# Bulletin No. 2024–32

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A0f9967376a155c60

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2024–32
August 5, 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.

ADMINISTRATIVE

INCOME TAX

TD 10003, page 342.

REG-119283-23, page 351.

This document contains final regulations relating to the
excise tax imposed on certain sales by manufacturers, producers, or importers of designated drugs. Specifically, the
final regulations set forth procedural provisions relating to
how taxpayers must report liability for such tax. The final
regulations also except such tax from semimonthly deposit
requirements. The final regulations affect manufacturers,
producers, or importers of designated drugs dispensed,
furnished, or administered to individuals under the terms of
Medicare during certain statutory periods.

EMPLOYEE PLANS
Notice 2024-59, page 348.

This notice sets forth updates on the corporate bond
monthly yield curve, the corresponding spot segment rates
for June 2024 used under § 417(e)(3)(D), the 24-month
average segment rates applicable for July 2024, and the
30-year Treasury rates, as reflected by the application of
§ 430(h)(2)(C)(iv).

Finding Lists begin on page ii.

This document contains proposed regulations relating
to the clean electricity production credit and the clean
electricity investment credit established by the Inflation
Reduction Act of 2022. The proposed regulations would
provide rules for: determining greenhouse gas emissions
rates resulting from the production of electricity; petitioning for provisional emissions rates; and determining
eligibility for these credits in various circumstances. The
proposed regulations would affect all taxpayers who
produce clean electricity and claim the clean electricity
production credit with respect to a facility or the clean
electricity investment credit with respect to a facility or
energy storage technology, as applicable, that is placed
in service after 2024.

Rev. Rul. 2024-15, page 340.

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 August 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.

August 5, 2024 

Bulletin No. 2024–32

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. 2024-15
This revenue ruling provides various
prescribed rates for federal income tax

AFR
110% AFR
120% AFR
130% AFR
AFR
110% AFR
120% AFR
130% AFR
150% AFR
175% AFR
AFR
110% AFR
120% AFR
130% AFR

Short-term adjusted AFR
Mid-term adjusted AFR
Long-term adjusted AFR

August 5, 2024

purposes for August 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 appro-

priate 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. 2024-15 TABLE 1
Applicable Federal Rates (AFR) for August 2024
Period for Compounding
Annual
Semiannual
Quarterly
Short-term
4.95%
4.89%
4.86%
5.45%
5.38%
5.34%
5.96%
5.87%
5.83%
6.46%
6.36%
6.31%
Mid-term
4.34%
4.29%
4.27%
4.78%
4.72%
4.69%
5.22%
5.15%
5.12%
5.66%
5.58%
5.54%
6.54%
6.44%
6.39%
7.65%
7.51%
7.44%
Long-term
4.52%
4.47%
4.45%
4.98%
4.92%
4.89%
5.43%
5.36%
5.32%
5.89%
5.81%
5.77%

Annual
3.74%
3.29%
3.42%

REV. RUL. 2024-15 TABLE 2
Adjusted AFR for August 2024
Period for Compounding
Semiannual
3.71%
3.26%
3.39%

340

Monthly
4.84%
5.32%
5.80%
6.28%
4.25%
4.67%
5.10%
5.52%
6.36%
7.40%
4.43%
4.87%
5.30%
5.74%

Quarterly
3.69%
3.25%
3.38%

Monthly
3.68%
3.24%
3.37%

Bulletin No. 2024–32

REV. RUL. 2024-15 TABLE 3
Rates Under Section 382 for August 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.)

3.42%
3.62%

REV. RUL. 2024-15 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for August 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
8.03%
Appropriate percentage for the 30% present value low-income housing credit
3.44%
REV. RUL. 2024-15 TABLE 5
Rate Under Section 7520 for August 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
August 2024. See Rev. Rul. 2024-15, page 340.

Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2024. See Rev. Rul. 2024-15, page 340.

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 August 2024. See Rev.
Rul. 2024-15, page 340.

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
August 2024. See Rev. Rul. 2024-15, page 340.

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 August 2024. See Rev. Rul.
2024-15, page 340.

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
August 2024. See Rev. Rul. 2024-15, page 340.

5.2%

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
August 2024. See Rev. Rul. 2024-15, page 340.

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
August 2024. See Rev. Rul. 2024-15, page 340.

Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of August 2024. See Rev. Rul.
2024-15, page 340.

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
August 2024. See Rev. Rul. 2024-15, page 340.

Bulletin No. 2024–32

341

August 5, 2024

26 CFR 40.0-1;26 CFR 40.6011(a)-1;26 CFR
40.6302(c)-1;26 CFR 47.5000D-0;26 CFR
47.5000D-1;26 CFR 47.5000D-2;26 CFR
47.5000D-3;26 CFR 47.5000D-4

TD 10003
Excise Tax on Designated
Drugs; Procedural
Requirements
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations relating to the excise tax
imposed on certain sales by manufacturers, producers, or importers of designated
drugs. Specifically, the final regulations
set forth procedural provisions relating
to how taxpayers must report liability
for such tax. The final regulations also
except such tax from semimonthly deposit
requirements. The final regulations affect
manufacturers, producers, or importers
of designated drugs dispensed, furnished,
or administered to individuals under the
terms of Medicare during certain statutory
periods.
DATES: Effective date: These regulations
are effective on August 5, 2024.
Applicability dates: For dates of applicability, see §§40.0-1(e), 40.6011(a)-1(e),
40.6302(c)-1(f), and 47.5000D-1(b).
FOR FURTHER INFORMATION
CONTACT: Jacob W. Peeples or James
S. Williford at (202) 317-6855 (not a tollfree number).
SUPPLEMENTARY INFORMATION:
Background
This document amends the Excise Tax
Procedural Regulations (26 CFR part 40)
and adds new part 47 to 26 CFR chapter I
to contain the “Designated Drugs Excise
Tax Regulations” related to the excise tax
imposed by section 5000D of the Internal
Revenue Code (Code) on certain sales by
manufacturers, producers, or importers of
designated drugs (section 5000D tax).

August 5, 2024

Sections 1191 through 1198 of the
Social Security Act (SSA), added by sections 11001 and 11002 of Public Law 117169, 136 Stat. 1818 (August 16, 2022),
commonly referred to as the Inflation
Reduction Act of 2022 (IRA), require
the Secretary of Health and Human Services to establish a Medicare prescription
drug price negotiation program (Medicare
Drug Price Negotiation Program) to negotiate maximum fair prices for certain high
expenditure, single-source drugs covered
under Medicare.
Section 5000D, added to new chapter 50A of the Code by section 11003 of
the IRA, imposes an excise tax on certain sales by manufacturers, producers, or
importers of designated drugs dispensed,
furnished, or administered to individuals
under the terms of Medicare during a day
that falls within a period described in section 5000D(b). The periods described in
section 5000D(b) relate to certain statutorily prescribed milestones in the Medicare
Drug Price Negotiation Program. Because
chapter 50A is a new chapter of the Code,
the existing regulations that prescribe procedural rules applicable to most Federal
excise taxes do not apply to chapter 50A.
Notice 2023-52 (2023-35 I.R.B. 650;
August 28, 2023) announced that the
Department of the Treasury (Treasury
Department) and the IRS intended to propose regulations addressing substantive
and procedural issues related to the section 5000D tax.
On October 2, 2023, a notice of proposed rulemaking (REG-115559-23) was
published in the Federal Register (88 FR
67690) (proposed regulations). No public
hearing was requested or held. The Treasury Department and the IRS received several comments in response to the proposed
regulations. The comments addressing the
proposed regulations are summarized in
the Summary of Comments and Explanation of Revisions section of this preamble.
Summary of Comments and
Explanation of Revisions
I. Overview
As noted in the Background section of
this preamble, the Treasury Department
and the IRS received several public comment submissions in response to the pro-

