Interested and eligible manufacturers, developers, and sponsors looking to pursue new advanced energy project tax credits under Internal Revenue Code Sections 48C and 45X have been faced with an important question: Should you apply for the Advanced Energy Project Tax Credit under Section 48C or claim the Advanced Manufacturing Production Credit under Section 45X?
These options should be analyzed carefully because your selection could have significant financial consequences.
Section 48C refers to the Qualifying Advanced Energy Project Credit, which offers a credit equal to up to 30% of the taxpayer’s basis in qualified investments – generally speaking, equipment and other tangible personal property – made as part of a qualifying advanced energy project.
Section 45X refers to the Advanced Manufacturing Production Credit, which offers tax credits of varying amounts depending on the type of “eligible component” – such as components within solar panels, wind turbines, batteries, and other products – produced by the taxpayer and sold to third parties. Due to the overlap, many taxpayers eligible for the Section 48C Credit are also eligible for the Section 45X Credit – however, a taxpayer cannot claim a Section 45X credit and Section 48C credit for products produced at the same “facility”, so the two tax credits are generally1 mutually exclusive.