26 U.S.C. § 45Y — Clean electricity production credit

(a) Amount of credit. (1) In general: The credit for the year equals the kilowatt-hours of electricity that (A) the taxpayer produced at a qualified facility, and (i)(I) sold to an unrelated person during the year, or (II) if the facility has a metering device owned by an unrelated person, sold, used, or stored by the taxpayer — multiplied by (B) the "applicable amount" for that facility. (2) Applicable amount: (A) Base amount — 0.3 cents per kilowatt-hour, for facilities that don't qualify for the alternative amount below (subject to the energy-community bonus in (g)(7)). (B) Alternative amount — 1.5 cents per kilowatt-hour, for a facility that either (i) has a maximum net output under 1 megawatt (AC), or (ii) began construction before the date 60 days after the Secretary publishes wage/apprenticeship guidance, or (iii) meets both the wage requirement in (g)(9) and the apprenticeship requirement in (g)(10). (b) Qualified facility. (1) (A) In general: a facility the taxpayer owns that generates electricity, was placed in service after December 31, 2024, and has a greenhouse gas emissions rate (under (2)) of zero or less. (B) 10-year credit period: a facility only counts as "qualified" for the 10 years starting when it was first placed in service. (C) Expansion; incremental production: for a facility placed in service before January 1, 2025, a new generating unit or added capacity placed in service after December 31, 2024 can itself count as a qualified facility — but only for the extra electricity that new unit or capacity produces. (D) Measuring capacity additions: this can be shown in any reasonable way, including filings with the Federal Energy Regulatory Commission or Nuclear Regulatory Commission, independent engineer reports, reports to grid operators, or another method the Secretary sets. The statute's text labels two different rules both as subparagraph "(E)": one — Coordination with other credits: a facility isn't "qualified" here if it already gets a credit under section 45, 45J, 45Q, 45U, 48, 48A, or 48E for that year or an earlier year. The other — Material assistance from prohibited foreign entities: a facility isn't "qualified" if construction begins after December 31, 2025 and the construction includes "material assistance" from a "prohibited foreign entity" (as defined in section 7701(a)(52)). (2) Greenhouse gas emissions rate: (A) This means the grams of CO2e (carbon-dioxide equivalent) a facility emits per kilowatt-hour of electricity it produces. (B) For a facility that burns fuel or gasifies it, the rate is the net lifecycle emissions rate, figured the way the Clean Air Act (section 211(o)(1)(H)) describes, expressed as grams of CO2e per kilowatt-hour. (C) Setting the rates: (i) the Secretary must publish an annual table of emissions rates for types of facilities, which taxpayers must use. (ii) If a facility's type isn't on the table, its owner can petition the Secretary for a rate. (iii) In setting these rates, the Secretary must consider studies published by the time this clause became law that show a net lifecycle emissions rate at or below zero, using widely accepted methods such as those in International Organization for Standardization (ISO) standards. (D) Carbon capture and sequestration: emissions counted don't include qualified carbon dioxide the taxpayer captures and either (i) permanently stores underground under section 45Q(f)(2) rules, or (ii) uses in a way described in section 45Q(f)(5). (c) Inflation adjustment. (1) Starting with calendar years after 2024, both the 0.3-cent and 1.5-cent amounts are each multiplied by an inflation adjustment factor for the year the electricity is sold, used, or stored. Round the 0.3-cent figure to the nearest 0.05 cent, and the 1.5-cent figure to the nearest 0.1 cent. (2) The Secretary must publish that year's inflation adjustment factor in the Federal Register by April 1 of each year. (3) The factor equals the GDP price deflator for the prior calendar year, divided by the GDP price deflator for calendar year 1992 — using the Commerce Department's most recent figures published before March 15 of the year. (d) Credit phase-out. (1) A facility whose construction begins in one of the years described in (2) gets its credit multiplied by a phase-out percentage. (2) Phase-out percentages: 100 percent for the first calendar year after the "applicable year," 75 percent for the second year after it, 50 percent for the third year after it, and 0 percent for any later year. (3) "Applicable year" means calendar year 2032. (4) Termination for wind and solar facilities: (A) This section does not apply to an "applicable facility" placed in service after December 31, 2027. (B) An "applicable facility" is a qualified facility that (i) uses wind to make electricity (under the same meaning used in section 45(d)(1), ignoring that section's construction-start-date rule), or (ii) uses solar energy to make electricity (under the same meaning used in section 45(d)(4), also ignoring the construction-start-date rule). (e) Definitions. (1) CO2e per kWh: the carbon-dioxide-equivalent (based on global warming potential) of a greenhouse gas, per kilowatt-hour of electricity produced. (2) Greenhouse gas: has the same meaning as under the Clean Air Act (section 211(o)(1)(G)), as that law read when this section was enacted. (3) Qualified carbon dioxide: carbon dioxide captured from an industrial source that (A) would otherwise have been released as an industrial emission, (B) is measured where it's captured and verified where it's disposed of or used, and (C) is captured and disposed of or used within the United States or a U.S. possession. (f) Guidance. By January 1, 2025, the Secretary must issue guidance for carrying out this section, including how to calculate greenhouse gas emissions rates and clean electricity production credits. (g) Special rules. (1) Only U.S. production counts: consumption, sales, or storage of electricity only count