X and Y each incur 50% of the cost of the transfer equipment. The fact that the Solar Qualified Facility and Energy Storage share property that is integral to both does not impact the ability of X to claim a section 48E credit for the Solar Qualified Facility or Y to claim a section 48E credit for the Energy Storage. When X and Y place in service the Solar Qualified Facility and Energy Storage, for purposes of computing the section 48E credit, 50% of the cost of the transfer equipment is included in X’s basis in the Solar Qualified Facility and 50% of the cost is included in Y’s basis in the Energy Storage. (c) Coordination with other credits— (1) In general. The term qualified facility (as defined in section 48E(b)(3)) and para- graph (a) of this section does not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 45Y, 48, or 48A is allowed under section 38 of the Code for the taxable year or any prior taxable year. A taxpayer that directly owns a qualified facility (as defined in section 48E(b)(3)) that is eligible for both a section 48E credit and another Federal income tax credit is eligible for the sec- tion 48E credit only if the other Federal income tax credit was not allowed with respect to the qualified facility. Nothing in this paragraph (c) precludes a taxpayer from claiming a section 48E credit with respect to a qualified facility (as defined in section 48E(b)(3)) that is co-located with another facility for which a credit deter- mined under section 45, 45J, 45Q, 45U, 45Y, 48, or 48A is allowed under section 38 of the Code for the taxable year or any prior taxable year. (2) Allowed. For purposes of paragraph (c)(1) of this section, the term allowed only includes credits that taxpayers have claimed on a Federal income tax return or Federal return, as appropriate, and that the Internal Revenue Service (IRS) has not challenged in terms of the taxpayer’s eli- gibility. (3) Examples. This paragraph (c)(3) provides examples illustrating the rules provided in this paragraph (c). (i) Example 1. Taxpayer claims a section 45Y credit on a solar farm and section 48E credit on co-located Energy Storage Technology. X owns a solar farm that is a qualifying facility (as defined in §1.45Y-2(a)) (45Y Solar Qualified Facility), and a co-located EST (as defined in §1.48E-2(g)) (Energy Storage). The Energy Storage is not part of the 45Y Solar Qualified Facility, and therefore X may claim the section 45Y credit based on the kWh of electric- ity produced by the 45Y Solar Qualified Facility, and X may also claim the section 48E credit based on its qualified investment in the Energy Storage. (ii) Example 2. Different taxpayers claim sec- tion 45Y credit for a solar farm and a co-located Energy Storage Technology. X owns a solar farm that is a qualifying facility (as defined in §1.45Y- 2(a)) (45Y Solar Qualified Facility), and Y owns a co-located EST (as defined in §1.48E-2(g)) (Energy Storage). The Energy Storage is not part of the 45Y Solar Qualified Facility, and therefore, X may claim the section 45Y credit based on the kWh of electricity produced by the 45Y Solar Qualified Facility, and Y may claim the section 48E credit based on its qualified investment in the Energy Storage. (iii) Example 3. Taxpayer claiming a section 48E credit; another credit is not allowed. X owns a wind facility that satisfies the requirements of a qualified facility (as defined in §1.48E-2(a)) under section 48E as well as the requirements of a qualified facility (as defined in §1.45Y-2(a)) under section 45Y. X claims a section 48E credit with respect to the wind facility. While a credit may be available with regard to the wind facility under section 45Y, because X claimed a section 48E credit with respect to the wind facility, a section 45Y credit is not allowed. (d) Qualified investment with respect to a qualified facility. For purposes of the section 48E credit, the qualified invest- ment with respect to any qualified facility for any taxable year is the sum of the fol- lowing— (1) The basis of any qualified prop- erty (as defined in paragraph (e)(1) of this section) placed in service by the taxpayer during such taxable year that is part of a qualified facility (as defined in paragraph (a) of this section); and (2) The amount of any expenditures paid or incurred by the taxpayer for qual- ified interconnection property (as defined in §1.48E-4(a)(2)). (e) Qualified property—(1) In general. For purposes of this paragraph (e), the term qualified property means property that meets all the following requirements: (i) The property is tangible personal property (as defined in paragraph (f)(1) of this section) or other tangible property (not including a building or its structural components) (as defined in paragraph (f) (2) of this section), but only if such other tangible property is used as an integral part of the qualified facility; (ii) Depreciation (or amortization in lieu of depreciation) is allowable (as defined paragraph (f)(6) of this section) with respect to the property; and (iii) Either— (A) The construction, reconstruction, or erection of the property is completed by the taxpayer (as defined in paragraph (f)(3) of this section); or (B) The taxpayer acquires the property (as defined in paragraph (f)(4) of this sec- tion) if the original use of the property (as defined paragraph (f)(5) of this section) commences with the taxpayer. (2) Location of qualified property. Any component of a qualified property that meets the requirements of paragraph (e) of this section is part of a qualified facil- ity regardless of where such component of property is located. (f) Definitions related to requirements for qualified property. For purposes of section 48E and paragraph (b) of this sec- tion, the definitions of this paragraph (f) apply: (1) Tangible personal property. The term tangible personal property means any tangible property except land and improve- ments thereto, such as buildings or other inherently permanent structures (includ- ing items that are structural components of such buildings or structures). Tangible per- sonal property includes all property (other than structural components) that is con- tained in or attached to a building. Further, all property that is in the nature of machin- ery (other than structural components of a building or other inherently permanent structure) is considered tangible personal property even though located outside a building. Local law is not controlling for purposes of determining whether property is or is not tangible property or tangible personal property. Thus, tangible property may be personal property for purposes of the energy credit even though under local law the property is considered a fixture and therefore real property. (2) Other tangible property. The term other tangible property means tangible property other than tangible personal property (not including a building and its structural components), that is used as an integral part of furnishing electricity by a person engaged in a trade or business of furnishing any such service. (3) Construction, reconstruction, or erection of qualified property. The term construction, reconstruction, or erection of qualified property means work per- formed to construct, reconstruct, or erect qualified property either by the taxpayer or for the taxpayer in accordance with the taxpayer’s specifications. August 5, 2024 404 Bulletin No. 2024–32 (4) Acquisition of qualified property. The term acquisition of qualified property means a transaction by which a taxpayer obtains rights and obligations with respect to qualified property including— (i) Title to the qualified property under the law of the jurisdiction in which the qualified property is placed in service, unless the qualified property is possessed or controlled by the taxpayer as a lessee, and (ii) Physical possession or control of the qualified property. (5) Original use of qualified prop- erty—(i) In general. The term original use of qualified property means the first use to which the unit of qualified property is put, whether or not such use is by the taxpayer. (ii) Retrofitted qualified facility. A ret- rofitted qualified facility acquired by the taxpayer will not be treated as being put to original use by the taxpayer unless the rules in §1.48E–4(c) regarding retrofitted qualified facilities (80/20 Rule) apply. The question of whether a qualified facility meets the 80/20 Rule is a facts and cir- cumstances determination. (6) Depreciation allowable—(i) In