342

posed regulations. The public comments
fall into six general categories: timing of
the publication of the proposed regulations; the quarterly filing requirement in
the proposed regulations; the proposed
regulations’ retroactive applicability
dates; the constitutionality of the section
5000D tax; technical issues and questions
relating to the implementation of the section 5000D tax itself; and comments on
the Special Analyses provided in the proposed regulations. Each of these categories of comments is addressed in turn in
parts II through VII of this Summary of
Comments and Explanation of Revisions.
All public comments were considered and
are available at https://www.regulations.gov
or upon request. After full consideration of
the public comments received in response
to the proposed regulations, this Treasury
decision adopts the proposed regulations
with three non-substantive modifications.
Specifically, the final regulations modify proposed §§40.0-1, 40.6011-1(d), and
40.6302(c)-1 by clarifying that the section
5000D tax is imposed on “the sale of” designated drugs. The language, as modified,
more closely tracks the language of section
5000D(a).
II. Timing of the Publication of the
Proposed Regulations
A commenter stated that the Treasury
Department and the IRS acted prematurely when publishing proposed regulations related to procedural rules prior
to publishing substantive rules for the
section 5000D tax and requested that the
Treasury Department and the IRS withdraw the proposed regulations until substantive rules are published.
The section 5000D tax is a self-executing tax – that is, the section 5000D
tax is effective and applicable regardless
of whether implementing regulations are
published by the Treasury Department and
the IRS. See Sundance Helicopters, Inc. v.
United States, 104 Fed. Cl. 1, 11 (2012)
(in determining whether the issuance of
regulations is a precondition to the application of a statute, the court followed Tax
Court precedent in Estate of Neumann v.
Comm’r, 106 T.C. 216 (1996) (setting out
the rule that “a tax statute is self-executing
if the regulation referred to in the statute
deals only with how, not whether, the tax

Bulletin No. 2024–32

is to be applied.”)). Further, under section
5000D(b)(1), the first date that a manufacturer, producer, or importer could be
liable for the section 5000D tax is October 2, 2023. As a result, publication of the
proposed regulations was not premature
because liability can arise under section
5000D in the absence of substantive regulatory guidance, and taxpayers needed this
procedural guidance on how to meet their
tax reporting and payment obligations for
section 5000D tax liability incurred on
and after October 2, 2023. Accordingly,
the Treasury Department and the IRS are
finalizing the proposed regulations without adopting this comment.
III. Quarterly Filing Requirement
A commenter expressed concern
regarding the proposed regulations’ quarterly filing and payment requirement. Specifically, the commenter stated that – in
the absence of substantive guidance such
as clarification of what sales are subject to
the section 5000D tax – it is “impossible”
for the IRS to determine that a “quarterly
cadence” for filing returns and paying the
section 5000D tax is rational. Further, the
commenter stated that the quarterly filing
requirement will be overly burdensome on
taxpayers.
Generally, §40.6011(a)-1(a)(2)(i) re­
quires that taxpayers subject to Federal
excise tax must file a Form 720, Quarterly Federal Excise Tax Return, beginning with the first calendar quarter during
which their Federal excise tax liability
arises. Once the first Form 720 is filed,
a taxpayer is generally required to continue filing Forms 720 for every calendar
quarter thereafter – regardless of whether additional Federal excise tax liabilities
are incurred during a particular subsequent calendar quarter – until the taxpayer permanently ceases all operations with
respect to which the Federal excise tax
liability was incurred. See §§40.6011(a)1(a)(2)(i) and 40.6011(a)-2(a)(1). Failure
to file subsequent quarterly returns after
filing the first Form 720 may result in
the assessment of penalties under section
6651(a) of the Code.
In developing the proposed regulations, the Treasury Department and the
IRS recognized that in the context of the
section 5000D tax (under which a tax-

