Energy Tax Provisions: Overview and Budgetary Cost

Energy Tax Provisions: Overview and Budgetary Cost

Energy Tax Provisions: Overview and
Budgetary Cost
Updated February 26, 2024
Congressional Research Service
https://crsreports.congress.gov
R46865

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Energy Tax Provisions: Overview and Budgetary Cost

Contents
Direct (Cash) Payments ................................................................................................................... 2
Credit Transfers ............................................................................................................................... 2

Tables
Table 1. Renewable Energy Tax Incentives ..................................................................................... 4
Table 2. Energy Efficiency Tax Incentives ..................................................................................... 11
Table 3. Tax Incentives for Vehicles and Vehicle Infrastructure.................................................... 14
Table 4. Renewable and Alternative Fuels Tax Incentives ............................................................ 22
Table 5. Fossil Fuels Tax Incentives .............................................................................................. 27
Table 6. Carbon Capture and Sequestration, Nuclear, and Other Tax Incentives .......................... 33

Contacts
Author Information ........................................................................................................................ 36

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he 117th Congress revamped significant portions of energy tax law. In the Infrastructure,
Investment, and Jobs Act (P.L. 117-58), the Chips and Science Act (P.L. 117-167), and the
T Inflation Reduction Act of 2022 (IRA; P.L. 117-169), Congress enacted 11 new energy tax
provisions and modified or extended 12 existing provisions. The IRA in particular enacted or
changed 21 energy tax provisions, including tax credits for carbon capture and storage, energy-
efficient building modifications, clean electricity generation, and purchases of electric vehicles.1
The IRA also created direct payments and credit transfers, two new tax mechanisms that expand
the number of energy providers that can benefit from nonrefundable credits. At the time of
enactment, the Joint Committee on Taxation (JCT) estimated that the energy tax credits and
deductions in the IRA would increase FY2022-FY2031 deficits by a combined $271 billion.2
This report provides background information on current-law, energy-specific provisions in the
federal income tax code (including both personal and corporate income taxes). It does not discuss
energy-specific excise tax provisions, with the exception of tax credits used to offset both income
and excise tax liabilities.3 It includes all energy provisions projected by the JCT to affect income
tax revenues over the FY2023-FY2027 period, though not every provision is available to
taxpayers in every year. For example, certain credits for other alternative fuel vehicles (discussed
in Table 4) only apply to vehicles purchased before 2011; however, because the credit can be
carried forward to offset tax liabilities up to 20 years into the future, these credits are expected to
reduce federal revenues in the coming years.
Following a description of direct pay and credit transfer tax mechanisms, this report presents a
series of tables, each of which includes (1) the name of the provision and its Internal Revenue
Code (IRC) section; (2) a description of the provision; (3) the law first enacting the provision; (4)
when the provision expires (if applicable) under current law; and (5) a cost estimate (if
available).4 Energy income tax provisions have been categorized as follows:
• renewable energy tax incentives (Table 1);
• energy efficiency tax incentives (Table 2);
• tax incentives for vehicles and vehicle infrastructure (Table 3);
• renewable and alternative fuels tax incentives (Table 4);
• fossil fuel tax incentives (Table 5); and
• carbon capture and sequestration (CCS), nuclear, and other tax incentives (Table
6).

1 The IRA enacted nine energy tax credits in Sections 25E, 40B, 45U, 45V, 45W, 45X, 45Y, 45Z, and 48E of the
Internal Revenue Code. The IRA modified or extended existing energy tax credits in Sections 25C, 25D, 30C, 30D, 40,
40A, 45, 45L, 45Q, 48, and 48C, and also modified the 179D tax deduction for energy efficient commercial buildings.
(The Section 48C credit, which has “capped” funding, was also given new allocations; see the 48C entry in Table 1 for
more information.)
2 See CRS Report R47202, Tax Provisions in the Inflation Reduction Act of 2022 (H.R. 5376), coordinated by Molly F.
Sherlock, pp. 24-27. The 10-year timeframe refers to FY2022-FY2031. The reinstatement of the Hazardous Substance
Superfund—which is classified as neither a tax credit nor a deduction, and is not counted toward the $271 billion
estimate—was estimated to raise $12 billion over the FY2022-FY2031 timeframe.
3 The other major sources of federal revenue—payroll taxes, estate taxes, and gift taxes—do not contain any energy-
specific provisions. For an overview of the federal tax system, see CRS Report R45145, Overview of the Federal Tax
System in 2022, by Molly F. Sherlock and Donald J. Marples.
4 The cost estimates are generally tax expenditure estimates, as provided in Joint Committee on Taxation, Estimates Of
Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-29, December 7, 2023. These estimates reflect tax
laws enacted through August 31, 2023, and assume that temporary provisions expire as scheduled.
Congressional Research Service

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Energy Tax Provisions: Overview and Budgetary Cost

Direct (Cash) Payments
Business tax credits have traditionally been nonrefundable, meaning that if a business’s tax
credits exceed its tax liabilities, the difference cannot be received as a refund. For example, if a
business has an income tax bill of $10,000 but is eligible for credits worth $14,000, those credits
reduce the business’s income tax payments to $0 but do not result in a federal refund for the
remaining $4,000.
Nonrefundable tax credits may have little to no effect on untaxed entities such as nonprofits, local
governments, and school districts. Because these entities do not pay federal income taxes, they
implicitly cannot benefit from nonrefundable tax credits. To incentivize greater “clean” energy
investments, the IRA allows certain untaxed entities to receive direct cash payments in place of
the IRC Sections 30C, 45, 45Q, 45U, 45V, 45W, 45X, 45Y, 45Z, 48, 48C, and 48E tax credits.
The entities eligible for direct payments include
• any private-sector entity exempt from federal income taxes, including 501(c)(3)
organizations such as hospitals, private colleges, and think tanks;
• state governments and political subdivisions thereof (including city governments,
county governments, and school districts);
• the Tennessee Valley Authority;
• Indian tribal governments;
• Alaska Native Corporations; and
• rural electricity cooperatives.
Organizations which are not tax-exempt entities can also claim direct payments in place of the
credits for carbon oxide sequestration (IRC §45Q), clean hydrogen production (IRC §45V), and
advanced manufacturing production (IRC §45X). However, they may only do so for five years,
starting with the year a facility is placed in service. This election cannot be made after December
31, 2032.
Credit Transfers
Entities not eligible for direct payments may transfer any of the tax credits listed in the previous
section, with the exception of the credit for qualified commercial clean vehicles (IRC §45W).
Credit transfers occur when one business sells its credits to another at an agreed-upon price in
exchange for a cash payment.
Such transfers hold two potential benefits for firms. First, businesses can sell their credits for a
price between the credit’s maximum value and the business’s income tax liabilities. For example,
if a firm owes $4,000 of federal income taxes but has a credit worth $7,000, it could sell the credit
to a second firm for $6,000. In this example, the first firm gains $2,000 (because it pays an
additional $4,000 in taxes but receives $6,000 in cash), while the second firm gains $1,000
(because it buys the credit for $6,000 but reduces its tax payments by $7,000).5 While traditional
credits are only claimed when firms file their taxes, transfers may occur at any time. Businesses
in need of quick cash can sell their credits instead of taking out loans, which is especially
important during periods of high interest rates.

5 This example assumes that the second firm’s income tax liabilities equal or exceed $7,000.
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Under proposed IRS regulations, if a firm is deemed ineligible for a credit it has already sold, the
liability falls on the purchaser of the credit.6 This could cause transferable credits to trade at less
than their full dollar value if the purchasers of such credits factor these potential losses into their
buying decisions.
In 2023, transferred tax credits typically sold at 89 to 95 cents on the dollar.7 It is not yet clear
how much of the difference between the tax credits’ sales prices and their maximum potential
values was attributable to liability concerns, the preference for immediately available cash, or
other factors.
The clean vehicle credit (IRC §30D) and the used clean vehicle credit (IRC §25E) are eligible for
a special type of credit transfer from consumers to car dealers. Such transfers are discussed in the
Sections 30D and 25E entries in Table 3.

