The IRS announced (Announcement 2022-23) the increases in the rates for the renewable electricity production credit under IRC Section 45 after the credit calculations were amended by the Inflation Reduction Act. The increased credit rate applies to qualified facilities placed in service after December 31, 2021.

The credit rate in Notice 2022-20, however, still applies to qualified facilities placed in service on or before December 31, 2021.

Under IRC Sections 45(b)(2) and 45(b)(6)(A), the renewable electricity production credit for calendar year 2022 is 2.75 cents per kilowatt hour for sales of electricity produced by (1) wind, (2) closed-loop biomass, (3) geothermal energy and (4) solar energy qualified facilities placed in service after December 31, 2021.

Under IRC Sections 45(b)(2), 45(b)(4)(A) and 45(b)(6)(A), the renewable electricity production credit for calendar year 2022 is 1.25 cents per kilowatt hour for sales of electricity produced by (1) open-loop biomass, (2) landfill gas, (3) trash, (4) hydropower and (5) marine and hydrokinetic qualified facilities placed in service after December 31, 2021.

Implications

Taxpayers or companies looking at projects should factor in the increased rate for the electricity production credit into their deal and project-related models and confirm that the credit is correctly reflected on their returns.

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Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor