Treasury's Final 45Y and 48E Rules Bring Clarity to Clean Power Credits Just as Their Political Future Darkens

On January 7, 2025, the Treasury Department and the Internal Revenue Service released final rules for the Clean Electricity Production Tax Credit under section 45Y and the Clean Electricity Investment Tax Credit under section 48E of the tax code. The rules, published in the Federal Register on January 15 as Treasury Decision 10024, implement the technology-neutral credits created by the Inflation Reduction Act. From the start of 2025, these credits replace the older technology-specific production and investment tax credits under sections 45 and 48 for projects placed in service after December 31, 2024.

The existing credits remain available for projects that began construction before 2025. The rules confirm which zero-emissions technologies qualify, including wind, solar, hydropower, marine and hydrokinetic energy, geothermal, nuclear and certain waste energy recovery property. Treasury said the final rules largely maintained the approach of the June 2024 proposal. As under the Inflation Reduction Act's other credits, the full value requires meeting prevailing wage and registered apprenticeship standards. The rules clarify several issues that had held back some investment decisions.

The rules also set out how projects that combine qualifying and non-qualifying equipment, or that are expanded over time, should be treated, including a rule on when integrated operations at a single site count as one facility. The shift from technology-specific credits to an emissions-based test is the most important long-term feature of the regime. The credits are now at the center of the federal budget debate. For projects in development, the priority is to establish that construction has begun under existing IRS guidance, either by starting significant physical work or by incurring at least 5 percent of total project costs.

For buyers of tax credits, transfer agreements should address the risk of changes in law, including indemnities and the allocation of risk if a credit is reduced or eliminated. Treasury's final 45Y and 48E rules are a well-constructed framework that gives developers and investors the clarity they asked for.