6 Internal Revenue Service, “Section 6418 Transfer of Certain Credits,” REG-101610-23, pp. 40496-40526, June 21,
2023.
7 Crux, Transferable Tax Credit Market Intelligence Report, New York, NY, January 16, 2024, pp. 44-47,
https://www.cruxclimate.com/2023-market-report.
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Table 1. Renewable Energy Tax Incentives
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Residential clean
A tax credit for the purchase of solar electric property, solar water
Energy Policy
Property placed in
FY2023-FY2027: $13.1
energy credit (IRC
heating property, fuel cells, geothermal heat pump property, battery Act of 2005
service by December
§25D)
storage property, or small wind energy property. The tax credit is
(EPACT05;
31, 2034.
30% of the cost of qualifying property through 2032. The tax credit
P.L. 109-58)
is reduced to 26% for property placed in service in 2033 and 22%
for property placed in service in 2034. The tax credit for fuel cells is
limited to $500 for each 0.5 kilowatt of capacity.
For more, see CRS Insight IN12051, Residential Energy Tax Credits:
Changes in 2023
Renewable electricity
A tax credit for electricity produced using qualifying renewable
Energy Policy
Construction must
FY2023-FY2027: $39.3
production tax credit
energy resources. For facilities placed in service prior to 2022, the
Act of 1992
begin by December
(PTC) (IRC §45)
2023 tax credit equals 2.8 cents per kWh for electricity produced
(EPACT92;
31, 2025.
from wind, closed-loop biomass, and geothermal energy and 1.3
P.L. 102-486)
cents per kWh for electricity produced from open-loop biomass,
landfil gas, trash combustion, qualified hydropower, and marine and
hydrokinetic sources. The tax credit is available for 10 years after
the date the facility is placed in service. Taxpayers may elect to
receive an investment tax credit (ITC) in lieu of the PTC.
For facilities placed in service after December 31, 2021, and the
construction of which begins before January 1, 2025, the 2023 base
credit is 0.55 cents per kWh from wind, closed-loop biomass,
geothermal energy, and solar energy, and 0.3 cents per kilowatt
hour on the sale of electricity produced from the qualified energy
resources of open-loop biomass, landfil gas, trash, qualified
hydropower, and marine and hydrokinetic renewable energy. The
base credit is increased five times for facilities that meet prevailing
wage and apprenticeship requirements during the construction
phase and the first 10 years of operation. Facilities can increase the
credit by 10% for meeting certain domestic content standards.
Facilities located in energy communities can be eligible for a 10%
increase in the credit. Certain organizations, generally tax-exempt
entities including state and local governments and Indian tribal
governments, may claim the tax credit as “direct pay,” while other
entities may elect a one-time transfer of the tax credit. Taxpayers
CRS-4

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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
may elect to receive an investment tax credit (ITC) in lieu of the
PTC. For facilities financed with tax-exempt bonds, the credit
amount would be reduced by the lesser of (1) 15%; or (2) the
fraction of the proceeds of a tax-exempt obligation used to finance
the project over the aggregate amount of the project’s financing
costs.
Advanced
A business tax credit for the domestic production and sale of
Inflation
Eligible components
FY2023-FY2027: $72.7
manufacturing
qualifying solar and wind components. The amount of the credit
Reduction
sold no later than
production credit
depends upon the specific solar or wind component. For wind
Act (P.L. 117-
December 31, 2032.
(IRC §45X)
energy components, the credit amount would be 10% of the sales
169)
price if the component is an offshore wind vessel. A credit of 10%
would also be available for the production of critical minerals.
The credit phases out ratably over four years for components sold
after December 31, 2029. The phaseout does not apply to the
production of critical minerals.
The credit cannot be claimed for components produced at a facility
for which a credit was claimed under Section 48C.
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Energy investment tax
A tax credit for investments in qualifying energy property. The base
Energy Tax
Construction must
FY2023-FY2027: $89.7
credit (ITC) (IRC §48)
credit rate is 6% for investment in geothermal, microturbine, energy Act of 1978
begin by December
Solar: $72.6
storage technology, qualified biogas property, and microgrid
(P.L. 95-618)
31, 2024, except for
control er property, or combined heat and power (CHP) property
geothermal and solar,
Interchange Property: $8.0
and 2% in the case of microturbine property. The increased credit
where there is a
Section 45 Property: $7.9
rate is 30% (10% in the case of microturbine property) with respect
permanent 10% credit.
to energy projects that have a maximum output of less than 1
For offshore wind
megawatt of electrical (alternating current) or thermal energy and
property,
for energy projects that meet certain prevailing wage and
construction must
apprenticeship requirements. Facilities can increase the credit by 2
begin by December
percentage points (10 percentage points for projects that meet
31, 2025.
domestic content requirements to certify that certain steel, iron,
and manufactured products used in the facility were domestically
produced). Facilities located in energy communities can be eligible
for an increase of 2 percentage points (10 percentage points for
projects that meet wage and workforce requirements). Certain
organizations, generally tax-exempt entities including state and local
governments and Indian tribal governments, may claim the tax
credit as “direct pay,” while other entities may elect a one-time
transfer of the tax credit. For facilities financed with tax-exempt
bonds, the credit amount is reduced by the lesser of (1) 15%; or (2)
the fraction of the proceeds of a tax-exempt obligation used to
finance the project over the aggregate amount of the project’s
financing costs.
Credit for investment
A competitively awarded tax credit for investments in selected
American
Allocation limit; $10
FY2023-FY2027: de minimis
in advanced energy
advanced energy property. The base credit rate is 6%, with an
Recovery and
bil ion.

property (IRC §48C)
increased 30% credit rate allowed for projects meeting prevailing
Reinvestment
wage and registered apprenticeship requirements. A total of $10.0
Act (ARRA;
bil ion is allocated for advanced energy property investment tax
P.L. 111-5)
credits, $4.0 bil ion of which must be deployed in energy
communities or communities that have not previously received tax
credits under this section. Certain organizations, generally tax-
exempt entities including state and local governments and Indian
tribal governments, may claim the tax credit as direct pay, while
other entities may elect a one-time transfer of the tax credit.
CRS-6

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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Credit for holders of
An income tax credit for holders of the bond. Clean Renewable
EPACT05
Allocation limit;
FY2023-FY2027: de minimis
clean renewable
Energy Bonds (CREBs) are subject to a volume cap of $1.2 bil ion
(P.L. 109-58)
authority to issue

energy bonds (IRC
with a credit rate set to allow the bond to be issued at par and

repealed in P.L. 115-
§§54, 54C)
without interest. New Clean Renewable Energy Bonds (New
97.
CREBs) are subject to a volume cap of $2.4 bil ion with a credit rate Energy
set at 70% of what would permit the bond to be issued at par and
Improvement
without interest. Tax credit bonds were repealed in the 2017 tax
and Extension
revision (commonly called the “Tax Cuts and Jobs Act” [TCJA]; P.L.
Act of 2008
115-97).
(P.L. 110-343)
Depreciation recovery Accelerated depreciation allowances are provided under the
Tax Reform
None
FY2023-FY2027: $0.5
periods for energy-
modified accelerated cost recovery system (MACRS) for
Act of 1986

specific items: five-
investments in certain energy property. Specifically, for property
(P.L. 99-514)
year MACRS for
placed in service prior to January 1, 2024, certain solar, wind,
certain energy
geothermal, fuel cell, microturbine, CHP, waste energy recovery,
property (IRC
and biomass property have a five-year recovery period. For
§168(e)(3)(B)(vi))
property placed in service after December 31, 2024, qualified
property includes any property which is a qualified investment, and
any energy storage technology, as those terms are defined for
purposes of the clean electricity production and clean electricity
investment credits. Qualified properties have a five-year recovery
period.
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Clean electricity
A tax credit for electricity produced using qualifying non-emitting
Inflation
The later of 2032 or
FY2023-FY2027: no revenue
production credit
energy resources for the sale of domestically produced electricity
Reduction
once certain emissions effect
(IRC §45Y)
with a greenhouse gas emissions rate not greater than zero. To
Act (P.L. 117-
target levels achieved.
qualify for a tax credit, electricity would need to be produced at a
169)
qualifying facility placed in service after December 31, 2024.
The base PTC amount was set to 0.3 cents per kWh in 1992 dol ars
and is adjusted for inflation. The tax credit amount is multiplied by
five for facilities that pay prevailing wages and meet registered
apprenticeship requirements. Facilities with a maximum net output
of less than 1 megawatt would also qualify for the ful 1.5 cents per
kWh amount. The PTC would be available for electricity produced
during the facility’s first 10 years of operation. Facilities can increase
the credit by 10% for meeting certain domestic content standards.
Facilities located in energy communities are eligible for a 10%
increase in the credit. The ability to claim the credit as direct pay
would be subject to meeting domestic content requirements.
The emissions target phaseout would begin after the calendar year
in which greenhouse gas emissions from the electric power sector
are equal to or less than 25% of 2022 electric power sector
emissions. Once phaseout begins, the ful credit amount would
remain available for facilities that begin construction the fol owing
year. The credit amount for facilities beginning construction in the
second year would be 75% of the ful credit amount. This would be
reduced to 50% for facilities beginning construction in the third
year, and zero afterward.
The provision would provide that for facilities financed with tax-
exempt bonds, the credit amount is reduced by the lesser of (1)
15%; or (2) the fraction of the proceeds of a tax-exempt obligation
used to finance the project over the aggregate amount of the
project’s financing costs.