gen- eral. For purposes of applying paragraph (b) of this section, depreciation (or amor- tization in lieu of depreciation) is allow- able with respect to qualified property (as defined in paragraph (e) of this section) if such property is of a character subject to the allowance for depreciation under section 167 of the Code and the basis or cost of such property is recovered using a method of depreciation (for example, the straight line method), which includes any additional first year depreciation deduc- tion method of depreciation (for example, under section 168(k) of the Code). Fur- ther, if an adjustment with respect to the Federal income tax or Federal return, as appropriate, for such taxable year requires the basis or cost of such qualified prop- erty to be recovered using a method of depreciation, depreciation is allowable to the taxpayer with respect to the qualified property. (ii) Exclusions from allowable. For purposes of paragraph (b) of this section, depreciation is not allowable with respect to a qualified facility if the basis or cost of such qualified facility is not recovered through a method of depreciation but, instead, such basis or cost is recovered through a deduction of the full basis or cost of the qualified facility in one taxable year (for example, under section 179 of the Code). (7) Placed in service—(i) In general. A qualified facility is considered placed in service in the earlier of: (A) The taxable year in which, under the taxpayer’s depreciation practice, the period for depreciation with respect to such qualified facility begins; or (B) The taxable year in which the qualified facility is placed in a condition or state of readiness and availability to produce electricity, whether in a trade or business or in the production of income. A qualified facility in a condition or state of readiness and availability to produce electricity includes, but is not limited to, components of property that are acquired and set aside during the taxable year for use as replacements for a particular quali- fied facility (or facilities) in order to avoid operational time loss and equipment that is acquired for a specifically assigned function and is operational but is undergo- ing testing to eliminate any defects. How- ever, components of property acquired to be used in the construction of a qualified facility are not considered in a condition or state of readiness and availability for a specifically assigned function. (ii) Qualified facility subject to §1.48-4 election to treat lessee as purchaser. Not- withstanding paragraph (f)(7)(i) of this section, a qualified facility with respect to which an election is made under section 50(d)(5) of the Code and §1.48-4 to treat the lessee as having purchased such quali- fied facility is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee. (8) Claim. With respect to a section 48E credit determined with respect to a qualified facility of a taxpayer, the term claim means filing a completed Form 3468, Investment Credit, or any successor form(s), with the taxpayer’s timely filed (including extensions) Federal income tax return or Federal return, as appropriate, for the taxable year in which the qualified facility is placed in service, and includes making an election under section 6417 or 6418 of the Code and corresponding reg- ulations with respect to such section 48E credit and made on the taxpayer’s filed return. (g) EST—(1) Property included in EST. An EST includes a unit of energy storage technology (unit of EST) (as defined in paragraph (g)(2) of this section) that meets the requirements of paragraph (g)(2)(ii) of this section. An EST also includes prop- erty owned by the taxpayer that is an inte- gral part (as defined in paragraph (g)(3) of this section) of the EST. An EST does not include equipment that is an addition or modification to an existing EST. For purposes of the section 48E credit, EST includes electrical energy storage property (as described in paragraph (g)(6)(i) of this section), thermal energy storage property (as described in paragraph (g)(6)(ii) of this section), and hydrogen energy storage property (as described in paragraph (g)(6) (iii) of this section). (2) Unit of EST—(i) In general. For purposes of the section 48E credit, a unit of EST includes all functionally inter- dependent components of property (as defined in paragraph (g)(2)(ii) of this section) owned by the taxpayer that are operated together and that can operate apart from other property to perform the intended function of the EST. No provision of this section, §1.48E-1, or §1.48E-4 through 1.48E-5 uses the term unit in respect of an EST with any mean- ing other than that provided in this para- graph (g)(2)(i). (ii) Functionally interdependent. Com- ponents of property are functionally inter- dependent if the placing in service of each of the components is dependent upon the placing in service of each of the other components to perform the intended func- tion of the EST. (3) Integral part. For purposes of the section 48E credit, property owned by a taxpayer is an integral part of an EST owned by the same taxpayer if it is used directly in the intended function of the EST and is essential to the completeness of such function. Property that is an inte- gral part of an EST is part of an EST. A taxpayer may not claim the section 48E credit for any property that is an integral part of the taxpayer’s EST that is not owned by the taxpayer. (4) Qualified investment with respect to EST. The qualified investment with respect to any EST for any taxable year is the basis of any EST placed in service by the taxpayer during such taxable year. Bulletin No. 2024–32 405 August 5, 2024 (5) Placed in service—(i) In general. An EST is considered placed in service in the earlier of: (A) The taxable year in which, under the taxpayer’s depreciation practice, the period for depreciation with respect to such EST begins; or (B) The taxable year in which the EST is placed in a condition or state of read- iness and availability for the intended function of the EST, whether in a trade or business or in the production of income. An EST in a condition or state of readi- ness and availability for its intended func- tion includes, but is not limited to, com- ponents of property that are acquired and set aside during the taxable year for use as replacements for a particular EST (or ESTs) in order to avoid operational time loss and equipment that is acquired for a specifically assigned function and is oper- ational but is undergoing testing to elimi- nate any defects. However, components of property acquired to be used in the con- struction of an EST are not considered in a condition or state of readiness and avail- ability for a specifically assigned function. (ii) EST subject to §1.48-4 election to treat lessee as purchaser. Notwithstand- ing paragraph (g)(5)(i) of this section, EST with respect to which an election is made under section 50(d)(5) of the Code and §1.48-4 to treat the lessee as having purchased such EST is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee. (6) Types of EST—(i) Electrical energy storage property. Electrical energy stor- age property is property (other than prop- erty primarily used in the transportation of goods or individuals and not for the production of electricity) that receives, stores, and delivers energy for conversion to electricity, and has a nameplate capac- ity of not less than 5 kWh. For example, subject to the exclusion for property pri- marily used in the transportation of goods or individuals, electrical energy storage property includes but is not limited to rechargeable electrochemical batteries of all types (such as lithium-ion, vanadium redox flow, sodium sulfur, and lead-acid); ultracapacitors; physical storage such as pumped storage hydropower, compressed air storage, flywheels; and reversible fuel cells. (ii) Thermal energy storage property. Thermal energy storage property is prop- erty comprising a system that is directly connected to a heating, ventilation, or air conditioning (HVAC) system; removes heat from, or adds heat to, a storage medium for subsequent use; and provides energy for the heating or cooling of the interior of a residential or commercial building. Thermal energy storage prop- erty includes equipment and materials, and parts related to the functioning of such equipment, to store thermal energy for later use to heat or cool, or to provide hot water for use in heating a residential