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11 July 2024

IRS issues 2024 inflation adjustments for renewable energy production tax credits

The IRS released the 2024 inflation adjustment factor and reference prices for calculating the IRC Section 45 production tax credit (PTC) for qualified energy resources.

The PTC originally allowed taxpayers to claim a credit equal to $1.5 cents (adjusted annually for inflation) per kilowatt hour of renewable electricity produced at a qualified facility. The inflation adjustment factor for calendar-year 2024 is 1.9499. The 2024 reference price for facilities producing electricity from wind is 3.15 cents per kilowatt hour; because this price does not exceed the 8 cents multiplied by the inflation adjustment factor in IRC Section 45(b)(1), the phaseout of the credit under IRC Section 45(b)(1) does not apply for calendar 2024. Reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy have not been determined for 2024.

For facilities placed in service before January 1, 2022, the PTC is:

  • 2.9 cents per kilowatt hour on the sale of electricity produced from wind, closed-loop biomass, and geothermal energy
  • 1.5 cents per kilowatt hour on the sale of electricity produced in open-loop biomass, landfill gas, trash, qualified hydropower, and marine and hydrokinetic facilities

For facilities placed in service on or after January 1, 2022, the PTC for electricity is 0.6 cents per kilowatt hour on the sale of electricity from all eligible technologies (3.0 cents if prevailing wage and apprenticeship requirements are met).

Implications

The Inflation Reduction Act made life slightly more complicated as there are now two different PTC rates to track: a rate of 2.9 cents per kilowatt hour for older projects and a rate of 3.0 cents per kilowatt hour for newer projects (assuming the prevailing wage and apprenticeship requirements are met allowing for the 5X bonus). While these two numbers may often be the same, taxpayers will need to make sure they are using the right rate for their various projects in 2024.

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Contact Information

For additional information concerning this Alert, please contact:

Tax Credit Investment Advisory Services

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

Document ID: 2024-1358

 

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