CRS-8

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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Clean electricity
A new clean electricity investment tax credit (ITC) for investment
Inflation
The later of 2032 or
FY2023-FY2027: $14.8
investment credit
in qualifying zero-emissions electricity generation facilities or energy Reduction
once certain emissions
(IRC §48E)
storage technology. Costs of qualified interconnection property are
Act (P.L. 117-
target levels achieved.
also eligible for clean electricity projects smaller than 5 megawatts.
169)
This credit is available for facilities and property placed in service
after December 31, 2024.
The base ITC amount is 6%, with the tax credit rate increased to
30% for facilities that pay prevailing wages and meet registered
apprenticeship requirements. Facilities with a maximum net output
of less than 1 megawatt and that begin construction less than 60
days after the Secretary of the Treasury publishes guidance on the
wage and registered apprenticeship requirements would also qualify
for the ful 30% amount. The clean electricity ITC is increased by
one-third (2 percentage points or 10 percentage points) for
property placed in service in an energy community (as defined
above for the purposes of the clean electricity PTC). Similarly, a 2-
percentage point domestic content bonus also applies for the clean
electricity ITC; the bonus is increased to 10 percentage points if the
firm meets prevailing wage and apprenticeship requirements. The
ability to claim the credit as direct pay is subject to domestic
content requirements. The clean electricity ITC phases out
according to the same schedule as would apply to the clean
electricity PTC.
For facilities financed with tax-exempt bonds, the credit amount is
reduced by the lesser of (1) 15%; or (2) the fraction of the
proceeds of a tax-exempt obligation used to finance the project
over the aggregate amount of the project's financing costs.
This credit also allows for the annual allocation of 1.8 gigawatts for
“environmental justice solar and wind capacity” credits. Taxpayers
receiving a capacity allocation may be entitled to tax credits in
addition to otherwise allowed clean electricity ITCs. Specifically,
projects receiving an allocation that are located in a low-income
community or on Indian land are eligible for a 10-percentage point
bonus investment tax credit, while projects that are part of a low-
income residential building project or qualified low-income
economic benefit project are eligible for a 20-percentage point
bonus investment credit. Qualifying clean electricity projects include
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
those with a nameplate capacity of 5 megawatts or less (other than
facilities producing electricity through combustion or gasification).
Facilities receiving an allocation are required to have the facility
placed in service within four years.
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-23,
December 7, 2023; CRS correspondence with the Joint Committee on Taxation.
Notes: IRC = Internal Revenue Code. kWh = kilowatt-hour. MACRS = modified accelerated cost recovery system. A de minimis tax expenditure is less than $250
mil ion FY2023-FY2027.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
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Table 2. Energy Efficiency Tax Incentives
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Energy efficient home
A 30% tax credit for qualified energy-efficiency improvements
EPACT05
Property placed in
FY2023-FY2027: $12.4
improvement credit (IRC
and expenditures for residential energy property including
(P.L. 109-58)
service by

§25C)
qualifying improvements to the building’s envelope (excluding

December 31,
roofs but including windows and doors), the HVAC system,
2032.
furnaces, boilers, or stoves. The overall credit is generally
limited to an annual value of $1,200 per taxpayer and $600 per
item (with lower limits for certain items such as exterior
doors), though it can be as high as $2,000 for energy-efficient
water heaters, heat pumps, air conditioners, boilers, and
biomass stoves. Property must be installed in the taxpayer’s
principal residence. A credit of up to $150 is available for home
energy audits.
For more, see CRS Insight IN12051, Residential Energy Tax
Credits: Changes in 2023.
Credit for construction
A tax credit for eligible contractors for building and selling
EPACT05
Property acquired
FY2023-FY2027: $1.1
of energy-efficient new
qualifying energy-efficient new homes. For homes acquired
(P.L. 109-58)
by December 31,

homes (IRC §45L)
after 2021, the credit would be $2,500 if the home meets

2032.
certain Energy Star efficiency standards and $5,000 if the home
is certified as a DOE Zero Energy Ready Home (ZERH). For
multifamily dwelling units, the credit is $500 per unit meeting
certain Energy Star efficiency standards and $1,000 per unit
meeting the DOE ZERH standards. The per-unit credit
amounts are increased to $2,500 and $5,000, respectively, if
the contractor pays its laborers and mechanics at or above
prevailing wage rates in the local construction sector.
Credit for holders of
The federal government has authorized the issue of $3.2 bil ion
Energy
Allocation limit
FY2023-FY2027: de minimis
qualified energy
in Qualified Energy Conservation Bonds (QECBs). QECBs
Improvement
(allocated to the

conservation bonds (IRC
provide a tax credit worth 70% of the tax credit bond rate
and Extension states); authority to
§54D)
stipulated by the Secretary of the Treasury. QECBs issued by
Act of 2008
issue repealed in
state and local governments must fund an energy-savings
(P.L. 110-343) P.L. 115-97.
project, such as the green renovation of a public building, R&D
in alternative fuels, and public transportation projects. The
ability to issue new tax credit bonds was repealed in the 2017
tax revision (TCJA; P.L. 115-97).
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Exclusion of energy
Subsidies provided by public utilities to customers for the
EPACT92
None
FY2023-FY2027: de minimis
conservation subsidies
purchase or installation of energy conservation measures are
(P.L. 102-486)

provided by public
excluded from taxable income. For the purposes of this
utilities (IRC §136)
provision, public utilities are entities selling electricity or
natural gas.

Exclusion of interest on
Tax-exempt private activity bonds can be issued to finance (or
American
Does not apply to
FY2023-FY2027: de minimis
state and local qualified
refinance) qualified green building and sustainable design
Jobs Creation any bond issued
private activity bonds for
projects.
Act of 2004
after September 30,
green buildings and
(P.L. 108-357) 2012.
sustainable design
projects (IRC
§142(a)(14))
Energy-efficient
Businesses may deduct the cost of energy efficient commercial
EPACT05
none
FY2023-FY2027: de minimis
commercial buildings
building property installed or placed in service during the
(P.L. 109-58)

deduction (IRC §179D)
taxable year. Qualifying energy-efficient commercial building

property includes property installed as part of (1) the interior

lighting system; (2) the heating, cooling, ventilation, or hot
water system; or (3) the building envelope. Qualifying property
must reduce the building’s annual energy and power costs by at
least 25% relative to a reference building. The maximum
deduction is equivalent to 50 cents per square foot of the
building, with an additional 2 cents per square foot for every
additional percentage point of energy and power cost
reduction above 25%, up to a maximum of $1.00 per square
foot, less the sum of the amounts deducted over the previous
three years. For firms meeting prevailing wage and registered
apprenticeship standards, the maximum deduction ranges from
$2.50 to $5.00 per square foot of the building.
An alternative deduction available under §179D(f) allows
buildings engaged in qualified retrofit plans to deduct the
adjusted basis in the retrofitted property. To qualify, the
building must be at least five years old, and the qualified retrofit
plan must reduce the building’s energy use intensity by at least
25%. Both the standard §179D deduction and the alternative
§179D(f) are adjusted for inflation after taxable year 2022. Tax-
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
exempt organizations making energy-efficiency upgrades may
transfer the deductible amount to the property designer.
Sources: CRS analysis of the Internal Revenue Code, and Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-23,
December 7, 2023.
Notes: IRC = Internal Revenue Code. A de minimis tax expenditure is less than $250 mil ion in FY2023-FY2027.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.

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Table 3. Tax Incentives for Vehicles and Vehicle Infrastructure
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Credits for other
Tax credits were previously available for purchases of advanced EPACT05
Hybrid vehicles,
FY2023-FY2027: de minimis
alternative fuel vehicles
lean burn technology motor vehicles, qualified hybrid motor
(P.L. 109-58)
excluding passenger
(IRC §30B)
vehicles, and qualified alternative fuel motor vehicles. The
vehicles and light
credits applied to four-wheeled vehicles and could be claimed
trucks: Vehicle
by both individuals and businesses. Credits claimed by
purchased no later
businesses could be carried forward up to 20 years (allowing
than 12/31/2009.
for potential future revenue losses). A credit could be claimed

