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Top 3 considerations for manufacturers considering applying for section 48C energy tax credits
Update April 2024: This past weekend 48C allocation was awarded to the first wave of applicants. Companies that receive allocation will need to evaluate compliance to limit credit recapture. Baker Tilly can help ensure your project complies through our compliance portal to deliver a seamless experience for you and your contractors to understand and address any PW&A issues as they arise. We’re also here to help those who didn’t receive an allocation with applying for the round two application.
The Inflation Reduction Act of 2022, Section 48C Advanced Energy Credit (AEC) is a competitive tax credit program that requires manufacturers apply in order to receive an allocation. The current credit, Section 48C Advanced Energy Credit, includes $10 billion in new 30% investment tax credits and broadens what is deemed to be eligible energy property a company can invest in to earn the credit. The credit value is 30% of the project capital investment that is deemed to be eligible energy property. Explore examples of qualified projects here.
1. There is no harm in applying for this investment tax credit.
The 48C program has incorporated a pre-application process which seeks concepts for expansion of their production facilities to know where advanced manufacturing needs exist. We are recommending that most any manufacturer with a current or planned energy related project consider applying. Projects will be scored after an initial review by the Department of Energy (DOE) with those scoring highest given the greatest likelihood of being awarded a tax credit allocation. This is also a great opportunity to get feedback on a project should you be seeking other Federal loan sources.
For those awarded, this credit will be significant, accounting for 6% or 30% of the capital investment in a qualified advanced energy project.
If you are thinking of applying for section 48C, it is likely your competitors are too.
2. Time is ticking.
The first $4 billion of funding was awarded to applicants on March 29, 2024. While additional guidance around domestic content is expected any week, now is the time to prepare pre-application materials. For manufacturers looking for a time-saving shortcut, our section 48C application portal is the answer.
How does Baker Tilly support manufacturers with their section 48C application?
- Get started. Enter your project information into the 48C portal and invite any relevant team members to help. Your entire team, no matter where they sit, can collaborate on your project in the portal from pre-application through construction.
- Engage Baker Tilly. Once you’ve entered your project information our team will share with you a scope of work so we can officially get started.
- Baker Tilly will help assemble your 48C pre-application materials that you can then take and submit to the DOE by July 31, 2023.
- Once you receive scoring on your energy concept, our specialists will work with you to develop a full application that maximizes the credit allocation amount. Once complete, you will submit to the Internal Revenue Service (IRS).
- Next, if you receive a credit allocation letter from the IRS, it will give you two years to begin construction and another two years to place your energy project in service. During this time, our Baker Tilly specialists continue to support you in helping to determine final credit value, performing energy cost segregation and generating work papers to help you claim the full credit.
- Finally, DOE will provide a certificate letter, enabling your company to claim the tax credit on your next return.
3. Leverage Baker Tilly’s portal as a singular workspace to manage your project from pre-application through construction.
Our portal enables users to grant access to their team members, so team collaboration happens seamlessly. We’ve helped clients apply for and win millions in competitive tax credits. Using that experience, we built the portal to make pre-application as easy as possible.
We’re with you from pre-application through formal concept papers and finally, if awarded, we can help ensure your project complies to limit credit recapture.
If you are interested in learning more about section 45X, connect with our IRA specialists here.
