June 21, 2023

The Internal Revenue Service (IRS) published a notice announcing the 2023 inflation adjustment factor and reference price for determining the availability of the credit for renewable electricity production under section 45 of the Internal Revenue Code (IRC) as revised by the Inflation Reduction Act. The section 45 tax credit is a per kilowatt-hour credit for electricity generated by qualified renewable energy resources, including wind, solar, geothermal, and biomass. The inflation adjustment factor and reference price are used in determining the availability of the section 45 credit for calendar year 2023.

The Inflation Reduction Act (IRA) amended IRC section 45, changing the manner in which section 45 credit amounts are calculated for any qualified facility placed into service after December 31, 2021. In the case of any qualified facility placed in service before January 1, 2022, the section 45 credit amounts are determined under the calculation rules provided by the prior version of section 45. Pursuant to the revisions made by the Inflation Reduction Act, the inflation adjustment factor for calendar year 2023 for qualified energy resources is 1.8909. For facilities placed in service before January 1, 2022, the 1.5 cent amount provided in section 45(a)(1) is adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs – in this case,1.8909. For facilities placed in service after December 31, 2021, the 0.3 cent amount provided in section 45(a)(1) is adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. 

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