November 17, 2023

Next Wednesday, November 22, 2023, the Internal Revenue Service (IRS) is publishing a proposed rule implementing Inflation Reduction Act provisions regarding the types of energy property eligible for the expanded energy credit, including additional types of energy property added by that law. The proposed regulations also detail additional rules generally applicable to energy property addressing issues such as: (1) functionally interdependent components; (2) property that is an integral part of an energy property; (3) application of an “80/20 Rule” to retrofitted energy property; (4) dual use property; (5) separate ownership of components of an energy property; (6) property that could be eligible for multiple Federal income tax credits; and (7) the election to treat qualified facilities eligible for the renewable electricity production credit as property eligible for the energy credit.

The rulemaking also withdraws and reproposes the IRS’s previously issued standards for satisfying the SWACCA-advocated Inflation Reduction Act prevailing wage and apprenticeship utilization standards that must be met to maximize the tax credits for eligible energy properties.

The proposed rule will be open for public comment 60 days after it publishes in the Federal Register.

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