Article

Changes to biogas tax credits in 2025 

Navigating the transition from IRC section 48 to section 48E

Feb. 5, 2025 · Authored by Gideon Gradman, Beckett Woodworth

The longstanding Investment Tax Credit (ITC) under Internal Revenue Code (IRC) section 48 for qualified biogas property has expired for projects that have not begun construction by Dec. 31, 2024. Developers who relied on section 48 as a funding source focused on capital cost reductions may need to explore other biogas tax credits, most notably section 48E, for projects that begin construction on or after Jan. 1, 2025.

What is section 48E?

Section 48E introduces Clean Electricity Investment Tax Credit for qualified clean electricity generation projects beginning construction on or after Jan. 1, 2025. Biogas projects that generate electricity (e.g., via fuel cell systems, reciprocating engines, or combined heat and power units) may qualify if they meet section 48E’s clean energy requirements. Specifically, a project’s electricity generation facility must demonstrate net-zero or negative greenhouse gas (GHG) emissions. Fortunately, many biogas projects can show net-negative life cycle emissions by capturing and destroying methane that would otherwise be released into the atmosphere, thus potentially qualifying for section 48E.

Changes to ITC-eligible basis 

Under section 48 Investment Tax Credit for Qualified Biogas Property, the ITC eligible basis could include all property that was integral to the production of energy, power-generation equipment, as well as feedstock preparation, feedstock collection (e.g., anaerobic digesters), gas upgrading equipment and ancillary systems critical to biogas production.