Bulletin No. 2024–14

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2024–14

April 1, 2024

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

EMPLOYEE PLANS

This notice sets forth updates on the corporate bond monthly

yield curve, the corresponding spot segment rates for February 2024 used under § 417(e)(3)(D), the 24-month average

segment rates applicable for March 2024, and the 30-year

Treasury rates, as reflected by the application of § 430(h)(2)

(C)(iv).

clean hydrogen that was added by the Inflation Reduction

Act of 2022. The proposed regulations provide guidance

on how to claim the section 45V credit, a production tax

credit, the amount of which is dependent on the quantity

and emissions intensity of the hydrogen produced. The

proposed regulations also provide guidance on the election to treat qualified property that is part of a specified

clean hydrogen production facility as energy property

under section 48, which is part of the investment tax

credit under section 46.

INCOME TAX

Rev. Rul. 2024-7, page 749.

Notice 2024-29, page 751.

REG-117631-23, page 754.

These proposed regulations would provide rules for the

new section 45V tax credit for the production of qualified

Finding Lists begin on page ii.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes of

sections 382, 1274, 1288, 7872 and other sections of the

Code, tables set forth the rates for April 2024.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

April 1, 2024 

Bulletin No. 2024–14

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7872.)

Rev. Rul. 2024-07

This revenue ruling provides various

prescribed rates for federal income tax

Annual

AFR

110% AFR

120% AFR

130% AFR

4.89%

5.38%

5.88%

6.38%

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

4.30%

4.73%

5.17%

5.61%

6.48%

7.58%

AFR

110% AFR

120% AFR

130% AFR

4.45%

4.90%

5.35%

5.80%

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

Bulletin No. 2024–14

purposes for April 2024 (the current

month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current

month for purposes of section 1274(d)

of the Internal Revenue Code. Table 2

contains the short-term, mid-term, and

long-term adjusted applicable federal

rates (adjusted AFR) for the current

month for purposes of section 1288(b).

Table 3 sets forth the adjusted federal long-term rate and the long-term

tax-exempt rate described in section

382(f). Table 4 contains the appropri-

ate percentages for determining the

low-income housing credit described in

section 42(b)(1) for buildings placed in

service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service

after July 30, 2008, shall not be less

than 9%. Finally, Table 5 contains the

federal rate for determining the present

value of an annuity, an interest for life

or for a term of years, or a remainder or

a reversionary interest for purposes of

section 7520.

REV. RUL. 2024-07 TABLE 1

Applicable Federal Rates (AFR) for April 2024

Period for Compounding

Semiannual

Quarterly

Short-term

4.83%

4.80%

5.31%

5.28%

5.80%

5.76%

6.28%

6.23%

Mid-term

4.25%

4.23%

4.68%

4.65%

5.10%

5.07%

5.53%

5.49%

6.38%

6.33%

7.44%

7.37%

Long-term

4.40%

4.38%

4.84%

4.81%

5.28%

5.25%

5.72%

5.68%

Annual

3.70%

3.26%

3.37%

REV. RUL. 2024-07 TABLE 2

Adjusted AFR for April 2024

Period for Compounding

Semiannual

3.67%

3.23%

3.34%

749

Quarterly

3.65%

3.22%

3.33%

Monthly

4.78%

5.25%

5.73%

6.20%

4.21%

4.64%

5.05%

5.47%

6.30%

7.33%

4.36%

4.79%

5.22%

5.65%

Monthly

3.64%

3.21%

3.32%

April 1, 2024

REV. RUL. 2024-07 TABLE 3

Rates Under Section 382 for April 2024

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal

long-term rates for the current month and the prior two months.)

3.37%

3.37%

REV. RUL. 2024-07 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for April 2024

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after

July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

8.02%

Appropriate percentage for the 30% present value low-income housing credit

3.44%

REV. RUL. 2024-07 TABLE 5

Rate Under Section 7520 for April 2024

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a

remainder or reversionary interest

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

Section 280G.—Golden

Parachute Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

The adjusted applicable federal long-term rate

is set forth for the month of April 2024. See Rev.

Rul. 2024-07, page 749.

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of April 2024. See Rev. Rul.

2024-07, page 749.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

5.20%

Section 483.—Interest on

Certain Deferred Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

Section 7520.—Valuation

Tables

The applicable federal mid-term rates are set

forth for the month of April 2024. See Rev. Rul.

2024-07, page 749.

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

April 2024. See Rev. Rul. 2024-07, page 749.

April 1, 2024

750

Bulletin No. 2024–14

Part III

Update for Weighted

Average Interest Rates,

Yield Curves, and Segment

Rates

Notice 2024-29

This notice provides guidance on the

corporate bond monthly yield curve, the

corresponding spot segment rates used

under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the

Internal Revenue Code. In addition, this

notice provides guidance as to the interest rate on 30-year Treasury securities

under § 417(e)(3)(A)(ii)(II) as in effect for

plan years beginning before 2008 and the

30-year Treasury weighted average rate

under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT

RATES

Section 430 specifies the minimum

funding requirements that apply to single-employer plans (except for CSEC plans

under § 414(y)) pursuant to § 412. Section

Applicable Month

March 2024

430(h)(2) specifies the interest rates that

must be used to determine a plan’s target

normal cost and funding target. Under

this provision, present value is generally

determined using three 24-month average

interest rates (“segment rates”), each of

which applies to cash flows during specified periods. To the extent provided under

§ 430(h)(2)(C)(iv), these segment rates

are adjusted by the applicable percentage

of the 25-year average segment rates for

the period ending September 30 of the

year preceding the calendar year in which

the plan year begins.1 However, an election may be made under § 430(h)(2)(D)

(ii) to use the monthly yield curve in place

of the segment rates.

Section 1.430(h)(2)-1(d) provides

rules for determining the monthly corporate bond yield curve,2 and § 1.430(h)

(2)-1(c) provides rules for determining

the 24-month average corporate bond

segment rates used to compute the target

normal cost and the funding target. Consistent with the methodology specified in

§ 1.430(h)(2)-1(d), the monthly corporate

bond yield curve derived from February

2024 data is in Table 2024-2 at the end

of this notice. The spot first, second, and

third segment rates for the month of February 2024 are, respectively, 4.97, 5.22,

and 5.37.

The 24-month average segment rates

determined under § 430(h)(2)(C)(i)

through (iii) must be adjusted pursuant to §

430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages

of the corresponding 25-year average segment rates. For this purpose, any 25-year

average segment rate that is less than 5%

is deemed to be 5%. The 25-year average

segment rates for plan years beginning in

2023 and 2024 were published in Notice

2022-40, 2022-40 I.R.B. 266 and Notice

2023-66, 2023-40 I.R.B. 992, respectively. The applicable minimum and maximum percentages are 95% and 105% for

plan years beginning in 2023 and 2024.

24-MONTH AVERAGE CORPORATE

BOND SEGMENT RATES

The three 24-month average corporate

bond segment rates applicable for March

2024 without adjustment for the 25-year

average segment rate limits are as follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

First Segment

Second Segment

4.64

5.12

The adjusted 24-month average segment rates set forth in the chart below

reflect § 430(h)(2)(C)(iv) of the Code. The

24-month averages applicable for March

2024, adjusted to be within the applicable

minimum and maximum percentages of

Third Segment

5.10

the corresponding 25-year average segment rates in accordance with § 430(h)(2)

(C)(iv) of the Code, are as follows:

Adjusted 24-Month Average Segment Rates

For Plan Years

Beginning In

Applicable Month

First Segment

Second Segment

Third Segment

2023

March 2024

4.75

5.12

5.74

2024

March 2024

4.75

5.12

5.59

Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount

of the full funding limitation under § 433(c)(7)(C)).

2

For earlier periods, the monthly corporate bond yield curve was determined in accordance with Notice 2007-81, 2007-44 I.R.B. 899. Section 1.430(h)(2)-1(d) generally adopts the methodology for determining the monthly corporate bond yield curve under Notice 2007-81 but includes two enhancements to take into account subsequent changes in the bond market. First, the

set of bonds taken into account has been expanded to include callable bonds for which the call feature is exercisable only during the last year before maturity. Second, a hump adjustment

variable that peaks at 20 years maturity has been added in order to capture the effects of the hump in yields that is often seen around 20 years maturity.

1

Bulletin No. 2024–14

751

April 1, 2024

30-YEAR TREASURY SECURITIES

INTEREST RATES

Section 431 specifies the minimum

funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum

amount for the full-funding limitation

described in § 431(c)(6)(A), based on the

plan’s current liability. Section 431(c)

(6)(E)(ii)(I) provides that the interest

rate used to calculate current liability for

this purpose must be no more than 5 percent above and no more than 10 percent

below the weighted average of the rates

of interest on 30-year Treasury securities

during the four-year period ending on the

last day before the beginning of the plan

year. Notice 88-73, 1988-2 C.B. 383,

provides guidelines for determining the

weighted average interest rate. The rate

of interest on 30-year Treasury securities

for February 2024 is 4.38 percent. The

Service determined this rate as the aver-

age of the daily determinations of yield

on the 30-year Treasury bond maturing

in November 2053 determined each day

through February 7, 2024 and the yield

on the 30-year Treasury bond maturing in

February 2054 determined each day for

the balance of the month. For plan years

beginning in March 2024, the weighted

average of the rates of interest on 30-year

Treasury securities and the permissible

range of rates used to calculate current

liability are as follows:

For Plan Years Beginning In

Treasury Weighted Average Rates

30-Year Treasury Weighted Average

Permissible Range 90% to 105%

March 2024

3.26

2.93 to 3.42

under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month

average. Notice 2007-81 provides guidelines for determining the minimum pres-

ent value segment rates. Pursuant to that

notice, the minimum present value segment rates determined for February 2024

are as follows:

MINIMUM PRESENT VALUE

SEGMENT RATES

In general, the applicable interest rates

Month

February 2024

Minimum Present Value Segment Rates

First Segment

Second Segment

4.97

5.22

DRAFTING INFORMATION

The principal author of this notice is

Tom Morgan of the Office of Associ-

April 1, 2024

ate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes). However, other personnel from

the IRS participated in the development

752

Third Segment

5.37

of this guidance. For further information

regarding this notice, contact Mr. Morgan

at 202-317-6700 or Tony Montanaro at

626-927-1475 (not toll-free numbers).

Bulletin No. 2024–14

Table 2024-2

Monthly Yield Curve for February 2024

Derived from February 2024 Data

Maturity

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

Yield

5.40

5.24

5.10

4.98

4.90

4.84

4.81

4.80

4.80

4.81

4.83

4.85

4.89

4.92

4.96

5.00

5.04

5.07

5.11

5.14

5.17

5.20

5.23

5.25

5.27

5.30

5.31

5.33

5.35

5.36

5.37

5.39

5.39

5.40

5.41

5.41

5.42

5.42

5.42

5.42

Maturity

20.5

21.0

21.5

22.0

22.5

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

34.5

35.0

35.5

36.0

36.5

37.0

37.5

38.0

38.5

39.0

39.5

40.0

Bulletin No. 2024–14

Yield

5.42

5.42

5.42

5.41

5.41

5.40

5.39

5.39

5.38

5.37

5.37

5.36

5.36

5.35

5.35

5.34

5.34

5.34

5.34

5.34

5.34

5.34

5.34

5.34

5.34

5.35

5.35

5.35

5.35

5.35

5.35

5.35

5.35

5.35

5.35

5.35

5.36

5.36

5.36

5.36

Maturity

40.5

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

45.0

45.5

46.0

46.5

47.0

47.5

48.0

48.5

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

53.5

54.0

54.5

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

Yield

5.36

5.36

5.36

5.36

5.36

5.36

5.36

5.36

5.36

5.36

5.36

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.37

5.38

5.38

5.38

5.38

5.38

5.38

753

Maturity

60.5

61.0

61.5

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

78.5

79.0

79.5

80.0

Yield

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.38

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

Maturity

80.5

81.0

81.5

82.0

82.5

83.0

83.5

84.0

84.5

85.0

85.5

86.0

86.5

87.0

87.5

88.0

88.5

89.0

89.5

90.0

90.5

91.0

91.5

92.0

92.5

93.0

93.5

94.0

94.5

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Yield

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

5.39

April 1, 2024

Part IV

Notice of Proposed

Rulemaking

Section 45V Credit for

Production of Clean

Hydrogen; Section 48(a)

(15) Election to Treat

Clean Hydrogen Production

Facilities as Energy

Property

REG-117631-23

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the credit

for production of clean hydrogen (clean

hydrogen production credit) and the

energy credit, as established and amended

by the Inflation Reduction Act of 2022,

respectively. The proposed regulations

would provide rules for: determining

lifecycle greenhouse gas emissions rates

resulting from hydrogen production processes; petitioning for provisional emissions rates; verifying production and sale

or use of clean hydrogen; modifying or

retrofitting existing qualified clean hydrogen production facilities; using electricity

from certain renewable or zero-emissions

sources to produce qualified clean hydrogen; and electing to treat part of a specified clean hydrogen production facility

instead as property eligible for the energy

credit. The proposed regulations would

affect all taxpayers who produce qualified

clean hydrogen and claim the clean hydrogen production credit, elect to treat part

of a specified clean hydrogen production

facility as property eligible for the energy

credit, or produce electricity from certain

renewable or zero-emissions sources used

by taxpayers or related persons to produce

qualified clean hydrogen. This document

also provides notice of a public hearing on

the proposed regulations.

DATES: Written or electronic comments

must be received by February 26, 2024.

April 1, 2024

The public hearing on these proposed

regulations is scheduled to be held on

March 25, 2024, at 10 a.m. (ET). Requests

to speak and outlines of topics to be discussed at the public hearing must be

received by March 4, 2024. If no outlines

are received by March 4, 2024, the public hearing will be cancelled. Requests to

attend the public hearing must be received

by March 18, 2024. The public hearing

will be made accessible to people with

disabilities. Requests for special assistance during the hearing must be received

by March 18, 2024.

ADDRESSES: Commenters are strongly

encouraged to submit public comments

electronically via the Federal eRulemaking Portal at https://www.regulations.gov

(indicate IRS and REG-117631-23) by

following the online instructions for submitting comments. Requests for a public

hearing must be submitted as prescribed

in the “Comments and Requests for a

Public Hearing” section. Once submitted

to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The

Department of the Treasury (Treasury

Department) and the IRS will publish for

public availability any comments submitted to the IRS’s public docket. Send paper

submissions to: CC:PA:LPD:PR (REG117631-23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin

Station, Washington, DC 20044.

FOR FURTHER INFORMATION

CONTACT: Concerning these proposed

regulations, the Office of Chief Counsel

(Passthroughs and Special Industries) at

(202) 317-6853 (not a toll-free number);

concerning submissions of comments or

the public hearing, Vivian Hayes at (202)

317-6901 (not a toll-free number) or by

email to publichearings@irs.gov (preferred).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed regulations to amend the Income Tax Regulations (26 CFR part 1) under sections

45V and 48(a)(15) of the Internal Revenue Code (Code), as added to the Code by

754

section 13204 of Public Law 117-169, 136

Stat. 1818 (August 16, 2022), commonly

known as the Inflation Reduction Act of

2022 (IRA).

The IRA added several provisions to

the Code related to the production of, and

investment in, clean hydrogen, which,

along with the provisions of sections 45V

and 48(a)(15), are described in part I of

this Background section. Part II of this

Background section describes a previous

request for public comment on these provisions.

I. IRA Provisions for Clean Hydrogen

Production and Investment

This part I describes the credit for production of clean hydrogen as determined

under section 45V (section 45V credit)

and the irrevocable election to claim an

energy credit under section 48 (section 48

credit) in lieu of the section 45V credit.

Also described are statutory exceptions to

the requirement that electricity be sold to

an unrelated person to be eligible for the

renewable electricity production credit

determined under section 45 (section

45 credit) or the zero-emission nuclear

power production credit determined under

section 45U (section 45U credit). Under

these exceptions, electricity produced by

a taxpayer from a qualified facility under

section 45(d) or a qualified nuclear power

facility under section 45U(b)(1) may be

treated as sold by the taxpayer to an unrelated person during the taxable year if the

electricity is used by the taxpayer or a

related person at a qualified clean hydrogen production facility to produce qualified clean hydrogen.

A. Section 45V

1. Amount of Credit

Section 45V provides a tax credit for

the production of qualified clean hydrogen. For purposes of section 38 of the

Code, section 45V(a) provides that the

clean hydrogen production credit for any

taxable year is an amount equal to the

product of (i) the kilograms of qualified

clean hydrogen produced by the taxpayer

Bulletin No. 2024–14

during such taxable year at a qualified

clean hydrogen production facility during

the 10-year period beginning on the date

such facility was originally placed in service, and (ii) the applicable amount as

determined under section 45V(b) with

respect to such hydrogen.

Section 45V(b)(1) provides that, for

purposes of section 45V(a)(2), the applicable amount is an amount equal to the

applicable percentage of $0.60. If the

amount so determined is not a multiple of

0.1 cent, then such amount is rounded to

the nearest multiple of 0.1 cent.

Section 45V(b)(2) provides that, for

purposes of section 45V(b)(1), the applicable percentage is determined based on the

lifecycle greenhouse gas emissions (lifecycle GHG emissions) rate of the process

to produce any qualified clean hydrogen

as follows: (i) if the lifecycle GHG emissions rate is not greater than 4 kilograms

of carbon dioxide equivalent (CO2e) per

kilogram of hydrogen, and not less than

2.5 kilograms of CO2e per kilogram of

hydrogen, then the applicable percentage

is 20 percent; (ii) if the lifecycle GHG

emissions rate is less than 2.5 kilograms

of CO2e per kilogram of hydrogen, and

not less than 1.5 kilograms of CO2e per

kilogram of hydrogen, then the applicable

percentage is 25 percent; (iii) if the lifecycle GHG emissions rate is less than 1.5

kilograms of CO2e per kilogram of hydrogen, and not less than 0.45 kilograms of

CO2e per kilogram of hydrogen, then the

applicable percentage is 33.4 percent; and

(iv) if the lifecycle GHG emissions rate

is less than 0.45 kilograms of CO2e per

kilogram of hydrogen, then the applicable

percentage is 100 percent.

Section 45V(b)(3) provides that the

$0.60 amount in section 45V(a)(1) is

adjusted by multiplying such amount by

the inflation adjustment factor (as determined under section 45(e)(2), determined

by substituting “2022” for “1992” in sec-

tion 45(e)(2)(B)) for the calendar year in

which the qualified clean hydrogen is produced. If any amount as increased under

section 45V(b)(3) is not a multiple of 0.1

cent, such amount is rounded to the nearest multiple of 0.1 cent.1

Section 45V(e)(1) provides that, in the

case of any qualified clean hydrogen production facility that satisfies the requirements of section 45V(e)(2), the amount

of the section 45V credit with respect to

qualified clean hydrogen described in

section 45V(b)(2) is equal to the amount

determined under section 45V(a) (determined without regard to section 45V(e)

(1)) multiplied by five.

A qualified clean hydrogen production

facility meets the requirements of section

45V(e)(2) if: (i) the facility began construction before January 29, 2023, and

with respect to any taxable year, for any

period of such taxable year that is within

the 10-year period beginning on the date

the facility is originally placed in service,

the prevailing wage requirements of section 45V(e)(3)(A) are met for any alteration or repair of the facility that occurs

after January 29, 2023 (to the extent applicable);2 or (ii) the facility satisfies the prevailing wage and apprenticeship (PWA)

requirements of sections 45V(e)(3)(A)

and (4).3

Generally, the prevailing wage requirements under section 45V(e)(3)(A) with

respect to any qualified clean hydrogen

production facility require the taxpayer

to ensure that any laborers and mechanics employed by the taxpayer or by any

contractor or subcontractor in (i) the construction of such facility, and (ii) with

respect to any taxable year, for any portion of such taxable year that is within the

10-year period beginning on the date such

facility was originally placed in service,

the alteration or repair of such facility, are

paid wages at rates not less than the prevailing rates for construction, alteration,

or repair of a similar character in the

locality in which such facility is located as

most recently determined by the Secretary

of Labor, in accordance with subchapter

IV of chapter 31 of title 40 of the United

States Code, commonly known as the

Davis-Bacon Act. Correction and penalty

rules similar to the rules of section 45(b)

(7)(B) also apply.

Section 45V(e)(4) provides that rules

similar to the apprenticeship requirements

of section 45(b)(8) apply for purposes of

section 45V(e)(2).4

For purposes of section 45V(a), in

the case of a qualified clean hydrogen

production facility that does not satisfy

the requirements of section 45(e)(2), the

amount of the clean hydrogen production

credit for any taxable year is $0.12, $0.15,

$0.20, or $0.60 per kilogram of qualified

clean hydrogen produced (before taking into account any inflation adjustment

under section 45V(b)(3)), depending on

the lifecycle GHG emissions rate associated with the facility’s hydrogen production process. For facilities meeting the

requirements of section 45V(e)(2), the

credit amount determined under section

45V(a) (as adjusted for inflation subject

to section 45V(b)(3)) is multiplied by five.

2. Definitions

a. Lifecycle Greenhouse Gas Emissions

Section 45V(c)(1)(A) provides that,

subject to section 45V(c)(1)(B), the term

“lifecycle greenhouse gas emissions” has

the same meaning given such term under

section 211(o)(1)(H) of the Clean Air Act

(42 U.S.C. 7545(o)(1)(H)), as in effect on

August 16, 2022. Under section 45V(c)

(1)(B), the term “lifecycle greenhouse

gas emissions” includes emissions only

through the point of production (well-togate), as determined under the most recent

Greenhouse gases, Regulated Emissions,

1

The IRS will publish the inflation-adjusted section 45V applicable amount annually. For the calendar year 2023, the section 45V(b)(3) inflation adjustment factor is equal to one, so the

inflation-adjusted applicable amount remains $0.60 for the calendar year 2023.

2

Section 45V(e)(3)(A)(ii) requires the payment of wages at prevailing rates “with respect to any taxable year, for any portion of such taxable year which is within the period described in

subsection (a)(2)”, with respect to the alteration or repair of the facility. There is no “period described in subsection (a)(2).” The Treasury Department and the IRS interpret the reference to

“subsection (a)(2)” as a reference to section 45V(a)(1) where the 10-year credit period is identified.

3

See proposed §§1.45-7, 1.45-8, 1.45-12, and 1.45V-3 as proposed in the notice of proposed rulemaking (REG-100908-23) published in the Federal Register (88 FR 60018) on August 30,

2023, and corrected at 88 FR 73807 on October 27, 2023.

4

Under proposed §1.45V-3, the PWA requirements for purposes of section 45V(e)(2) would be satisfied if a facility meets the prevailing wage requirements of section 45(b)(7) and proposed

§1.45-7, the apprenticeship requirements of section 45(b)(8) and proposed §1.45-8, and the recordkeeping and reporting requirements of proposed §1.45-12. Those proposed regulations

are outside the scope of this notice of proposed rulemaking and proposed §1.45V-3 is addressed only to the extent necessary for purposes of formatting the proposed regulations that are the

subject of this notice of proposed rulemaking in accordance with CFR standards.

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755

April 1, 2024

and Energy use in Transportation model,

referred to as the “GREET model” commonly and in this document, developed by

Argonne National Laboratory, or a successor model as determined by the Secretary

of the Treasury or her delegate (Secretary).

b. Qualified Clean Hydrogen

Section 45V(c)(2)(A) provides that

the term “qualified clean hydrogen”

means hydrogen that is produced through

a process that results in a lifecycle GHG

emissions rate of not greater than 4 kilograms of CO2e per kilogram of hydrogen.

Section 45V(c)(2)(B) further provides

that the term “qualified clean hydrogen”

does not include any hydrogen unless

(i) such hydrogen is produced (A) in

the United States (as defined in section

638(1) of the Code) or a U.S. territory

(having the meaning of the term “possession” as defined in section 638(2)), (B) in

the ordinary course of a trade or business

of the taxpayer, and (C) for sale or use;

and (ii) the production and sale or use of

such hydrogen is verified by an unrelated

party.

c. Provisional Emissions Rate

Section 45V(c)(2)(C) provides that,

in the case of any hydrogen for which a

lifecycle GHG emissions rate has not

been determined for purposes of section

45V, a taxpayer producing such hydrogen may file a petition with the Secretary

for a determination of the lifecycle GHG

emissions rate with respect to such hydrogen, which is referred to as a “provisional

emissions rate” or PER in the proposed

regulations.

d. Qualified Clean Hydrogen Production

Facility

Section 45V(c)(3) provides that the

term “qualified clean hydrogen production facility” means a facility (i) owned by

the taxpayer, (ii) that produces qualified

clean hydrogen, and (iii) the construction

of which begins before January 1, 2033.5

3. Special Rules

a. Treatment of Facilities Owned by More

than One Taxpayer

Section 45V(d)(1) provides that rules

similar to the rules of section 45(e)(3)

apply for purposes of section 45V. Section 45(e)(3) provides that, in the case of a

facility in which more than one person has

an ownership interest, except to the extent

provided in regulations prescribed by the

Secretary, production from the facility is

allocated among such persons in proportion to their respective ownership interests

in the gross sales from such facility.

b. Coordination with Section 45Q

Section 45V(d)(2) provides that no

section 45V credit is allowed with respect

to any qualified clean hydrogen produced

at a facility that includes carbon capture

equipment for which a credit is allowed to

any taxpayer as determined under section

45Q (section 45Q credit) for the taxable

year or any prior taxable year.

c. Credit Reduced for Tax-Exempt Bonds

Section 45V(d)(3) provides that rules

similar to the rules under section 45(b)

(3) (credit reduced for tax-exempt bonds)

apply for purposes of section 45V. Section 45V(d)(3) is effective for facilities

that begin construction after August 16,

2022. Section 13204(a)(5)(B) of the IRA.

Section 45(b)(3) provides that the amount

of the credit determined under section

45(a) with respect to any facility for any

taxable year (determined after the application of section 45(b)(1) and (2) regarding phaseout and inflation adjustment

rules) is reduced by the amount that is the

product of the amount so determined for

such year and the lesser of 15 percent or

a fraction (A) the numerator of which is

the sum, for the taxable year and all prior

taxable years, of proceeds of an issue of

any obligations the interest on which is

exempt from tax under section 103 and

that is used to provide financing for the

qualified facility, and (B) the denominator of which is the aggregate amount of

additions to the capital account for the

qualified facility for the taxable year and

all prior taxable years. Section 45(b)(3)

further provides that the amounts determined under section 45(b)(3) for any taxable year are determined as of the close

of the taxable year.

d. Modification of Existing Facilities

Section 45V(d)(4) provides that for

purposes of section 45V(a)(1), in the

case of any facility that (A) was originally placed in service before January

1, 2023, and, prior to the modification

described in section 45V(d)(4)(B), did

not produce qualified clean hydrogen, and (B) after the date such facility was originally placed in service (i)

is modified to produce qualified clean

hydrogen, and (ii) amounts paid or

incurred with respect to such modification are properly chargeable to the

capital account of the taxpayer, such

facility is deemed to have been originally placed in service as of the date the

property required to complete the modification described in section 45V(d)(4)

(B) is placed in service. Section 45V(d)

(4) is effective for modifications made

after December 31, 2022. See section

13204(a)(5)(C) of the IRA.

B. Electricity Used at a Qualified Clean

Hydrogen Production Facility

Section 45(e)(13) provides that electricity produced by the taxpayer is treated

as sold by such taxpayer to an unrelated

person during the taxable year if (i) such

electricity is used during such taxable year

by the taxpayer or a person related to the

taxpayer at a qualified clean hydrogen

production facility (as defined in section

45V(c)(3)) to produce qualified clean

hydrogen (as defined in section 45V(c)

(2)); and (ii) such use and production is

verified (in such form or manner as the

Secretary may prescribe) by an unrelated

party. Section 45(e)(13) is effective for

5

Section 45V does not specify an earliest date on which a qualified clean hydrogen production facility must begin construction or be placed in service to be eligible to claim the section 45V

credit. However, the section 45V credit is available for qualified clean hydrogen produced after December 31, 2022. Section 13204(a)(5)(A) of the IRA. Thus, the owner of a qualified clean

hydrogen production facility originally placed in service after December 31, 2012, could claim the section 45V credit for qualified clean hydrogen produced during at least some portion of

the 10-year period described in section 45V(a)(1), provided all other requirements are met.

April 1, 2024

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electricity produced after December 31,

2022. See section 13204(b)(3) of the IRA.

Section 45U(c)(2) provides that rules

similar to the rules of section 45(e)(13)

apply for purposes of section 45U. Generally, section 45U is effective for electricity produced at a qualified nuclear power

facility and sold after December 31, 2023,

in taxable years beginning after that date.

C. Election To Treat Clean Hydrogen

Production Facilities as Energy Property

Section 48(a)(15)(A)(i) provides that,

in the case of any qualified property (as

defined in section 48(a)(5)(D)) that is

part of a specified clean hydrogen production facility, such property is treated

as energy property. Section 48(a)(15)(A)

(ii) provides that the energy percentage of

the basis of any qualified property that is

treated as energy property is, for a facility

that is designed and reasonably expected

to produce qualified clean hydrogen with

a lifecycle GHG emissions rate that is:

(i) not greater than 4 kilograms of CO2e

per kilogram of hydrogen, and not less

than 2.5 kilograms of CO2e per kilogram

of hydrogen, 1.2 percent; (ii) less than

2.5 kilograms of CO2e per kilogram of

hydrogen, and not less than 1.5 kilograms

of CO2e per kilogram of hydrogen, 1.5

percent; (iii) less than 1.5 kilograms of

CO2e per kilogram of hydrogen, and not

less than 0.45 kilograms of CO2e per

kilogram of hydrogen, 2 percent; and

(iv) less than 0.45 kilograms of CO2e per

kilogram of hydrogen, 6 percent. Under

section 48(a)(9), the amount of the section 48 credit determined for a specified

clean hydrogen production facility under

section 48(a)(15) is multiplied by five if

the facility meets the requirements of section 48(a)(9)(B) (regarding application

of certain maximum net output levels of

electrical or thermal energy, beginning

of construction, or prevailing wage and

apprenticeship requirements). However,

the domestic content and energy communities bonuses under section 48(a)(12)

and (a)(14) do not apply to a specified

clean hydrogen production facility.

Section 48(a)(15) is effective for

property placed in service after December 31, 2022, and for any property the

construction of which began before January 1, 2023, only to the extent of the

Bulletin No. 2024–14

basis thereof attributable to construction,

reconstruction, or erection after December 31, 2022. See section 13204(c)(3) of

the IRA.

1. Denial of Production Credit

Section 48(a)(15)(B) provides that no

section 45V credit or section 45Q credit is

allowed for any taxable year with respect

to any specified clean hydrogen production facility or any carbon capture equipment included at such facility.

2. Specified Clean Hydrogen Production

Facility

Section 48(a)(15)(C) provides that the

term “specified clean hydrogen production facility” means any qualified clean

hydrogen production facility (as defined

in section 45V(c)(3)) (i) that is placed in

service after December 31, 2022, (ii) with

respect to which (I) no section 45V credit

or section 45Q credit has been allowed,

and (II) the taxpayer makes an irrevocable

election to have section 48(a)(15) apply,

and (iii) for which an unrelated third party

has verified (in such form or manner as the

Secretary may prescribe) that such facility

produces hydrogen through a process that

results in lifecycle GHG emissions that

are consistent with the hydrogen that such

facility was designed and expected to produce under section 48(a)(15)(A)(ii).

3. Qualified Clean Hydrogen

Section 48(a)(15)(D) provides that, for

purposes of section 48(a)(15), the term

“qualified clean hydrogen” has the meaning given such term by section 45V(c)(2).

4. Regulations

Section 48(a)(15)(E) provides the

Secretary authority to issue regulations

or other guidance as she determines necessary to carry out the purposes of section 48, including regulations or other

guidance that recaptures so much of any

section 48 credit allowed as exceeds the

amount of the credit that would have been

allowed if the expected production were

consistent with the actual verified production (or all of the credit so allowed in the

absence of verification).

757

II. Previous Request for Comments

On November 3, 2022, the Treasury

Department and the IRS published Notice

2022-58, 2022-47 I.R.B. 483. The notice

requested general comments on issues

arising under section 45V and the associated clean hydrogen production and

investment incentives in sections 45 and

48. The notice also requested specific

comments concerning (i) definitions; (ii)

boundaries of the well-to-gate analysis for

determining the lifecycle GHG emissions

rate; (iii) the PER process; (iv) recordkeeping and reporting; (v) verification by

unrelated parties; and (vi) coordination

with sections 45, 48, and 45Q. The Treasury Department and the IRS received

over 200 comments from industry participants, environmental groups, individuals, and other stakeholders. The Treasury

Department and the IRS appreciate the

commenters’ interest and engagement on

these issues. These comments have been

carefully considered in the development

of these proposed regulations.

Explanation of Provisions

I. Overview

Proposed §1.45V-1 would provide

guidance, including definitions of key

terms used in proposed §§1.45V-1 through

1.45V-6 and 1.48-15, to determine the eligibility for, and the amount of, the section

45V credit for the production of qualified

clean hydrogen. The term “section 45V

credit” would be provided at §1.45V-1(a)

(12) and mean the credit for production of

clean hydrogen determined under section

45V, so much of sections 6417 and 6418

that relate to section 45V, and the section

45V regulations. The term “section 45V

regulations” would be provided at proposed §1.45V-1(a)(13) to mean the provisions of §§1.45V-1 through 1.45V-6 and

so much of the regulations under sections

6417 and 6418 that relate to the section

45V credit.

Proposed §1.45V-2 would provide special rules for purposes of the section 45V

credit. Proposed §1.45V-4 would provide

procedures for determining lifecycle GHG

emissions rates for qualified clean hydrogen. Proposed §1.45V-5 would provide

procedures for verification of qualified

April 1, 2024

clean hydrogen production and sale or use.

Proposed §1.45V-6 would provide rules for

determining the placed in service date for

an existing facility that is modified or retrofitted to produce qualified clean hydrogen.

Additionally, proposed §1.48-15 would

provide procedures for a taxpayer to elect

to treat any qualified property that is part

of a specified clean hydrogen production

facility as energy property for purposes of

the section 48 credit.

II. Definitions

Proposed §1.45V-1(a)(2) through (13)

would provide generally applicable definitions of terms for purposes of section 45V,

so much of sections 6417 and 6418 of the

Code that relate to the section 45V credit,

and the section 45V regulations. The definitions for applicable amount, applicable

percentage, and qualified clean hydrogen

production facility would generally reflect

the statutory definitions without additional

elaboration on the terms. See proposed

§1.45V-1(a)(2), (3), and (10). This part II

discusses those definitions in the proposed

regulations that provide additional clarity

beyond the statutory language.

A. Facility

Proposed §1.45V-1(a)(7)(i) would provide that, for purposes of the definition

of a qualified clean hydrogen production

facility provided at section 45V(c)(3), the

term “facility” means a single production

line that is used to produce qualified clean

hydrogen. A “single production line”

would include all components of property

that function interdependently to produce

qualified clean hydrogen. Components of

property are functionally interdependent if

the placing in service of each component

is dependent upon the placing in service

of each of the other components to produce qualified clean hydrogen. Proposed

§1.45V-1(a)(7)(ii) would provide that a

facility does not include equipment used

to condition or transport hydrogen beyond

the point of production. A facility would

also not include electricity production

equipment used to power the hydrogen

production process, including any carbon

capture equipment associated with the

electricity production process. Proposed

§1.45V-1(a)(7)(iii) would provide that

components that have a purpose in addition to the production of qualified clean

hydrogen may be part of a facility if such

components function interdependently

with other components to produce qualified clean hydrogen. Proposed §1.45V1(a)(7)(iv) would provide an example to

illustrate the definition of facility for purposes of section 45V.

B. Lifecycle greenhouse gas emissions

Proposed §1.45V-1(a)(8)(i) would

incorporate the statutory definition of the

term “lifecycle greenhouse gas emissions”

under section 45V(c)(1)(A) and (B), specifically providing that the term has the

same meaning as that in 42 U.S.C. 7545(o)

(1)(H) as in effect on August 16, 2022, and

includes emissions only through the point

of production (well-to-gate) as determined

under the most recent GREET model.

C. Most recent GREET Model

Proposed §1.45V-1(a)(8)(ii) would

provide that the term “most recent

GREET model” means the latest version

of 45VH2-GREET developed by Argonne

National Laboratory (ANL) that is publicly available on the first day of the taxpayer’s taxable year in which the qualified

clean hydrogen for which the taxpayer

is claiming the section 45V credit was

produced.6 After consultation with the

Department of Energy (DOE), the Treasury Department and the IRS believe that

the use of the latest version of 45VH2GREET would be appropriate because it

is tailored to the administration of the section 45V tax credit and includes features

that make it easy to use for taxpayers. Use

of the latest version of 45VH2-GREET

would also ensure that the pathways and

approaches provided for determining

well-to-gate emissions for various hydrogen production processes are of sufficient

methodological certainty to be appropriate

for determining eligibility of tax credits.

The latest version of 45VH2-GREET is

the only variant of GREET that is suitable for use and may be used to determine

emissions rates for purposes of the section

45V credit.

Further, proposed §1.45V-1(a)(8)

(ii) would provide that, if a version of

45VH2-GREET becomes publicly available after the first day of the taxable year

of production (but still within such taxable

year), then the taxpayer may, in its discretion, treat such version of 45VH2-GREET

as the most recent GREET model.

Instead of defining “most recent

GREET model” to be the latest version of

45VH2-GREET that is publicly available

on the first day of the taxpayer’s taxable

year, an alternative approach would be for

the Secretary to determine that the latest

version of 45VH2-GREET is an appropriate “successor model,” as provided by

section 45V(c)(1)(B), for the purpose of

administering the section 45V tax credit.

The Treasury Department and the IRS

request comment on these approaches.

D. Emissions through the point of

production (well-to-gate)

Proposed §1.45V-1(a)(8)(iii) would

provide that, for purposes of section

45V(c)(1)(B) and proposed §1.45V-1(a)

(8)(i), the term “emissions through the

point of production (well-to-gate)” means

the aggregate lifecycle GHG emissions

related to hydrogen produced at a hydrogen production facility during the taxable

year through the point of production.

It includes emissions associated with

feedstock growth, gathering, extraction,

processing, and delivery to a hydrogen

production facility. It also includes the

emissions associated with the hydrogen

production process, inclusive of the electricity used by the hydrogen production

facility and any capture and sequestration

of carbon dioxide generated by the hydrogen production facility.

E. Qualified clean hydrogen

Proposed §1.45V-1(a)(9)(i) would

incorporate the statutory definition of the

6

45VH2-GREET is a user interface designed to accept input related to a hydrogen production facility, execute GREET calculations in the background, and display the well-to-gate carbon

intensity of produced hydrogen in kg of CO2e/kg of H2. 45VH2-GREET is currently available at www.energy.gov/45vresources. Successor locations for 45VH2-GREET will be provided in

IRS forms and instructions.

April 1, 2024

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term “qualified clean hydrogen” provided

at section 45V(c)(2)(A) and (B), including

the requirement that the hydrogen be produced (i) in the United States or a U.S. territory (meaning possession as provided in

section 638(2)); (ii) in the ordinary course

of a trade or business of the taxpayer; and

(iii) for sale or use. Proposed §1.45V-1(a)

(9)(i) would provide that, to qualify as

qualified clean hydrogen, the production

and sale or use of such hydrogen must be

verified by an unrelated party (as required

by section 45V(c)(2)(B)(ii)). See also proposed §1.45V-5.

Proposed §1.45V-1(a)(9)(ii) would provide that for purposes of section 45V(c)

(2)(B)(i)(III) and proposed §1.45V-1(a)

(9)(i)(C) the term “for sale or use” means

for the primary purpose of making such

hydrogen ready and available for sale or

use. Storage of hydrogen before its sale or

use would not disqualify such hydrogen

from being considered produced for sale

or use.

III. Rules of General Applicability

Proposed §1.45V-1(b)(1) would provide the general rules for calculating the

amount of the section 45V credit.

Proposed §1.45V-1(b)(2) would provide that, for purposes of section 45V(a)

(1) and proposed §1.45V-1(b)(1), the term

“taxpayer” means the taxpayer that owns

the qualified clean hydrogen production

facility at the time of the facility’s production of qualified clean hydrogen with

respect to which the section 45V credit is

claimed, regardless of whether such taxpayer is treated as a producer under section 263A of the Code or under any other

provision of law with respect to such qualified clean hydrogen. This rule is intended

to avoid unintended consequences that

could arise with respect to contract manufacturing and tolling arrangements under

§1.263A-2(a)(1)(ii)(A) and (a)(1)(ii)(B)

(1) in the context of the section 45V credit,

as well as to simplify the administration of

the section 45V credit and provide clarity

for taxpayers.

Proposed §1.45V-1(c) would provide

that, subject to any applicable Code sections that may limit the section 45V credit

amount, the section 45V credit for any

taxable year is determined with respect

to the qualified clean hydrogen produced

Bulletin No. 2024–14

by the taxpayer during that taxable year

although the verification of the production and sale or use of such hydrogen

may occur in a later taxable year. However, the taxpayer would not be eligible

to claim the section 45V credit until all

relevant verification requirements, and

the verification itself, have been completed. Therefore, despite such verification occurring in a later taxable year,

the section 45V credit would be properly

claimed with respect to the taxable year

of hydrogen production and subject to

the general period of limitations for filing a claim for credit or refund. Thus, if

verification occurred after the extended

return filing deadline for the taxable year

in which the hydrogen was produced, the

taxpayer would need to file an amended

return or administrative adjustment

request (AAR) to claim the section 45V

credit for such hydrogen. The Treasury

Department and the IRS request comments on this proposed rule, specifically

whether taxpayers anticipate they will

be able to complete all the requirements

for claiming the section 45V credit,

including the proposed requirements

for verification specified below, by the

extended return filing deadline for the

taxable year of hydrogen production. If

taxpayers anticipate that they will not be

able to complete all the requirements by

such filing deadline, comments are also

requested on what specific alternatives to

the proposed rule, if any, should be considered and their rationale.

IV. Special Rules

Proposed §1.45V-2(a) would address

the coordination between the section 45V

credit and the section 45Q credit.

Proposed §1.45V-2(b)(1) would provide an anti-abuse rule that would make

the section 45V credit unavailable in

extraordinary circumstances in which,

based on a consideration of all the relevant facts and circumstances, the primary

purpose of the production and sale or use

of qualified clean hydrogen is to obtain

the benefit of the section 45V credit in a

manner that is wasteful, such as the production of qualified clean hydrogen that

the taxpayer knows or has reason to know

will be vented, flared, or used to produce

hydrogen.

759

If the cost of producing qualified

clean hydrogen were to be less than the

amount of the section 45V credit that

would be available with respect to such

hydrogen, the Treasury Department and

the IRS are concerned that taxpayers

may have an incentive to produce qualified clean hydrogen solely for the purpose of exploiting the section 45V credit

in a manner that is inconsistent with a

purpose of section 45V, which is to provide an incentive to produce qualified

clean hydrogen for a productive use.

Producing and selling or using qualified

clean hydrogen with the primary purpose

of obtaining the benefit of the section

45V credit in a wasteful manner would

not, in certain circumstances, satisfy the

requirement in section 45V(c)(2)(B)(i)

(II) for hydrogen to be produced in the

ordinary course of a trade or business of

the taxpayer. Proposed §1.45V-2(b)(2)

would provide an example illustrating

this anti-abuse rule.

V. Procedures for Determining Lifecycle

Greenhouse Gas Emissions Rates for

Qualified Clean Hydrogen

Proposed §1.45V-4(a) would provide

that the amount of the section 45V credit

is determined under section 45V(a) and

proposed §1.45V-1(b) based upon the

lifecycle GHG emissions rate (as defined

in proposed §1.45V-1(a)(8)(i)) of all

hydrogen produced at a qualified clean

hydrogen production facility (as defined

in proposed §1.45V-1(a)(10)) during the

taxable year. This determination is made

following the close of each such taxable

year and must include all hydrogen production from the year. Further, proposed

§1.45V-4(a) would provide that the lifecycle GHG emissions rate for purposes of

section 45V is determined under the most

recent GREET model (as defined in proposed §1.45V-1(a)(8)(ii)). Additionally,

proposed §1.45V-4(a) would provide that

in the case of any hydrogen for which a

lifecycle GHG emissions rate has not been

determined under the most recent GREET

model for purposes of section 45V, a taxpayer producing such hydrogen may file

a petition with the Secretary for a determination of the lifecycle GHG emissions

rate with respect to such hydrogen (a provisional emissions rate (PER)).

April 1, 2024

A. GREET model

Proposed §1.45V-4(b) would provide

procedures to calculate the lifecycle GHG

emissions rate of hydrogen produced at

a hydrogen production facility using the

most recent GREET model as defined in

proposed §1.45V-1(a)(8)(ii) (referring to

45VH2-GREET). Proposed §1.45V-4(b)

would provide that for each taxable year

during the period described in section

45V(a)(1), a taxpayer claiming the section

45V credit determines the lifecycle GHG

emissions rate of hydrogen produced

at a hydrogen production facility using

the most recent GREET model. Such a

determination is made separately for each

hydrogen production facility the taxpayer

owns and as of the close of each respective taxable year in which such production

occurs (that is, such a determination is

made for that taxable year’s total hydrogen production at a hydrogen production

facility). Proposed §1.45V-4(b) would

provide that in calculating the lifecycle

GHG emissions rate for purposes of determining the amount of the section 45V

credit, the taxpayer must accurately enter

all information about its qualified clean

hydrogen production facility requested

within the interface of 45VH2-GREET in

compliance with the most recent version

of the Guidelines to Determine Well-toGate Greenhouse Gas (GHG) Emissions

of Hydrogen Production Pathways Using

45VH2-GREET (GREET User Manual), which currently can be found at:

www.energy.gov/45vresources. Current

45VH2-GREET, previous versions of

45VH2-GREET, and subsequent updates

to 45VH2-GREET can be found at www.

energy.gov/45vresources.

Proposed

§1.45V-4(b) would provide that information for the location of 45VH2-GREET

and accompanying documentation will be

included in the instructions to the Form

7210, Clean Hydrogen Production Credit,

or any successor form(s).

45VH2-GREET includes various

hydrogen production pathways. As of the

publication date of these proposed regulations, 45VH2-GREET includes the following hydrogen production pathways—

(1) Steam methane reforming (SMR)

of natural gas, with potential carbon capture and sequestration (CCS);

(2) Autothermal reforming (ATR) of

natural gas, with potential CCS;

(3) SMR of landfill gas with potential

CCS;

(4) ATR of landfill gas with potential

CCS;

(5) Coal gasification with potential

CCS;

(6) Biomass gasification with corn stover and logging residue with no significant

market value with potential CCS;

(7) Low-temperature water electrolysis

using electricity; and

(8) High-temperature water electrolysis using electricity and potential heat

from nuclear power plants.

As described in Guidelines to Determine Well-to-Gate Greenhouse Gas

(GHG) Emissions of Hydrogen Production

Pathways Using 45VH2-GREET (GREET

User Manual), certain parameters in

45VH2-GREET are fixed assumptions,

referred to as “background data” in this

document. Users of 45VH2-GREET may

not change background data. Examples of

background data include upstream methane loss rates, emissions associated with

power generation from specific generator types, and emissions associated with

regional electricity grids. Background data

are parameters for which bespoke inputs

from hydrogen producers are unlikely

to be independently verifiable with high

fidelity, given the current status of verification mechanisms. The Treasury Department and the IRS seek comment on the

readiness of verification mechanisms that

could be utilized for certain background

data in 45VH2-GREET if it were reverted

to foreground data in future releases. For

example, the upstream methane loss rate

is background data in 45VH2-GREET,

and the Treasury Department and the IRS

seek comment on conditions, if any, under

which the methane loss rate may in future

releases become foreground data (such

as certificates that verifiably demonstrate

different methane loss rates for natural

gas feedstocks, sometimes described as

responsibly sourced natural gas).

45VH2-GREET allows users to input

the quantity of valorized co-products (that

is, co-products from the hydrogen production process that are productively utilized

or sold) and allocates emissions to those

co-products (rather than to the hydrogen

production) as described in Guidelines

to Determine Well-to-Gate Greenhouse

Gas (GHG) Emissions of Hydrogen Production Pathways Using 45VH2-GREET

2023. As described in that document,

45VH2-GREET utilizes the “system

expansion” approach for all co-products if

possible, but restricts the amount of steam

co-product that reformers can claim based

on the quantity of steam that an optimally

designed reformer is expected to be capable of producing based on modeling from

the National Energy Technology Laboratory.7 This restriction is included within

the model to avoid incentivizing generation or over-production of hydrogen

co-products like steam to enable access

to a higher tax credit value by artificially

reducing the calculated carbon intensity

of the hydrogen (for example, by combustion of fuel onsite that is unnecessary

for hydrogen production). The Treasury

Department and the IRS seek comments

on this approach, including whether alternative co-product accounting methods,

such as physical allocation (for example,

energy allocation or mass allocation) or

allocation based on other characteristics,

would better ensure well-to-gate carbon

intensity of hydrogen production is accurately represented.