if the electricity was produced within the United States or a U.S. possession. (2) Combined heat and power system property: (A) electricity a taxpayer is treated as producing at a qualified facility includes useful thermal energy made by combined heat and power system property within that facility, and the emissions from making that thermal energy count toward the facility's emissions rate. (B) "Combined heat and power system property" borrows the definition in section 48(c)(3), leaving out that definition's subparagraphs (A)(iv), (B), and (D). (C) Converting BTUs to kilowatt-hours: (i) divide the total useful thermal energy the combined heat and power property produced by (ii) the facility's "heat rate" — the amount of energy (in British thermal units) the facility needs to generate one net kilowatt-hour of electricity. (3) Production attributable to the taxpayer: if more than one person owns a qualified facility, production is split among them based on their share of the facility's gross sales, unless Secretary regulations say otherwise. (4) Related persons: people or companies count as related if they'd be a single employer under section 52(b) regulations. A corporation in an affiliated group filing a consolidated return is treated as selling electricity to an unrelated person if another member of that group makes the actual sale to that unrelated person. (5) Pass-through for estates and trusts: rules like those under section 52(d) apply. (6) Allocating credit to patrons of agricultural cooperatives: (A) Election to allocate: (i) an eligible cooperative can choose to divide part of its credit among its patrons, based on how much business each patron did with it that year. (ii) This election must be made on a timely filed return, is irrevocable once made, and doesn't take effect unless the cooperative mails patrons written notice of the allocation during the "payment period" defined in section 1382(d). (B) Treatment of the allocated amount: it (i) is not counted as part of the cooperative's own credit for the year, and (ii) counts as the patron's credit for whichever tax year of the patron includes the end of that payment period — or, if earlier, the patron's tax year that includes the date the patron receives notice of the allocation. (C) If the cooperative's actual credit for a year turns out lower than what it reported, the excess — minus whatever wasn't allocated to patrons — is added back as extra tax owed by the cooperative; that added amount doesn't count as tax for purposes of figuring other credits. (D) "Eligible cooperative" means a cooperative described in section 1381(a) that is more than 50 percent owned by agricultural producers, or by entities that are themselves more than 50 percent owned by agricultural producers. (7) Increase in credit in energy communities: for a qualified facility located in an "energy community" (as defined in section 45(b)(11)(B)), the applicable amount under (a)(2) is increased by 10 percent of what it would otherwise be. (8) Credit reduced for tax-exempt bonds: rules like those under section 45(b)(3) apply. (9) Wage requirements: rules like those under section 45(b)(7) apply. (10) Apprenticeship requirements: rules like those under section 45(b)(8) apply. (11) Domestic content bonus credit: (A) a qualified facility meeting the requirement in (B)(i) gets its credit increased by 10 percent of what it would otherwise be (without the energy-community bonus). (B) Requirement: (i) the taxpayer must certify to the Secretary, in the required form and manner, that all the steel, iron, and manufactured products that are part of the completed facility were produced in the United States (as determined under 49 CFR 661). (ii) For steel and iron specifically, this follows 49 CFR 661.5. (iii) For manufactured products, they count as U.S.-produced if at least the "adjusted percentage" (set in (C)) of their total cost comes from products mined, produced, or manufactured in the United States. (C) Adjusted percentage: (i) generally — 40 percent if construction began before 2025; 45 percent if it began in 2025; 50 percent if it began in 2026; 55 percent if it began after 2026. (ii) for an offshore wind facility — 20 percent if construction began before 2025; 27.5 percent if it began in 2025; 35 percent if it began in 2026; 45 percent if it began in 2027; 55 percent if it began after 2027. (12) Phaseout for elective payment: (A) if a taxpayer elects direct payment of this credit under section 6417, the payment equals the credit's value multiplied by an "applicable percentage." (B) That percentage is 100 percent for a qualified facility that either meets the domestic-content requirement in (11)(B), or has a maximum net output under 1 megawatt (AC). (C) For other facilities, the percentage depends on when construction began: 100 percent if before 2024; 90 percent if it began in 2024; 85 percent if in 2025; 0 percent if after 2025. (D) Exceptions: (i) the Secretary must grant an exception to this domestic-content requirement if using U.S.-made steel, iron, or products would raise total construction costs by more than 25 percent, or if those U.S. materials aren't available in sufficient quantity or acceptable quality. (ii) Where an exception applies, the applicable percentage is 100 percent. (13) Restrictions relating to prohibited foreign entities: (A) no credit under (a) for any tax year if the taxpayer is a "specified foreign entity" or a "foreign-influenced entity" (as defined in section 7701(a)(51)). (B) If a taxpayer only counts as a foreign-influenced entity because of the "effective control" test in section 7701(a)(51)(D)(i)(II), the credit is denied only as it relates to a qualified facility described in (b)(1). (h) Denial of credit for wind and solar leasing arrangements. No credit under this section for electricity produced from property described in section 25D(d)(1) or (4) (with "lessee" substituted for "taxpayer") if the taxpayer rents or leases that property to someone else during the tax year.