Today, the IRS issued Notice 2024-36, which announces the procedures for the second round of allocation of section 48C Qualifying Advanced Energy Project credits. The Inflation Reduction Act extended the section 48C credit to provide an additional credit allocation of $10 billion (of which $4 billion may be allocated only to projects located in Energy Communities). The IRS, in consultation with the Department of Energy (DOE), allocated $4 billion of section 48C credits with approximately $1.5 billion allocated to projects located in Energy Communities earlier this year pursuant to Notices 2023-18 and 2023-44. The IRS anticipates allocating the remaining $6 billion (with $2.5 billion allocated to projects in Energy Communities) in Round 2.
Similar to the Round 1 allocation, the taxpayer must first submit a concept paper. The DOE will review the concept paper and send the taxpayer a letter encouraging or discouraging the submission of a full section 48C application. Failure to receive an allocation in Round 1 does not preclude an applicant from applying in Round 2.
Notice 2024-36 also updates the guidance contained in the appendices, for example, to provide additional examples of eligible and ineligible property in Appendix A. The categories of qualifying advanced energy projects remain the same: (1) clean energy manufacturing and recycling projects, (2) industrial decarbonization projects, and (3) critical material projects. The second category was renamed from "greenhouse gas emissions reduction projects," which was intended to reduce confusion with some of the requirements; it was not intended to be a substantive change. The Notice also clarifies that investments aimed at expanding the manufacturing capacity of a facility are not eligible to be considered under the second category, but may be considered under the first category.
The IRS and DOE anticipate opening the portal to accept concept papers by May 28, 2024, and taxpayers will have 30 days to submit their concept papers. The portal for the full section 48C application is expected to open over the summer, and applications must be submitted within 50 days after the portal opens. The IRS anticipates making Round 2 allocation decisions by January 15, 2025.
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