by the seller (rather than the purchaser) if a vehicle was sold to
New advanced lean
a tax-exempt entity such as a local government. For all
burn technology
qualifying vehicles, the taxpayer must have acquired the vehicle
motor vehicles, new
for use or lease, and original use of the vehicle must have
qualified alternative
commenced with the taxpayer.
fuel vehicles, hybrid
For advanced lean burn technology passenger vehicles (PVs)
passenger vehicles,
and lightweight trucks (LWTs), hybrid PVs, and hybrid LWTs, a
and hybrid light
tax credit of up to $2,400 was available based on the given
trucks: Vehicle
vehicle’s fuel economy. A supplementary conservation credit
purchased no later
for lifetime fuel savings of up to $1,000 was also available. For
than 12/31/2010.
hybrid vehicles other than PVs and LWTs, a credit was available
based on the car’s fuel economy and incremental cost. Hybrid
vehicles used to claim the §30B credit could not be used to
claim the §30D credit. The credits phased out during the four
calendar quarters after a manufacturer had sold 60,000 hybrid
vehicles or 60,000 advanced lean burn technology vehicles.
A tax credit was also available for purchases of qualified
alternative fuel motor vehicles. The credit was worth up to
50% or 80% of the vehicle’s incremental cost, with maximum
values of $5,000 for lightweight vehicles and $40,000 for the
heaviest vehicles. (The caps scaled up according to vehicle
weight.) Incremental cost was defined as the excess of
manufacturer suggested retail price (MSRP) over the price of a
gas- or diesel-powered car of the same model. Partial credits
were available for vehicles relying on a mix of petroleum-based
fuel and alternative fuel. (The MSRP is the price suggested by
the manufacturer and may differ from the price paid by the
taxpayer.)
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Description
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Expiration Date
Estimate (billions)a
Credit for qualified
The credit for qualified commercial clean vehicles, also known
Inflation
Does not apply to
FY2023-FY2027: $14.9
commercial clean vehicles as the commercial clean vehicle credit, reduces tax payments
Reduction
vehicles acquired
(IRC §45W)
for businesses and tax-exempt organizations purchasing electric Act of 2022
after 12/31/2032.
vehicles, hybrid vehicles, and fuel cell vehicles. Vehicles must be
(P.L. 117-169)
made by qualified manufacturers and must have been purchased
for use or lease, not for resale. Eligible commercial vehicles
must be subject to a depreciation allowance, unless they are
purchased by tax-exempt organizations for use (not for lease).
The depreciable basis for commercial clean vehicles must be
reduced by the amount of the §45W credit. Qualifying vehicles
cannot have previously received a §30D clean vehicle credit,
nor may a vehicle be used to claim more than one §45W credit
over its lifetime. Hybrid and electric vehicles must have battery
capacity of at least 7 kilowatt hours if the vehicle’s gross vehicle
weight rating (GVWR) is less than 14,000 pounds, or a battery
capacity of at least 15 kilowatt hours if the vehicle’s GVWR is
14,000 pounds or more.
For hybrid vehicles, the credit equals the lesser of the
incremental cost of the vehicle or 15% of the vehicle’s cost
basis. For electric vehicles and fuel cell vehicles, the credit
equals the lesser of the incremental cost of the vehicle or 30%
of the vehicle’s cost basis. A vehicle’s incremental cost is
defined as the additional cost for an electric, hybrid, or fuel cell
vehicle, as compared with a gas- or diesel-fueled vehicle of
similar size and use. The credit may not exceed $40,000 for a
vehicle with a GVWR of 14,000 pounds or more, nor may it
exceed $7,500 for lighter-weight vehicles.
The commercial clean vehicle credit is nonrefundable, meaning
that taxpayers are not entitled to a refund if their tax credits
exceed their tax liabilities. However, any unused credits may be
carried forward to offset future tax liabilities. Tax-exempt
organizations are eligible to receive the credit as a direct
payment instead of as a nonrefundable tax credit.
For leased vehicles, the tax credit is generally received by the
vehicle’s owner rather than its lessee. Existing legal principles
are used to distinguish between a lease and a sale for tax
purposes. For example, if the lease agreement covers more
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Description
Legislation
Expiration Date
Estimate (billions)a
than 80% or 90% of the vehicle’s projected useful life, or if the
agreement requires the lessee to purchase the vehicle at the
end of the lease, then the lease agreement is deemed a sale for
tax purposes. Under these and other circumstances, the
vehicle’s owner is ineligible for the credit, but the lessee may
claim either the §45W credit or the §30D clean vehicle credit.
Used clean vehicle credit
The used clean vehicle credit, also known as the previously-
Inflation
Does not apply to
FY2023-FY2027: de minimisb
(IRC §25E)
owned clean vehicles credit, provides a tax credit for purchases Reduction
vehicles acquired
of used electric or fuel cell vehicles. The credit equals 30% of
Act of 2022
after 12/31/2032.
the vehicle’s sales price up to a maximum value of $4,000.
(P.L. 117-169)
Credits in excess of tax liabilities cannot be received as refunds,
nor can they offset future tax liabilities. To qualify for the
credit, both the purchaser (the taxpayer) and the vehicle must
meet certain criteria. Additional restrictions apply to credits
transferred from purchasers to dealers.
Individuals and couples are eligible for the credit; business
entities such as corporations and partnerships are not. The
taxpayer must purchase the vehicle for personal use, not for
resale, and cannot have claimed another used clean vehicle
credit in the three years prior to the date of purchase. In either
the year the vehicle is acquired or the year before, the
taxpayer’s modified adjusted gross income (MAGI) must be at
or below certain thresholds. The thresholds are $150,000 for
married couples, $112,500 for heads of household, and $75,000
for single filers and others.
To qualify for a credit, the vehicle must be purchased from a
licensed dealer for $25,000 or less. The dealer must produce a
report of the transaction for both the buyer and the IRS. The
vehicle must have a gross vehicle weight rating of less than
14,000 pounds, and used electric vehicles must have a battery
capacity of 7 kilowatt hours or more. In addition, the vehicle’s
model year must be at least two years before the year of
purchase; for example, used vehicles purchased in 2030 must
have model years of 2028 or earlier. Finally, the vehicle cannot
have been transferred to another qualified buyer after August
16, 2022, effectively limiting used credit claims to one per
vehicle. (Vehicle sales from the initial owner to a dealer, or
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from one dealer to another, do not violate the first transfer
rule.)
Rules for credit transfers under the used clean vehicle credit
are similar to those under the clean vehicle credit. Buyers can
claim the credit at the point of purchase, and dealers may
compensate buyers with a reduced down payment, a reduced
partial payment, or cash. The credit amount may exceed
taxpayers’ income tax liabilities, in effect making transferred
credits ful y refundable. Buyers cannot transfer a partial credit
to the dealer, and credit amounts received by the dealer are
increased by 6.0445%. Dealers must inform buyers of the
relevant MAGI eligibility thresholds, and buyers must attest that
they expect to be eligible for the credit. Taxpayers who
transfer the used clean vehicle credit but exceed the income
limits must pay back the credit to the IRS when filing their
taxes. Finally, the transfer rules only apply to used vehicles
acquired between 2024 and 2032.
The used clean vehicle credit went into effect starting in 2023.
However, vehicles purchased in 2022 (or earlier) but acquired
after December 31, 2022, are eligible for the credit. The credit
does not apply to vehicles acquired by the taxpayer after
December 31, 2032.
Clean vehicle credit (IRC
New fuel cell vehicles and plug-in electric vehicles placed in
Energy
Vehicle must be
FY2023-FY2027: $19.0
§30D)
service after 2022 may qualify for a “clean vehicle credit.”
Improvement
placed in service on
Eligible vehicles must have been acquired on or before
and Extension or before
December 31, 2032, have a gross vehicle weight rating of less
Act of 2008
12/31/2032.
than 14,000 pounds, and have undergone final assembly in
(P.L. 110-
North America. Qualifying plug-in electric vehicles are required 343); section
to have a battery capacity of 7 kilowatt-hours or more.
modified and
Individuals and businesses may claim the credit for at most one
retitled
vehicle per year. Original use of the vehicle must commence
“Clean
with the taxpayer, and taxpayers must use or lease the vehicle;
vehicle
vehicles purchased for resale are ineligible for the credit. The
credit” by the
vehicle’s MSRP cannot exceed $80,000 for vans, sport utility
Inflation
vehicles, and pickup trucks, and cannot exceed $55,000 for
Reduction
other vehicles.
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The credit amount is $3,750 for vehicles meeting the critical
Act of 2022
minerals requirement and $3,750 for vehicles meeting the battery
(P.L. 117-169)
components requirement, for a maximum total credit of $7,500.
To meet the former requirement, a car’s battery must have a
certain threshold percentage of “critical minerals that were
extracted or processed in a country with which the United
States has a free trade agreement, or recycled in North
America.” The threshold percentage is 40% in 2023, 50% in
2024, 60% in 2025, 70% in 2026, and 80% thereafter. To meet
the latter requirement, a certain share of a battery’s
component parts must be manufactured or assembled in North
America, with the share depending on the year the car is placed
in service. The share is 50% in 2023, 60% in 2024 and 2025,
70% in 2026, 80% in 2027, 90% in 2028, and 100% thereafter. In
addition, for vehicles placed in service after 2024, no applicable
critical minerals in the vehicle’s battery may come from a
“foreign entity of concern” (FEOC) as defined in 42 U.S.C.
§18741; vehicles placed in service after 2023 cannot use battery
components manufactured or assembled by an FEOC.
To qualify for the credit, modified adjusted gross income
(MAGI) for either the current or previous year must be at or
below $300,000 for married couples, $150,000 for single filers,
and $225,000 for heads of household. The credit is
nonrefundable, meaning that credits in excess of tax liabilities
are not refunded to the taxpayer.
Beginning in 2024, a buyer may elect to transfer the credit to
the dealer. As compensation for the transferred credit, qualified
dealers may compensate buyers with cash, a reduced down
payment on the vehicle, or a reduced partial payment on the
vehicle. The transferred credit may exceed the taxpayer’s
income tax liabilities, in effect making transferred credits ful y
refundable. Buyers are not allowed to transfer partial credits,
and credits transferred to eligible dealers are increased by
6.0445%. Taxpayers who transfer the credit at the time of
purchase must stil file tax form 8936 and indicate that they
used the clean vehicle credit earlier in the year. Dealers must
inform consumers of the MAGI thresholds at the time
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Expiration Date
Estimate (billions)a
taxpayers elect to transfer their credits, and taxpayers must
attest to the dealer that they expect to be below the income
threshold for their filing status. Taxpayers who transfer the
credit but exceed the MAGI limits must pay back the credit (to
the IRS) when filing their taxes.
Vehicles placed in service before April 18, 2023, are not subject
to the critical minerals requirement or the battery components
requirement. Consumers who purchased a vehicle before April
18, 2023, but took possession of it after that date are stil
subject to the requirements. For vehicles placed in service
between January 1, 2023, and April 17, 2023, the minimum
credit for vehicles with a battery capacity of at least 7 kilowatt
hours is $3,751, with an additional $417 available for each
additional kilowatt hour, up to a maximum credit of $7,500.
For new plug-in electric vehicles purchased before 2023, the
minimum credit is $2,917 for vehicles with battery capacities of
at least 5 kilowatt hours, with an additional $417 for each
additional kilowatt hour, up to a maximum of $7,500. If a plug-
in electric vehicle was purchased and received by the taxpayer
between August 7, 2022, and December 31, 2022, the vehicle
must have undergone final assembly in North America.
Credit for fuel cell
A previously available tax credit for fuel cell vehicles. Fuel cell
EPACT05
Property purchased
FY2023-FY2027: de minimis
vehicles (IRC §30B)
vehicles received a base credit of $4,000 for vehicles weighing
(P.L. 109-58)
by 12/31/2021.
less than 8,500 pounds. Heavier vehicles qualified for up to a

