Highlights
- The U.S. Department of the Treasury and IRS on April 10, 2024, issued a supplemental notice of proposed rulemaking (NPRM) regarding the clean hydrogen production tax credit (PTC) under Section 45V of the Internal Revenue Code.
- The supplemental NPRM provides additional information on the provisional emissions rate (PER) process.
- The Treasury Department and IRS are seeking comments on the supplemental NPRM within approximately 30 days of its release.
The U.S. Department of the Treasury Department and IRS on April 10, 2024, issued a supplemental notice of proposed rulemaking (NPRM) under the Internal Revenue Code's Section 45V clean hydrogen production tax credit (PTC). The supplemental NPRM provides additional information on the provisional emissions rate (PER) process and requests comments on the same. The supplemental NPRM follows the initial NPRM under Section 45V, issued on Dec. 26, 2023. (See Holland & Knight's previous alerts, "Treasury, IRS Release Section 45V Clean Hydrogen PTC Proposed Regulations," Dec. 22, 2023, and "Breaking Down the Section 45V Clean Hydrogen PTC Proposed Regulations," Jan. 10, 2024.)
The PER Process
The amount of the Section 45V credit is determined by reference to the life cycle greenhouse gas (LGHG) emissions rate of all hydrogen produced at a qualified clean hydrogen production facility during a taxable year. The LGHG emissions are to be determined by the U.S. Department of Energy's (DOE) Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model. If the most recent GREET model does not provide an LGHG emissions rate associated with a facility's hydrogen production pathway (i.e., if either the feedstock used by the facility or the production technology is not included in the most recent GREET model), Proposed Treas. Reg. § 1.45V-4 directs the taxpayer to use the PER process.
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Requesting a PER
Under the initial NPRM, a taxpayer can request a PER only after it has completed a front-end engineering and design (FEED) study or similar indicia of project maturity. The supplemental NPRM provides that the PER process begins with a submission of a completed Emissions Value Request Application and requires that a FEED study be completed based on an Association for Advanced Cost Engineering Class 3 Cost Estimate.
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As discussed in the supplemental NPRM, in order to request a PER
for a given hydrogen production facility, taxpayers must submit the
following information to the DOE:
- specific sections of the FEED study, as described in the DOE's emissions value request process instructions
- a completed Emissions Value Request Form, as described in the instructions
Additionally, taxpayers may submit any additional information that may be beneficial to the DOE in completing an LGHG analysis. The Treasury Department and IRS are requesting comments regarding the PER process, including:
- whether additional procedures should be implemented to effectuate the Emissions Value Request Application process
- information to be collected and whether additional information should be considered by the DOE in evaluating an Emissions Value Request Application
- any other aspects of the process
Comments are due in approximately 30 days.
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