SECTION 14. DRAFTING

INFORMATION

The principal author of this notice is John M. Deininger of the Office of As­ sociate Chief Counsel (Passthroughs & Special Industries). For further infor­

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mation regarding this notice contact Mr. Deininger on (202) 317-6853 (not a tollfree call). Any questions or comments regarding the non-tax aspects of this no­ tice can be submitted to the Department of Energy at 48CQuestions@hq.doe.gov. DOE may post questions and answers

related to this notice on Infrastructure eXCHANGE at https://infrastructure-ex­ change.energy.gov (select 48C from the list of options to view questions and an­ swers specific to notice). Any questions or comments received under this notice are subject to public release pursuant to

the Freedom of Information Act. DOE is under no obligation to respond to, or acknowledge receipt of, any questions or comments submitted under this no­ tice and any responses provided do not constitute legal advice provided by either DOE or the IRS.

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APPENDIX A Qualifying Advanced Energy Projects

For the purposes of determining eligibility for the § 48C tax credit, a qualifying advanced energy project means:

1. Clean Energy Manufacturing and Recycling Projects

A qualifying advanced energy project in this category re-equips, expands, or establishes an industrial or manufacturing facility for the production or recycling of:

a. Property designed to be used to produce energy from the sun, water, wind, geothermal deposits (within the meaning of 26 U.S.C. § 613(e)(2)), or other renewable resources .

(i) Examples of eligible property include solar panels and their specialized support structures; wind turbines, towers, floating offshore platforms, and related equipment; power electronics designed for use with eligible solar or wind property; equipment to concentrate sunlight to generate heat for industrial processes or to convert it to electricity; geothermal turbines and heat pumps; hydropower turbines; and other products directly used to generate electrical and/or thermal energy from renewable resources, as well as the specialized components, subcomponents, and materials incorporated into any such eligible property, including equipment for sensing communication, and control.

(ii) Examples of ineligible property include equipment for applications other than the conversion of energy from renewable resources for delivering electricity, building heat, or industrial process heat such as a gas turbine generator set which burns natural gas, or building that houses a boiler to heat water from fossil fuel.

b. Fuel cells, microturbines, or energy storage systems and components .

(i) Examples of eligible property include stationary batteries; stationary hydrogen fuel cells; hydrogen storage vessels; microturbines for combined heat and pow­ er systems; pumps and turbines for pumped hydropower storage systems; and the specialized components of any such equipment, including equipment for sensing communication, and control.

(ii) Examples of ineligible property include heavy gas turbines. For electric vehicle batteries and fuel cells for vehicles see the “light-, medium-, or heavy-duty electric or fuel cell vehicles” project class.

c. Electric grid modernization equipment or components .

(i) Examples of eligible property include grid equipment for electricity delivery; power flow, control, and conversion, such as transformers, power electronics, advanced cables and conductors, advanced meters, breakers, switchgears, composite poles, converters, MVDC and HVDC lines, grid enhancing technologies, and electrical steel or alloys used in transformer cores. Examples of eligible property also include the specialized components of any such grid modernization equipment, including components for sensing communication, and control.

(ii) Electric vehicle supply equipment qualifies under the “light-, medium-, or heavy-duty electric or fuel cell vehicles” project class. Storage technologies for grid applications qualify under the “fuel cells, microturbines, or energy storage systems and components” project class.

d. Property designed to capture, transport, remove, use, or sequester carbon oxide emissions .

(i) Examples of eligible property include carbon capture equipment necessary to compress, treat, process, liquefy, pump or perform some other physical action to capture carbon oxides, including solvents; membranes; sorbents; chemical processing equipment; compressors; monitoring equipment; and injection equipment; and well components such as packers, casing strings, steel tubulars, well head, valves, and sensors suitable for use in Underground Injection Control (UIC) Class VI wells. Eligible property also includes transportation equipment, as in a system of gathering and distribution pipelines, including pipelines that collect carbon oxide captured from an industrial facility or multiple facilities for the purpose of transporting that carbon oxide.

