Clean Energy Tax Incentives: Elective Pay Eligible Tax Credits
The Ination Reduction Act of 2022 (“IRA”) makes several clean energy tax credits available to businesses; tax-exempt organi -
zations; state, local, and tribal governments; other entities; and individuals. The IRA also enables entities to take advantage of
certain clean energy tax credits through its elective pay provision (also colloquially known as direct pay). Elective pay allows
several types of entities, such as tax-exempts and governments, to treat the amount of certain credits as a payment against tax
on their tax returns and as a result receive direct payments for certain clean energy tax credits.
Tax Provision Description
Production Tax Credit for
Electricity from Renewables
(§ 45, pre-2025)
For production of electricity from eligible renewable sources, including wind, biomass, geothermal, solar,
small irrigation, landll and trash, hydropower, marine and hydrokinetic energy.
Credit Amount (for 2022): 0.55 cents/kilowatt (kW); (1/2 rate for electricity produced from open loop biomass,
landll gas, and trash); 2.75 cents/kW if Prevailing Wage and Apprenticeship (PWA) rules are met
1,2,3,7
Clean Electricity Production
Tax Credit (§ 45Y, 2025 onwards)
Technology-neutral tax credit for production of clean electricity. Replaces § 45 for facilities that begin
construction and are placed in service after 2024.
Credit Amount: Starts in 2025, consistent with credit amounts under section 45
1,2,3,6,7
Investment Tax Credit for
Energy Property (§ 48, pre-2025)
For investment in renewable energy projects including fuel cell, solar, geothermal, small wind, energy storage,
biogas, microgrid controllers, and combined heat and power properties
Credit Amount: 6% of qualied investment (basis); 30% if PWA requirements met
1,4,5,6,8
Clean Electricity Investment
Tax Credit (§ 48E, 2025 onwards)
Technology-neutral tax credit for investment in facilities that generate clean electricity and qualied energy
storage technologies. Replaces § 48 for facilities that begin construction and are placed in service after 2024
Credit Amount: 6% of qualied investment (basis); 30% if PWA requirements met
1,4,5,6
Low-Income Communities
Bonus Credit (§ 48(e), 48E(h))
Application required
Additional investment tax credit for small-scale solar and wind (§ 48(e)) or clean electricity (§48E(h)) facil-
ities (<5MW net output) on Indian land, federally subsidized housing, in low-income communities, and benet
low-income households. Allocated through an application process.
Credit Amount: 10 or 20 percentage point increase on base investment tax credit
7
Credit for carbon dioxide sequestration coupled with permitted end uses in the United States.
Credit for Carbon Oxide
Credit Amount: $12-36 per metric ton of qualied carbon oxide captured and sequestered, used as a tertiary
Sequestration (§ 45Q)
injectant, or used, depending on the specied end use; $60-$180 per metric ton if PWA
requirements met.
1,7
Zero-Emission Nuclear Power
For electricity from nuclear power facilities. Facilities in operation prior to August 16, 2022.
Production Credit (§ 45U)
Credit Amount (for 2023): 0.3 cents/kWh (reduced rate for larger facilities); 1.5 cent/kWh if PW req’s met
1,7
Advanced Energy Project
For investments in advanced energy projects. A total of $10 billion will be allocated, not less than $4 billion
Credit (§ 48C)
of which will be allocated to projects in certain energy communities.
Application required
Credit Amount: 6% of taxpayer’s qualied investment; 30% if PWA requirements are met
1
Advanced Manufacturing
Production Credit (§ 45X)
Production tax credit for domestic clean energy manufacturing of components including solar and wind
energy, inverters, battery components, and critical materials.
Credit Amount: Varies by component
Fuels Vehicles Manufacturing Energy Generation & Carbon Capture
Credit for Qualified
Commercial Clean Vehicles (§
45W)
Alternative Fuel Vehicle
For alternative fuel vehicle refueling and charging property, located in low-income and non-urban areas.
Refueling Property Credit
Qualied fuels include electricity, ethanol, natural gas, hydrogen, and biodiesel.
(§ 30C)
Credit Amount: 6% of basis for businesses and can increase to 30% if PWA is met.
For purchasers of commercial clean vehicles. Qualifying vehicles include passenger vehicles, buses,
ambulances, and certain other vehicles for use on public streets, roads, and highways.
Credit Amount: Up to $40,000 (max $7,500 for vehicles <14,000 lbs)
9
Clean Hydrogen Production
Tax Credit (§ 45V)
Clean Fuel Production Credit
(§ 45Z, 2025 onwards)
For producing clean hydrogen at a qualied, U.S.-based clean hydrogen production facility.
Credit Amount: $0.60/kg multiplied by the applicable percentage (20% to 100%, depending on lifecycle green-
house gas emissions), amount increases if PWA is met
1,7
Technology neutral tax credit for domestic production of clean transportation fuels
, including sustainable
aviation fuels, beginning in 2025*
Credit Amount: $0.20/gallon ($0.35/gal for aviation fuel) multiplied by CO2 “emissions factor”; $1.00/gallon
($1.75/gal for aviation fuel) multiplied by CO2 “emissions factor” if PWA is met
1,7
Please see the notes on the next page or see IRS.gov/cleanenergy for more information.
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Notes:
The information in this document may be subject to change as guidance is issued or nalized. For all IRA clean energy tax credits,
please see irs.gov/cleanenergy for further details and eligibility requirements.
1
Credit is increased by 5 times for projects that pay prevailing wages and use registered apprentices. Apprenticeship
requirements do not apply for §§ 45L and 45U. Prevailing wage and apprenticeship requirements do not apply to certain
projects, including certain projects of less than 1 megawatt or those that began construction prior to January 29, 2023.
2
Credit is increased by 10% if the project meets certain domestic content requirements for steel or iron, and manufac
tured products.
3
Credit is increased by 10% if located in an energy community.
4
Credit is increased by up to 10 percentage points for projects meeting certain domestic content requirements for steel,
iron, and manufactured products.
5
Credit is increased by up to 10 percentage points if located in an energy community.
6
Section 168(e) provides favorable depreciation treatment for facilities or property qualifying for this tax credit. These
facilities or property will be treated as a 5-year property for purposes of cost recovery, leaving them with lower taxable
income in the earlier years of a clean energy investment.
7
Credit rate is adjusted annually for ination.
8
See section 48 for more detail and applicable exceptions to the credit rate.
9
The entities eligible for elective pay of the commercial clean vehicle credit is a subset of the entities eligible for elective
pay of other credits. In addition, starting January 1, 2024, the amount of a new clean vehicle or previously owned clean
vehicle tax credit (but not a commercial clean vehicle credit) can be transferred to a dealer for an equivalent reduction in
the eligible vehicle’s sales price.
Publication 5817-G (6-2023) Catalog Number 94141A Department of the Treasury Internal Revenue Service www.irs.gov