or commercial building. It does not include a swimming pool, combined heat and power system property (as defined in sec- tion 45Y(g)(2)), or a building or its struc- tural components. For example, thermal energy storage includes, but is not limited to, thermal ice storage systems that use electricity to run a refrigeration cycle to produce ice that is later connected to the HVAC system as an exchange medium for air conditioning a building, heat pump systems that store thermal energy in an underground tank or borehole field to be extracted for later use for heating and/ or cooling, and electric furnaces that use electricity to heat bricks to high tempera- tures and later use this stored energy to heat a building through the HVAC system. (iii) Hydrogen energy storage property. Hydrogen energy storage property is prop- erty (other than property primarily used in the transportation of goods or individuals and not for the production of electricity) that stores hydrogen and has a nameplate capacity of not less than 5 kWh, equiva- lent to 0.127 kg of hydrogen or 52.7 stan- dard cubic feet (scf) of hydrogen. Hydro- gen energy storage property must store hydrogen that is solely used as energy and not for other purposes such as for the production of end products such as fertil- izer. For example, hydrogen energy stor- age property includes, but is not limited to, a hydrogen compressor and associated storage tank and an underground storage facility and associated compressors. (7) Modification of EST. With respect to an electrical energy storage property or a hydrogen energy storage property , mod- ified as set forth in this paragraph (g)(7), such property will be treated as an electri- cal energy storage property (as described in paragraph (g)(6)(i) of this section) or a hydrogen energy storage property (as described in paragraph (g)(6)(iii) of this section), except that the basis of any exist- ing electrical energy storage property or hydrogen energy storage property prior to such modification is not taken into account for purposes of this paragraph (g)(7) and section 48E. This paragraph (g)(7) applies to any electrical energy storage property and hydrogen energy storage property that either: (i) Was placed in service before August 16, 2022, and would be described in sec- tion 48(c)(6)(A)(i), except that such prop- erty had a capacity of less than 5 kWh and is modified in a manner that such property (after such modification) has a nameplate capacity of not less than 5 kWh; or (ii) Is described in section 48(c)(6)(A) (i) and is modified in a manner that such property (after such modification) has an increase in nameplate capacity of not less than 5 kWh. (8) Claim. With respect to a section 48E credit determined with respect to an EST of a taxpayer, the term claim means filing a completed Form 3468, Investment Credit, or any successor form(s), with the taxpayer’s timely filed (including exten- sions) Federal income tax return or Fed- eral return, as appropriate, for the taxable year in which the EST is placed in service, and includes making an election under section 6417 or 6418 of the Code and corresponding regulations with respect to such section 48E credit and made on the taxpayer’s filed return. (h) Applicability date. This section applies to qualified facilities and EST placed in service after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER]. §1.48E-3 [Reserved] §1.48E-4 Rules of general application. (a) Rules for certain lower-output qualified facilities to include qualified interconnection costs in the basis of asso- ciated qualified facility—(1) In general. For purposes of determining the section 48E credit, the qualified investment with respect to a qualified facility (as defined August 5, 2024 406 Bulletin No. 2024–32 in §1.48E-2(a)) includes amounts paid or incurred by the taxpayer for quali- fied interconnection property (as defined in paragraph (a)(2) of this section), in connection with a qualified facility (as defined in §1.48E–2(a)) that has a max- imum net output of not greater than 5 MW (as measured in alternating current) as described in paragraph (a)(3) of this section (Five-Megawatt Limitation). The qualified interconnection property must provide for the transmission or distribu- tion of the electricity produced by a qual- ified facility and must be properly charge- able to the capital account of the taxpayer as reduced by paragraph (a)(6) of this sec- tion. (2) Qualified interconnection property. For purposes of this paragraph (a), the term qualified interconnection property means, with respect to a qualified facil- ity, any tangible property that is part of an addition, modification, or upgrade to a transmission or distribution system that is required at or beyond the point at which the qualified facility interconnects to such transmission or distribution system in order to accommodate such interconnec- tion; is either constructed, reconstructed, or erected by the taxpayer (as defined in §1.48E–2(f)(3)), or for which the cost with respect to the construction, recon- struction, or erection of such property is paid or incurred by such taxpayer; and the original use (as defined in §1.48E–2(f)(5)) of which, pursuant to an interconnection agreement (as defined in paragraph (a)(4) of this section), commences with a util- ity (as defined in paragraph (a)(5) of this section). Qualified interconnection prop- erty is not part of a qualified facility. As a result, qualified interconnection property is not taken into account in determining whether a qualified facility satisfies the requirements for the increase in credit rate for energy communities provided in section 48E(a)(3)(A) or for the increase in credit rate for domestic content referenced in section 48E(a)(3)(B) (by reference to rules similar to the rules of section 48(a) (12)). (3) Five-Megawatt Limitation—(i) In general. For purposes of this paragraph (a), the Five-Megawatt Limitation is mea- sured at the level of the qualified facility in accordance with section 48E(b)(1)(B). The maximum net output of a qualified facility is measured only by nameplate generating capacity of the unit of qualified facility, which does not include the name- plate capacity of any integral property, at the time the qualified facility is placed in service. The nameplate generating capac- ity of the unit of qualified facility is mea- sured independently from any other qual- ified facilities that share the same integral property. (ii) Nameplate capacity for purposes of the Five-Megawatt Limitation. The deter- mination of whether a qualified facility has a maximum net output of not greater than 5 MW (as measured in alternating current) is based on the nameplate capac- ity of the unit of qualified facility. The nameplate capacity for purposes of the Five-Megawatt Limitation is the maxi- mum electrical generating output in mega- watts that the unit of qualified facility is capable of producing on a steady state basis and during continuous operation under standard conditions, as measured by the manufacturer and consistent with the definition of nameplate capacity provided in 40 CFR 96.202. If applicable, taxpay- ers should use the International Standard Organization (ISO) conditions to measure the maximum electrical generating output of a unit of qualified facility. (4) Interconnection agreement. For purposes of this paragraph (a), the term interconnection agreement means an agreement with a utility for the purposes of interconnecting the qualified facility owned by such taxpayer to the transmis- sion or distribution system of the utility. (5) Utility. For purposes of this para- graph (a), the term utility means the owner or operator of an electrical transmission or distribution system that is subject to the regulatory authority of a State or political subdivision thereof, any agency or instru- mentality of the United States, a public service or public utility commission or other similar body of any State or politi- cal subdivision thereof, or the governing or ratemaking body of an electric cooper- ative. (6) Reduction to amounts chargeable to capital account. For purposes of this paragraph (a), in the case of expenses paid or incurred for qualified interconnection property (as defined in paragraph (a)(2) of this section), amounts otherwise charge- able to capital account with respect to such expenses must be reduced under rules similar to the rules of section 50(c) of the Code, specifically the rules under section 