(ii) Examples of ineligible property include scrubbers for conventional air pollutants (except those that are required to remove pollutants upstream of carbon capture equipment for technical performance reasons); energy generation equipment, (except as related to energy recovery at carbon capture systems); and refining equipment.

e. Equipment designed to refine, electrolyze, or blend any fuel, chemical, or product which is renewable, or low-carbon and low- emission . For the purposes of Round 1 of the § 48C(e) program, such renewable, and low-carbon, low-emission fuels, chemicals, and products include:

(i) Renewable transportation fuel which: (A) is suitable for use as a fuel in a vehicle, marine vessel, or aircraft, (B) is derived from or co-processed with: (I) a biomass feedstock, or (II) hydrogen produced from renewable energy and inputs, and

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(C) is not derived from palm fatty acid distillates or fossil fuels, including coal, natural gas, and petroleum. A qualifying advanced energy project does not include any portion of a project for the production of any property which is used in the refining or blending of any transportation fuel (other than renewable fuels, as described herein).

(ii) Clean hydrogen produced with a well-to-gate carbon intensity of less than 4kgCO2e/kgH2, in accordance with the definition of qualified clean hydrogen under the § 45V tax credit program.

(iii) Other fuel which: (A) is derived from or co-processed with a renewable feedstock or achieves at least a 50 percent lifecycle greenhouse gas emis­ sions reduction in comparison with the conventional alternative,

(I) is not a transportation fuel, and (II) is not derived from palm fatty acid distillates or fossil fuels, including coal, natural gas, and petroleum. (iv) Product or chemical which: (A) is derived from or co-processed with a renewable feedstock or achieves at least a 50 percent lifecycle greenhouse gas emis­ sions reduction in comparison with the conventional alternative,

(B) is suitable for use as an industrial feedstock, and (C) is not derived from palm fatty acid distillates or fossil fuels, including coal, natural gas, and petroleum.

(v) Examples of eligible property include electrolyzers; mixing devices; pumps; separation devices; bioprocessing equipment; biomass preprocessing equipment; and reactors, so long as they are intended for use to produce eligible fuels, chemical, and products, as demonstrated through engineering specifications or offtake agreements.

(vi) Examples of eligible fuels, chemicals, and products produced by eligible equipment include hydrogen produced through electrolysis powered by low- or zero-emissions energy; low-emissions ammonia; renewable biofuels, including sustainable aviation fuel and fuels intended to displace petroleum fuel in on-road and off-road applications; and low-emissions chemicals, basic organic chemicals, and polymer resins.

(vii) Examples of ineligible fuels and chemicals would include those derived solely from fossil resources produced through conventional petroleum and natural gas refining.

Instructions for calculating well-to-gate carbon intensity of clean hydrogen and lifecycle emissions rates will be provided in additional § 48C(e) program guidance.

f. Property designed to produce energy conservation technologies (including residential, commercial, and industrial applications)

(i) Examples of eligible energy conservation property include technologies and grid-interactive devices eligible for residential or commercial efficiency im­ provements for purposes of the § 25C credit or the § 179D tax deduction, as well as equipment that directly reduces net energy use in industrial applications, such as ultra-efficient heat pumps, insulation, ultra-efficient hot water systems, sensors, controls, and similar advanced efficiency technologies.

(ii) Examples of ineligible energy conservation property include those that reduce electricity usage by increasing direct natural gas or other fossil fuel use and/or lead to increased system-level emissions.

g. Light-, medium-, or heavy-duty electric or fuel cell vehicles, as well as technologies, components, or materials for such vehicles, and associated charging or refueling infrastructure .

(i) Examples of eligible property include battery electric, plug-in hybrid electric, or fuel cell cars, trucks, and buses, as well as the specialized components of those vehicles, such as batteries, electric drive systems, fuel cells, and the materials and subcomponents therein.

(ii) Examples of eligible charging or refueling infrastructure include electric vehicle supply equipment (EVSE), components from the grid connection to the vehicle, bidirectional charging equipment, and components used in hydrogen refueling stations (e.g., hydrogen compressors, pumps, storage vessels, and dispensing equipment).

(iii) Examples of ineligible equipment include internal combustion engine vehicles of all sizes, non-plug-in hybrid vehicles of less than 14,000 pounds gross vehi­ cle weight rating, and their components, as well as associated refueling infrastructure, such as petroleum gas, liquefied or compressed natural gas, or ethanol refueling stations. Examples of ineligible equipment also include components of charging or refueling stations, such as signage, that are not directly involved in the transfer of fuel or power to the vehicle.

h. Hybrid vehicles with a gross vehicle weight rating of not less than 14,000 pounds, as well as technologies, components, or materials for such vehicles.

