SECTION 2. BACKGROUND

.01 Overview . The amount of the en­ ergy investment credit determined under

§ 48(a) (§ 48 credit) for a taxable year is generally calculated by multiplying the basis of each energy property placed in service during that taxable year by the energy percentage (as defined in § 48(a)). Section 13103 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), com­ monly known as the Inflation Reduction Act of 2022 (IRA), amended § 48, in part, to add new § 48(e) to potentially increase the amount of the § 48 credit with respect to eligible property that is part of a quali­ fied solar and wind facility.

.02 Eligible Property . The term eligible property is defined in § 48(e)(3) to mean energy property (including energy storage technology described in § 48(a)(3)(A)(ix) installed in connection with such energy property) that (i) is part of a wind facility described in § 45(d)(1) for which an elec­ tion to treat the facility as energy property was made under § 48(a)(5) (wind facility), or (ii) is solar energy property described in § 48(a)(3)(A)(i) (solar energy property) or qualified small wind energy property described in § 48(a)(3)(A)(vi) (small wind energy property).

.03 Qualified Solar and Wind Facility . The term qualified solar and wind facility is defined in § 48(e)(2) to mean any facili­ ty (i) that generates electricity solely from a wind facility, solar energy property, or small wind energy property; (ii) that has a maximum net output of less than 5 mega­ watts (as measured in alternating current); and (iii) that is described in at least one of the following four categories described in § 48(e)(2)(A)(iii):

(1) Category 1 : The facility is located in a low-income community described in section 3.01 of this notice.

(2) Category 2 : The facility is located on Indian land described in section 3.02 of this notice.

(3) Category 3 : The facility is part of a qualified low-income residential building project described in section 3.03 of this notice.

(4) Category 4 : The facility is part of a qualified low-income economic benefit project described in section 3.04 of this notice.

.04 Increase in Section 48 Credit . Sec­ tion 48(e) provides for an increase in the energy percentage used to calculate the amount of the § 48 credit (§ 48(e) In­ crease) in the case of qualified solar and wind facilities that receive an allocation of Capacity Limitation. Depending on the category of the facility, the § 48(e) Increase is either 10 percentage points or 20 percentage points. Section 48(e)(1) (A)(i) provides for a § 48(e) Increase of 10 percentage points for eligible property that is part of a Category 1 facility or a Category 2 facility that is not also a Cate­ gory 3 facility or Category 4 facility. See the rules in section 3.01 and section 3.02 in this notice concerning facilities that are described in multiple categories. Sec­ tion 48(e)(1)(A)(ii) provides for a § 48(e) Increase of 20 percentage points for eli­ gible property that is part of a Category 3 facility or a Category 4 facility. Section 3 of this notice provides additional infor­ mation regarding the four categories for qualified solar and wind facilities. Sec­ tion 48(e)(1)(B) provides that the § 48(e) Increase for any taxable year for all prop­ erty that is part of a qualified solar and wind facility cannot exceed the amount that bears the same ratio to the amount of the § 48 Increase as the Capacity Lim­ itation allocated to such facility bears to the total megawatt nameplate capacity of such facility, as measured in direct cur­ rent.

.05 Placed in Service Deadline . To be eligible for the § 48(e) Increase, § 48(e) (4)(E) requires that the property must be placed in service within four years after the date the applicant was notified of the allocation of Capacity Limitation to the facility of which such property is a part. Any Capacity Limitation that is allocated but expires because property is not placed in service within four years is taken into account as an excess, or increase in ex­ cess, under the carryover rules in § 48(e) (4)(D). See section 2.07(2) of this notice.

.06 Placed in Service . (1) In general . Eligible property is con­ sidered placed in service in the earlier of the following taxable years:

1 Unless otherwise specified, all “section” or “§” references are to sections of the Code.

Bulletin No. 2023–10 505 March 6, 2023

(A) The taxable year in which, under the taxpayer’s depreciation practice, the period for depreciation with respect to such eligible property begins; or

(B) The taxable year in which the eli­ gible property is placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business or in the production of income.

(2) Eligible property subject to § 1.48- 4 election to treat lessee as purchaser. Eligible property with respect to which an election is made under § 1.48-4 of the Income Tax Regulations (26 C.F.R. part

1. to treat the lessee as having purchased such energy property is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee.

.07 Establishment of Allocation Pro- gram .

(1) In general . Section 48(e)(4) directs the Secretary of the Treasury or her del­ egate (Secretary) to establish a program, within 180 days of enactment of the IRA, to allocate amounts of Capacity Limita­ tion to qualified solar and wind facilities.

(2) Annual Capacity Limitation . Under § 48(e)(4)(C), the total annual Capaci­ ty Limitation is 1.8 gigawatts of direct current capacity for each of the calendar years 2023 and 2024. Under § 48(e)(4) (D), if the annual Capacity Limitation for any calendar year exceeds the aggregate amount allocated for such year, the excess is carried forward to the next year, but not beyond calendar year 2024. Any excess from calendar year 2024 may be carried forward and applied to the Capacity Lim­ itation for calendar year 2025 under new § 48E(h)(4)(D)(ii). ²