In August 2022, the United States (U.S.) Congress passed the Inflation Reduction Act of 2022 (the “IRA”), landmark legislation that modified and extended the longstanding 30% investment tax credit (ITC) for solar photovoltaic (PV) projects and added solar PV projects to the list of qualified facilities eligible for production tax credits (PTCs). In addition to imposing new requirements to qualify for the full amount of the credit available under prior law, the IRA also introduced the domestic content bonus and energy community bonus for projects placed in service after December 31, 2022, which provide for incremental credit amounts above and beyond the credit amounts available under prior law for projects that satisfy the bonus criteria. As amended by the IRA, the PTC and ITC regimes under Internal Revenue Code (the “Code”) Sections 45 and 48 are phased out for projects that begin construction after December 31, 2024, after which a new “technology neutral” credit regime under new Code Sections 45Y and 48E are phased in for projects that are placed in service after January 1, 2025. Projects that begin construction on or before December 31, 2024, and that are placed in service after December 31, 2024, effectively have a choice between the two regimes. PTCs and ITCs available under the new credit regime are calculated the same as under the current regime and will begin to phase down at the later of (i) 2033 or (ii) after electricity generation-caused greenhouse gas emissions in the U.S. fall by at least 75% from 2022 levels.
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