(i) Examples of eligible property include traction batteries, converters, power electronics, and assembled hybrid vehicles themselves, but components and materials must be designed for large hybrid vehicles with a gross vehicle weight rating of not less than 14,000 pounds, as demonstrated through engineering specifications and/ or offtake agreements.

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i. Other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary .

(i) Examples of eligible advanced energy property include specialized components and equipment for nuclear power reactors or their fuels, and equipment used to reduce the emissions of industrial processes. Property may be determined to be designed to reduce greenhouse gas emissions either through published guidance or in the letter notifying a taxpayer that the IRS has accepted the taxpayer’s application for §48C certification with respect to the property.

2. Greenhouse Gas Emission Reduction Projects

A qualifying advanced energy project in this category re-equips an industrial or manufacturing facility, including energy-intensive manufacturing sectors, such as cement, iron and steel, aluminum, and chemicals, with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of one of more of the following:

a. Low- or zero-carbon process heating systems .​

(i) Examples of eligible equipment include electric heat pumps, combined heat and power (CHP) systems, and heating systems based on electricity, clean hydro­ gen, biomass, or waste heat recovery.

b. Carbon capture, transport, utilization, and storage systems .​

(i) Examples of eligible equipment include carbon capture equipment necessary to compress, treat, process, liquify, pump, or perform some other physical action to capture carbon oxides, and specialized equipment and materials needed for the storage of carbon oxide including carbon dioxide pipelines; monitoring equipment; and injection equipment and well components such as packers; casing strings; steel tubulars; well head; valves; and sensors suitable for use in UIC Class VI wells.

(ii) Examples of ineligible property include scrubbers for conventional air pollutants, except those that are required to remove pollutants upstream of carbon capture equipment for technical performance reasons; energy generation equipment, except as related to energy recovery at carbon capture systems; and refining equipment.

c. Energy efficiency and reduction in waste from industrial processes .

(i) Examples of eligible equipment include technologies that reduce direct fuel use, electricity use, or waste in industrial applications, such as industrial heat pumps, combined heat and power (CHP) systems, insulation, sensors, controls, advanced recycling approaches, smart energy management, and similar advanced efficiency technologies.

d. Any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary .

(i) Examples of other eligible industrial technologies include electrification of direct fuel use processes, adoption of renewable or low-emissions fuels and feedstocks, and other equipment replacement or process redesigns that reduce fuel or process-related emissions or otherwise contribute to reducing greenhouse gas emissions by at least 20 percent.

Instructions for calculating and demonstrating an emissions reduction of 20 percent will be provided in the additional § 48C(e) program guidance.

3. Critical Material Projects

A qualifying advanced energy project in this category re-equips, expands, or establishes an industrial facility for the processing, refining, or recycling of critical materials (as defined in § 7002(a) of the Energy Act of 2020 (30 U.S.C. § 1606(a)). For purposes of this Phase I, critical materials will consist of:

a. The currently effective final list of critical minerals as determined by the U.S. Geological Survey ( see 2022 Final List of Crit­ ical Minerals for the list published in 2022 available at: https://www.federalregister.gov/documents/2022/02/24/2022-04027/2022 -final-list-of-critical-minerals); and

b. Any additional critical materials as determined by the Secretary of Energy and posted on the http://www.energy.gov/criticalm­ aterials by July 31, 2023.

Examples of eligible projects in this project category include industrial facilities that process raw ore, brines, mine tailings, end-of-life products, waste streams, and other source materials into critical materials.

Examples of ineligible projects under this project category include facilities that process critical materials into derivative products, such as metals processing. However, facilities of this latter type may be eligible under the Clean Energy Manufacturing and Recycling Projects category.

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APPENDIX B DOE APPLICATION PROCESS

I. DOE Review Process

A two-stage technical evaluation process will be used for submissions:

• Stage 1 – Concept Paper

• Stage 2 – § 48C(e) Application

A. Concept Paper

The first stage requires taxpayers to submit concept papers describing the proposed project. Concept papers will be evaluated against criteria that may include eligibility requirements, definitions for qualifying advanced energy projects, reasonable expectation of commercial viability, and other factors described in the additional § 48C(e) program guidance. Following this preliminary review, taxpayers will receive a letter either encouraging them to submit a § 48C(e) application or discouraging them from submitting a § 48C(e) application. DOE will begin accepting concept papers when the additional § 48C(e) program guidance is issued on May 31, 2023, and concept papers must be submitted to DOE no later than July 31, 2023.