B. Provisional emissions rate

Proposed §1.45V-4(c)(1) would provide that, for purposes of section 45V(c)

(2)(C) and proposed §1.45V-4(a), the term

“provisional emissions rate” or “PER”

means the lifecycle GHG emissions rate

of the process by which qualified clean

hydrogen is produced by the taxpayer at a

qualified clean hydrogen production facility as determined by the Secretary under

proposed §1.45V-4(c).

Proposed §1.45V-4(c)(2)(i) would provide that a taxpayer may not file a petition with the Secretary for a PER unless

National Energy Technology Laboratory, DOE, “Comparison of Commercial, State-of-the-Art, Fossil-Based Hydrogen Production Technologies,” April 12, 2022, available at https://www.

netl.doe.gov/energy-analysis/details?id=ed4825aa-8f04-4df7-abef-60e564f636c9.

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760

Bulletin No. 2024–14

a lifecycle GHG emissions rate has not

been determined under the most recent

GREET model (as defined in proposed

§1.45V-1(a)(8)(ii) as 45VH2-GREET)

for hydrogen produced by the taxpayer at

a hydrogen production facility. Proposed

§1.45V-4(c)(2)(i) would further provide

that a lifecycle GHG emissions rate has

not been determined under the most recent

GREET model with respect to hydrogen

produced by the taxpayer at a hydrogen

production facility if it uses a hydrogen

production pathway that is not included in

the most recent GREET model—that is, if

either the feedstock used by such facility

or the facility’s hydrogen production technology is not included in the most recent

GREET model.

For example, the initial version of

45VH2-GREET does not model every

possible biomass fuel as a feedstock nor

does it represent all hydrogen production

technologies that are currently of commercial interest or that may be commercially viable in the future, including geologic hydrogen, trigeneration, or other

technologies if sufficient technical analysis had not been completed at the time

the model was published. A taxpayer

with one of these types of hydrogen production pathways may use the PER process to obtain carbon intensities because

such hydrogen production technologies or feedstocks are not currently in

45VH2-GREET. To use the PER process,

the hydrogen production pathway that

the taxpayer is utilizing must either be

consuming a feedstock that is not represented in 45VH2-GREET (for example, a

type of biomass that is not represented in

the model) or using a hydrogen production technology that is not represented in

45VH2-GREET (for example, technologies used to drill for geologic hydrogen

or trigeneration that can use a fuel cell to

co-produce hydrogen, heat, and power).

A taxpayer may not use the PER process

if its feedstock and hydrogen production

technology are represented in 45VH2GREET, even if the taxpayer disagrees

with the underlying assumptions (that is,

background data) or calculation approach

used by the most recent 45VH2-GREET.

Future versions of 45VH2-GREET may

include additional hydrogen production

pathways, such as geologic hydrogen, as

sufficient technical information becomes

Bulletin No. 2024–14

available to provide consistent treatment

in 45VH2-GREET.

Proposed §1.45V-4(c)(2)(i) would also

provide that, if a taxpayer’s request for an

emissions value from the DOE under proposed §1.45V-4(c)(5) with respect to the

hydrogen produced by the taxpayer at a

hydrogen production facility is pending at

the time such hydrogen production facility’s pathway is included in an updated

version of 45VH2-GREET, the taxpayer’s request for an emissions value will be

automatically denied.

Proposed §1.45V-4(c)(2)(ii) would

specify that, notwithstanding proposed

§1.45V-1(a)(8)(ii), for the taxable year in

which the hydrogen production pathway

the taxpayer uses to produce hydrogen at a

qualified clean hydrogen production facility is first included in an updated version

of 45VH2-GREET, the updated version

of 45VH2-GREET will be considered the

most recent GREET model with respect to

the hydrogen produced by the taxpayer at

the hydrogen production facility.

1. Process for Filing a Provisional

Emissions Rate Petition

Proposed §1.45V-4(c)(3) would provide that a taxpayer petitions the Secretary

for a PER by attaching a PER petition to its

Federal income tax return or information

return for the first taxable year of hydrogen production ending within the 10-year

period described in section 45V(a)(1) for

which the taxpayer claims the section 45V

credit for hydrogen to which the PER petition relates and for which a lifecycle GHG

emissions rate has not been determined, as

defined under proposed §1.45V-4(c)(2)(i).

Proposed §1.45V-4(c)(3) would provide

that a PER petition must contain (i) an

emissions value obtained from the DOE

setting forth the DOE’s analytical assessment of the lifecycle GHG emissions rate

associated with the facility’s hydrogen

production pathway, and (ii) a copy of

the taxpayer’s request to the DOE for an

emissions value, including any information that the taxpayer provided to the DOE

pursuant to the emissions value request

process specified in proposed §1.45V-4(c)

(5). Proposed §1.45V-4(c)(3) would further provide that, if the taxpayer obtained

more than one emissions value from the

DOE, then the PER petition must contain

761

the emissions value setting forth the lifecycle GHG emissions rate of the hydrogen

for which the section 45V credit is claimed

on the Form 7210, Clean Hydrogen Production Credit, or any successor form(s),

to which the PER petition is attached.

2. Provisional Emissions Rate

Determination

Proposed §1.45V-4(c)(4) would provide that upon the IRS’s acceptance of

the taxpayer’s Federal income tax return

or information return containing a PER

petition, the emissions value specified

on such PER petition will be deemed

accepted. Proposed §1.45V-4(c)(4) would

provide that a taxpayer would be able to

rely upon an emissions value provided by

the DOE for purposes of calculating and

claiming a section 45V credit, provided

that any information, representations, or

other data provided to the DOE in support

of the request for an emissions value are

accurate. Proposed §1.45V-4(c)(4) would

also state that the IRS’s deemed acceptance of such emissions value is the Secretary’s determination of the PER. Proposed

§1.45V-4(c)(4) would state, however, that

the production and sale or use of such

hydrogen must be verified by an unrelated

party under section 45V(c)(2)(B)(ii) and

in compliance with the procedures provided in proposed §1.45V-5. Proposed

§1.45V-4(c)(4) would state that such verification and any information, representations, or other data provided to the DOE

in support of the request for an emissions

value are subject to later examination by

the IRS.

3. Department of Energy Emissions Value

Request Process

Proposed §1.45V-4(c)(5) would provide that, in order to obtain an emissions

value, an applicant must submit a request

for an emissions value following procedures that will be specified by the DOE.

The emissions value request process will

open on April 1, 2024.

Proposed §1.45V-4(c)(5) would also

provide that emissions values will be evaluated using the same well-to-gate system

boundary that is employed in 45VH2GREET, as proposed in §1.45V-1(a)(8)

(iii). Additionally, proposed §1.45V-4(c)(5)

April 1, 2024

would also provide that if applicable, background data parameters in 45VH2-GREET

would also be treated as background data

(with fixed values that an applicant cannot

change) in the emissions value request process. The emissions value request process

would be subject to any guidance issued

under section 45V, including any guidance

related to the use of EACs.

Proposed §1.45V-4(c)(5) would also

provide that an applicant may request an

emissions value from the DOE only after a

front-end engineering and design (FEED)

study or similar indication of project

maturity, such as project specification

and cost estimation sufficient to inform a

final investment decision, has been completed for the hydrogen production facility. Forthcoming guidance from the DOE,

which will be published prior to the April

1, 2024, opening of the emissions value

request process, will specify criteria the

DOE intends to consider in evaluating

whether a FEED study has been completed or that a similar indicator of project

readiness has been achieved. The Treasury

Department and the IRS seek comments

on appropriate indicators of project readiness that should be in place before an

applicant requests an emissions value to

ensure that requests correspond to hydrogen production facilities with significant

commercial interest, and standards against

which these indicators could be measured.

Additionally, proposed §1.45V-4(c)(5)

would provide that the DOE may decline

to review applications that are not responsive, including those applications that use a

hydrogen production technology and feedstock already in GREET or applications that

are incomplete. Guidance and procedures for

applicants to request and obtain an emissions

value from the DOE will be published by the

DOE,8 including a process for, under limited

circumstances, a revision to the DOE’s initial

analytical assessment of an emissions value,

such as to address revised technical information or facility design and operation.

4. Effect of Provisional Emissions Rate

Proposed §1.45V-4(c)(6) would provide that a taxpayer may use a PER deter-

mined by the Secretary to calculate the

amount of the clean hydrogen production

credit under section 45V(a) and proposed

§1.45V-1(b) with respect to qualified clean

hydrogen produced by the taxpayer at a

qualified clean hydrogen production facility beginning with the first taxable year in

which a PER determined by the Secretary

has been obtained and for any subsequent

taxable year during the 10-year period

beginning on the date such facility was

originally placed in service, provided all

other requirements of section 45V are met,

and until the lifecycle GHG emissions rate

of such hydrogen has been determined

(for purposes of section 45V(c)(2)(C))

under the most recent GREET model (as

defined in proposed §1.45V-1(a)(8)(ii)).

Proposed §1.45V-4(c)(6) would provide that the Secretary’s PER determination is not an examination or an inspection of books of account for purposes of

section 7605(b) of the Code, and would

not preclude or impede the IRS (under

section 7605(b) or any administrative

provisions adopted by the IRS) from later

examining a return or inspecting books

or records with respect to any taxable

year for which the section 45V credit is

claimed. Proposed §1.45V-4(c)(6) would

provide that a verification report submitted under section 45V(c)(2)(B)(ii) and

§1.45V-5 and any information, representations, or other data provided to the DOE

in support of an emissions value request

would still be subject to IRS examination.

Further, proposed §1.45V-4(c)(6) would

state that a PER determination would not

mean that the IRS has determined that all

the requirements of section 45V have been

satisfied for any taxable year, nor would it

create an inference that such a presumption exists.

C. Use of energy attribute certificates

The Treasury Department and the IRS,

in consultation with the United States

Environmental Protection Agency (EPA)

and the DOE, have preliminarily determined that energy attribute certificates

(EACs) may be considered under certain

conditions in documenting purchased

electricity inputs and assessing emissions

impacts of electricity used in the production of hydrogen for purposes of the section 45V credit.9 For purposes of these

proposed regulations, the term “EACs”

refers solely to EACs that represent attributes of electricity generated by a specific

facility or source. The EPA has advised

that EACs are an established mechanism

for substantiating the purchase of electricity from zero GHG-emitting sources and

that the use of EACs with attributes that

meet certain criteria is an appropriate way

for the Treasury Department and the IRS

to document electricity inputs to electrolytic hydrogen production. Such EACs can

also serve as a reasonable methodological proxy for quantifying certain indirect

emissions associated with electricity for

purposes of the section 45V credit. Similarly, the EPA and the DOE have advised

that it would be appropriate for EACs with

attributes that meet certain criteria to be

included as part of the basis for assessing

emissions for purposes of the section 45V

credit. The Treasury Department and the

IRS have preliminarily determined that

the use of certain EACs, which satisfy the

qualifying EAC requirements (as specified

in proposed §1.45V-4(d)(3)), is consistent

with the references to subparagraph (H)

of section 211(o)(1) of the Clean Air Act

(42 U.S.C. 7545(o)(1)(H)) and the most

recent GREET model, as specified in section 45V(c)(1).

Proposed §1.45V-4(d)(1) would provide that for purposes of section 45V, if

a taxpayer determines a lifecycle GHG

emissions rate for hydrogen produced at

a hydrogen production facility using the

most recent GREET model (as defined in

proposed §1.45V-1(a)(8)(ii)) or a PER (as

defined in proposed §1.45V-4(c)(1)), then

the taxpayer may reflect in GREET or

include in a PER such hydrogen production facility’s use of electricity as being

from a specific electricity generating facility rather than from the regional electricity

grid (as represented in 45VH2-GREET)

only if the taxpayer acquires and retires

a qualifying EAC (as defined in proposed

§1.45V-4(d)(2)(iv)) for each unit of electricity that the taxpayer claims from such

DOE will provide guidance and procedures at www.energy.gov/45vresources.

EPA Letter, available at https://home.treasury.gov/system/files/136/45V-NPRM-EPA-letter.pdf; DOE, “Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for the

Section 45V Clean Hydrogen Production Tax Credit,” Washington, DC (2023), available at www.energy.gov/45vresources.

8

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Bulletin No. 2024–14

source. For example, one megawatt-hour

of electricity used to produce hydrogen

would need to be matched with one megawatt-hour of qualifying EACs. The Treasury Department and the IRS seek comments on whether a different treatment

would be more appropriate to account for

transmission and distribution line losses.

Further, proposed §1.45V-4(d)(1)

would provide that to satisfy this requirement, a taxpayer’s acquisition and retirement of qualifying EACs must also be

recorded in a qualified EAC registry or

accounting system (as defined in proposed

§1.45V-4(d)(2)(v)) so that the acquisition

and retirement of such EACs may be verified by a qualified verifier (as defined in

proposed §1.45V-5(h)).

The double counting of EACs and their

underlying attributes would undermine the

integrity of lifecycle GHG emissions rate

determinations that incorporate EACs. A

double counting occurs if two different

parties claim the same environmental benefits from the same generated energy.10

Uniformly requiring claims of using electricity generated from specific sources

to be evidenced by EACs that meet the

requirements of proposed §1.45V-4(d)(1)

would mitigate the risk of double counting. Thus, proposed §1.45V-4(d)(1) would

provide that certain requirements must be

met regardless of whether the electricity

generating facility giving rise to the qualifying EAC is grid connected, directly connected, or co-located with the hydrogen

production facility (that is, regardless of

whether the underlying source of the qualifying EAC physically supplies electricity

through a direct connection to the hydrogen production facility).

1. Definitions Related to Use of Energy

Attribute Certificates

Proposed §1.45V-4(d)(2)(i) would

define the term “commercial operations

date” or “COD” as the date on which a

facility that generates electricity begins

commercial operations. The COD, as

defined here, is the first date of the operation of the relevant electricity generating

facility. The general rules for determining

10

11

an electricity generating facility’s placed

in service date for Federal income tax purposes would not apply in determining its

COD.

Proposed §1.45V-4(d)(2)(ii) would

define the term “energy attribute certificate” or “EAC” to mean a tradeable contractual instrument, issued through a qualified EAC registry or accounting system

(as defined in proposed §1.45V-4(d)(2)

(v)), that represents the energy attributes

of a specific unit of energy produced. An

EAC may be acquired with or separately

from the underlying energy it represents.

An EAC can be retired by or on behalf

of its owner, which is the party that has

the right to claim the underlying attributes represented by an EAC. Renewable

energy certificates (RECs) and other similar energy certificates issued through a

registry or accounting system are forms of

EACs.

Proposed §1.45V-4(d)(2)(iii) would

define the term “eligible EAC” to mean

an EAC that, with respect to the electricity to which the EAC relates, provides, at

minimum, the following information: (i)

a description of the electricity generating facility, including the technology and

feedstock used to generate the electricity;

(ii) the amount and units of electricity;

(iii) the date on which the facility that generated the electricity first began commercial operations (referred to as the commercial operations date (COD)) (as defined

in proposed §1.45V-4(d)(2)(i)); (iv) for

electricity that is generated before January 1, 2028, the calendar year in which

such electricity was generated; (v) for

electricity that is generated after December 31, 2027, the date and hour in which

such electricity was generated; and (vi) a

unique project identification number or

assigned identifier for each EAC that can

be used to cross reference any additional

electricity generating facility information

that may be needed, such as location.

Proposed §1.45V-4(d)(2)(iv) would

define the term “qualifying EAC” to

mean an eligible EAC (as defined in

proposed §1.45V-4(d)(2)(iii)) that meets

the requirements of proposed §1.45V4(d)(3) and for which the satisfaction of

those requirements has been verified by a

qualified verifier (as defined in proposed

§1.45V-5(h)).

