Advanced Energy Manufacturing
Tax Credit
IRC Section 48C offers an important opportunity for
qualified manufacturers of advanced energy assets.
As part of the American Reinvestment and Recovery Act of 2009 (ARRA), the Department
of Treasury awarded $2.3 billion in tax credits in January 2010, for qualified investments
in renewable and advanced energy projects to support new, expanded or re-equipped
domestic manufacturing facilities. Treasury recently announced Phase II of the 48C
program which provides $150 million of additional credits to be allocated in 2013. The
Section 48C tax credit is equal to 30% of the basis of qualified investments used to
manufacture property that will reduce greenhouse gas emissions or air pollutants.
Given the appetite for these credits and success of the previous allocation, the Obama
Administration has proposed renewing this program and expanding it to $5 billion. Several
bills are currently working through Congress to approve this renewal and expansion.
Examples of successful
2010 48C applicants:
• Wind turbine manufacturer
• Wind turbine bearing
manufacturer
• Solar panel manufacturer
• Solar panel component
manufacturer
• Manufacturer of fuelefficient tires
• Fuel-efficient jet engine
manufacturer
• Low VOC chemical
manufacturer
• Automotive component
manufacturer for fuelefficient cars
• Coating manufacturer for
win turbine blade
The goal of Section 48C is to grow the domestic manufacturing industry for clean energy,
thereby supporting the larger goals of stimulating economic growth, creating jobs and
reducing greenhouse gas emissions. Manufacturing companies can reduce the overall
cost of future capital expenditures related to machinery used for the manufacture of
components used in, or the final assembly of, renewable or advanced energy property.
While the goal of the tax credit will remain the same, the structure of the qualification
process may change from the previous allocation.
Who may qualify for a Section 48C tax credit
Based on the previous allocation, this tax credit will likely apply to manufacturing facilities
involved in the production of property that will reduce greenhouse gas emissions or air
pollutants.
Manufacturers likely eligible for 48C include:
• Producers of technologies that create energy from renewable resources (sun, wind,
geothermal and other renewable resources)
• Producers of energy storage technologies (fuel cells, microturbines and other energy
storage systems used in electric vehicles)
• Producers of advanced transmission technologies that support renewable generation
(including storage)
Ernst & Young
• Producers of renewable fuel-refining or blending technologies
• Producers of energy conservation technologies (advanced lighting, smart grid)
• Producers of plug-in electric vehicles and vehicle components (motors, generators)
• Producers of property to capture and sequester carbon dioxide
• Producers of other property designed to reduce greenhouse gas emissions
• The tax credit likely will not apply to energy generation projects themselves; however,
there are related credits and incentives that might be applicable.
For the previous application, the Department of Energy (DOE) and the Internal Revenue
Service (IRS) reviewed and made determinations on the eligibility and merit of Section
48C applications. The application process was competitive, and awards were evaluated
based on the following criteria:
• Domestic job creation
• Net impact in avoiding or reducing air pollutants or anthropogenic emissions of
greenhouse gases
• Potential for technological innovation and commercial deployment
• Project time from certification to completion
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Applicants will likely receive tax credits based on their competitive ranking relative to
other projects. In addition to the evaluation criteria, geographic, technology and projectsize diversity, are likely to be considered.
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All Rights Reserved.
Additional business incentives and tax credits to promote
manufacturing of advanced energy property
This publication contains information in summary form
and is therefore intended for general guidance only. It
is not intended to be a substitute for detailed research
or the exercise of professional judgment. Neither
Ernst & Young LLP nor any other member of the global
Ernst & Young organization can accept any
responsibility for loss occasioned to any person acting
or refraining from action as a result of any material
in this publication. On any specific matter, reference
should be made to the appropriate advisor.
Many states offer additional incentives for investments in manufacturing equipment used
for advanced energy property that can be layered on top of the federal tax credit (for
example, Mississippi, Arkansas and California). While the requirements of these statelevel incentives programs vary from state to state, they may take the form of sales tax
exemptions, income tax credits, franchise tax exemptions, and grants.
In addition, with more states placing a higher priority on “green” jobs, advanced energy
manufacturing projects are an attractive trigger for traditional state incentive programs.
These
are programs that incentivize capital expenditure in general, job creation, or training.
Ernst & Young LLP has a national network of Incentives professionals who can provide
assistance in identifying, capturing and complying with these state-level incentives.
How Ernst & Young LLP can help
Our dedicated team of Tax professionals has deep experience in helping our clients
navigate the demands of government agencies.
In the first round of 48C tax credits, Ernst & Young LLP was able to secure successful
awards for 60% of its clients, nearly twice the overall success rate of the program. We
worked with clients from a wide variety of industries, including chemical manufacturers,
steel manufacturers, engine assemblers, vehicle and aircraft manufacturers, and solar
manufacturers.
Our team is ready to assist you in evaluating which of your capital-budget projects may
qualify for this important opportunity, and we can assist you in preparing the Section
48C application. Given the expected time frame for renewal and the limited window of
opportunity before applications are due, Ernst & Young LLP recommends that companies
begin to identify potentially qualifying projects and evaluate the likelihood that those
projects would result is successful applications.
SCORE no. YY2397
For more information, please
contact your local Ernst &
Young LLP office or one of the
following federal tax credit
professionals:
Paul Naumoff
+1 614 232 7142
[email protected]
Michael Bernier
+1 617 585 0322
[email protected]
Dominick Brook
+1 614 232 7376
[email protected]
Dorian Hunt
+1 617 375 2448
[email protected]
1302-1025609