A taxpayer that receives a discouragement letter may still submit a § 48C(e) application in accordance with the § 48C(e) program guidance. Receiving a discouragement letter in response to a submitted concept paper does not disqualify a taxpayer from submitting a § 48C(e) application but represents DOE’s feedback that the project, as proposed, is unlikely to receive a recommendation based on the information provided in the concept paper.

B. § 48C(e) Application

The second evaluation stage will consist of a review of § 48C(e) applications submitted after the concept paper stage. Taxpayers may not submit § 48C(e) applications unless they submitted concept papers by the specified deadline.

DOE will review applications for DOE recommendation for compliance to determine that (1) the application meets the eligibility requirements, (2) the information required by the additional § 48C(e) program guidance has been submitted, (3) the taxpayer filed a timely concept paper, and (4) all mandatory requirements of the additional § 48C(e) program guidance are satisfied. The review will also include a thorough, consistent, and objective examination of applications for DOE recommendation based on technical review criteria and program policy factors outlined in the additional § 48C(e) program guidance.

II. Application Evaluation Information

A. Technical Review Criteria

Applications for DOE recommendation will be evaluated based on technical review criteria to be described in the additional § 48C(e) program guidance. These criteria will include selection criteria described in § 48C(d)(3) and additional criteria that further the goals of the program.

As part of the technical review criteria to be described in the additional § 48C(e) program guidance, DOE anticipates evaluating applications for DOE recommendation based on the net impact of the qualifying project in avoiding or reducing greenhouse gases emissions, as described in the additional § 48C(e) program guidance. DOE also anticipates evaluating applications for DOE recom­ mendation based on the community benefits of the proposed qualifying advanced energy projects, which may include community and labor engagement and commitment to high quality and accessible jobs and workforce pathways.

B. Program Policy Factors

In addition to technical review criteria, DOE may consider one or more policy factors in determining which applications for DOE recommendation submitted during Round 1 of the § 48C(e) program to recommend to the IRS for certification.

To achieve maximum benefits to strengthen U.S. industrial competitiveness and clean energy supply chains as well as to promote high quality jobs and community benefits, DOE may consider giving priority to qualifying advanced energy projects not eligible for support from other DOE financial assistance programs funded by the Infrastructure Investment and Jobs Act (Public Law 117-58) or the Inflation Reduction Act of 2022 (Public Law 117-169).

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In some cases, benefits towards the program’s goals may be enhanced if a project receiving a credit under § 48C also receives com­ plementary assistance from other programs. For taxpayers seeking assistance from other programs for the same proposed qualifying advanced energy project, DOE may consider whether the application for DOE recommendation sufficiently justifies the need for and benefits of receiving assistance from multiple programs. Complementary assistance may also affect the tax treatment of property for which a taxpayer receives an allocation under the § 48C(e) program.

C. Strengthening Secure, Domestic, Clean Energy Supply Chains

To help build more resilient, diverse, and secure U.S. clean energy supply chains, DOE may consider whether proposed projects address specific gaps, vulnerabilities, or risks in the domestic production of clean energy products. The additional § 48C(e) program guidance will indicate specific priority technologies that would address these gaps, vulnerabilities, and risks to relevant domestic supply chains.

To further ensure the § 48C(e) program supports these goals to the greatest extent possible, DOE may conduct a review to determine if an applicant has a connection with a foreign country of risk that could frustrate the achievement of these goals. To ensure trans­ parency of foreign connections, DOE anticipates requiring applicants to provide certain information regarding, for example, board membership, ownership structure, and foreign relationships, as well as sources of, and any plans to export, critical minerals.

III. Submission and Registration Requirements for DOE Recommendation Process

This section describes DOE’s submission and registration requirements for applicants. An application for DOE recommendation will not be considered in Round 1 of the § 48C(e) program unless the concept paper is received by the concept paper deadline, and the § 48C(e) application is received by the end of the application period.

A. Submission of Application

All § 48C(e) application materials must be submitted through the eXCHANGE portal at https://infrastructure-exchange.energy.gov to be considered. Taxpayers will not be able to submit a § 48C(e) application through the eXCHANGE portal unless registered. Please read the registration requirements below carefully and start the registration process immediately. If you have problems completing the registration process, send an email to the eXCHANGE portal helpdesk at https://infrastructure-exchange.energy.gov. Section 48C(e) applications submitted by any other means will not be accepted.

