Section 48C: the $10 billion in investment tax credits every manufacturer should know about

Update April 2024: This past weekend 48c manufacturing tax credits were awarded to the first wave of applicants. Companies that receive allocation will need to evaluate compliance to limit credit recapture. Baker Tilly can help ensure your project complies through our compliance portal to deliver a seamless experience for you and your contractors to understand and address any PW&A issues as they arise. We’re also here to help those who didn’t receive an allocation with applying for the round two application.

Unlike many of the tax credits in the Inflation Reduction Act of 2022, section 48C Advanced Energy Credit (AEC) is a competitive tax credit program that requires manufacturers apply in order to receive an allocation. Program guidance released on Feb. 13, 2023 announced that manufacturers seeking this credit will be required to submit a concept paper describing their project. The first $4 billion in allocations was awarded to applicants on March 29, 2024. The remaining $6 billion of funds will be issued at a later date.

What is it?

The Inflation Reduction Act of 2022 extended credits first offered through the American Recovery and Reinvestment Act of 2009, which was previously known as the Advanced Manufacturing Tax Credit (AMTC). The prior AMTC issued a 30% tax credit that was valued at $2.3 billion and was largely oversubscribed by manufacturers' applications.

The current credit, Section 48C Advanced Energy Credit, includes $10 billion in new 30% investment tax credits, and also broadens what is deemed to be eligible energy property a company can invest in to earn the credit. The credit value is 30% of the project capital investment that is deemed to be eligible energy property. Examples include projects which re-equip, expand or establish a manufacturing facility in one of the following ways:

1. A project which re-equips, expands or establishes a manufacturing facility for production or recycling of property used to produce energy from certain energy areas, or designed to beneficially capture, remove, use, or sequester carbon oxide emissions.