Bulletin No. 2024–32

payer may incur liability in a particular
calendar quarter and then never incur liability again in subsequent calendar quarters), to require a taxpayer to continue to
file Form 720 for every calendar quarter
following the filing of its first Form 720
even if no tax liability is incurred in subsequent calendar quarters would be both
unnecessary for tax administration and
unduly burdensome on the taxpayer. As a
result, the proposed regulations exempted
taxpayers that incur a section 5000D tax
liability (section 5000D taxpayers) and
report that tax liability on a timely filed
Form 720 from the general requirement
to file subsequent Forms 720 if no section
5000D tax liability is incurred during a
subsequent calendar quarter. Specifically,
proposed §40.6011(a)-1(d) required a taxpayer to file a subsequent Form 720 only
if a new section 5000D tax liability arises
during a particular calendar quarter.
Regarding the requirement to pay
a section 5000D tax liability quarterly
with the taxpayer’s Form 720, generally, §§40.6071(a)-1(a) and 40.6151(a)-1
require that Form 720 filers must pay the
tax shown on the return at the same time
the return is filed. Providing a different
rule for section 5000D taxpayers would
introduce unnecessary complexity into
the excise tax filing and payment regime.
An increase in complexity could lead to
taxpayer confusion and likely result in
a greater burden on both taxpayers and
the IRS with little to no benefit accruing
to stakeholders. The Treasury Department and the IRS also note that proposed
§40.6302(c)-1 exempted the section
5000D tax from the semimonthly deposit
requirements that apply to most other
Federal excise taxpayers. By finalizing
this proposed rule without this modification to the requirement to pay with the
quarterly filing, the compliance burden
on section 5000D taxpayers will be further reduced.
For these reasons, as well as for reasons similar to those discussed in part II
of this Summary of Comments and Explanation of Revisions (related to the necessity to timely provide section 5000D taxpayers with procedural guidance on how
to meet their tax reporting and payment
obligations), the Treasury Department and
the IRS are finalizing the proposed regulations without adopting this comment.

343

IV. Applicability Dates
The proposed regulations provided that
the Treasury decision finalizing the proposed regulations will apply to calendar
quarters beginning on or after October 1,
2023; in other words, the proposed regulations provided that this Treasury decision will not apply beginning on the date
that it is published in the Federal Register, but rather it will retroactively apply
as of the first day of the fourth calendar
quarter of 2023. A commenter requested
that the Treasury Department and the IRS
reconsider the retroactive applicability
dates provided in the proposed regulations
because the section 5000D tax is new.
As discussed in part II of this Summary
of Comments and Explanation of Revisions, the Treasury Department and the
IRS prioritized providing section 5000D
taxpayers with procedural guidance on
how to meet their tax reporting and payment obligations by October 2, 2023, the
first date when a taxpayer could incur a
section 5000D tax liability. Because the
first date when a taxpayer could incur liability for the section 5000D tax is October 2, 2023, which falls within the fourth
calendar quarter of 2023, it is appropriate
for the final regulations that provide rules
relating to filing and payment of the section 5000D tax to relate back to the beginning of the fourth calendar quarter of 2023
(that is, October 1, 2023), which in accordance with section 7805(b)(1)(B), would
be the first taxable period ending after
October 2, 2023 (that is, the date the proposed regulations were published in the
Federal Register). As a result, the Treasury Department and IRS are finalizing
the proposed applicability dates without
adopting this comment.
V. Constitutionality
Some commenters stated that the
Medicare Drug Price Negotiation Program generally, and the section 5000D
tax specifically, may be unconstitutional.
These comments are outside the scope of
the proposed regulations, which set forth
proposed rules for administering a duly
enacted tax law. Therefore, it is not appropriate for the Treasury Department and the
IRS to address these comments in the context of this rulemaking.