$40,000 credit. An additional credit of up to $4,000 was
available for cars and light trucks that exceeded the 2002 base
fuel economy.
The credit for fuel cell vehicles is no longer available. Certain
qualifying fuel cell vehicles are eligible for an IRC §30D clean
vehicle credit beginning in 2023.
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Enacting
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Expiration Date
Estimate (billions)a
Alternative fuel vehicle
A tax credit for the cost of qualified alternative fuel vehicle
EPACT05
Property placed in
FY2023-FY2027: $0.4
refueling property credit
refueling property at a business or at a taxpayer’s principal
(P.L. 109-58)
service by
(IRC §30C)
residence. Costs for vehicle charging equipment—including

12/31/2032.
bidirectional charging equipment and charging stations for
electric motorcycles (two- and three-wheeled electric vehicles)
intended for use on public roads—are eligible for the credit.
The credit is equal to 30% of qualifying costs for personal
property (property not subject to depreciation), up to a
maximum value of $1,000. For depreciable business property,
the credit is equal to 30% of costs if the firm meets prevailing
wage and qualified apprenticeship requirements, and is 6% if the
firm does not meet such requirements. The credit for
depreciable business property is limited to $100,000 per item
of property. For property installed before January 1, 2023, the
maximum total credit value is $30,000 for depreciable business
property and $1,000 for personal property.
Starting in 2023, property is only eligible for the credit if it is
installed in either a nonurban or a low-income census tract.
Any census tract not classified as an “urban area” by the
Secretary of Commerce in the most recent decennial census
qualifies for the credit. To qualify as a “low-income
community,” census tracts must meet one of five criteria. First,
all census tracts with a poverty rate of 20% or higher qualify for
the credit. Second, census tracts located in metropolitan areas
qualify for the credit if median family income in the tract does
not exceed 80% of either statewide median family income or
metropolitan area median family income, whichever is greater;
census tracts located in nonmetropolitan areas are eligible if
median family income does not exceed 80% of statewide
median family income. Third, subject to regulations established
by the Secretary of the Treasury, targeted populations (within
the meaning of Section 103(20) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (12
U.S. Code §4702(20)) may be treated as low-income
communities. Fourth, high-migration rural counties—defined as
counties which have lost 10% or more of their population due
to net out-migration over the 20-year period ending with the
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most recent census—are eligible for the credit if they are in
census tracts located in nonmetropolitan areas wherein median
family income does not exceed 85% of statewide median family
income. Fifth, census tracts with fewer than 2,000 people which
are located in empowerment zones (as designated under 26
U.S. Code §1391) and which border a “low-income community”
(as defined according to the criteria described here) are
classified as “low-income communities” as well. Census tracts
need only meet either the nonurban criterion or one of the five
low-income criteria for property to be eligible for the credit.
Credits for plug-in
A tax credit was previously available for the purchase of
Energy
Credit for plug-in
FY2023-FY2027: de minimis
electric vehicles and
qualifying plug-in electric vehicles. The credit ranged from
Improvement
electric vehicles
electric motorcycles (IRC
$2,500 to $7,500 per vehicle, depending on the vehicle’s
and Extension phased out and
§30D)
battery capacity. The tax credit phased out once a vehicle
Act of 2008
replaced by the
manufacturer had sold 200,000 qualifying vehicles. For vehicles
(P.L. 110-343) “clean vehicle
purchased by tax-exempt organizations, the seller of the vehicle
credit.” See the
was able to claim the credit under certain circumstances.
“Clean vehicle
ARRA (P.L.
A separate 10% credit, up to $2,500, was previously available
credit (IRC §30D)”
111-5)
for the cost of two-wheeled plug-in electric vehicles (e.g.,
entry in this table.
motorcycles). Eligible vehicles must have had a weight rating of

