26 U.S.C. § 48 - Energy credit

Cite as26 U.S.C. § 48

(a) Energy credit

(1) In general

For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.

(2) Energy percentage

(A) In general

Except as provided in paragraphs (6) and (7), the energy percentage is-

(i) 30 percent in the case of-

(I) qualified fuel cell property,

(II) energy property described in paragraph (3)(A)(i) but only with respect to property the construction of which begins before January 1, 2024,

(III) energy property described in paragraph (3)(A)(ii),

(IV) qualified small wind energy property, and

(V) waste energy recovery property, and

(ii) in the case of any energy property to which clause (i) does not apply, 10 percent.

(B) Coordination with rehabilitation credit

The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.

(3) Energy property

For purposes of this subpart, the term "energy property" means any property-

(A) which is-

(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,

(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight but only with respect to property the construction of which begins before January 1, 2024,

(iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,

(iv) qualified fuel cell property or qualified microturbine property,

(v) combined heat and power system property,

(vi) qualified small wind energy property,

(vii) equipment which 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, but only with respect to property the construction of which begins before January 1, 2024, or

(viii) waste energy recovery property,

(B)

(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,

(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and

(D) which meets the performance and quality standards (if any) which-

(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and

(ii) are in effect at the time of the acquisition of the property.

Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.

(4) Special rule for property financed by subsidized energy financing or industrial development bonds

(A) Reduction of basis

For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by-

(i) subsidized energy financing, or

(ii) the proceeds of a private activity bond (within the meaning of section 141) the interest on which is exempt from tax under section 103,

the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).

(B) Determination of fraction

For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction-

(i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and

(ii) the denominator of which is the basis of the property.

(C) Subsidized energy financing

For purposes of subparagraph (A), the term "subsidized energy financing" means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.

(D) Termination

This paragraph shall not apply to periods after December 31, 2008, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

(5) Election to treat qualified facilities as energy property

(A) In general

In the case of any qualified property which is part of a qualified investment credit facility-

(i) such property shall be treated as energy property for purposes of this section, and

(ii) the energy percentage with respect to such property shall be 30 percent.

(B) Denial of production credit

No credit shall be allowed under section 45 for any taxable year with respect to any qualified investment credit facility.

(C) Qualified investment credit facility

For purposes of this paragraph, the term "qualified investment credit facility" means any facility-

(i) which is a qualified facility (within the meaning of section 45) described in paragraph (1), (2), (3), (4), (6), (7), (9), or (11) of section 45(d),

(ii) which is placed in service after 2008 and the construction of which begins before January 1, 2022, and

(iii) with respect to which-

(I) no credit has been allowed under section 45, and

(II) the taxpayer makes an irrevocable election to have this paragraph apply.

(D) Qualified property

For purposes of this paragraph, the term "qualified property" means property-

(i) which is-

(I) tangible personal property, or

(II) 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 investment credit facility,

(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

(iii) which is constructed, reconstructed, erected, or acquired by the taxpayer, and

(iv) the original use of which commences with the taxpayer.

(E) Phaseout of credit for wind facilities

In the case of any facility using wind to produce electricity which is treated as energy property by reason of this paragraph, the amount of the credit determined under this section (determined after the application of paragraphs (1) and (2) and without regard to this subparagraph) shall be reduced by-

(i) in the case of any facility the construction of which begins after December 31, 2016, and before January 1, 2018, 20 percent,

(ii) in the case of any facility the construction of which begins after December 31, 2017, and before January 1, 2019, 40 percent,

(iii) in the case of any facility the construction of which begins after December 31, 2018, and before January 1, 2020, 60 percent, and

(iv) in the case of any facility the construction of which begins after December 31, 2019, and before January 1, 2022, 40 percent.

(F) Qualified offshore wind facilities

(i) In general

In the case of any qualified offshore wind facility-

(I) subparagraph (C)(ii) shall be applied by substituting "January 1, 2026" for "January 1, 2022",

(II) subparagraph (E) shall not apply, and

(III) for purposes of this paragraph, section 45(d)(1) shall be applied by substituting "January 1, 2026" for "January 1, 2022".

(ii) Qualified offshore wind facility

For purposes of this subparagraph, the term "qualified offshore wind facility" means a qualified facility (within the meaning of section 45) described in paragraph (1) of section 45(d) (determined without regard to any date by which the construction of the facility is required to begin) which is located in the inland navigable waters of the United States or in the coastal waters of the United States.

(6) Phaseout for solar energy property

(A) In general

Subject to subparagraph (B), in the case of any energy property described in paragraph (3)(A)(i) the construction of which begins before January 1, 2024, the energy percentage determined under paragraph (2) shall be equal to-

(i) in the case of any property the construction of which begins after December 31, 2019, and before January 1, 2023, 26 percent, and

(ii) in the case of any property the construction of which begins after December 31, 2022, and before January 1, 2024, 22 percent.

(B) Placed in service deadline

In the case of any energy property described in paragraph (3)(A)(i) the construction of which begins before January 1, 2024, and which is not placed in service before January 1, 2026, the energy percentage determined under paragraph (2) shall be equal to 10 percent.

(7) Phaseout for certain other energy property

(A) In general

Subject to subparagraph (B), in the case of any qualified fuel cell property, qualified small wind property, waste energy recovery property, or energy property described in paragraph (3)(A)(ii), the energy percentage determined under paragraph (2) shall be equal to-

(i) in the case of any property the construction of which begins after December 31, 2019, and before January 1, 2023, 26 percent, and

(ii) in the case of any property the construction of which begins after December 31, 2022, and before January 1, 2024, 22 percent.

(B) Placed in service deadline

In the case of any energy property described in subparagraph (A) which is not placed in service before January 1, 2026, the energy percentage determined under paragraph (2) shall be equal to 0 percent.

(b) Certain progress expenditure rules made applicable

Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).

(c) Definitions

For purposes of this section-

(1) Qualified fuel cell property

(A) In general

The term "qualified fuel cell property" means a fuel cell power plant which-

(i) has a nameplate capacity of at least 0.5 kilowatt of electricity using an electrochemical process, and

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