August 5, 2024

VI. Technical Comments
A commenter requested that the Treasury Department and the IRS consider providing sales-reporting and calculation “safe
harbors” in these final regulations. Another
commenter stated their belief that Notice
2023-52 requested clarification on how the
Treasury Department and the IRS should
define “sales” for purposes of the section
5000D tax. These comments are outside the
scope of the proposed regulations, which
related only to the procedures for reporting
and paying the section 5000D tax.
VII. Comments on the Special Analyses
A. Paperwork Reduction Act
A commenter requested that the Treasury Department and the IRS reconsider
the paperwork burden estimate in the
Paperwork Reduction Act (44 U.S.C.
3507(d)) (PRA) section of the proposed
regulations because the commenter
believes that the number of estimated
hours is too low. In this request, the
commenter suggested that it is possible
that no taxpayers will ever incur a section 5000D tax liability. The commenter
accepted that the Treasury Department
and the IRS do not have historical data on
the number of compliance hours affected
taxpayers may experience if a section
5000D tax liability is incurred and did
not offer a specific estimated number of
hours it views as more accurate than the
estimate provided in the proposed regulations. Similarly, the commenter did not
offer an alternative calculation methodology that the Treasury Department and the
IRS could use to provide a better burden
estimate.
The Treasury Department and the IRS
calculated the estimated number of paperwork burden hours using the long-standing
and established methodology outlined in
Publication 5743, Taxpayer Compliance
Burden, to arrive at the estimated total
annual reporting burden of 1,380 hours
stated in the proposed regulations. For
these reasons, the Treasury Department and
the IRS estimate that this Treasury decision
will impose a total annual reporting burden
of 1,380 hours, as discussed in part II of the
Special Analyses section of this preamble.

August 5, 2024

However, the Treasury Department and the
IRS will regularly examine and, as necessary, update the estimated total annual
reporting burden of this Treasury decision
as required by the PRA.
B. Regulatory Flexibility Act
A commenter requested that the Treasury
Department and the IRS conduct a Regulatory Flexibility Act (5 U.S.C. chapter 6)
(RFA) analysis because the commenter is
concerned that this Treasury decision may
have an indirect effect on small entities. An
agency may properly certify that no RFA
analysis is needed when it determines that
a rule will not have a significant economic
impact on a substantial number of small
entities that are subject to the requirements
of the proposed rule. See Mid-Tex Elec.
Co-op., Inc. v. FERC, 773 F.2d 327, 342
(D.C. Cir. 1985) (holding that Congress did
not intend to require consideration of every
indirect effect that any regulation might
have on small businesses). Accordingly, as
discussed in part III of the Special Analyses section of this preamble, the Treasury
Department and the IRS continue to certify
that this Treasury decision will not create
additional obligations for, or impose a significant economic impact on, small entities,
and as a result, a regulatory flexibility analysis under the RFA is not required.
Special Analyses
I. Regulatory Planning and Review—
Economic Analysis
Pursuant to the Memorandum of
Agreement, Review of Treasury Regulations under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The collection of information contained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the PRA under control number 15450023.

344

The collections of information in
these regulations relate to reporting and
recordkeeping requirements that will
allow taxpayers to meet their tax reporting obligations. The collections of information would generally be used by the
IRS for tax compliance purposes and by
taxpayers to facilitate proper tax reporting and compliance. The reporting and
recordkeeping requirements are covered
within the form and instructions for Form
720.
Because the section 5000D tax is a
new tax that has never been reported to
the IRS, the Treasury Department and
the IRS do not have historical data on the
number of affected taxpayers. The Centers for Medicare and Medicaid Services
(CMS) has selected 10 drugs for price
negotiation for initial price applicability
year 2026. CMS will select for negotiation a limited number of drugs for each
initial price applicability year after that,
as outlined in the IRA. Further, manufacturers, producers, or importers of such
drugs may or may not become subject
to a section 5000D tax liability. Based
on the foregoing, the IRS estimates that
there will be between 0 and 50 taxpayers
during the next 3 years.
If a taxpayer has a section 5000D tax
liability, it would be required to file Form
720 to report such liability. Form 720 is
a quarterly return. A taxpayer would only
be required to file Form 720 during calendar quarters in which the taxpayer has
a section 5000D tax liability. Therefore,
a taxpayer that has a section 5000D tax
liability in one calendar quarter but not in
subsequent calendar quarters would only
be required to file one Form 720.
The respondents with regard to the
section 5000D tax are manufacturers,
producers, or importers of certain drugs.
The Treasury Department and the IRS
estimate the annual burden of the collections of information as follows (these estimates, which are for PRA purposes only,
are based on the high end of the range of
possible taxpayers and the high end of the
range of the frequency of responses, in
which a taxpayer would have tax liability
in all four calendar quarters):
Estimated frequency of responses:
Quarterly.
Estimated number of responses: 50.