less than 14,000 pounds; have been propelled by a battery-
Credit for electric
powered electric motor with a battery capacity of at least 2.5
motorcycles:
kilowatt-hours; been used or leased (not resold) by the
Motorcycle
taxpayer; been used in the United States; been manufactured
acquired on or
for use on streets, roads, and highways; and been capable of
before 12/31/2021.
achieving a speed of at least 45 miles per hour. In addition,
original use of the motorcycle must have commenced with the
taxpayer.
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-23; and
correspondence with the Joint Committee on Taxation.
Notes: IRC = Internal Revenue Code. A de minimis tax expenditure is less than $250 mil ion in FY2023-FY2027.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. The Joint Committee on Taxation did not include a cost estimate for the used clean vehicle credit in its most recent tax expenditures report (covering FY2023-
FY2027). The committee estimated that the credit would reduce federal revenues by $0.4 bil ion from FY2022 to FY2026 in its previous report. See Joint
Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2022-2026, JCX-22-22, December 22, 2022.
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Table 4. Renewable and Alternative Fuels Tax Incentives
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Clean fuel production
Starting in 2025, producers registered with the IRS can claim a
Inflation
Fuel sold by
FY2023-FY2027: $6.7
credit (IRC §45Z)
tax credit for clean fuel produced in the United States or its
Reduction
12/31/2027.
territories. Producers who sell clean fuel to other producers
Act of 2022
for use in a fuel mixture are eligible for the credit.
(P.L. 117-169)
The credit differs in value depending on the greenhouse gas
(GHG) emissions rate for the applicable fuel; the most
substantial credits are for zero-emission fuels. For producers
not meeting prevailing wage and apprenticeship requirements,
the credit has a maximum value of $0.20 per gallon of
nonaviation fuel and 35¢ per gallon of sustainable aviation fuel.
The maximum values rise to $1.00 and $1.75 per gallon,
respectively, for producers meeting prevailing wage and
qualified apprenticeship requirements. All maximum values are
adjusted annually for inflation.
For producers with nonzero emissions, the credit phases down
to zero as the fuel emissions factor rises to 50 kilograms of
CO2 per 1 mil ion British Thermal Units (mmBTU). GHGs
other than CO2 are evaluated on a CO2-equivalent basis
depending on their relative contribution to global warming.
Producers cannot use the same production facility to claim
both the clean fuel production credit and the clean hydrogen
production credit (IRC §45V), the investment credit (IRC §48)
for a specified clean hydrogen facility, or the credit for carbon
oxide sequestration (IRC §45Q).
For more, see CRS In Focus IF12502, The Section 45Z Clean Fuel
Production Credit.
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Sustainable aviation fuel
Starting in 2023, certain taxpayers may claim tax credits for the
Inflation
Fuel not sold or
FY2023-FY2027: de minimisb
credit (IRC §40B)
sale or use of “sustainable” aviation fuel. To be deemed
Reduction
used after
“sustainable,” such aviation fuel must reduce lifecycle GHG
Act of 2022
12/31/2024.
emissions by at least 50% compared with petroleum-based jet
(P.L. 117-169)
fuel. The credit starts at $1.25 per gallon, and there is a
supplementary credit amount of $0.01 for each percentage
point by which the GHG emissions reduction exceeds 50%.
(For example, the supplementary amount would be $0.30 for
aviation fuel which reduces emissions by 80% compared to
petroleum-based jet fuel.) The maximum combined value of the
baseline credit and the supplementary credit is $1.75 per gallon.
Taxpayers may use this credit to offset their excise tax
liabilities, offset their income tax liabilities, or receive payments.
All credit amounts are included in taxpayers’ gross income for
income tax purposes.
Additional requirements for being counted as sustainable
include the fol owing: (1) aviation fuel must meet the
requirements of ASTM International Standard D7566, or the
Fischer Tropsch provisions of ASTM International Standard
D1655, Annex A1; (2) aviation fuel may not be derived from
coprocessing an applicable material (or materials derived from
an applicable material) with a feedstock which is not biomass;
and (3) fuel cannot be derived from palm fatty acid distil ates or
petroleum. Producers or importers applying for the credit must
be registered with the Secretary of the Treasury under IRC
§4101.
Certain qualified fuel mixtures of kerosene and sustainable
aviation fuel may be eligible for the credit. To be counted as a
“qualified mixture,” the given mixture must be produced by the
taxpayer in the United States, be used by the taxpayer (or sold
by the taxpayer for use) in an aircraft, and be sold or used in
the ordinary course of a trade or business of the taxpayer. In
addition, the transfer of the mixture to the given aircraft fuel
tank must occur in the United States.
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Estimate (billions)a
Credit for production of
Taxpayers producing hydrogen at qualified clean hydrogen
Inflation
Facility construction FY2023-FY2027: $4.7
clean hydrogen (IRC
production facilities may receive a credit based on the amount
Reduction
must begin before
§45V)
of hydrogen produced, the lifecycle CO2 equivalent (CO2e)
Act of 2022
01/01/2033
emissions rate of the hydrogen through the point of production (P.L. 117-169)
(well-to-gate), and the taxpayer’s compliance with applicable
wage and apprenticeship requirements.
To be classified as a qualified clean hydrogen production facility,
a facility must be owned by the taxpayer, must produce
qualified clean hydrogen, and must have begun its construction
before January 1, 2033. Qualified clean hydrogen (QCH) cannot
have a lifecycle GHG emissions rate greater than 4 kilograms of
CO2e per kilogram of hydrogen through the point of
production. The production of QCH must occur in the United
States or its possessions, in the ordinary course of the
taxpayer’s trade or business, and for sale or use. The
production and sale or use of QCH must be verified by an
unrelated party. If a facility placed in service before January 1,
2023, did not produce qualified clean hydrogen at that time, but
is modified before January 1, 2033, to produce clean hydrogen,
and if those modifications are charged to the taxpayer’s capital
account, then the facility can qualify for the 45V credit.
The baseline credit is $0.60 per kilogram of QCH, adjusted
annually for inflation. Taxpayers producing QCH with lifecycle
GHG emissions below 0.45 kilograms of CO2e through the
point of production are eligible for the ful baseline credit.
Taxpayers are eligible for 33.4% of the baseline credit if the
CO2e emissions rate is between 0.45 and 1.5 kilograms; 25% of
the baseline credit if the rate is between 1.5 and 2.5 kilograms;
and 20% of the baseline credit if the rate is between 2.5 and 4.0
kilograms. These credit amounts are multiplied by five for
producers meeting prevailing wage and qualified apprenticeship
requirements. Credits are only available during the first 10
years after the facility is placed in service.
For projects financed with tax-exempt bonds, the credit is
reduced by an amount equivalent to the share of financing
coming from such bonds, with a maximum reduction of 15%.
(For example, if 10% of project financing comes from tax-
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Cost or Tax Expenditure
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Expiration Date
Estimate (billions)a
exempt bonds, the credit amount is reduced by 10%; if 25% of
its financing comes from tax-exempt bonds, the credit amount
is reduced by 15%.)
Clean hydrogen production facilities used to claim the §45V
credit cannot also be used to claim the energy investment tax
credit (in 2023 and 2024) or the credit for carbon oxide
sequestration (indefinitely).c
Second-generation biofuel A per-gallon tax credit for qualified second-generation biofuel
Food,
Fuel produced
FY2023-FY2027: de minimis
producer credit (IRC
production. The amount of the credit is generally $1.01 per
Conservation, before 01/01/2025.
§40(a)(4))
gallon. Qualifying fuels include cellulosic biofuel, which is
and Energy
produced using lignocellulosic or hemicellulosic matter
Act of 2008
(cellulosic feedstock) available on a renewable or recurring
(P.L. 110-246)
basis, as well as second-generation biofuels, which include
cultivated algae, cyanobacteria, or lemna.
Credits for biodiesel, agri-
There are three tax credits for biodiesel: the biodiesel mixture
American
Fuel sold, used, or
FY2023-FY2027: $6.4d
biodiesel, renewable
credit, the biodiesel credit, and the small agri-biodiesel
Jobs Creation removed by
diesel fuel, alternative
producer credit. Each gallon of biodiesel, including agri-
Act of 2004
12/31/2024.
fuels, and alternative fuels
biodiesel (biodiesel made from virgin oils), may be eligible for a
(P.L. 108-357)
mixtures (IRC §§40A,
$1.00 tax credit. Additionally, an eligible small agri-biodiesel

6426, & 6427)
producer credit of 10 cents is available for each gallon of
qualified agri-biodiesel production. The mixtures tax credit may Safe,
be claimed as an instant excise tax credit against the blender’s
Accountable,
fuel excise tax payments. Credits in excess of excise tax liability Flexible,
may be refunded. The biodiesel and small agri-biodiesel credits
Efficient
may be claimed as income tax credits.
Transportatio
n Equity Act:
Tax credits are also available for certain alternative fuels and
A Legacy for
alternative fuels mixtures. There is a 50-cents-per-gallon excise
Users
tax credit for certain alternative fuels used as fuel in a motor
(SAFETEA-
vehicle, motor boat, or airplane, and a 50-cents-per-gallon
LU; P.L. 109-
credit for alternative fuels mixed with a traditional fuel
59)
(gasoline, diesel, or kerosene) for use as a fuel. Qualifying fuels
include liquefied petroleum gas; P Series fuels (certain
renewable, nonpetroleum, liquid fuels); compressed or liquefied
natural gas (CNG or LNG); any liquefied fuel derived from coal
or peat through the Fischer-Tropsch process that meets
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Description
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Expiration Date
Estimate (billions)a
certain carbon-capture requirements; compressed or liquefied
gas derived from biomass; and liquid fuel derived from biomass.
These credits wil be replaced by the clean fuel production
credit beginning in 2025.
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-23,
December 7, 2023; Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Of Title I – Committee On Finance, Of An Amendment In The Nature Of A
Substitute To H.R. 5376, “An Act To Provide For Reconciliation Pursuant To Title II Of S. Con. Res. 14,” As Passed By The Senate On August 7, 2022, And Scheduled For Consideration
By The House Of Representatives On August 12, 2022, JCX-18-22, August 9, 2022; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions
Contained In The House Amendment To The Senate Amendment To H.R. 1865, the Further Consolidated Appropriations Act, 2020, JCX-54R-19, December 17, 2019.
Notes: IRC = Internal Revenue Code. A de minimis tax expenditure is less than $250 mil ion in FY2023-FY2027.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. The Joint Committee on Taxation did not include cost estimates for the sustainable aviation fuel credit in its most recent tax expenditures reports (covering fiscal
years 2023-2027 and 2022-2026, respectively). The committee estimated that the credit would reduce federal revenues by $49 mil ion from FY2022 to FY2026 in its
cost estimate of the Inflation Reduction Act of 2022. See Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Of Title I – Committee On
Finance, Of An Amendment In The Nature Of A Substitute To H.R. 5376, “An Act To Provide For Reconciliation Pursuant To Title II Of S. Con. Res. 14,” As Passed By The Senate
On August 7, 2022, And Scheduled For Consideration By The House Of Representatives On August 12, 2022, JCX-18-22, August 9, 2022.
c. The energy investment tax credit (ITC) is authorized by IRC Section 48 in 2023 and 2024 and by IRC Section 48E beginning in 2025. Subsection (a)(15) of IRC
Section 48 prevents taxpayers from receiving both the ITC and the clean hydrogen production credit for the same clean hydrogen production facility, but no similar
provision is included in IRC Section 48E. However, the Secretary of the Treasury is required to issue guidance on IRC Subsection 48E no later than January 1, 2025,
and it is possible that the Secretary might address simultaneous receipt in the guidance. Firms might also be prevented from claiming the ITC and clean hydrogen
production credit for the same expenditures under the “double benefit rule.” For more information on the double benefit rule, see CRS Insight IN11378, IRS
Guidance Says No Deduction Is Allowed for Business Expenses Paid with Forgiven PPP Loans, by Sean Lowry and Jane G. Gravelle.
d. The income tax credit portion is de minimis.