Proposed §1.45V-4(d)(2)(v) would

define the term “qualified EAC registry

or accounting system” to mean a tracking

system that (i) assigns a unique identification number to each EAC tracked by such

system, (ii) enables verification that only

one EAC is associated with each unit of

electricity, (iii) verifies that the underlying attributes of each EAC is claimed and

retired only once, (iv) identifies the owner

of each EAC, and (v) provides a publicly

accessible view (for example, through an

application programming interface) of all

currently registered electricity generators in the tracking system to prevent the

duplicative registration of such generators. Qualified EAC registries currently

include, but are not limited to, the following: Electric Reliability Council of Texas

(ERCOT); Michigan Renewable Energy

Certification System (MIRECS); Midwest Renewable Energy Tracking System,

Inc. (M-RETS); North American Registry

(NAR); New England Power Pool Generation Information System (NEPOOLGIS); New York Generation Attribute

Tracking System (NYGATS); North Carolina Renewable Energy Tracking System

(NC-RETS); PJM Generation Attribute

Tracking System (PJM-GATS); and Western Renewable Energy Generation Information System (WREGIS).

Proposed §1.45V-4(d)(2)(vi) would

define the term “region” to mean a United

States region derived from the National

Transmission Needs Study (DOE Needs

Study) that was released by the DOE on

October 30, 2023.11 The DOE has mapped

the DOE Needs Study regions to actual balancing authorities. The data file and map of

the resulting United States regions can be

found in Guidelines to Determine Well-toGate Greenhouse Gas (GHG) Emissions

of Hydrogen Production Pathways Using

45VH2-GREET (GREET User Manual)

as of December 26, 2023. The location of

an electricity generation source and the

location of a hydrogen production facility

will be based on the balancing authority to

which it is electrically interconnected (not

EPA, “Double Counting,” last updated Feb. 5, 2023, available at https://www.epa.gov/green-power-markets/double-counting.

DOE, National Transmission Needs Study, Oct. 2023, available at https://www.energy.gov/sites/default/files/2023-10/National_Transmission_Needs_Study_2023.pdf.

Bulletin No. 2024–14

763

April 1, 2024

its geographic location), with each balancing authority linked to a single region. The

Midcontinent Independent System Operator, Inc. (MISO) balancing authority is an

exception because it is split into two U.S.

regions as shown in the map located in the

GREET User Manual as of December 26,

2023. Alaska, Hawaii, and each U.S. territory will be treated as separate regions.

2. Qualifying Energy Attribute Certificate

Requirements

Proposed §1.45V-4(d)(3) would provide that an EAC meets the requirements

to be a qualifying EAC if it meets the

requirements for incrementality, temporal

matching, and deliverability. The incrementality requirement in proposed §1.45V4(d)(3)(i) would require qualifying EACs

to represent incremental source electricity,

such as electricity from an electricity generating facility that has a recent COD. As

discussed in more detail later in this section, the Treasury Department and the IRS

are requesting comments on whether and

under what circumstances electricity generated by an existing electricity generating

facility (that is, with a less recent COD)

that is dedicated to hydrogen production

may be treated as satisfying the incrementality requirement. The temporal matching

requirement in proposed §1.45V-4(d)(3)

(ii) would require that qualifying EACs

represent electricity produced in the same

time period in which the hydrogen production facility consumes electricity in the

production of hydrogen. The deliverability requirement in proposed §1.45V-4(d)

(3)(iii) would require qualifying EACs to

represent electricity that was produced by

an electricity generating facility that is in

the same region as the relevant hydrogen

production facility.

The Treasury Department and the IRS,

in consultation with the EPA and the DOE,

have preliminarily determined that these

qualifying EAC requirements are consistent with the requirements of section

45V(c)(1)(A) and (B) of the Code.12 The

EPA has advised that, based on its prior

implementation of section 211(o)(1)(H)

of the Clean Air Act in other contexts, it

would be reasonable and consistent with

the EPA’s precedent for the Treasury

Department and the IRS to determine that

induced grid emissions are an anticipated

real-world result of electrolytic hydrogen production that must be considered

in lifecycle GHG analyses for purposes

of the section 45V credit. Such interpretation would be consistent with the EPA’s

long-standing interpretation and application of section 211(o)(1)(H) of the Clean

Air Act in the context of the Renewable

Fuel Standard (RFS) program. The EPA

has also noted that EACs are an established means for documentation and verification of the electricity generation and

purchase of zero-GHG electricity. Moreover, the EPA has advised that it believes

it would be reasonable for the Treasury

Department and the IRS to use EACs that

possess specific attributes that meet certain criteria as a means of reducing the risk

of induced grid emissions resulting from

new load from electrolytic hydrogen production being added to an existing grid.

Such requirements would mitigate the

risk of inappropriately crediting hydrogen

production that does not meet the lifecycle

GHG levels required by section 45V.

DOE has published a technical paper,

Assessing Lifecycle Greenhouse Gas

Emissions Associated with Electricity Use

for the Section 45V Clean Hydrogen Production Tax Credit, which the Treasury

Department and the IRS have reviewed,

and which has informed the development

of the proposed regulations. As discussed

therein, incrementality, temporal matching, and deliverability requirements are

important guardrails to ensure that hydrogen producers’ electricity use can be reasonably deemed to reflect the emissions

associated with the specific generators

from which the EACs were purchased

and retired. If hydrogen producers rely on

EACs without attributes that meet these

three criteria there is a significant risk that

hydrogen production would significantly

increase induced grid GHG emissions

beyond the allowable levels required to

qualify for the section 45V credit.

Electricity from a specific generator

will have a GHG emissions profile that

results from both its direct and indirect

emissions. EACs with attributes that meet

the three criteria are intended to address

indirect GHG emissions resulting from

the dynamics of the electricity market and

the electric grid. If a hydrogen producer

purchases zero GHG-emitting electricity

that is represented by such EACs it is relatively straightforward to verify both the

direct and indirect emissions resulting

from such purchase and use. However, for

minimal-emitting sources of electricity,

additional considerations may be necessary to verify the full range of direct and

indirect emissions. The Treasury Department and the IRS request comment on

what information is needed to document

and verify GHG emissions related to minimal-emitting electricity generation that is

purchased and used for hydrogen production for purposes of claiming the section

45V credit.

While the Treasury Department and the

IRS are soliciting comment on the type of

information that hydrogen producers must

provide in order to document and verify

the direct and indirect GHG emissions

associated with purchased electricity generally, we are also seeking input on two

specific types of electricity generation

for which GHG emissions can be highly

variable or uncertain: fossil fuel-powered

electricity generation with CCS and biomass-powered electricity generation. With

regard to non-minimally emitting electricity generation, and fossil fuel-powered

generation and biomass powered generation with or without CCS in particular, the

Treasury Department and the IRS request

comment on mechanisms to verify accurately real-world emissions related to

hydrogen production. This includes mechanisms for, among other things, verification of the origin of the feedstock, rate of

carbon capture, and other parameters that

are relevant to accurate lifecycle analysis,

as well as the ability of EAC instruments

to represent accurately such attributes.

The Treasury Department and the IRS

also request comment on specific lifecycle

GHG emissions considerations, including

the use of counterfactual scenarios, that

should be considered in evaluating direct

EPA Letter, available at https://home.treasury.gov/system/files/136/45V-NPRM-EPA-letter.pdf; DOE, “Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for

the Section 45V Clean Hydrogen Production Tax Credit,” Washington, DC (2023), available at www.energy.gov/45vresources.

12

April 1, 2024

764

Bulletin No. 2024–14

and indirect emissions associated with

specific types of biomass and its consumption. The Treasury Department and the

IRS also request comment on the extent

and manner in which incrementality, temporal matching, and deliverability should

be applied in accounting for existing or

new electricity generation from biomass

or fossil feedstock. These comments may

inform future versions of 45VH2-GREET.

a. Incrementality

Proposed §1.45V-4(d)(3)(i)(A) would

provide that an EAC meets the incrementality requirement if the electricity generating facility that produced the unit of

electricity to which the EAC relates has

a COD (as defined in proposed §1.45V4(d)(2)(i)) that is no more than 36 months

before the hydrogen production facility

for which the EAC is retired was placed

in service.

The Treasury Department and the IRS

understand that EAC tracking systems

capture the COD of each electricity generating facility during the registration

process (often using data also reported to

the Energy Information Administration),

inclusive of month and year, which can

be cross-referenced based on project identification codes included on those EACs.

That COD should represent the initial date

of operation for the relevant electricity

generating facility. Third-party verifiers

should use this data to confirm the eligibility of purchased and retired EACs.

The Treasury Department and the IRS

note that there are circumstances in which

an existing higher-emitting electricity

generating facility may make upgrades

to subsequently deliver minimal-emitting

electricity. For example, an existing fossil-fuel electricity generating facility may

add CCS capability, thereby reducing its

lifecycle GHG emissions rate as determined in 45VH2-GREET. The Treasury

Department and the IRS request comments on whether the electricity generated

by such a facility should be considered

incremental under circumstances such as

if an existing fossil fuel electricity-generating facility after the addition of CCS

(after upgrade), had a COD that is no more

than 36 months before the relevant hydrogen production facility was placed in service. Comment is also requested on the

related question of whether, depending on

its carbon dioxide capture rate, it would be

appropriate to treat such a facility as a new

source of minimal-emitting generation

on the grid that would not be associated

with induced grid emissions. Relevant

to these questions, the Treasury Department and the IRS additionally request

comment on what information would

be needed to allow for qualifying EACs

representing existing fossil fuel-powered

electricity from facilities that have added

CCS. In particular, comment is requested

on whether there are safeguards that can

ensure that a hydrogen producer’s purchase and use of electricity from an existing fossil fuel-fired electricity generating

facility that installs CCS does not result

in indirect GHG emissions due to the

dynamics of the electricity market and

electric grid. The Treasury Department

and the IRS request comment on the direct

and induced emissions impacts of making

such a facility eligible, and whether and

under what circumstances it would be

appropriate to do so.

Proposed §1.45V-4(d)(3)(i)(B) would

provide an alternative test for establishing

incrementality for electricity generating

facilities that undergo an uprate. Proposed

§1.45V-4(d)(3)(i)(B) would provide that

an EAC satisfies this alternative test if the

electricity represented by the EAC is produced by an electricity generating facility

that had an uprate no more than 36 months

before the hydrogen production facility

with respect to which the EAC is retired

was placed in service and such electricity

is part of such electricity generating facility’s uprated production.

Proposed §1.45V-4(d)(3)(i)(B) would

provide rules for determining uprated production. Specifically, proposed

§1.45V-4(d)(3)(i)(B) would provide that

an uprated electricity generating facility’s production must be prorated to each

hour or year, consistent with the requirements in proposed §1.45V-4(d)(3)(ii), of

such facility’s generation by multiplying

each hour’s production by the uprated

production rate to determine the electricity to which the uprate relates. Proposed §1.45V-4(d)(3)(i)(B) would define

key terms, including: (i) “uprate,” which

means an increase in an electricity generating facility’s rated nameplate capacity

(in nameplate megawatts); (ii) “pre-uprate capacity,” which means the nameplate capacity of an electricity generating

facility immediately before an uprate; (iii)

“post-uprate capacity,” which means the

nameplate capacity of an electricity generating facility immediately after an uprate;

(iv) “incremental generation capacity,”

which means the increase in an electricity generating facility’s rated nameplate

capacity from the pre-uprate capacity to

the post-uprate capacity; (v) “uprated

production rate,” which means the incremental generation capacity (in nameplate

megawatts) divided by the post-uprate

capacity (in nameplate megawatts); and

(vi) “uprated production,” which means

the uprated production rate of an electricity generating facility multiplied by its

total generation output in a given hour (in

megawatt hours). Proposed §1.45V-4(d)

(3)(i)(C) would provide an example to

illustrate the application of the alternative

test for establishing incrementality due to

uprates.

The DOE has advised that there are

circumstances during which diversion of

existing minimal (that is, zero or nearzero) emissions power generation to

hydrogen production is unlikely to result

in significant induced GHG emissions.13

Such circumstances may include generation from minimal-emitting power plants

(i) that would retire absent the ability to

sell electricity for qualified clean hydrogen production, (ii) during periods in

which minimal-emitting generation would

have otherwise been curtailed, if marginal

emissions rates are minimal, or (iii) in

locations where grid-electricity is 100

percent generated by minimal-emitting

generators or where increases in load do

not increase grid emissions, for example,

due to State policy capping total GHG

emissions such that new load must be met

with minimal-emitting generators. The

13

DOE, “Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for the Section 45V Clean Hydrogen Production Tax Credit,” Washington, DC (2023), available at

www.energy.gov/45vresources.

Bulletin No. 2024–14

765

April 1, 2024

Treasury Department and the IRS seek

comments on whether and how to provide alternative approaches to identifying

circumstances in which there is minimal

risk of significant induced grid emissions

for certain existing electricity generating

facilities.

The Treasury Department and the IRS

are considering providing, in the final regulations, alternative circumstances under

which an EAC may be deemed to satisfy the incrementality requirement. The

Treasury Department and the IRS request

comments on these specific circumstances

as described in part V.C.2.a.i through iii of

this Explanation of Provisions.

i. Avoided Retirements Approach

The Treasury Department and the IRS

seek comments on whether to recognize

an avoided retirements approach that

would treat EACs from an existing electricity generating facility as satisfying the

incrementality requirement if the facility

is likely to avoid retirement because of

its relationship with a hydrogen production facility. With respect to this potential

approach, the Treasury Department and

the IRS request comments on the following: (i) the appropriate criteria that should

be considered to assess retirement risk;

(ii) the extent to which demonstration of

financial loss, projected or actual local

electricity market conditions, presence

of out-of-market financial support (which

could potentially include financial support

driven by Federal or State policy, bilateral contracts for EACs or above-market

electricity sales, or revenue provided by

cost-of-service regulation), or upcoming

relicensing decisions, in combination,

are appropriate criteria to assess risk;

(iii) industry best practices for estimating

financial loss and the documentation necessary to support those estimates; (iv) the

appropriate criteria that should be taken

into account to assess the likelihood that

an electricity generator’s relationship with

a hydrogen production facility avoids

retirement of the generator (for example,

size of electrolyzer, co-location, contract

length, or otherwise); (v) the appropriate

criteria that should be taken into account

to ensure that only electricity generation

supplying the minimum hydrogen production necessary to avoid retirement is

counted as incremental, and, in particular, whether there should be a cap on the

amount of generation from a given facility

that qualifies as incremental and how such

a cap should be determined; (vi) the period

during which any determination of incrementality of existing electricity generators

would be maintained before a new showing would be required; (vii) the process by

which eligibility for this approach should

be determined and any related administrability considerations; and (viii) what role,

if any, EAC tracking systems should play

in the verification or tracking of eligible

EACs from such electricity generators.

With respect to processes that may

be used to implement this approach, the

Treasury Department and the IRS request

comments on whether such approach

should allow existing minimal-emitting

generators that wish to provide EACs to

hydrogen producers to demonstrate incrementality through submission to the IRS

or another Federal agency, such as the

DOE, specific information that supports a

conclusion that the electricity generator is

at risk of retirement that may be mitigated

by sales to hydrogen producers, and, if so,

what information and information submission process should be required.

The available data on retirement risk

indicates this approach may be warranted.

Some clean power plants, primarily

nuclear plants, have retired in recent years.

Based on data from the Energy Information Administration (EIA), from 2013

through 2022, 10,800 megawatts (MW) of

nuclear, 1,700 MW of wind, 950 MW of

hydropower, and 360 MW of solar have

retired.14 Studies have shown that there is

risk of continued retirement in the years

ahead.15 The EIA, for example, estimates

that an additional 4,600 MW of existing

nuclear plants may retire through 2032,

equivalent to five percent of the existing nuclear fleet (1,900 gigawatts (GW)

of renewable power plants may retire as

well).16 Some of these plant owners (primarily owners of nuclear plants) may

decide whether to retire the plants based

on the finances of continuing to operate

the plants. It is likely that for some plants,

additional revenue from selling EACs and

electricity to hydrogen producers may

improve the financial outlook of the plant

and help avert retirement, thereby keeping the minimal-emitting power plant in

operation and not resulting in induced

grid emissions compared to a scenario in

which the plant retires.

ii. Zero or Minimal Induced Grid

Emissions Through Modeling or Other

Evidence

The Treasury Department and the IRS

seek comments on whether to provide

an opportunity to demonstrate zero or

minimal induced grid emissions through

modeling or other evidence under specific

circumstances. A demonstrated or modeled minimal-emission approach could

treat electricity produced by certain existing electricity generating facilities under

certain circumstances as satisfying the

incrementality requirement if it is demonstrated that such sources and circumstances would not give rise to significant

induced grid emissions. Such a showing

could be based on modeling or potentially

be deemed to be made in certain circumstances based on regional grid characteristics, State policy, or facility history.