B. Registration Process Requirements

Taxpayers that wish to participate in the § 48C(e) program must register and create an account on the eXCHANGE portal at: https:// infrastructure-exchange.energy.gov. This account will allow the user to apply to any open Funding Opportunity Announcements (FOA) that are currently the eXCHANGE portal. It is recommended that each business unit use only one account as the appropriate contact point for each submission.

Potential applicants will be required to have a Login.gov account to access the eXCHANGE portal. As part of the eXCHANGE portal registration process, new users will be directed to create an account in Login.gov. Please note that the email address associated with Login.gov must match the email address associated with the eXCHANGE portal account. For more information, refer to the Infra­ structure eXCHANGE Login Guide in the Manuals section of the eXCHANGE portal at https://infrastructure-exchange.energy.gov/ Manuals.aspx.

C. Electronic Authorization of Applications

Submission of § 48C(e) application materials through electronic systems used by DOE, including the eXCHANGE portal, will con­ stitute the authorized representative’s approval and electronic signature.

D. Markings of Confidential Information

If elements of a § 48C(e) application contain information the taxpayer considers to be trade secrets, confidential, privileged or oth­ erwise exempt from disclosure under the Freedom of Information Act (FOIA, 5 U.S.C. § 552), the taxpayer may assert a claim of exemption at the time of application by placing the following text on the first page of the § 48C(e) application, and specifying the page or pages of the § 48C(e) application to be restricted:

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“Pages [list applicable pages] of this document may contain trade secrets, confidential, proprietary, or privileged information that is exempt from public disclosure. Such information shall be used or disclosed only for evaluation purposes or in accordance with a financial assistance or loan agreement between the submitter and the Government. The Government may use or disclose any information that is not appropriately marked or otherwise restricted, regardless of source. [End of Notice]”

The header and footer of every page that contains confidential, proprietary, or privileged information must be marked as follows: “Contains Trade Secrets, Confidential, Proprietary, or Privileged Information Exempt from Public Disclosure.” In addition, each line or paragraph containing proprietary, privileged, or trade secret information must be clearly marked with double brackets or highlighting.

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means, with respect to any corporation for any taxable year, the net income or loss of the taxpayer set forth on the taxpayer’s applicable financial statement (AFS) for that taxable year, adjusted as provided in § 56A. See § 56A(a).

(b) General definition of AFS . For pur­ poses of § 56A, the term AFS means, with respect to any taxable year, an AFS, as de­ fined in § 451(b)(3) or as specified by the Secretary of the Treasury or her delegate (Secretary) in regulations or other guid­ ance, that covers that taxable year. See § 56A(b).

(c) General adjustments to AFSI . Sec­ tion 56A(c) provides general adjustments to be made to AFSI, several of which are described in section 2.01(3)(c) of Notice 2023-7. Section 56A(c)(2) provides spe­ cial rules that take into account the rela­ tionship between entities.

(d) Treatment of dividends and other amounts . Section 56A(c)(2)(C) provides that in the case of a corporation that is not included on a consolidated return with a taxpayer, the taxpayer’s AFSI with respect to such other corporation is determined by taking into account only the dividends received from such other corporation (re­ duced to the extent provided by the Secre­ tary) and other amounts that are includible in gross income or deductible as a loss under chapter 1 of the Code (other than amounts required to be included under §§ 951 and 951A or such other amounts as provided by the Secretary) with respect to such other corporation.

(e) AFSI of partners and partnerships . Section 56A(c)(2)(D)(i) provides that, ex­ cept as provided by the Secretary, if the taxpayer is a partner in a partnership, the taxpayer’s AFSI with respect to such part­ nership is adjusted to take into account only the taxpayer’s distributive share of such partnership’s AFSI. Section 56A(c) (2)(D)(ii) provides that, for purposes of §§ 55 through 59, a partnership’s AFSI is the partnership’s net income or loss set forth on that partnership’s AFS (adjusted under rules similar to the rules set forth in § 56A).

(f) Authority of the Secretary to provide necessary adjustments . Section 56A(c)

Interim Guidance Regarding Certain Insurance Related Issues for the Determination of Adjusted Financial Statement Income under Section 56A of the Internal Revenue Code