50(c)(3). In addition, the taxpayer must pay or incur the interconnection prop- erty costs; therefore, any reimbursement, including by a utility, must be accounted for by reducing the taxpayer’s expenditure to determine eligible costs. (7) Examples. This paragraph (a)(7) provides examples illustrating the rules of this paragraph (a). (i) Example 1. Application of Five-Megawatt Limitation to an interconnection agreement for qual- ified facilities owned by taxpayer. X places in service two solar qualified facilities (48E Facilities) each with a maximum net output of 5 MW (as measured in alternating current). The two 48E Facilities each have their own inverter, which is integral property to each facility, and share a step-up transformer, which is integral property to both facilities. As part of the development of the 48E Facilities, interconnec- tion costs are required by the utility to modify and upgrade the transmission system at or beyond the common intertie to the utility’s transmission system to accommodate the interconnection. X has an inter- connection agreement with the utility that allows for a maximum output of 10 MW (as measured in alter- nating current). The interconnection agreement pro- vides the total cost of the qualified interconnection property. X may include the costs paid or incurred by X, respectively, for qualified interconnection prop- erty subject to the terms of the interconnection agree- ment, to calculate X’s section 48E credit for each of the 48E Facilities because each qualified facility has a maximum net output of not greater than 5 MW. (ii) Example 2. Application of Five-Megawatt Limitation to an interconnection agreement for qualified facilities owned by separate taxpayers. X places in service a solar farm that is a qualified facility (as defined in §1.48E-2(a)) (Solar Qualified Facility) with a maximum net output of 5 MW (as measured in alternating current). The Solar Quali- fied Facility includes an inverter, which is integral property. Y places in service a wind facility (as defined in §1.48E-2(a)) (Wind Qualified Facility), with a maximum net output of 5 MW (as measured in alternating current). The Solar Qualified Facil- ity and the Wind Qualified Facility share a step-up transformer, which is integral to both facilities. As part of the development of the Solar Qualified Facility and Wind Qualified Facility, interconnec- tion costs are required by the utility to modify and upgrade the transmission system at or beyond the common intertie to the utility’s transmission system to accommodate the interconnection. X and Y are party to the same interconnection agreement with the utility that allows for a maximum output of 10 MW (as measured in alternating current). The interconnection agreement provides the total cost of the qualified interconnection property. X and Y may include the costs paid or incurred by X and Y, respectively, for qualified interconnection prop- erty subject to the terms of the interconnection agreement, to calculate their respective section 48E credits for the Solar Qualified Facility and the Wind Bulletin No. 2024–32 407 August 5, 2024 Qualified Facility because each has a maximum net output of not greater than 5 MW. (b) Expansion of facility; Incremental production—(1) In general. Solely for purposes of this paragraph (b), the term qualified facility includes either a new unit or an addition of capacity placed in service after December 31, 2024, in con- nection with a facility described in section 48E(b)(3)(A) (without regard to clause (ii) of such paragraph), which was placed in service before January 1, 2025, but only to the extent of the increased amount of elec- tricity produced at the facility by reason of such new unit or addition of capacity. A new unit or an addition of capacity that meets the requirements of this paragraph (b) will be treated as a separate qualified facility. For purposes of this paragraph (b), a new unit or an addition of capacity requires the addition or replacement of qualified property (as defined in §1.48E- 2(e)), including any new or replacement integral property added to a facility nec- essary to increase capacity. If applicable for purposes of this paragraph (b), taxpay- ers must use modified or amended facil- ity operating licenses or the International Standard Organization (ISO) conditions to measure the maximum electrical generat- ing output of a facility to determine name- plate capacity. For purposes of assessing the One-Megawatt Exception in section 48E(a)(2)(A)(ii)(I), the capacity for a new unit or an addition of capacity is the sum of the nameplate capacity of the added qualified facility and the nameplate capac- ity of the facility to which the qualified facility was added. (2) Special rule for restarted facilities. Solely for purposes of this paragraph (b), a facility that is decommissioned or in the process of decommissioning and restarts can be considered to have increased capac- ity if the following conditions are met: (i) The existing facility must have ceased operations; (ii) The existing facility must have a shutdown period of at least one calendar year during which it is without a valid operating license from its respective Federal regulatory authority (that is, the Federal Energy Regulatory Commission (FERC) or the Nuclear Regulatory Com- mission (NRC)); and (iii) The increased capacity of the restarted facility must have a new, rein- stated, or renewed operating license issued by either FERC or NRC. (3) Computation of qualified invest- ment for a new unit or an addition of capacity—(i) New unit. For purposes of this paragraph (b), the term new unit means components of property including any new or replacement integral property added to a facility necessary to increase the capacity of the facility but do not replace the existing capacity of the facil- ity. The taxpayer’s qualified investment in the new unit during the taxable year that results in an increase in capacity is eligible for the section 48E credit. (ii) Addition of capacity. For pur- poses of this paragraph (b), the term addition of capacity means compo- nents of property, including any new or replacement integral property added to a facility necessary to increase the capac- ity of the facility by replacing, in whole or in part, the existing capacity of the facility. To determine a taxpayer’s qual- ified investment during the taxable year that resulted in an increased capacity of a facility by reason of an addition of capacity (not described in paragraph (b) (3)(i) of this section), a taxpayer must multiply its total qualified investment during the taxable year with respect to the facility, by a fraction, the numera- tor of which is the increase in nameplate capacity that results from the addition of capacity, and the denominator of which is the total nameplate capacity associ- ated with the components of property that result in the addition of capacity. (4) Examples. This paragraph (b)(4) provides examples illustrating the rules of this paragraph (b). (i) Example 1. New Unit. X owns a hydropower facility (Facility H) that was originally placed in service in 2020, with a nameplate capacity of 600 megawatts. During taxable years 2020 through 2024, X claimed a section 45 credit for the electricity pro- duced by Facility H. On July 1, 2025, X places in service components of property comprising a new unit that results in Facility H having an increased nameplate capacity of 900 megawatts in 2025. For purposes of this paragraph (b), this new unit will be treated as a separate facility (Facility J). X deter- mines the amount of its section 48E credit based on the amount of its qualified investment in Facility J. Even though X claimed a section 45 credit for the existing electricity capacity of Facility H in taxable years 2020 through 2024, X can claim a section 48E credit for its qualified investment in Facility J. X may also continue to claim the section 45 credit through taxable year 2030 for electricity generated by Facil- ity H (excluding the incremental electricity genera- tion related to Facility J). (ii) Example 2. Addition of Capacity. Y owns a nuclear facility (Facility N) that was originally placed in service on January 1, 2000, with a name- plate capacity of 800 megawatts. Y claimed a sec- tion 45U credit in taxable years 2024 and 2025 for the electricity generated by Facility N. On January 15, 2026, Y removed components of property with a nameplate capacity of 200 megawatts and placed in