The Treasury Department and the IRS

request comments on this demonstrated

or modeled minimal-emission approach,

including: (i) the circumstances in which

it should be available and the criteria that

are appropriate to evaluate and determine

whether those circumstances occur; (ii)

who should apply under this approach, the

electricity generation facility, the hydrogen producer, or both; (iii) what data or

modeling should be submitted; (iv) best

practices for making such demonstrations,

including for ensuring the impartiality and

replicability of calculation approaches; (v)

how an administrator of such a program

would validate the accuracy of applicant

Monthly Generator Report Based on Form 860 available at https://www.eia.gov/electricity/data/eia860m/.

See John Bistline et al, “Emissions and energy impacts of the Inflation Reduction Act”, 380Science, 1324-27, June 29, 2023, available at https://www.science.org/doi/10.1126/science.

adg3781; U.S. Energy Information Administration, Annual Energy Outlook 2023, March 16, 2023, available at https://www.eia.gov/outlooks/aeo/tables_ref.php.

16

U.S. Energy Information Administration, Annual Energy Outlook 2023, March 16, 2023, available at https://www.eia.gov/outlooks/aeo/tables_ref.php.

14

15

April 1, 2024

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submissions; (vi) under what circumstances, if any, it would be appropriate

to deem generation to satisfy the incrementality requirement without modeling,

and what documentation should be provided in these cases; (vii) the process by

which eligibility for this approach should

be determined and any related administrability considerations; (viii) the period

during which any determination of incrementality would be maintained before a

new showing would be required; and (ix)

the circumstances and capability of EACs

and tracking systems to track and verify

energy attributes from such sources.

There are several circumstances that

may be covered under this pathway. Periods of curtailment or zero or negative

pricing is one such circumstance. Hydropower plants sometimes “spill” water, a

form of curtailment. Curtailment of minimal-emitting electricity generation tends

to occur during times when wholesale

electricity prices are zero or negative on

a system-wide basis. Purchasing EACs

from existing minimal-emitting electricity

generators under these conditions would

have limited or no induced grid emissions

as these are times during which increased

load would tend to be met by the otherwise

curtailed minimal-emitting electricity

generators rather than inducing increased

generation from emitting electricity generators, and so is unlikely to significantly

increase induced grid emissions.

Similarly, if in a particular region, all

generation—including imported generation—comes from minimal-emitting electricity generators, then increased load is

unlikely to significantly increase induced

grid emissions. The same may be true if

a region is subject to a State or local policy that ensures that new load is met with

minimal-emitting electricity generation.

There may be limited risk of significant

induced GHG emissions for islanded generation systems. Diversion of generation

from a minimal-emitting electricity generator that has never been connected to

the grid generally may not have the same

induced GHG emissions effects as diversion from an electricity generator that is

connected to the grid. Induced GHG emissions could occur, however, if the energy

demand that the existing minimal-emitting electricity generator previously met

is instead met by a different, emitting,

energy source. For example, an onsite

minimal-emitting electricity generator

that powers an industrial facility could

be diverted for hydrogen production, in

which case the induced GHG emissions

would depend on what happens at the

site to meet the power needs of the industrial facility (unless the industrial facility

ceases operation).

iii. Formulaic approaches to addressing

incrementality from existing clean

generators

The Treasury Department and the

IRS recognize the difficulty in reliably

identifying the specific electricity generators and specific times and places in

which the circumstances described in

part V.C.2.a.i and ii of this Explanation

of Provisions might occur. Therefore,

the Treasury Department and the IRS are

also considering alternative approaches

that would serve as proxy for all the pathways described in part V.C.2.a.i and part

V.C.2.a.ii of this Explanation of Provisions. EACs that satisfy the incrementality requirement through this pathway

would still be required to meet temporal

matching and deliverability requirements.

One such approach would deem five

percent of the hourly generation from

minimal-emitting electricity generators

(for example, wind, solar, nuclear, and

hydropower facilities) placed in service

before January 1, 2023, as satisfying the

incrementality requirement. This pathway may be appropriate because some

circumstances (including periods of curtailment or times when generation from

minimal-emitting electricity generation

is on the margin) may make the resulting

incremental generation difficult to anticipate or identify, or because the process

for identifying the circumstances (such

as avoided retirement risk or modeling of

minimal-emissions) may be overly bur-

densome to evaluate for specific electricity generators or require data that is not

available. In some instances, for example,

in determining whether EACs come from

electricity generation that would otherwise have been curtailed, these circumstances require understanding of counterfactual “what if” scenarios that depend

on numerous assumptions. In other circumstances, for example, in determining

whether EACs come from minimal-emitting electricity generators that otherwise

would have retired or if policy regimes

restrict increases in grid emissions in the

face of growing electricity demand, they

may require detailed assessment and

pre-qualification based on applicant-submitted information and forecasts with

related concerns about information accuracy. In still other cases, they may require

complex geographically and temporally

granular modeling and data (such as for

marginal emission rates that consider

operational and structural effects17) in

concert with hourly EAC tracking infrastructure that is not yet widely available.

The Treasury Department and the IRS

are mindful of the risk that an allowance

without further temporal, spatial, and circumstantial precision results in hydrogen

production facilities receiving credits for

which they should not be eligible given

their induced emissions rates. Given the

risks of induced GHG emissions, the Treasury Department and the IRS believe that

a broadly available allowance that is not

tailored to specific geographic or other

conditions should not be greater than the

national average rate of the occurrence

of the above circumstances and instead

should be a conservative lower bound of

the national average. The DOE reports

that wind curtailment in 2022 averaged 5.3

percent of total wind generation nationwide (data are only available for Independent System Operator (ISO) regions),18

and Lawrence Berkeley National Laboratory reports curtailment rates for solar

photovoltaics at over 10 percent of solar

generation in ERCOT and over 3 percent

in California Independent System Operator (CAISO).

17

DOE, “Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for the Section 45V Clean Hydrogen Production Tax Credit,” Washington, DC (2023), available at

www.energy.gov/45vresources.

18

Office of Energy Efficiency & Renewable Energy, DOE, “Land-Based Wind Market Report: 2023 Edition,” Aug. 24, 2023, available at https://www.energy.gov/eere/wind/articles/landbased-wind-market-report-2023-edition.

Bulletin No. 2024–14

767

April 1, 2024

Purchasing EACs from existing minimal-emission electricity generators,

whether or not from the electricity generators that would otherwise curtail their

output, under these conditions would have

limited risk of induced grid emissions. As

noted earlier, curtailment is most likely

to occur in the face of negative wholesale electricity prices if the marginal grid

emissions rate is minimal or zero. Based

on a data tool developed by Lawrence

Berkeley National Laboratory that considers over 50,000 wholesale pricing nodes

across the nation, negative wholesale

prices occurred during roughly five percent of hours over the last several years

(6.3 percent of hours in 2022, 5.8 percent

in 2021, 4.8 percent in 2020, 3.3 percent

in 2019, and 2.3 percent in 2018).19 These

are times during which increased load is

unlikely to increase significantly induced

grid emissions.20 Modeled data from the

National Renewable Energy Laboratory

(NREL) is broadly consistent with these

trends. Specifically, NREL’s Cambium

data set for 2024 shows that long-run marginal emissions rates on a national basis

are projected to be at or near zero for about

five percent of hours, times during which

minimal-emitting electricity generators

are on the margin and often curtailed.21

In addition, some minimal-emitting

electricity generators are at risk of retirement, including about five percent of the

nuclear fleet according to EIA estimates.

A percentage allowance can also serve as

proxy for avoided retirements.

The Treasury Department and the IRS

seek comments on this five percent-allowance approach, including the merits of this

approach compared to the targeted pathways described, particularly with respect

to balancing administrative feasibility and

burden with accuracy of identifying circumstances with a low risk of induced grid

emissions. The Treasury Department and

the IRS also seek comments on whether

five percent is the appropriate magnitude for an allowance. In particular, as

noted earlier, data show that curtailment

rates have increased in recent years, and

NREL’s Cambium model predicts additional increases going forward. In light of

these data and projections, the Treasury

Department and the IRS seek comments

on whether a higher amount, such as up

to 10 percent, would be appropriate, either

in general or in certain cases or circumstances. The Treasury Department and

the IRS also seek comments on: (i) how a

five-percent allowance should be tracked,

allocated, and administered and how feasible it is for EAC tracking systems to

incorporate data on such an allowance;

(ii) whether the five percent should apply

to all existing minimal-emitting electricity generators in all locations or a subset

and for what reasons; (iii) whether such

an allowance should be assessed at the

individual plant level or across an operator’s fleet within the same deliverability

region; and (iv) any other administrability

considerations. The Treasury Department

and the IRS seek comments specifically

on whether and how the “averaging”

approach of a proxy appropriately captures the circumstances in which generation is incremental or does not generate

induced grid emissions. The Treasury

Department and the IRS also seek comments on how and whether the targeted

alternative approaches or the other proxy

approaches described subsequently in

this part V.C.2.a.iii of this Explanation of

Provisions might replace the five-percent

allowance or might be coordinated with

the allowance.

The Treasury Department and the IRS

invite comments on alternative formulaic,

proxy approaches that might better capture conditions under which using existing

minimal-emitting electricity generation to

produce hydrogen does not significantly

impact induced grid emissions. The Treasury Department and the IRS request

comments on whether there would be an

appropriate, more formulaic approach to

capturing retirement risk, instead of the

application-based process or the five-percent allowance. Comments are specifically

requested on whether such an alternative

approach should be limited to facilities

with specific technical, market, or geographic characteristics corresponding with

a greater risk of retirement (for example,

participation in a wholesale market, lack of

State support for a facility, nuclear plants

with a single reactor) and higher likelihood

that using a subset of electricity generation

and related EACs for hydrogen production

would minimize the risk.

In particular, the Treasury Department

and the IRS seek comments on whether

existing nuclear and hydroelectric facilities that need to undertake a relicensing

process are generally at higher risk of

retirement without additional financial

assistance and, if so, what considerations

should be integrated into a potential formulaic approach. Comments are further

requested on whether there are particular

characteristics of hydrogen production

facilities associated with existing generators at risk of retirement that should

be considered (i) to demonstrate that the

hydrogen production reduces retirement

risk, such as co-location of hydrogen

production with an existing generator

and (ii) to assess the minimum hydrogen

production necessary to reduce retirement

risk, such as limitations on project size,

electrolyzer capacity, or percent of generation used by the hydrogen production.

Comments are further requested on how

to determine the portion of such electricity generation and related EACs, which is

generally likely to be sufficient to minimize that risk. Similarly, with respect to

the modeled or demonstrated approach

described in part V.C.2.a.ii of this Explanation of Provisions, the Treasury Department and the IRS request comments on

whether there are formulaic approaches

that might be used instead of an application-based pre-qualification process and

the broad five-percent allowance.

For each of these possible alternative

approaches to establish incrementality,

the Treasury Department and the IRS

request comments on how eligibility for

the approach may be reliably verified by

an unrelated party and administered by the

IRS.

19

Berkeley Lab, Electricity Markets & Policy, The Renewables and Wholesale Electricity Prices (ReWEP) Tool, available at https://emp.lbl.gov/renewables-and-wholesale-electricity-prices-rewep.

20

For example, see New York State Energy Research and Development Authority (NYSERDA), “Projected Emission Factors for New York State Grid Electricity,” NYSERDA Report Number

22-18 (2022), available at https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/Publications/Energy-Analysis/22-18-Projected-Emission-Factors-for-New-York-Grid-Electricity.pdf.

21

See National Renewable Energy Laboratory, Energy Analysis, Cambium, available at https://www.nrel.gov/analysis/cambium.html. Long-run marginal emissions rates at or near zero are

defined as under 25 kg CO2e/MWh.

April 1, 2024

768

Bulletin No. 2024–14

b. Temporal Matching

Proposed §1.45V-4(d)(3)(ii)(A) would

provide the general rule that an EAC satisfies the temporal matching requirement

if the electricity represented by the EAC

is generated in the same hour that the taxpayer’s hydrogen production facility uses

electricity to produce hydrogen. Proposed

§1.45V-4(d)(3)(ii)(B) would provide a

transition rule to allow an EAC that represents electricity generated before January 1, 2028 to fall within the general rule

provided in proposed §1.45V-4(d)(3)(ii)

(A) if the electricity represented by the

EAC is generated in the same calendar

year that the taxpayer’s hydrogen production facility uses electricity to produce hydrogen. The DOE has advised that

hourly matching is necessary to properly

address significant indirect emissions

from electricity use and that the tracking

systems and related contractual structures for hourly matching will take some

time to develop to an appropriate level of

maturity.22 This transition rule is intended

to provide time for the EAC market to

develop the hourly tracking capability

necessary to verify compliance with this

requirement.

Hourly tracking systems for EACs are

not yet broadly available across the country and will take some time to develop.23

In a recent survey of nine existing tracking systems,24 two of the tracking systems

indicated that they are already tracking on

an hourly basis, although software functionality in these two systems remains

limited. Fully developing the functionality of these systems will take time, as will

creating and developing the functionality

of hourly tracking infrastructure in other

regions of the country. Of the other tracking systems, assuming that challenges are

overcome, four gave a timeline of less

than one year to two years, and one gave a

timeline of three to five years; in the latter

case, the respondent noted that the time-

line could be closer to three years if there

is full State agency buy-in, clear instructions are received from Federal or State

agencies, and funding for stakeholder

participation is made available. Two

tracking systems declined to give a timeline to develop this functionality. In the

same survey, tracking systems identified

a number of challenges to hourly tracking

that will need to be overcome, including

cost, regulatory approval, interactions

with State policy, sufficient stakeholder

engagement, data availability and management, and user confusion. Moreover,

once the tracking software infrastructure

is in place nationally, it may take additional time for transactional structures and

efficient hourly EAC markets to develop.

Among the issues that require resolution

as EAC tracking systems move to hourly

resolution is the treatment of electricity

storage.25

Given the state of tracking systems,

the expected responses to this proposed

rule, and the impact of demand to drive

development of the tracking systems, the

Treasury Department and the IRS anticipate that the proposed duration of the

transition rule would allow sufficient time

for systems to develop hourly tracking

mechanisms and for the associated trading markets to develop. The Treasury

Department and the IRS acknowledge

uncertainty in the timing of implementing

an hourly matching requirement, however, and request comments on the appropriate duration of this transition rule to

hourly matching, including specific data

regarding current industry practices, the

predicted timelines for development of

hourly tracking mechanisms, and the predicted timeline for market development

for hourly EACs.

c. Deliverability

Proposed §1.45V-4(d)(3)(iii) would

provide that an EAC meets the deliv-

erability requirements if the electricity

represented by the EAC is generated by

a source that is in the same region (as

defined in proposed §1.45V-4(d)(2)(vi))

as the relevant hydrogen production facility. This approach provides reasonable

assurances of deliverability of electricity

because the regions, as defined earlier,

were developed by the DOE in consideration of transmission constraints and

congestion and, in many cases, match

power-systems operation. The Treasury

Department and the IRS recognize that

transmission limitations also exist within

these specified regions but are not aware

of readily administrable options to reflect

those grid constraints. The DOE has generally found that inter-regional transmission constraints tend to be greater than

within-region constraints.26 The Treasury

Department and the IRS request comments on whether there are additional

ways to establish deliverability, such as

circumstances indicating that electricity

is actually deliverable from an electricity generating facility to a hydrogen production facility, even if the two are not

located in the same region or if the clean

electricity generator is located outside of

the United States.

VI. Procedures for Verification of

Qualified Clean Hydrogen Production

and Sale or Use.

Section 45V(c)(2)(B)(ii) provides that

hydrogen is not qualified clean hydrogen

unless “the production and sale or use of

such hydrogen is verified by an unrelated

party.”

A. Requirements for verification reports

Proposed §1.45V-5(a) would provide

that a verification report must be attached

to the taxpayer’s Form 7210, Clean

Hydrogen Production Credit, or any successor form(s), and included with the

22

DOE, “Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for the Section 45V Clean Hydrogen Production Tax Credit,” Washington, DC (2023), available at

www.energy.gov/45vresources.

