Increasing Green Energy Production: Navigating the 48C Loan Application Process | Haynsworth Sinkler Boyd, Pennsylvania

The Eligible Advanced Energy Project Credit (48C) was created under the American Recovery and Reinvestment Act of 2009 to focus on green energy production and was reinstated with the Inflation Reduction Act (IRA). The IRA allocated $10 billion to the program to invest in green energy projects. The application period for Round 1 ended in December 2023, and in April 2024, recipients were awarded $4 billion in allocation awards. The Round 2 application period will begin in late May 2024, with $6 billion available for allocation through a competitive application process.

APPLICABLE PROJECT CATEGORIES
Eligible projects are as follows, taken from the Internal Revenue Code:

A project to re-equip, expand or establish an industrial or manufacturing facility to produce or recycle a range of clean energy equipment and vehicles;
A project to re-equip an industrial or manufacturing facility with equipment intended to reduce greenhouse gas emissions by at least 20 percent; Or
A project to re-equip, expand, or establish an industrial facility for the processing, refining, or recycling of critical materials.

APPLICATION PROCESS
The application process consists of two main stages.

Concept Paper – The Concept Paper is a summary of the project that will be based on a template questionnaire compared to the Round 1 narrative. The Concept Paper is a presentation the company makes to the Department of Energy (“DoE”) about the project’s impact in terms of technological innovation, jobs , capital investment, community impact, supply chain strength and profitability. After review, the Department of Energy will issue a letter encouraging or discouraging your application. Regardless of the Department of Energy’s response, applicants may still submit an application. In the first round of applications, which was scheduled for December 2023, a surprisingly large number of Concept Papers received letters of discouragement, so this step is certainly not a formality.
Entry – The entry is a maximum of thirty (30) pages with an unlimited number of pages of exhibits. The app is more comprehensive and technical, but has the same general structure. Once submitted, the Internal Revenue Service and DoE will review all applications and make allocation decisions.

The concept note and proposal include additional elements such as a data sheet and a staff and community engagement document.

AMOUNT OF CREDIT
The credit represents a base amount of 6% of qualifying assets, which may increase to 30% if applicable salary and seniority requirements are met. Although property of a more technical nature, generally eligible property includes investments other than construction and land, primarily machinery and equipment that are part of a production process. The portion of the investment that constitutes eligible property depends on whether it is a renovation, modernization of an existing facility or construction of a new facility, but is typically approximately 50% of the total project cost.

RECEIVING A LOAN
For a project to be eligible from a time perspective, it will not be eligible if it is put into operation before 15 January 2025 or the date of allocation.

For projects that may not have started yet, if the project has been awarded an allocation, the company must certify the project within two years of the allocation letter. To receive certification, a project must obtain all necessary permits. After certification, the company will have two years to put the project into operation.

Once the project is put into operation, the relief will be distributed in a given tax year in the form of a lump sum that can be freely transferred or sold. This market is expected to be quite well developed.

KEY DATES
Concept document:

The 48C submission portal will open on May 22, 2024
Concept documents are due on June 21, 2024 by 17:00
Receive an encouragement/discouragement letter probably by September 2024

App:

Due fifty (50) days from receipt of the encouragement/discouragement letter
Allocation decisions until January 15, 2025