service components of property with a nameplate capacity of 300 megawatts at Facility N. For pur- poses of this paragraph (b), Facility N’s addition of capacity is treated as a new separate qualified facil- ity placed in service on January 15, 2026 (Facility P). Y determines the amount of its section 48E credit based on the amount of its qualified investment in Facility P, which is determined by multiplying Y’s qualified investment with respect to the addition of capacity by one-third (equal to the 100-megawatt increase in nameplate capacity divided by the 300 megawatt nameplate capacity associated with the new components of property that result in the addi- tion of capacity). Even though Y claimed a section 45U credit in taxable years 2024 and 2025 for the existing capacity of Facility N, Y can claim a sec- tion 48E credit for its investment in the addition of capacity associated with Facility P. Y may also con- tinue to claim the section 45U credit through tax- able year 2032 for electricity generated by Facility N (excluding the incremental electricity generation related to Facility P). (c) Retrofit of an existing facility (80/20 Rule)—(1) In general. For purposes of section 48E(b)(3)(A)(ii), a retrofitted qualified facility may qualify as originally placed in service even if it contains some used components of property within the unit of qualified facility, provided that the fair market value of the used components of the unit of qualified facility is not more than 20 percent of the total value of the unit of qualified facility (that is, the cost of the new components of property plus the value of the used components of property within the unit of qualified facility) (80/20 Rule). (2) Expenditures taken into account. Notwithstanding the rule provided in paragraph (c)(1) of this section, only expenditures paid or incurred that relate to the new components of the unit of quali- fied facility are taken into account for pur- poses of computing the credit determined under section 48E with respect to the qual- ified facility. (3) Cost of new components. For pur- poses of this 80/20 Rule, the cost of new components of the unit of qualified facility includes all costs properly included in the depreciable basis of the new components of the unit of qualified facility. August 5, 2024 408 Bulletin No. 2024–32 (4) New costs. If the taxpayer satisfies the 80/20 Rule with regard to the unit of qualified facility and the taxpayer pays or incurs new costs for property that is an integral part of the qualified facility (as defined in §1.48E-2(a)), the taxpayer may include these new costs paid or incurred for property that is an integral part of the qualified facility in the basis of the qual- ified facility for purposes of the section 48E credit. (5) Excluded costs. Costs incurred for new components of property added to used components of a unit of qualified facility may not be taken into account for pur- poses of the section 48E credit unless the taxpayer satisfies the 80/20 Rule by plac- ing in service a unit of qualified facility for which the fair market value of the used components of property is not more than 20 percent of the total value of the unit of qualified facility taking into account the cost of the new components of property plus the value of the used components of property. (6) Examples. The following examples illustrate the rules of this paragraph (c). (i) Example 1. Retrofitted facility that satisfies the 80/20 Rule. A owns an existing wind facility. On February 1, 2026, A replaces used components of the wind facility with new components at a cost of $2 million. The fair market value of the remaining original components of the wind facility is $400,000, which is not more than 20 percent of the retrofitted facility’s total fair market value of $2.4 million (the cost of the new components ($2 million) + the fair market value of the remaining original components ($400,000)). Thus, the retrofitted wind facility will be considered newly placed in service for purposes of section 48E, assuming all the other requirements of section 48E are met, and A will be able to claim a section 48E credit based on its investment in 2026 ($2 million). (ii) Example 2. Retrofit of an existing facility that meets the 80/20 Rule. Facility Z, a facility that was originally placed in service on January 1, 2026, was not a qualified facility (as defined in §1.48E-2(a)) when it was placed in service because it did not meet the greenhouse gas emission rate requirements (as determined under rules provided in §1.48E-5). On January 1, 2027, Facility Z was retrofitted and now meets the requirements to be a qualified facility (as defined in §1.48E-2(a)). After the retrofit, the cost of the new property included in Facility Z is greater than 80 percent of Facility Z’s total fair market value. Because Facility Z meets the 80/20 Rule, Facility Z is deemed to be originally placed in service on Jan- uary 1, 2027. Assuming all the other requirements of section 48E are met, Z may claim a section 48E credit based on its investment in the new components used to retrofit the existing facility in 2027. (iii) Example 3. Retrofitted nuclear facility that satisfied the 80/20 Rule. T owns a nuclear facility (Facility N) that was originally placed in service on March 1, 1982, and was decommissioned on September 20, 2010. T replaces used components of property at Facility N with new components at a cost of $200 million, and then places in Facility N in service on July 15, 2026. The fair market value of the remaining original components of Facility N, after being decommissioned and prior to restart, is $30 million, which is not more than 20 percent of Facility N’s total fair market value of $230 million (the cost of the new components ($200 million) + the fair market value of the remaining original com- ponents ($30 million)). Thus, assuming all the other requirements of section 48E are met, Facility N will be considered newly placed in service on July 15, 2026, for purposes of section 48E, and T will be able to claim a section 48E credit based on its investment in the new components ($200 million). (iv) Example 4. Capital improvements to an existing qualified facility that do not satisfy the 80/20 Rule. X owns an existing facility, Facility C, that was originally placed in service on January 1, 2023. X makes capital improvements to Facility C that are placed in service on June 6, 2026. The cost of the capital improvements total $500,000 and the fair market value of Facility C after the improvements is $2 million. The fair market value of the old com- ponents of Facility C is $1,500,000 or 75 percent of the total fair market value of the Facility C after the improvements. Because the fair market value of the new property included in Facility C is less than 80 percent of Facility C’s total fair market value, Facil- ity C does not meet the 80/20 Rule. Facility C will not be considered a qualified facility (as defined in §1.48E-2(a)) eligible for the section 48E credit. (d) Special rules regarding owner- ship—(1) Qualified investment with respect to a qualified facility or EST. For purposes of this paragraph (d), a taxpayer that owns a qualified investment with respect to a qualified facility or EST is eligible for the section 48E credit only to the extent of the taxpayer’s eligible invest- ment in the qualified facility or EST. In the case of multiple taxpayers holding direct ownership through their qualified invest- ments in a single qualified facility or EST (and such arrangement is not treated as a partnership for Federal income tax pur- poses), each taxpayer determines its eli- gible investment based on its fractional ownership interest in the qualified facility or EST. (2) Multiple owners. A taxpayer must directly own at least a fractional inter- est in the entire unit of qualified facility (as defined in §1.48E-2(b)(2)) or unit of EST (as defined in §1.48E-2(g)(2)) for a section 48E credit to be determined with respect to such taxpayer’s interest. No section 48E credit may be determined with respect to a taxpayer’s ownership of one or more separate components of a qualified facility or an EST if the compo- nents do not constitute a unit of qualified facility (as defined in §1.48E-2(b)(2)) or unit of EST (as defined in §1.48E-2(g) (2)). However, the use of property owned by one taxpayer that is an integral part of a qualified facility or EST owned by another taxpayer will not prevent a section 48E credit from