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Table 5. Fossil Fuels Tax Incentives
Enacting
Provision
Description
Legislation
Expiration Date
Costa
Enhanced oil recovery
A tax credit for Enhanced Oil Recovery (EOR) costs available
Omnibus
None
FY2023-FY2027: de minimis
(EOR) credit (IRC §43)
when oil prices are below a certain threshold. The credit amount
Budget
is 15% of qualified domestic EOR costs. The EOR credit phases
Reconciliation
out over a $6 range once oil’s reference price exceeds $28 per
Act of 1990
barrel (adjusted for inflation after 1991; $52.10 in 2022). The EOR (P.L. 101-508)
credit was ful y phased out every year from 2006 through 2015.
Low oil prices led to the ful EOR credit becoming available in
2016, 2017, and 2021. A partial credit was available for 2018, but
it was ful y phased out in 2019, 2020, and 2022.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences;
and CRS Insight IN11381, Low Oil Prices May Trigger Certain Tax
Benefits, but Not Others.
Coal production credits:
A tax credit for Indian coal produced from reserves that were
EPACT05
Coal produced by
FY2023-FY2027: de minimis
Refined coal and Indian
owned by an Indian tribe or held in trust by the United States for
(P.L. 109-58)
12/31/2021
coal (IRC §45)
a tribe on June 14, 2005. The amount of the credit is $2.00 per
ton (adjusted for inflation; $2.60 per ton in 2021). Tax credits
were also available for refined coal produced at refined coal
production facilities placed in service after the date of the
enactment of the American Jobs Creation Act of 2004 and before
January 1, 2012. The amount of the credit was $4.375 per ton
(adjusted for inflation to $7.38 in 2021.)
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Credit for producing oil
A tax credit for producing oil and gas from marginal wells,
American
None
FY2023-FY2027: de minimis
and gas from marginal
available when oil and gas prices are below certain thresholds. The Jobs Creation
wells (IRC §45I)
base credit amount, in 2004 prices, is $3 per barrel of qualified
Act of 2004
crude oil and 50 cents per 1,000 cubic feet (mcf) of qualified
(P.L. 108-357)
natural gas. These values are adjusted for inflation every year. The
base credit amounts were $4.50 per barrel of qualified crude oil
and $0.75 per mcf of natural gas in 2023.
The credit starts phasing out if the reference prices, in 2023
dol ars, exceed $22.49 per barrel of oil or $2.50 per mcf of
natural gas for the preceding year adjusted for inflation. The credit
is fully phased out if the reference price exceeds $18 per barrel or
$2.00 per mcf in 2004 dol ars ($26.99 for oil and $2.99 for gas in
2023).
The credit for crude oil has never been triggered. For natural gas,
a partial credit was available in 2016, 2017, and 2019, and the ful
credit was available in 2020 and 2021; no credit was available in
2022 or 2023. The §45I and §45K credits cannot be claimed for
the same well.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences;
and CRS Insight IN11381, Low Oil Prices May Trigger Certain Tax
Benefits, but Not Other.
Safe harbor from
This provision allows tax-exempt bonds to be used to finance
EPACT05
None
Not available.
arbitrage rules for
prepaid natural gas contracts without applying otherwise
(P.L. 109-58)
prepaid natural gas (IRC
applicable arbitrage rules.
§148(b)(4))
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Amortization of
Geological and geophysical (G&G) expenditures are costs
EPACT05
None
FY2023-FY2027: $0.7
geological and
associated with determining the location and potential size of a
(P.L. 109-58)
geophysical expenditures
natural resource or mineral deposit. Generally, these costs are
associated with oil and
viewed as capital costs, and as such would be recovered over the
gas exploration (IRC
same time frame as other capital costs. Most producers amortize
§167(h))
G&G expenditures over two years. Major integrated oil
companies amortize G&G expenditures over seven years. A major
integrated oil company, as defined in statute, has (1) average daily
worldwide production of crude oil of at least 500,000 barrels; (2)
gross receipts in excess of $1 bil ion in its tax year ending during
2005; and (3) at least 15% ownership interest in a crude oil
refinery.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences.
Seven-year MACRS
A seven-year MACRS recovery period is provided for any natural
American
None
FY2023-FY2027: de minimis
Alaska natural gas
gas pipeline system located in the State of Alaska that has a
Jobs Creation
pipeline (IRC
capacity of more than 500 bil ion BTU of natural gas per day.
Act of 2004
§168(e)(3)(C)(i i))
(P.L. 108-357)
Seven-year MACRS for
Natural gas gathering lines are treated as 7-year property. A
EPACT05
None
Not available.
natural gas gathering lines natural gas gathering line consists of the pipe, equipment, and
(P.L. 109-58)
(IRC §168(e)(3)(C)(iv))
appurtenances determined to be a gathering line by the Federal
Energy Regulatory Commission (FERC) or a gathering line used to
deliver natural gas to a gas processing plant, an interconnection
with a transmission pipeline, or an interconnection with a local
distribution company, a gas storage facility, or an industrial
consumer.
15-year MACRS
A natural gas distribution line, the original use of which
EPACT05
12/31/2010 (line
FY2023-FY2027: $0.3
depreciation recovery
commences with the taxpayer after April 11, 2005, and which is
(P.L. 109-58)
must have been
period for natural gas
placed in service before January 1, 2011, is treated as 15-year
placed in service by
distribution lines (IRC
property.
this date)
§168(e)(3)(E)(vi))
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Amortization of air
Five-year (60-month) amortization applies to a “certified pol ution
EPACT05
None
FY2023-FY2027: $0.3
pol ution control facilities control facility” used in connection with a plant or other property
(P.L. 109-58)
(IRC §§169 and
in operation before January 1, 1976, and to an “atmospheric
291(a)(4))
pol ution control facility” placed in service after April 11, 2005,
and used in connection with an electric generation plant or other
property that is primarily coal fired. Seven-year (84-month)
amortization applies only to an “atmospheric pol ution control
facility” placed in service after April 11, 2005, and used in
connection with an electric generation plant or other property
that is primarily coal fired and that was placed in operation after
December 31, 1975. If an election is made under §169 with
respect to any certified pol ution control facility, the amortizable
basis of the facility is reduced by 20%.
Expensing of tertiary
Taxpayers can deduct tertiary injectant expenses, other than
Crude Oil
None
FY2023-FY2027: de minimis
injectants (IRC §193)
expenses for recoverable hydrocarbon injectants, in the year costs Windfall
are incurred.
Profit Tax
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences.
Act of 1980
(P.L. 96-223)
Expensing of intangible
IDCs include expenses on items without salvage value (e.g., wages, 1916
None
Oil and Gas
dril ing costs (IDCs) and
fuel, and dril ing site preparations). Integrated oil and gas
Treasury
FY2023-FY2027: $3.3
exploration and
producers (producers who also have substantial refining or retail
regulation
development costs (IRC
activities) must capitalize 30% of IDCs and then recover those
(T.D. 45,

§§263(c), 263A(c)(3),
costs over a five-year period. The remaining 70% of IDCs can be
article 223);
Other Fuels
291(b), 616, 617)
ful y expensed (costs deducted in the year they are incurred).
codified in
FY2023-FY2027: de minimis
Nonintegrated producers can ful y expense IDCs. The election to
1954 (P.L. 83-

deduct intangible dril ing and development costs applies to oil and
591)
gas wells and to wells dril ed for any geothermal deposit. For
mineral properties, exploration and development expenditures
are deductible as an expense in the year paid, as opposed to being
capitalized.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences.
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Passive loss rules for
Deductions from passive trade or business activities, to the extent Tax Reform
None
FY2023-FY2027: $0.1b
working interests in oil
they exceed income from all such passive activities, generally may
Act of 1986
and gas property (IRC
not be deducted against other income (salary, interest, dividends,
(P.L. 99-514)
§469(c)(3))
and active business income). These passive activity loss rules are
not applicable to working interests in oil or gas property.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences.
Percentage depletion
Certain independent oil and gas producers (producers who are
Revenue Act
None
Oil and Gas
(IRC §§611, 613, and
not retailers or refiners) may elect to claim percentage depletion
of 1926 (P.L.
FY2023-FY2027: $3.8
613A)
as opposed to cost depletion. The percentage depletion allowance 69-20)
is 15% of gross income from the property, not to exceed (1)

100% of taxable income from the property, and (2) 65% of the
Other Fuels
taxpayer’s taxable income. Oil and gas producers may claim
FY2023-FY2027: $0.6
percentage depletion on up to 1,000 barrels of average daily

production (or an equivalent amount of domestic natural gas).
Percentage depletion rates for other minerals range from 5% to
22%.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences.
Fossil fuel capital gains
Certain sales of coal under royalty contracts qualify for taxation as Revenue Act
None
Not available.
treatment (IRC §631(c))
capital gains rather than ordinary income. Income from these sales of 1964 (P.L.

is taxed at the preferred 20% rate applied to capital gains, as
88-272)
opposed to being taxed as ordinary income.