Bulletin No. 2024–32

Estimated burden time per respondent:
6.9 hours.
Estimated total annual reporting burden: 1,380 hours.
A Federal agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information displays a valid control number assigned
by OMB. Books or records relating to a
collection of information must be retained
if their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by section 6103.
The Treasury Department and the IRS
received a comment suggesting that the
paperwork burden estimate provided in
the proposed regulations was too low.
However, for the reasons discussed in
detail in the Summary of Comments and
Explanation of Revisions section of this
preamble and in this Special Analyses section, the Treasury Department and the IRS
have not changed the estimates provided
herein.
III. Regulatory Flexibility Act
For the reasons discussed in detail in
the Summary of Comments and Explanation of Revisions section of this preamble and in this Special Analyses section,
pursuant to the RFA, it is hereby certified that these final regulations will not
have a significant economic impact on
a substantial number of small entities.
This certification is based on the fact
that the section 5000D tax is imposed
only on certain sales by manufacturers,
producers, or importers of designated
drugs during periods described in section 5000D(b). The periods described in
section 5000D(b) relate to milestones in
the Medicare Drug Price Negotiation Program, which involve only certain drugs
with high Medicare expenditures. Drugs
with high Medicare expenditures that are
not already excluded from the Medicare
Drug Price Negotiation Program under an
exception such as the SSA’s small biotech
exception (sections 1192(b) and (d)(2) of
the SSA) are likely to be manufactured,
produced, or imported by large entities, so
if any section 5000D tax liability arises,

Bulletin No. 2024–32

an insubstantial number of taxpayers will
be small entities. As noted earlier, data is
not available about the number of taxpayers affected, but the number is likely to be
limited, in part due to the limited number
of drugs selected for the Medicare Drug
Price Negotiation Program in any particular year. In addition, these final regulations will assist taxpayers in meeting their
tax reporting obligations by providing
clarity on how to report section 5000D
tax liability, which will make it easier for
taxpayers to comply with section 5000D.
Therefore, these final regulations will
not create additional obligations for, or
impose a significant economic impact on,
small entities, and a regulatory flexibility
analysis under the RFA is not required.
IV. Section 7805(f)
Pursuant to section 7805(f) of the
Code, the notice of proposed rulemaking preceding these final regulations was
submitted to the Chief Counsel for the
Office of Advocacy of the Small Business
Administration for comment on its impact
on small business. No comments were
received from the Chief Counsel for the
Office of Advocacy of the Small Business
Administration.

compliance costs on State and local governments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications, do not impose
substantial direct compliance costs on
State and local governments, and do not
preempt State law within the meaning of
the Executive order.
Statement of Availability of IRS
Documents
The IRS Notice cited in this preamble is published in the Internal Revenue
Bulletin and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC
20402, or by visiting the IRS website at
https://www.irs.gov.
Drafting Information
The principal author of these regulations is Jacob W. Peeples of the Office of
the Associate Chief Counsel (Passthroughs
& Special Industries). However, other personnel from the Treasury Department and
the IRS participated in their development.

V. Unfunded Mandates Reform Act

List of Subjects

Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal mandate that may result in expenditures in
any one year by a State, local, or Tribal
government, in the aggregate, or by the
private sector, of $100 million in 1995
dollars, updated annually for inflation.
These final regulations do not include any
Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector, in excess
of that threshold.

26 CFR Part 40

VI. Executive Order 13132: Federalism

PART 40—EXCISE TAX
PROCEDURAL REGULATIONS

Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct

345

Excise taxes, Reporting and recordkeeping requirements.
26 CFR Part 47
Excise taxes.
Adoption of Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS amend 26 CFR chapter I, subchapter D, as follows:

Paragraph 1. The authority citation
for part 40 continues to read in part as follows:

August 5, 2024

Authority: 26 U.S.C. 7805.
*****
Par. 2. Section 40.0-1 is amended by
revising paragraphs (a) and (e) to read as
follows:
§40.0-1 Introduction.
(a) In general. The regulations in this
part are designated the Excise Tax Procedural Regulations. The regulations in this
part set forth administrative provisions
relating to the excise taxes imposed by
chapters 31 through 34, 36, 38, 39, 49, and
50A of the Internal Revenue Code (Code)
(except for the chapter 32 tax imposed by
section 4181 (firearms tax) and the chapter 36 taxes imposed by sections 4461
(harbor maintenance tax) and 4481 (heavy
vehicle use tax)), and to floor stocks taxes
imposed on articles subject to any of these
taxes. Chapter 31 relates to retail excise
taxes; chapter 32 to manufacturers’ excise
taxes; chapter 33 to taxes imposed on communications services and air transportation services; chapter 34 to taxes imposed
on certain insurance policies; chapter 36
to taxes imposed on transportation by
water; chapter 38 to environmental taxes;
chapter 39 to taxes imposed on registration-required obligations; chapter 49 to
taxes imposed on indoor tanning services;
and chapter 50A to taxes imposed on the
sale of designated drugs. References in
this part to taxes also include references
to the fees imposed by sections 4375 and
4376 of the Code. See parts 43, 46 through
49, and 52 of this chapter for regulations
related to the imposition of tax.
*****
(e) Applicability dates—(1) Paragraph
(a). Paragraph (a) of this section applies
to returns required to be filed under
§40.6011(a)-1 for calendar quarters beginning on or after October 1, 2023. For rules
that apply before October 1, 2023, see 26
CFR part 40, revised as of April 1, 2024.
(2) Paragraphs (b) and (c). Paragraphs (b) and (c) of this section apply
to returns for calendar quarters beginning
after March 31, 2013. For rules that apply
before March 31, 2013, see 26 CFR part
40, revised as of April 1, 2012.
(3) Paragraph (d). Paragraph (d) of
this section applies to returns for calendar
quarters beginning on or after January 19,

August 5, 2024

2021. For rules that apply before January
19, 2021, see 26 CFR part 40, revised as
of April 1, 2020.
Par. 3. Section 40.6011(a)-1 is
amended by:
1. Revising the first sentence of paragraph (a)(2)(i).
2. Adding paragraphs (d) and (e).
The revision and additions read as follows:
§40.6011(a)-1 Returns.
(a) * * *
(2) * * *
(i) * * * Except as provided in paragraphs (b) through (d) of this section, the
return must be made for a period of one
calendar quarter. * * *
*****
(d) Tax on the sale of designated drugs.
A return that reports liability imposed by
section 5000D of the Internal Revenue
Code must be made for a period of one
calendar quarter. A return must be filed
for each calendar quarter in which liability for the tax imposed by section 5000D
is incurred. There is no requirement that
a return be filed for a calendar quarter in
which there is no liability imposed by section 5000D.
(e) Applicability dates—(1) Paragraph
(a)(2)(i). Paragraph (a)(2)(i) of this section applies to returns filed for calendar
quarters beginning on or after October 1,
2023. For rules that apply before October
1, 2023, see 26 CFR part 40, revised as of
April 1, 2024.
(2) Paragraph (c). See paragraph (c)(2)
of this section.
(3) Paragraph (d). Paragraph (d) of
this section applies to returns filed for
calendar quarters beginning on and after
October 1, 2023.
Par. 4. Section 40.6302(c)-1 is
amended by:
1. Revising paragraphs (e)(1)(iv) and
(v).
2. Adding paragraph (e)(1)(vi).
3. Revising paragraph (f).
The revisions and addition read as follows:
§40.6302(c)-1 Deposits.
*****