being determined with respect to the second taxpayer’s qualified investment in a qualified facility or EST. See §1.48E-2(b)(3)(vi) for rules regarding shared integral property. (3) Section 761(a) election. If a qual- ified facility or EST is owned through an unincorporated organization that has made a valid election under section 761(a) of the Code, each member’s undivided ownership share in the qualified facility or EST will be treated as a separate qualified facility or EST owned by such member. (4) Related taxpayers—(i) Definition. For purposes of the section 48E credit, the term related taxpayers means mem- bers of a group of trades or businesses that are under common control (as defined in §1.52–1(b)). (ii) Related taxpayer rule. For purposes of the section 48E credit, related taxpayers are treated as one taxpayer in determining whether a taxpayer has made an invest- ment in a qualified facility or EST with respect to which a section 48E credit may be determined. (5) Examples. The following examples illustrate the rules in this paragraph (d). In each example, X and Y are unrelated taxpayers. (i) Example 1. Fractional ownership required to satisfy section 48E. X and Y each own a direct fractional ownership interest in an entire qualified facility (as defined in §1.48E-2(a)) and as a result, a section 48E credit may be determined with respect to X’s and Y’s qualified investment in their fractional ownership interests in the qualified facility. (ii) Example 2. Ownership of separate compo- nents of property that are part of a qualified facility. X and Y each own separate components of a quali- fied facility, which taken together would constitute a unit of qualified facility but taken separately would not constitute a unit of qualified facility. X owns component A and Y owns component B. No section 48E credit may be determined with respect to either component A or component B because X and Y each owns a separate component of a qualified facility that does not constitute a unit of qualified facility (as defined in §1.48E–2(b)(2)). (iii) Example 3. Separate ownership of property that is an integral part of separate qualified facili- ties. X owns a solar farm that is a qualified facility (as defined in §1.48E-2(a)) (Solar Qualified Facility), Bulletin No. 2024–32 409 August 5, 2024 which includes property that is an integral part of the Solar Qualified Facility, specifically a transformer in which the electricity is stepped up to electrical grid voltage before being transmitted to the electrical grid through an intertie. Y owns a wind facility that is a qualified facility (as defined in §1.48E-2(a)) (Wind Qualified Facility) that connects to X’s transformer. Because Y does not hold an ownership interest in the transformer, Y may compute its section 48E credit for the Wind Qualified Facility, but it may not include any costs relating to the transformer in its section 48E credit base. (e) Coordination rule for section 42 credits and section 48E credits. As pro- vided under section 50(c)(3)(C) of the Code, in the case of a taxpayer deter- mining eligible basis for purposes of calculating a credit under section 42 of the Code (section 42 credit), a taxpayer is not required to reduce its basis in a qualified facility or EST by the amount of the section 48E credit determined with respect to the taxpayer’s quali- fied investment with respect to such qualified facility or EST. The qualified investment with respect to a qualified facility or EST property may be used to determine a section 48E credit and may also be included in eligible basis to determine a section 42 credit. See para- graph (d) of this section for special rules regarding ownership. (f) Recapture—(1) In general. The credit calculated under section 48E(a) and §1.48E-1(b) is subject to general recapture rules under section 50(a). Additionally, section 48E(g) provides for recapture for any qualified facility for which a taxpayer claimed a section 48E credit that has a greenhouse gas emissions rate (as deter- mined under rules provided in §1.45Y-5) of greater than 10 grams of CO 2 e per kWh during the five-year period beginning on the date such qualified facility is origi- nally placed in service (five-year recap- ture period). (2) Recapture event—(i) In general. Any event that results in a qualified facil- ity having a greenhouse gas emissions rate (as determined under rules provided in §1.45Y-5) of greater than 10 grams of CO 2 e per kWh during the five-year period is a recapture event. If a qualified facility’s greenhouse gas emissions rate exceeds 10 grams of CO 2 e per kWh, the section 48E credit is subject to recapture. (ii) Changes to the Annual Table. A change to the greenhouse gas emissions rate for a type or category of facility that is published in the Annual Table (as defined in 1.45Y-5(f)) after a facility is placed in service does not result in a recapture event. (iii) Yearly Determination. (A) In gen- eral. A determination of whether a recap- ture event occurred under paragraph (f) (2) of this section must be made for each taxable year (or portion thereof) occur- ring within the five-year recapture period, beginning with the taxable year ending after the date the qualified facility is placed in service. Thus, for each taxable year that begins or ends within the five-year recap- ture period, the taxpayer must determine, for any qualified facility for which it has claimed the section 48E credit, whether such facility has maintained a greenhouse gas emissions rate of not greater than 10 grams of CO 2 e per kWh. (B) Annual Reporting Requirement. A taxpayer that has claimed the section 48E credit amount under §1.48E-1(b) or transferred a specified credit portion under section 6418 of the Code is required to provide to the IRS information on the greenhouse gas emissions rate of the qual- ified facility during the recapture period at the time and in the form and manner pre- scribed in IRS forms or instructions or in publications or guidance published in the Internal Revenue Bulletin. See §601.601 of this chapter. (iv) Carryback and carryforward adjustments. In the case of any recapture event described in paragraph (f)(2) of this section, the carrybacks and carryfor- wards under section 39 of the Code must be adjusted by reason of such recapture event. (3) Recapture Amount—(i) In general. If a recapture event occurred as described in paragraph (f)(2) of this section, the tax under chapter 1 of the Code for the taxable year in which the recapture event occurs is increased by an amount equal to the appli- cable recapture percentage multiplied by the credit amount that was claimed by the taxpayer under §1.48E-1(b). (ii) Applicable recapture percentage. If the recapture event occurs: (A) Within one full year after the prop- erty is placed in service, the recapture per- centage is 100; (B) Within one full year after the close of the period described in paragraph (f)(3) (ii)(A) of this section, the recapture per- centage is 80; (C) Within one full year after the close of the period described in paragraph (f)(3) (ii)(B) of this section, the recapture per- centage is 60; (D) Within one full year after the close of the period described in paragraph (f)(3) (ii)(C) of this section, the recapture per- centage is 40; (E) Within one full year after the close of the period described in paragraph (f)(3) (ii)(D) of this section, the recapture per- centage is 20. (4) Recapture period. The five-year recapture period begins on the date the qualified facility is placed in service and ends on the date that is five full years after the placed in service date. Each 365-day period (366-day period in case of a leap year) within the five-year recapture period is a separate recapture year for recapture purposes. (5) Increase in tax for recapture. The increase in tax under chapter 1 of the Code for the recapture of the credit amount claimed under section 48E(a) and §1.48E- 1(b) occurs in the year of the recapture event. (g) Cross references. (1) To determine applicable recapture rules, see section 50(a) of the Code. (2) For rules regarding the credit eligi- bility of property used outside the United States, see section 50(b)(1) of the Code. (3) For rules regarding the credit eligi- bility of property used by certain tax-ex- empt organizations, see section 50(b)(3) of the Code. See section 6417(d)(2) of the Code for an exception to this rule in the case of an applicable entity making an elective payment election. (4) For application