Investment Tax Credits (Section 48/48E)

Section 48 and 48E Investment Tax Credit (ITC) is a federal incentive designed to promote clean energy adoption and reduce greenhouse gas emissions by providing a tax credit for a portion of the cost of eligible energy property. 

While Section 48 traditionally applied to specific technologies like solar, wind, and energy storage, the newer Section 48E is technology-neutral, applying to any electricity generation facility with zero greenhouse gas emissions placed in service on or after January 1, 2025. 

The base credit rate is 6% of the project’s cost basis, but this increases to 30% for projects under one megawatt or those that satisfy prevailing wage and apprenticeship (PWA) requirements. Furthermore, projects may qualify for additional bonus credits—including the domestic content bonus, energy community bonus, and low-income community bonus—potentially raising the total credit amount up to 70% in certain cases. 

Eligible entities, including tax-exempt organizations and municipalities, can monetize these credits through elective (direct) pay or transfers, provided they complete a mandatory pre-filing registration and file IRS Form 3468. 

Once claimed, the ITC is subject to a five-year recapture period, during which certain events, such as a sale or loss of eligibility, may trigger a partial clawback of the credit.