Exclusion of interest on
Interest income on state and local bonds used to finance the
Revenue and
None
FY2023-FY2027: de minimis
state and local
construction of certain private energy facilities for a city and one
Expenditure
government qualified
contiguous county, or two contiguous counties, is tax-exempt.
Control Act
private activity bonds for
These energy facility bonds are classified as private activity bonds,
of 1968 (P.L.
energy production
rather than as governmental bonds, because a substantial portion
90-364)
facilities (IRC §142)
of their benefits accrues to individuals or businesses rather than
to the general public. These bonds are subject to the state private
activity bond annual volume cap.
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Exceptions for publicly
Publicly traded partnerships are general y treated as corporations.
Revenue Act
None
Other Energy Related Activities
traded partnerships with
The exception from this rule occurs if at least 90% of its gross
of 1987 (P.L.
FY2023-2027: $2.8
qualified income derived
income is derived from interest, dividends, real property rents, or
100-203)

from certain energy-
certain other types of qualifying income. Qualifying income
related activities (IRC
includes income derived from certain energy-related activities,
Exploration and Mining of Natural
§7704)
such as fossil fuel or geothermal exploration, development,
Resources
mining, production, refining, transportation, and marketing.
FY2023-FY2027: $0.3
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences;
and CRS Report R41893, Master Limited Partnerships: A Policy
Option for the Renewable Energy Industry.
Sources: CRS analysis of the Internal Revenue Code; and Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-23,
December 7, 2023.
Notes: IRC = Internal Revenue Code. MACRS = modified accelerated cost recovery system. A de minimis tax expenditure is less than $250 mil ion in FY2023-FY2027.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. Exceptions to the passive activity loss rules are not classified as tax expenditures by JCT. These estimates are from the Treasury Department. Treasury Department
tax expenditure estimates are available at https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures. The cost estimate for this provision is $50 mil ion
($0.05 bil ion) for FY2023-FY2027 and $100 mil ion ($0.1 bil ion) for FY2023-FY2032. The estimate presented in this table has been rounded to the nearest tenth of
$1 bil ion (the nearest hundred mil ion).

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Table 6. Carbon Capture and Sequestration, Nuclear, and Other Tax Incentives
Enacting
Provision
Description
Legislation
Expiration Date
Costa
Credit for production of
A tax credit for electricity produced from qualifying nuclear
EPACT05
Facilities placed in
FY2023-FY2027: de minimis
electricity from qualifying
facilities. The advanced nuclear production tax credit (PTC)
(P.L. 109-58)
service by January 1,
advanced nuclear power
provides a 1.8 cent per kWh tax credit for electricity sold that
2021. The IRS is to
facilities (IRC §45J)
was produced at qualifying facilities. Criteria for qualifying
allocate unutilized

facilities include that they must use nuclear reactor designs
national megawatt
approved by the Nuclear Regulatory Commission after 1993.
capacity after that
Qualifying facilities can claim tax credits during the first eight
date.
years of production. The credit is restricted to 6,000
megawatts (MW) of total electric generating capacity for all
qualifying facilities, with the 6,000 MW allocated by the Internal
Revenue Service (IRS). Taxpayers can claim no more than $125
mil ion in tax credits per 1,000 MW of the allocated capacity in
any single year.
Advanced manufacturing
A 25% business tax credit for investments in advanced
Chips and
Construction of
FY2023-FY2027: $30.7
investment credit (IRC
manufacturing facilities. “Advanced manufacturing facilities” are
Science Act
qualifying property
§48D)
domestic facilities producing semiconductors or
(P.L. 117-167) must begin no later
semiconductor equipment. Businesses may elect to receive the
than 12/31/2026.
credit as a payment, in effect making the credit ful y refundable.
Exclusion of interest on
Tax-exempt private activity bonds can be issued to finance
Infrastructure None
Not available
state and local
direct air capture facilities (as defined in IRC §45Q(e)(3)) and
Investment
government private
eligible component parts used in industrial carbon dioxide
and Jobs Act
activity bonds for qualified facilities for carbon capture.
(P.L. 117-58)
carbon dioxide capture
facilities (IRC §142(a)(17))
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Credit for carbon oxide
A tax credit for the capture and sequestration of carbon
Energy
Construction must
FY2023-FY2027: $4.8
sequestration (IRC §45Q)
emissions (including carbon dioxide and carbon monoxide).
Improvement
begin by December

For carbon capture equipment placed in service on or after
and Extension 31, 2032.
February 9, 2018, and before January 1, 2023, the credit is the
Act of 2008
sum of (1) $40.89 in 2023 per metric ton of carbon oxide
(P.L. 110-343)
captured that is not used as a tertiary injectant and placed in
secure geological storage, during the first 12 years fol owing
the facility being placed in service; and (2) $27.61 in 2023 per
metric ton of carbon oxide captured that is used as a tertiary
injectant or other qualified uses, during the first 12 years
fol owing the facility being placed in service.
For carbon capture equipment placed in service on or after
January 1, 2023, and that began construction prior to January
1, 2033, the credit is the sum of (1) $17 per metric ton of
carbon oxide that is not used as a tertiary injectant and placed
in secure geological storage, during the first 12 years fol owing
the facility being placed in service ($36 for Direct Air Capture
[DAC]), increased to $85 ($180 for DAC) for facilities that
pay prevailing wages during the construction phase; and (2)
$12 per metric ton of carbon oxide captured that is used as a
tertiary injectant or other qualified uses ($26 for DAC),
increased to $60 ($130 for DAC) for facilities that pay
prevailing wages during the construction phase and during the
first 12 years of operation and meet registered apprenticeship
requirements. Amounts adjusted for inflation after 2026.
For more, see CRS In Focus IF11455, The Section 45Q Tax
Credit for Carbon Sequestration.
10-year MACRS for smart 10-year property includes any qualified smart electric meter
Energy
None
FY2023-FY2027: $0.3
electric distribution
and any qualified smart electric grid system. A smart electric
Improvement
property (IRC
meter is a time-based meter and related communication
and Extension
§§168(e)(3)(D)(i i) and
equipment. Smart electric grid systems include property that is
Act of 2008
168(e)(3)(D)(iv))
used as part of a system for electric distribution grid
(P.L. 110-343)
communications, monitoring, and management.
15-year MACRS for
15-year property includes original-use electricity transmission
EPACT05
None
FY2023-FY2027: $0.3
certain electric
property that is used in the transmission of electricity for sale
(P.L. 109-58)
transmission property
at 69 or more kilovolts.
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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Zero-emission nuclear
A tax credit for electricity produced from qualifying zero-
Inflation
December 31, 2032
FY2023-FY2027: $10.1
power production credit
emissions nuclear facilities. Qualified nuclear power facilities
Reduction
(IRC §45U)
are taxpayer-owned facilities that use nuclear power to
Act (P.L. 117-
generate electricity that did not receive an advanced nuclear
169)
production tax credit allocation under Section 45J, and were
placed in service before August 16, 2022. The tax credit is
calculated as 0.3 cents per kWh. Taxpayers that meet
prevailing wage requirements are eligible for a tax credit of five
times the base amount per kWh (i.e., up to 1.5 cents per
kWh). Credits are reduced by a reduction amount, which is
16% of the excess of gross receipts from electricity produced
by the facility and sold over the product of 2.5 cents times the
amount of electricity sold during the taxable year. Thus, the
credit would phase down as annual average prices exceed 2.5
cents per kWh. Credit amounts and amounts in the reduction
amount formula would be adjusted for inflation
Accelerated deductions
An eligible taxpayer may deduct cash payments made by the
Deficit
None
FY2023-FY2027: de minimis
for nuclear
taxpayer to a nuclear decommissioning reserve fund, and
Reduction
decommissioning costs
deduct the ratable portion of any special transfer to the fund,
Act of 1984
(IRC §468A)
even if under the applicable method of accounting the taxpayer (P.L. 98-369)
would typically claim the deduction in a later tax year.
Special tax rate for
A special 20% tax rate for investments made by nuclear
Deficit
None
FY2023-FY2027: de minimis
nuclear decommissioning
decommissioning reserve funds.
Reduction
reserve funds (IRC
Act of 1984
§468A(e)(2))
(P.L. 98-369)
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027, JCX-59-23,
December 7, 2023.
Notes: IRC = Internal Revenue Code. kWh = kilowatt-hour. MACRS = modified accelerated cost recovery system. A de minimis tax expenditure is less than $250
mil ion in FY2023-FY2027.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. Internal Revenue Service, Inflation Adjustment Factor Issued for Sequestration Credit, IRS Notice 2020-40, June 15, 2020.

CRS-35

Energy Tax Provisions: Overview and Budgetary Cost

Author Information

Nicholas E. Buffie
Donald J. Marples
Analyst in Public Finance
Specialist in Public Finance

Acknowledgments
A previous version of this report was authored by Molly F. Sherlock.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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copy or otherwise use copyrighted material.

Congressional Research Service
R46865 · VERSION 3 · UPDATED
36