of the normalization rules to the section 48E credit in the case of certain regulated companies, including rules regarding the election not to apply the normalization rules to energy storage technology (as defined in section 48(c)(6) of the Code), see section 50(d)(2) of the Code. (5) For rules relating to certain leased property, see section 50(d)(5) of the Code. (h) Applicability date. This section applies to qualified facilities and energy storage technologies placed in service after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REG- ULATIONS IN THE FEDERAL REGIS- TER]. August 5, 2024 410 Bulletin No. 2024–32 §1.48E-5 Greenhouse gas emissions rates for qualified facilities under section 48E. (a) In general. Section 48E(b)(3)(B)(ii) provides that rules similar to the rules of section 45Y(b)(2) regarding greenhouse emissions rates apply for purposes of sec- tion 48E. Paragraphs (b) through (f) of this section thus provide that the defini- tions and rules regarding greenhouse gas emission rate requirements (as determined under rules provided in §1.45Y-5) apply for purposes of section 48E and this sec- tion. Paragraph (g) of this section provides rules related to provisional emissions rates for purposes of section 48E and this sec- tion. Paragraph (h) of this section pro- vides rules for determining an anticipated greenhouse gas emissions rate. Paragraph (i) of this section provides rules regard- ing reliance on the annual publication of emissions rates and provisional emissions rates. Finally, paragraph (j) of this section provides rules for substantiation. (b) Definitions. The definitions pro- vided in §1.45Y-5(b) apply for purposes of section 48E and this section. (c) Non-C&G Facilities. The rules pro- vided in §1.45Y-5(c) apply for purposes of determining greenhouse gas emissions rates for Non-C&G Facilities for purposes of section 48E and this section. (d) C&G Facilities. The rules pro- vided in §1.45Y-5(d) apply for purposes of determining greenhouse gas emissions rates for C&G Facilities for purposes of section 48E and this section. (e) Carbon capture and sequestration. The rules provided in §1.45Y-5(e) regard- ing carbon capture and sequestration apply for purposes of section 48E and this section. (f) Annual publication of emissions rates. The rules provided in §1.45Y-5(f) regarding the annual publication of a table (Annual Table) that sets forth the green- house gas emissions rates for types or cat- egories of facilities apply for purposes of section 48E and this section. (g) Provisional emissions rates—(1) In general. In the case of any facility for which an emissions rate has not been established by the Secretary, a taxpayer that owns such facility may file a petition with the Secretary for determination of the emissions rate with respect to such facil- ity (Provisional Emissions Rate or PER). A PER must be determined and obtained under the rules of this section. (2) Rate not established. An emissions rate has not been established by the Sec- retary for a facility for purposes of sec- tions 45Y(b)(2)(C)(ii) and 48E(b)(3)(B) (ii) if such facility is not described in the Annual Table. If a taxpayer’s request for an emissions value pursuant to paragraph (g)(5) of this section is pending at the time such facility is or becomes described in the Annual Table, the taxpayer’s request for an emissions value will be automati- cally denied. (3) Process for filing a PER petition. To file a PER petition with the Secretary, a taxpayer must submit a PER petition by attaching it to the taxpayer’s Federal income tax return or Federal return, as appropriate, for the taxable year in which the taxpayer claims the section 48E credit with respect to the facility to which the PER petition relates. The PER petition must contain an emissions value and, if applicable, the associated letter from DOE. An emissions value may be obtained from DOE or by using the designated lifecycle analysis (LCA) model in accordance with paragraph (g)(6) of this section. An emis- sion value obtained from DOE will be based on an analytical assessment of the emissions rate associated with the facility performed by one or more of the National Laboratories, in consultation with other agency experts as appropriate, consistent with this section. A taxpayer must retain in its books and records the application and correspondence to and from DOE including a copy of the taxpayer’s request to DOE for an emissions value, including any information provided by the taxpayer to DOE pursuant to the emissions value request process provided in paragraph (g)(5) of this section. Alternatively, an emissions value can be determined by the taxpayer for a facility using the most the recent version of an LCA model, as of the time the PER petition is filed, that has been designated by the Secretary for such use under paragraph (g)(6) of this section. If an emissions value is deter- mined using the designated LCA model under paragraph (g)(6) of this section, a taxpayer is required to provide to the IRS information to support its determination in the form and manner prescribed in IRS forms or instructions or in publications or guidance published in the Internal Reve- nue Bulletin. See §601.601 of this chapter. A taxpayer may not request an emissions value from DOE for a facility for which an emissions value can be determined using the most recent version of an LCA model or models designated for such use under paragraph (g)(6) of this section. (4) PER determination. Upon the IRS’s acceptance of the taxpayer’s return to which a PER petition is attached, the emissions value of the facility specified on such petition is deemed accepted. A taxpayer can rely upon an emissions value provided by DOE for purposes of claim- ing a section 48E credit, provided that any information, representations, or other data provided to DOE in support of the request for an emissions value are accurate. If applicable, a taxpayer may rely upon an emissions value determined for a facility using the LCA model designated under paragraph (g)(6) of this section, provided that any information, representations, or other data used to obtain such emissions value are accurate. The IRS’s deemed acceptance of an emissions value is the Secretary’s determination of the PER. However, the taxpayer must also comply with all applicable requirements for the section 48E credit and any information, representations, or other data supporting an emissions value are subject to later examination by the IRS. (5) Emissions value request process. An applicant that submits a request for an emissions value must follow the pro- cedures specified by DOE to request and obtain such emissions value. Emissions values will be determined consistent with the rules provided in this section. An applicant can request an emissions value from DOE only after a front-end engineer- ing and design (FEED) study or similar indication of project maturity, as deter- mined by DOE, such as the completion of a project specification and cost estima- tion sufficient to inform a final investment decision for the facility. DOE may decline to review applications that are not respon- sive, including those applications that relate to a facility described in the Annual Table (consistent with paragraph (g)(2) of this section) or a facility for which an emissions value can be determined by an LCA model under paragraph (g)(6) of Bulletin No. 2024–32 411 August 5, 2024 this section (consistent with paragraph (g)(3) of this section), or applications that are incomplete. Applicants must fol- low DOE’s guidance and procedures for requesting and obtaining an emissions value from DOE. DOE will publish this guidance and procedures, including a process for, under limited circumstances, a revision to DOE’s initial assessment of an emissions value on the basis of revised technical information or facility design and operation. (6) LCA model for determining an emissions value for C&G Facilities. The rules provided in §1.45Y-5(g)(6) regard- ing the designation of an LCA model or models for determining an emissions value for C&G Facilities apply for pur- poses of section 48E and this section. (7) Effect of PER. A taxpayer who files for a PER must use a PER determined by the Secretary to determine eligibility for the section 48E credit, provided all other requirements of section 48E are met. The Secretary’s PER determination is not an examination or inspection of books of account for purposes of section 7605(b) of the