23

Electric Power Research Institute, “24/7 Carbon-free Energy: Matching Carbon-free Energy Procurement to Hourly Electric Load,” Dec. 15, 2022, available at https://www.epri.com/

research/products/000000003002025290.

24

Center for Research Solutions, “Readiness for Hourly: U.S. Renewable Energy Tracking Systems,” June 15, 2023, available at https://resource-solutions.org/wp-content/uploads/2023/06/

Readiness-for-Hourly-U.S.-Renewable-Energy-Tracking-Systems.pdf.

25

DOE, “Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for the Section 45V Clean Hydrogen Production Tax Credit,” Washington, DC (2023), available at

www.energy.gov/45vresources.

26

DOE, National Transmission Needs Study, Oct. 2023, available at https://www.energy.gov/sites/default/files/2023-10/National_Transmission_Needs_Study_2023.pdf.

Bulletin No. 2024–14

769

April 1, 2024

taxpayer’s Federal income tax return or

information return for each qualified clean

hydrogen production facility and for each

taxable year in which the taxpayer claims

the section 45V credit. Proposed §1.45V5(b) would provide that the verification

report specified in §1.45V-5(a) must be

prepared by a qualified verifier (as defined

in §1.45V-5(h)) under penalties of perjury. Proposed §1.45V-5(b)(1) through (6)

would describe the following information

that a verification report must contain:

(i) an attestation from the qualified verifier regarding the taxpayer’s production

of qualified clean hydrogen for sale or

use during the taxable year (production

attestation), (ii) an attestation from the

qualified verifier regarding the amount of

such qualified clean hydrogen sold or used

(sale or use attestation), (iii) an attestation

from the qualified verifier regarding conflicts of interest (conflict attestation), (iv)

certain information regarding the qualified verifier, including documentation

of the qualified verifier’s qualifications

(qualified verifier statement), (v) certain

general information about the taxpayer’s

hydrogen production facility where the

hydrogen production undergoing verification occurred, and (vi) any documentation

necessary to substantiate the verification

process given the standards and best practices prescribed by the qualified verifier’s

accrediting body and the circumstances of

the taxpayer and the taxpayer’s hydrogen

production facility.

B. Requirements for production

attestation

Proposed §1.45V-5(c)(1) would provide that a production attestation must

state, under penalties of perjury, that the

qualified verifier performed a verification

sufficient to determine that the operation, during the applicable taxable year,

of the hydrogen production facility that

produced the hydrogen for which the section 45V credit is claimed, and any EACs

applied pursuant to proposed §1.45V-4(d),

are accurately reflected in: (i) the amount

of qualified clean hydrogen produced by

the taxpayer that is claimed on the Form

7210, Clean Hydrogen Production Credit,

or any successor form(s), to which the

verification report is attached; and (ii)

either the data the taxpayer entered into

April 1, 2024

the most recent GREET model (as defined

in proposed §1.45V-1(a)(8)(ii)) to determine the lifecycle GHG emissions rate

that is claimed on the Form 7210, Clean

Hydrogen Production Credit, or any successor form(s), or the data the taxpayer

submitted in the PER petition relating to

the hydrogen for which the section 45V

credit is claimed, and which was provided to the DOE in support of the taxpayer’s request for the emissions value

provided in the PER petition. For any

acquisition and retirement of qualifying

EACs, the verification must include validation that any purchases of EACs from

specified sources as entered into the most

recent GREET model or used as part of

a PER application meet all requirements

for being qualifying EACs, and that any

required technical parameters of the generating source (for example, CCS capture

rate, or sources of biomass) as entered into

45VH2-GREET or as part of a PER application are accurate.

Proposed §1.45V-5(c)(2) would provide that, if the production attestation

attests to the information specified in

proposed §1.45V-5(c)(1)(ii)(B), then the

production attestation must also specify

the emissions value received from the

DOE that was calculated using such data,

expressed in kilograms of CO2e per kilogram of hydrogen.

Proposed §1.45V-5(c)(3) would provide that the production attestation must

specify the lifecycle GHG emissions rate

(expressed in kilograms of CO2e per kilogram of hydrogen) and the amount of

qualified clean hydrogen produced by the

taxpayer (expressed in kilograms), that are

claimed on the Form 7210, Clean Hydrogen Production Credit, or any successor

form(s), to which the verification report is

attached.

C. Requirements for sale or use

attestation

Proposed §1.45V-5(d)(1) would provide that the sale or use attestation must be

an attestation, made under penalties of perjury, that the qualified verifier performed a

verification sufficient to determine that the

amount of qualified clean hydrogen that

is specified in the production attestation

(described in proposed §1.45V-5(c)), and

that is claimed on the Form 7210, Clean

770

Hydrogen Production Credit, or any successor form(s), to which the verification

report is attached, has been sold or used.

Proposed §1.45V-5(d)(2) would provide that, for purposes of section 45V(c)

(2)(B)(ii) and §1.45V-1(a)(9)(ii), the

hydrogen specified in proposed §1.45V5(d)(1) has been used if a person makes

a verifiable use of such hydrogen. Section

45V does not deny a section 45V credit if

the hydrogen is sold or used outside the

United States (as defined in section 638(1)

or a U.S. territory (having the meaning of

the term “possession” as defined in section 638(2)). Thus, a verifiable use can

occur within or outside the United States.

A verifiable use can be made by the taxpayer or a person other than the taxpayer.

For example, in a tolling arrangement pursuant to which a service recipient provides

raw materials or inputs such as water or

electricity to a third-party service provider

that owns a hydrogen production facility

(the toller), and the toller produces hydrogen for the service recipient using the service recipient’s raw materials or inputs in

exchange for a fee, use of the hydrogen by

the service recipient would be a verifiable

use. However, a verifiable use includes

neither (i) use of hydrogen to generate

electricity that is then directly or indirectly

used in the production of more hydrogen,

nor (ii) venting or flaring hydrogen.

Excluding those activities from qualifying as a verifiable use is intended to

prevent the wasteful production of hydrogen and abusive section 45V credit generation schemes. For example, without

this restriction, the section 45V credit

could be exploited through the production of qualified clean hydrogen that is

used to generate electricity that is, in turn,

used to produce additional qualified clean

hydrogen. The primary purpose of these

arrangements would be the exploitation of

the section 45V credit and possibly other

Federal income tax credits. Such arrangements are inconsistent with the intent of

section 45V and with the statutory “use”

requirement because they would incentivize the inefficient production of qualified

clean hydrogen for unproductive use and

would result in excessive claims of the

section 45V credit. The Treasury Department and the IRS request comments on

whether there are additional safeguards

that the regulations could adopt to pre-

Bulletin No. 2024–14

vent this or similar types of abusive section 45V credit claims, including section

45V credit claims arising if such circular

arrangements are coordinated among multiple parties.

D. Requirements for conflict attestation

Proposed §1.45V-5(e)(1) would provide that the verification report must also

include a conflict attestation, made under

penalties of perjury, that (i) the qualified

verifier has not received a fee based to any

extent on the value of any section 45V

credit that has been or is expected to be

claimed by any taxpayer and no arrangement has been made for such fee to be

paid at some time in the future; (ii) the

qualified verifier was not a party to any

transaction in which the taxpayer sold

qualified clean hydrogen it had produced

or in which the taxpayer purchased inputs

for the production of such hydrogen; (iii)

the qualified verifier is not related, within

the meaning of section 267(b) or 707(b)

(1), to, or an employee of, the taxpayer;

(iv) the qualified verifier is not married

to an individual described in proposed

§1.45V-5(e)(1)(iii); and (v) if the qualified

verifier is acting in his or her capacity as

a partner in a partnership, an employee of

any person, whether an individual, corporation, or partnership, or an independent

contractor engaged by a person other than

the taxpayer, the attestations under proposed §1.45V-5(e)(1)(i) through (iv) must

be made with respect to the partnership or

the person who employs or engages the

qualified verifier.

Proposed §1.45V-5(e)(2) would provide that, if a transfer election has been

made under section 6418(a) of the Code

with respect to the section 45V credit,

then the attestation requirements under

proposed §1.45V-5(e)(1) would need to

be made with respect to the qualified verifier’s independence from both the eligible

taxpayer (as defined in section 6418(f)(2)

and §1.6418-1(b)) and the transferee taxpayer (as described in section 6418(a) and

defined in §1.6418-1(m)).

E. Requirements for qualified verifier

statement

Proposed §1.45V-5(f) would provide

that the qualified verifier statement must

Bulletin No. 2024–14

contain (i) the qualified verifier’s name,

address, and taxpayer identification number; (ii) the qualified verifier’s qualifications to conduct the verification, including the qualified verifier’s education and

experience and a photocopy of the qualified verifier’s certificate received from

their accrediting body; (iii) if the qualified

verifier is acting in his or her capacity as

a partner in a partnership, an employee of

any person, whether an individual, corporation, or partnership, or an independent

contractor engaged by a person other than

the taxpayer, the name, address, and taxpayer identification number of the partnership or the person who employs or engages

the qualified verifier; (iv) the signature of

the qualified verifier and the date signed

by the qualified verifier; and (v) a statement that the verification was conducted

for Federal income tax purposes.

F. General information required to be

included in verification report

Proposed §1.45V-5(g) would provide

that the verification report must include (i)

the location of the hydrogen production

facility; (ii) a description of the hydrogen

production facility, including its method

of producing hydrogen; (iii) the type(s) of

feedstock(s) used by the hydrogen production facility during the taxable year of production; (iv) the amount(s) of feedstock(s)

used by the hydrogen production facility

during the taxable year of production; and

(v) a list of the metering devices used to

record any data used by the qualified verifier to support the production attestation

along with a statement that the qualified

verifier is reasonably assured that the

device(s) underwent industry-appropriate

quality assurance and quality control, and

that the accuracy and calibration of the

device(s) has been tested in the last year.

Standard program. The Treasury Department and the IRS request comment on this

definition of “qualified verifier,” including

on whether additional accreditations that

demonstrate sufficient expertise for verification of lifecycle analysis for the section

45V credit should be included.

Proposed §1.45V-5(i) would define the

term “unrelated party” (as described in

section 45V(c)(2)(B)(ii)) to mean a qualified verifier who meets the conflict attestation requirements as provided in proposed

§1.45V-5(e).

H. Requirements for taxpayers claiming

both the section 45V credit and the

section 45 credit or the section 45U

credit

Proposed §1.45V-5(j) would provide

requirements that, in the case of a taxpayer who produces electricity for which

either the section 45 credit or section

45U credit is claimed and the taxpayer

or a related person (as defined in section

45(e)(4)) uses such electricity (and related

EACs) to produce hydrogen for which the

section 45V credit is claimed, the verification report must also contain attestations

that the qualified verifier performed a verification sufficient to determine that (i) the

electricity used to produce hydrogen was

produced at the relevant facility for which

either the section 45 credit or section 45U

credit was claimed, (ii) the given amount

of such electricity (in kilowatt hours) used

to produce hydrogen at the relevant qualified clean hydrogen production facility

is reasonably assured of being accurate,

and (iii) the electricity for which a section

45 or section 45U credit was claimed is

represented by EACs that are retired in

connection with the production of such

hydrogen.

G. Definitions related to verifications

I. Required time for filing a verification

report

Proposed §1.45V-5(h) would define

the term “qualified verifier” to mean any

individual or organization with active

accreditation (i) as a validation and verification body from the American National

Standards Institute National Accreditation

Board; or (ii) as a verifier, lead verifier,

or verification body under the California

Air Resources Board Low Carbon Fuel

Proposed §1.45V-5(k) would provide

that a verification report must be signed

and dated by the qualified verifier no later

than (i) the due date, including extensions,

of the Federal income tax return or information return for the taxable year during

which the hydrogen undergoing verification is produced; or (ii) in the case of

a section 45V credit first claimed on an

771

April 1, 2024

amended return or administrative adjustment request (AAR), the date on which

the amended return or AAR is filed.

VII. Placed in Service Date for Existing

Facility that is Modified or Retrofitted to

Produce Qualified Clean Hydrogen

A. Modification of an existing facility

Under section 45V(d)(4), in the case of

any facility that was originally placed in

service before January 1, 2023, and, prior

to the modification (described in section

45V(d)(4)(B)), did not produce qualified

clean hydrogen, and after the date the

facility was originally placed in service

(i) is modified to produce qualified clean

hydrogen, and (ii) amounts paid or incurred

with respect to the modification are properly chargeable to the taxpayer’s capital

account, the facility will be deemed to have

been originally placed in service as of the

date the property required to complete the

modification is placed in service. The rule

in section 45V(d)(4) for modification of

existing facilities applies to modifications

made after December 31, 2022. See section

13204(a)(5)(C) of the IRA.

Proposed §1.45V-6(a)(1) would incorporate the statutory provisions of section 45V(d)(4). Proposed §1.45V-6(a)

(2) would further provide that an existing

facility will not be deemed to have been

originally placed in service as of the date

the property required to complete the

modification is placed in service unless

the modification is made for the purpose

of enabling the facility to produce qualified clean hydrogen and the taxpayer pays

or incurs an amount with respect to such

modification that is properly chargeable

to the taxpayer’s capital account for the

facility. Proposed §1.45V-6(a)(2) would

also provide that a modification is made

for the purpose of enabling the facility to

produce qualified clean hydrogen if the

facility could not produce hydrogen with

a lifecycle GHG emissions rate that is less

than or equal to 4 kilograms of CO2e per

kilogram of hydrogen but for the modification. Changing fuel inputs to the hydrogen production process, such as switching

from conventional natural gas to renewable natural gas, would not qualify as a

facility modification for purposes of proposed §1.45V-6(a)(2).

April 1, 2024

Examples 1, 2, and 3 of proposed

§1.45V-6(c) would provide examples

illustrating the application of the rules

provided by section 45V(d)(4) and proposed §1.45V-6(a).

B. Retrofit of an existing facility (80/20

Rule)

Proposed §1.45V-6(b) would provide

that an existing facility may establish a

new date on which it is considered originally placed in service for purposes of

section 45V, even though the facility contains some used property, provided the

fair market value of the used property is

not more than 20 percent of the facility’s

total value (the cost of the new property

plus the value of the used property) (80/20

Rule). Proposed §1.45V-6(b) would further provide that for purposes of the 80/20

Rule, the cost of new property includes all

properly capitalized costs of the new property included within the facility. Proposed

§1.45V-6(b) would provide that, if a facility satisfies the requirements of the 80/20

Rule, then the date on which such facility

is considered originally placed in service

for purposes of section 45V(a)(1) is the

date on which the new property added to

the facility is placed in service. Proposed

§1.45V-6(b) would also provide that the

80/20 Rule applies to any existing facility,

regardless of whether the facility previously produced qualified clean hydrogen

and regardless of when the facility was

originally placed in service (before application of proposed §1.45V-6(b)). Examples 4 and 5 of proposed §1.45V-6(c)

would provide examples illustrating the

application of the 80/20 Rule.

VIII. Election to Treat a Clean Hydrogen

Production Facility as Energy Property

for Purposes of the Section 48 Credit

A. Overview

Section 48(a)(15) allows a taxpayer

that owns and places in service a specified clean hydrogen production facility (as

defined in section 48(a)(15)(C)) to make

an irrevocable election to claim the section

48 credit in lieu of the section 45V credit

for any qualified property (as defined in

section 48(a)(5)(D)) that is part of the

facility. This provision is effective for

772

property placed in service after December

31, 2022. For any property that is placed

in service after December 31, 2022, and

the construction of which begins before

January 1, 2023, section 13204(c)(3) of

the IRA provides that section 48(a)(15)

applies only to the extent of the basis of

such property that is attributable to construction, reconstruction, or erection

occurring after December 31, 2022.

Proposed §1.48-15(a) would provide

that a taxpayer that owns and places in

service a specified clean hydrogen production facility (as defined in section

48(a)(15)(C) and proposed §1.48-15(b))

can make an irrevocable election under

section 48(a)(15)(C)(ii)(II) to treat any

qualified property (as defined in section

48(a)(5)(D)) that is part of the facility as

energy property for purposes of section

48.