Code and does not preclude or impede the IRS (under section 7605(b) or any administrative provisions adopted by the IRS) from later examining a return or inspecting books or records with respect to any taxable year for which the section 48E credit is claimed. Further, a PER determination does not signify that the IRS has determined that the requirements of section 48E have been satisfied for any taxable year. (h) Determining anticipated green- house gas emissions rate—(1) In gen- eral. A facility’s anticipated greenhouse gas emissions rate must be objectively determined based on an examination of all the facts and circumstances. Certain Non-C&G Facilities, such as the facilities described in §1.45Y-5(c)(2), may have an anticipated greenhouse gas emissions rate that is not greater than zero based on the technology and practices they rely upon to generate electricity. For facilities that require the use of certain feedstocks or carbon capture and sequestration, which may vary, to generate electricity with a greenhouse gas emissions rate that is not greater than zero, objective indicia that such facilities will operate with a green- house gas emissions rate that is not greater than zero for at least 10 years beginning from the date the facility is placed in ser- vice are required to establish that its antic- ipated greenhouse gas emissions rate is not greater than zero. (2) Examples of objective indicia. Examples of objective indicia that may establish an anticipated greenhouse gas emissions rate that is not greater than zero include, but are not limited to, the follow- ing: (i) Co-location of the facility with a fuel source (for example, an anaerobic digester) for which the combination of fuel, type of facility, and practice is rea- sonably expected to result in a greenhouse gas emissions rate that is not greater than zero; (ii) A 10-year contract to purchase fuels for which the combination of fuel, type of facility, and practice is reasonably expected to result in a greenhouse gas emissions rate that is not greater than zero; (iii) A facility type that only accommo- dates one type of fuel or a small range of fuels for which the combination of fuel, type of facility, and practice is reason- ably expected to result in a greenhouse gas emissions rate that is not greater than zero; or (iv) A 10-year contract for the capture, disposal, or utilization of qualified carbon dioxide from the facility for which the combination of fuel, type of facility, and practice is reasonably expected to result in a greenhouse gas emissions rate that is not greater than zero. (i) Reliance on Annual Table or Pro- visional Emissions Rate. Taxpayers may rely on the Annual Table in effect as of the date a facility began construction or the provisional emissions rate determined by the Secretary for the taxpayer’s facil- ity under paragraph (g)(4) of this section to determine the facility’s greenhouse gas emissions rate, provided that the facility continues to operate as a type of facility that is described in the Annual Table or the facility’s emissions value request, as applicable, for the entire taxable year. (j) Substantiation—(1) In general. A taxpayer must maintain in its books and records documentation regarding the design and operation of a facility that establishes that such facility had an antic- ipated greenhouse gas emissions rate that is not greater than zero in the year in which the section 48E credit is determined and operated with a greenhouse gas emis- sions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period that applies for purposes of section 48E(g). (2) Sufficient substantiation. Docu- mentation sufficient to substantiate that a facility had a greenhouse gas emissions rate, as determined under this section, not greater than 10 grams of CO 2 e per kWh during each year of the recapture period that applies for purposes of sec- tion 48E(g) includes documentation or a report prepared by an unrelated party that verifies the facility’s actual emissions rate. A facility described in §1.45Y-5(c)(2) can maintain sufficient documentation to demonstrate a greenhouse gas emissions rate that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period that applies for purposes of section 48E(g) by showing that it is the type of facility described in §1.45Y-5(c) (2). The Secretary may determine that other types of facilities can sufficiently substantiate a greenhouse gas emissions rate, as determined under this section, that is not greater than 10 grams of CO 2 e per kWh during each year of the recapture period that applies for purposes of section 48E(g) with certain documentation and will describe such facilities and documen- tation in IRS forms or instructions or in publications or guidance published in the Internal Revenue Bulletin. See §601.601 of this chapter. (k) Applicability date. This section applies to qualified facilities placed in ser- vice after December 31, 2024, and during a taxable year ending on or after [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER]. Douglas W. O’Donnell, Deputy Commissioner. (Filed by the Office of the Federal Register May 29, 2024, 8:45 a.m., and published in the issue of the Federal Register for June 03, 2024, 89 FR 47792) Bulletin No. 2024–32 i August 5, 2024 Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior pub- lished position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confu- sion. It is not used where a position in a prior ruling is being changed. Distinguished describes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above). Obsoleted describes a previously pub- lished ruling that is not considered deter- minative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the sub- stance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rul- ings in the series. Suspended is used in rare situations to show that the previous published rul- ings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE—Beneficiary. BK—Bank. B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cumulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Cooperative. Ct.D. —Court Decision. CY—County. D—Decedent. DC—Dummy Corporation. DE—Donee. Del. Order—Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Employer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduciary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Foreign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Federal Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grantee. GP—General Partner. GR—Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—Nonacquiescence. O—Organization. P—Parent Corporation. PHC—Personal Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Partnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Transferee. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpayer. TR—Trust. TT—Trustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. August 5, 2024 ii Bulletin No. 2024–32 Numerical Finding List 1 Bulletin 2024–32 Announcements: 2024-26, 2024-27 I.R.B. 14 2024-27, 2024-27 I.R.B. 14 2024-28, 2024-28 I.R.B. 39 2024-29, 2024-29 I.R.B. 71 Notices: 2024-47, 2024-27 I.R.B. 1 2024-52, 2024-27 I.R.B. 2 2024-53, 2024-27 I.R.B. 4 2024-54, 2024-28 I.R.B. 24 2024-55, 2024-28 I.R.B. 31 2024-56, 2024-29 I.R.B. 64 2024-57, 2024-29 I.R.B. 67 2024-58, 2024-30 I.R.B. 120 2024-59, 2024-32 I.R.B. 348 Proposed Regulations: REG-124593-23, 2024-28 I.R.B. 40 REG-109032-23, 2024-31 I.R.B. 332 REG-120137-19, 2024-31 I.R.B. 336 REG-119283-23, 2024-32 I.R.B. 351 Revenue Procedures: 2024-26, 2024-27 I.R.B. 7 2024-29, 2024-30 I.R.B. 121 2024-30, 2024-30 I.R.B. 183 2024-27, 2024-31 I.R.B. 300 2024-28, 2024-31 I.R.B. 326 Revenue Rulings: 2024-13, 2024-28 I.R.B. 18 2024-14, 2024-28 I.R.B. 18 2024-15, 2024-32 I.R.B. 340 Treasury Decisions: 10002, 2024-29 I.R.B. 56 9999, 2024-30 I.R.B. 72 10000, 2024-31 I.R.B. 185 10003, 2024-32 I.R.B. 342 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin 2024–52, dated December 30, 2024. Bulletin No. 2024–32 iii August 5, 2024 Finding List of Current Actions on Previously Published Items 1 Bulletin 2024–32 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin 2024–52, dated December 30, 2024. Internal Revenue Service Washington, DC 20224 Official Business Penalty for Private Use, $300 INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/. We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington, DC 20224.
Continua la tua ricerca in ChatGPT o Claude
Collega Omnilex per cercare nel corpus legale dal tuo assistente IA.