Proposed §1.48-15(b) would define the

term “specified clean hydrogen production facility” to mean any qualified clean

hydrogen production facility (within the

meaning of section 45V(c)(3) and proposed §1.45V-1(a)(10)): (i) that is placed

in service after December 31, 2022; (ii)

with respect to which no section 45V credit

or section 45Q credit has been allowed,

and for which the taxpayer makes an irrevocable election to have section 48(a)(15)

apply; and (iii) for which an unrelated

party has verified in the manner specified

in proposed §1.48-15(e) that such facility

produces hydrogen through a process that

results in lifecycle GHG emissions that

are consistent with the hydrogen that such

facility was designed and expected to produce under section 48(a)(15)(A)(ii) and

proposed §1.48-15(c).

Proposed §1.48-15(c)(1) would provide the energy percentage (used by a

taxpayer to calculate a section 48 credit)

for a specified clean hydrogen production facility that is designed and reasonably expected to produce qualified clean

hydrogen through a process that results

in a lifecycle GHG emissions rate of not

greater than 4 kilograms of CO2e per kilogram of hydrogen. Proposed §1.48-15(c)

(2) would further provide that “designed

and reasonably expected to produce”

means hydrogen produced through a

process that results in the lifecycle GHG

emissions rate specified in the annual

verification report for the taxable year in

Bulletin No. 2024–14

which the section 48(a)(15) election is

made. The Treasury Department and the

IRS request comments on this proposed

rule and whether there are any challenges

to using the lifecycle GHG emissions

rate achieved in the taxable year in which

the section 48(a)(15) election is made to

determine the facility’s energy percentage

for purposes of calculating the section 48

credit amount.

B. Election procedures

1. Time and Manner of Making Election

Proposed §1.48-15(d)(1) would provide that, to make an election under section 48(a)(15)(c)(ii)(II), a taxpayer must

claim the section 48 credit with respect

to a specified clean hydrogen production facility on a Form 3468, Investment

Credit, or any successor form(s), and

file the form with the taxpayer’s Federal

income tax return or information return

for the taxable year in which the specified

clean hydrogen production facility is originally placed in service. Proposed §1.4815(d)(1) would provide that the taxpayer

must also attach a statement to its Form

3468, Investment Credit, or any successor

form(s), filed with its Federal income tax

return or information return that includes

all the information required by the instructions to Form 3468, Investment Credit, or

any successor form(s), for each specified

clean hydrogen production facility subject to an election. Proposed §1.48-15(d)

(1) would provide that a separate election

must be made for each specified clean

hydrogen production facility that meets

the requirements provided in section 48(a)

(15) to treat the qualified property that is

part of the facility as energy property.

Proposed §1.48-15(d)(1) would further provide that, if any taxpayer owning

an interest in a specified clean hydrogen

production facility makes an election with

respect to the facility, then that election

would be binding on all taxpayers that

directly or indirectly own an interest in

the facility. Thus, consistent with section

48(a)(15)(B), if a taxpayer owning an

interest in a specified clean hydrogen production facility makes an election under

section 48(a)(15)(C)(ii)(II), then no other

taxpayer owning an interest in the same

facility will be allowed a section 45V

Bulletin No. 2024–14

credit or section 45Q credit with respect

to the facility.

The Treasury Department and the IRS

request comments on whether, in the context of a specified clean hydrogen production facility that is directly owned through

an arrangement properly treated as a tenancy-in-common for Federal income tax

purposes or through an organization that

has made a valid election under section

761(a) of the Code, each co-owner’s or

member’s undivided ownership share of

the qualified property comprised in the

facility should be treated for purposes of

section 48(a)(15)(C)(ii)(II) as a separate

facility owned by such co-owner or member, with each such co-owner or member

eligible to make a separate election under

section 48(a)(15)(C)(ii)(II) to claim the

section 48 credit in lieu of the section 45V

credit with respect to its undivided ownership interest in the facility or share of the

underlying qualified property.

2. Special Rule for Partnerships and S

Corporations

Proposed §1.48-15(d)(2) would provide that, in the case of a specified clean

hydrogen production facility owned by a

partnership or an S corporation, the election under section 48(a)(15)(C)(ii)(II)

would be made by the partnership or S

corporation and would be binding on all

ultimate credit claimants (as defined in

§1.50-1(b)(3)(ii)). Proposed §1.48-15(d)

(2) would provide that the partnership or S

corporation must file a Form 3468, Investment Credit, or any successor forms(s),

with its partnership or S corporation return

for the taxable year in which the specified clean hydrogen production facility is

placed in service to indicate that it is making the election, and attach a statement

that includes all the information required

by the instructions to Form 3468, Investment Credit, or any successor form(s), for

each specified clean hydrogen production

facility subject to the election. Proposed

§1.48-15(d)(2) would provide that the

ultimate credit claimant’s section 48 credit

must be based on each claimant’s share of

the basis (as defined in §1.46-3(f)) of the

specified clean hydrogen production facility on a completed Form 3468, Investment

Credit, or any successor form(s), and file

such form with a Federal income tax return

773

or information return for the taxable year

that ends with or within the taxable year

in which the partnership or S corporation

made the election. Proposed §1.48-15(d)

(2) would provide that the partnership or S

corporation making the election must provide the ultimate credit claimants with the

necessary information to complete Form

3468, Investment Credit, or any successor

form(s), to claim the section 48 credit.

3. Election Irrevocable

Proposed §1.48-15(d)(3) would provide that the election to treat any qualified

property that is part of a specified clean

hydrogen production facility as energy

property would be irrevocable.

4. Election Availability Date

Proposed §1.48-15(d)(4) would provide that the election to treat any qualified

property that is part of a specified clean

hydrogen production facility as energy

property would be available for property placed in service after December 31,

2022, and, for any property that began

construction before January 1, 2023, only

to the extent of the basis thereof attributable to the construction, reconstruction, or

erection after December 31, 2022.

C. Third-party verification

Proposed §1.48-15(e)(1) would provide that, in the case of a taxpayer that

makes an election under section 48(a)(15)

(c)(ii)(II) to treat any qualified property

that is part of a specified clean hydrogen

production facility as energy property for

purposes of the section 48 credit, the taxpayer must obtain an annual verification

report for the taxable year in which the

election is made and for each taxable year

thereafter of the recapture period specified in proposed §1.48-15(f)(3). Proposed

§1.48-15(e)(1) would further provide that

the taxpayer must also submit the annual

verification report as an attachment to

the Form 3468, Investment Credit, or any

successor form(s), for the taxable year in

which the election is made.

Further, proposed §1.48-15(e)(2)(i)

would provide that the annual verification

report must be signed under penalties of

perjury by a qualified verifier (as defined

April 1, 2024

in proposed §1.45V-5(h)) and contain (i)

the information specified in §§1.45V-5(b)

and 1.45V-5(d) through 1.45V-5(h); (ii) a

statement attesting to the lifecycle GHG

emissions rate (determined under section

45V(c) and §1.45V-4) of the hydrogen

produced at the specified clean hydrogen

production facility for the taxable year to

which the annual verification report relates

and that the operation, during such taxable

year, of the specified clean hydrogen production facility, and any EACs applied

pursuant to §1.45V-4(d) for the purpose

of accounting for such facility’s emissions, are accurately reflected in the data

the taxpayer entered into the most recent

GREET model (as defined in §1.45V-1(a)

(8)(ii)) (or in the data the taxpayer provided to the DOE in support of the taxpayer’s request for an emissions value),

to determine the lifecycle GHG emissions

rate of the hydrogen undergoing verification; and (iii) an attestation that the facility produced hydrogen through a process

that results in a lifecycle GHG emissions

rate that is consistent with, or lower than,

the lifecycle GHG emissions rate of the

hydrogen that such facility was designed

and expected to produce.

Proposed §1.48-15(e)(2)(ii) would

provide that if a transfer election has been

made under section 6418(a) of the Code

with respect to the section 48 credit for a

specified clean hydrogen production facility, then the conflict attestation containing the information specified in proposed

§1.45V-5(e)(1) must be made with respect

to the qualified verifier’s independence

from both the eligible taxpayer (as defined

in section 6418(f)(2) and §1.6418-1(b))

and the transferee taxpayer (as described

in section 6418(a) and defined in §1.64181(m)), and without regard to the requirements under proposed §1.45V-5(e)(2).

Proposed §1.48-15(e)(2)(iii) would

provide that in the event the facility produces qualified clean hydrogen through

a process that results in a lifecycle GHG

emissions rate greater than the lifecycle GHG emissions rate such facility

was designed and expected to produce

(and thus the qualified verifier cannot

provide the attestation specified in proposed §1.48-15(e)(2)(i)(B)), resulting in a

reduced energy percentage under section

48(a)(15)(A)(ii) with respect to such facility, an emissions tier recapture event under

April 1, 2024

proposed §1.48-15(f)(2) will occur. Proposed §1.48-15(e)(2)(iv) would provide

that the hydrogen a facility was “designed

and expected to produce” would mean

hydrogen produced through a process that

results in the lifecycle GHG emissions

rate specified in proposed §1.48-15(c)(2).

Additionally, proposed §1.48-15(e)(2)

(v) would require that the annual verification report must be signed and dated by

the qualified verifier no later than the due

date, including extensions, of the Federal

income tax return or information return

for the taxable year in which the hydrogen

undergoing verification was produced.

Proposed §1.48-15(e)(2)(vi) would provide that in addition to the recordkeeping

requirements set forth in §1.48-15(g), the

taxpayer must retain the annual verification report for at least six years after the

due date, with extensions, for filing the

Federal income tax return or information

return for the taxable year in which the

hydrogen undergoing verification was

produced.

D. Credit recapture

Section 48(a)(15)(E) directs the Secretary to issue such regulations or other

guidance as determined necessary to carry

out the purposes of section 48, including

regulations or other guidance addressing

recapture of so much of the credit allowed

under section 48 as exceeds the amount of

the credit that would have been allowed

if the expected production were consistent

with the actual verified production or all

of the credit so allowed in the absence of

such verification.

1. Emissions Tier Recapture Events

Under Section 48(a)(15)(E)

Proposed §1.48-15(f)(1), would provide that, for purposes of section 48(a)(15)

(E), in any taxable year of the recapture

period specified in proposed §1.48-15(f)

(3) in which an emissions tier recapture

event (as defined in proposed §1.48-15(f)

(2)) occurs, the tax imposed on the taxpayer under chapter 1 of the Code for the

taxable year of the emissions tier recapture

event is increased by the recapture amount

specified in proposed §1.48-15(f)(4).

Proposed §1.48-15(f)(2) would provide that an emissions tier recapture event

774

under section 48(a)(15)(E) occurs during

any taxable year of the recapture period

specified in proposed §1.48-15(f)(3) under

the following circumstances: (i) the taxpayer fails to obtain an annual verification

report by the deadline for filing its Federal

income tax return or information return

(including extensions) for any taxable year

in which an annual verification report was

required under proposed §1.48-15(e)(1);

(ii) the specified clean hydrogen production facility actually produced hydrogen

through a process that results in a lifecycle

GHG emissions rate that can only support

a lower energy percentage than the energy

percentage used to calculate the amount of

the section 48 credit for such facility for

the year in which the facility is placed in

service; or (iii) the specified clean hydrogen production facility actually produced

hydrogen through a process that results in

a lifecycle GHG emissions rate of greater

than 4 kilograms of CO2e per kilogram of

hydrogen.

2. Recapture Period Under Section 48(a)

(15)(E)

Proposed §1.48-15(f)(3) would provide that the recapture period begins on

the first day of the first taxable year after

the taxable year in which the facility was

placed in service and ends on the last day

of the fifth taxable year after the close of

the taxable year in which the facility was

placed in service. For example, if a calendar-year taxpayer places in service a specified clean hydrogen production facility

on June 1, 2023, then the last day of the

fifth taxable year following the close of

the taxable year in which the facility was

placed in service is December 31, 2028.

Therefore, the recapture period is January

1, 2024, through December 31, 2028.

3. Recapture Amount

Proposed §1.48-15(f)(4) would provide

that, if an emissions tier recapture event

has occurred under proposed §1.48-15(f)

(2), the recapture amount for the taxable

year in which the emissions tier recapture event occurred is equal to 20 percent

of the excess of (i) the section 48 credit

allowed to the taxpayer for the specified

clean hydrogen production facility for

the taxable year in which the facility was

Bulletin No. 2024–14

placed in service, over (ii) the section 48

credit that would have been allowed to the

taxpayer for the facility if the taxpayer

had used the energy percentage supported

by the actual production to calculate the

amount of the section 48 credit. Proposed

§1.48-15(f)(4)(ii) would provide that, in

the case of any emissions tier recapture

event described in proposed §1.48-15(f)

(2), the carrybacks and carryovers under

section 39 must be adjusted by reason of

the emissions tier recapture event. Proposed §1.48-15(f)(4)(iii) would further

provide that, if the specified clean hydrogen production facility produced hydrogen

through a process that results in a lifecycle

GHG emissions rate of greater than 4 kilograms of CO2e per kilogram of hydrogen,

or if the taxpayer fails to submit an annual

verification report with its Federal income

tax return or information return with

respect to a specified clean hydrogen production facility for any taxable year of the

recapture period, then the section 48 credit

that would have been allowed to the taxpayer for the facility would be zero. Thus,

in that case, the recapture amount in the

taxable year of the emissions tier recapture event would be 20 percent of the section 48 credit allowed to the taxpayer with

respect to such specified clean hydrogen

production facility. Proposed §1.48-15(f)

(5) would provide an example illustrating

the application of proposed §1.48-15(f)(1)

through (4).

Unless modified in future guidance,

any reporting of emissions tier recapture under proposed §1.48-15(f) is made

on the taxpayer’s annual tax return. The

Secretary may issue future guidance and/

or prescribe tax forms and instructions

to address the reporting of emissions tier

recapture under proposed §1.48-15(f) and

any additional annual reporting obligations. The Treasury Department and IRS

therefore request comments on the reporting of recapture and any additional annual

reporting obligations.

4. Coordination with Recapture Rules

under Sections 50 and 48(a)(10)(C)

Proposed §1.48-15(f)(6) would provide

that, during any taxable year of the recap-

27

ture period for any credit allowed under

section 48(a) with respect to qualified

property that is part of a specified clean

hydrogen production facility, the recapture rules would be applied, if applicable,

in the following order: (i) section 50(a)

(recapture in case of dispositions, etc.);

(ii) section 48(a)(10)(C) (recapture relating to the prevailing wage requirements);

and (iii) section 48(a)(15)(E) (emissions

tier recapture).

E. Recordkeeping Requirements

Proposed §1.45V-2(c) would provide

that a taxpayer claiming the section 45V

credit would need to meet the general

recordkeeping requirements under section

6001 necessary to substantiate the amount

of the section 45V credit claimed by the

taxpayer. Section 6001 provides that

every person liable for any tax imposed

by the Code, or for the collection thereof,

must keep such records as the Secretary

may from time to time prescribe. Section

1.6001-1(a) provides that any person subject to income tax must keep such permanent books of account or records as are

sufficient to establish the amount of gross

income, deductions, credits, or other matters required to be shown by such person

in any return of such tax. Section 1.60011(e) provides that the books and records

required by §1.6001-1 must be retained so

long as the contents thereof may become

material in the administration of any internal revenue law.

Proposed §1.45V-2(c) would also provide that taxpayers must retain all raw

data used for submission of the request

for an emissions value to the DOE for at

least six years after the due date (including

extensions) for filing the Federal income

tax return or information return to which

the PER petition is ultimately attached.

Proposed §1.48-15(g) would provide

corresponding recordkeeping rules.

IX. Renewable Natural Gas and Fugitive

Sources of Methane

The Treasury Department and the IRS

intend to provide rules addressing hydrogen production pathways that use renew-

able natural gas (RNG) or other fugitive

sources of methane (for example, from

coal mine operations) for purposes of the

section 45V credit. In the context of this

guidance, the term RNG refers to biogas

that has been upgraded to be equivalent

in nature to fossil natural gas. Fugitive

methane refers to the release of methane

through, for example, equipment leaks,

or venting during the extraction, processing, transformation, and delivery of

fossil fuels to the point of final use, such

as coal mine methane or coal bed methane. Such rules would apply to all RNG

used for the purposes of the section 45V

credit and would provide conditions that

must be met before certificates for RNG

or fugitive methane (representations of

the environmental attributes of the methane) and the GHG emissions benefits they

are meant to represent may be taken into

account in determining lifecycle GHG

emissions rates for purposes of the section 45V credit. Such conditions would be

logically consistent with but not identical

to the incrementality, temporal match

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