346

(e) * * *
(1) * * *
(iv) Sections 4375 and 4376 (relating
to fees on health insurance policies and
self-insured insurance plans);
(v) Section 5000B (relating to indoor
tanning services); and
(vi) Section 5000D (relating to the sale
of designated drugs).
*****
(f) Applicability dates—(1) Paragraphs (a) through (d). Paragraphs (a)
through (d) of this section apply to deposits and payments made after March 31,
2013. For rules that apply before March
31, 2013, see 26 CFR part 40, revised as
of April 1, 2013.
(2) Paragraph (e). Paragraph (e) of
this section applies to calendar quarters
beginning on or after October 1, 2023.
For rules that apply before October 1,
2023, see 26 CFR part 40, revised as of
April 1, 2024.
Par. 5. Add part 47 to read as follows:
PART 47—DESIGNATED DRUGS
EXCISE TAX REGULATIONS
Sec.
47.5000D-0 Table of contents.
47.5000D-1 Introduction.
47.5000D-2 - 47.5000D-4 [Reserved]
Authority: 26 U.S.C. 7805.
Section 47.5000D-1 also issued under
26 U.S.C. 5000D.
§47.5000D-0 Table of contents.
This section lists the table of contents
for §§47.5000D-1 through 47.5000D-4.
§47.5000D-1 Introduction.
(a) In general.
(b) Applicability date.
§§47.5000D-2 - 47.5000D-4 [Reserved]
§47.5000D-1 Introduction.
(a) In general. The regulations in this
part are designated the Designated Drugs
Excise Tax Regulations. The regulations
in this part relate to the tax imposed by
section 5000D of the Internal Revenue
Code. See part 40 of this chapter for reg-

Bulletin No. 2024–32

ulations relating to returns, payments,
and other procedural rules applicable to
this part.
(b) Applicability date. This section
applies to returns filed for calendar quarters beginning on or after October 1, 2023.

Bulletin No. 2024–32

§§47.5000D-2 - 47.5000D-4 [Reserved]
Douglas W. O’Donnell,
Deputy Commissioner.

Aviva R. Aron-Dine,
Acting Assistant Secretary of
the Treasury (Tax Policy).

Approved: June 24, 2024.

(Filed by the Office of the Federal Register July 3,
2024, 8:45 a.m., and published in the issue of the
Federal Register for July 5, 2024, 89 FR 55507)

347

August 5, 2024

Part III
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates

under § 414(y)) pursuant to § 412. Section
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 June 2024

Notice 2024-59
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

Applicable Month
July 2024

data is in Table 2024-6 at the end of this
notice. The spot first, second, and third
segment rates for the month of June 2024
are, respectively, 5.09, 5.28, and 5.52.
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 July
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
4.99
5.29

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 July
2024, adjusted to be within the applicable
minimum and maximum percentages of

Third Segment
5.29

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

July 2024

4.99

5.29

5.74

2024

July 2024

4.99

5.29

5.59

30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to multi-

employer 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) pro-

vides 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

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 months before February 2024, 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.
Those enhancements are described in the preamble to TD 9986 (89 FR 2127).
1

August 5, 2024

348

Bulletin No. 2024–32

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 June 2024 is 4.45 percent. The Service determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond matur-

ing in May 2054. For plan years beginning
in July 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%

July 2024

3.52

3.17 to 3.69

under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Section 1.417(e)-1(d)(3) and
Notice 2007-81 provide guidelines for

determining the minimum present value
segment rates. Pursuant to those guidelines,
the minimum present value segment rates
determined for June 2024 are as follows:

MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates

Month
June 2024

Minimum Present Value Segment Rates
First Segment
Second Segment
5.09
5.28

DRAFTING INFORMATION
The principal author of this notice
is Tom Morgan of the Office of Associ-

Bulletin No. 2024–32

ate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development

349

Third Segment
5.52

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 number).

August 5, 2024

Table 2024-6
Monthly Yield Curve for June 2024
Derived from June 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
5.53
5.38
5.25
5.14
5.05
4.98
4.93
4.90
4.88
4.88
4.89
4.91
4.94
4.97
5.01
5.05
5.08
5.12
5.16
5.19
5.23
5.26
5.28
5.31
5.33
5.35
5.37
5.39
5.41
5.42
5.43
5.44
5.45
5.46
5.46
5.47
5.48
5.48
5.48
5.49

August 5, 2024

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

Yield
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.49
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.51
5.51
5.51
5.51
5.51
5.51
5.51
5.52
5.52
5.52
5.52
5.52
5.52
5.52
5.52
5.53
5.53
5.53

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
5.53
5.53
5.53
5.53
5.53
5.53
5.53
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.54
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.55
5.56
5.56

350

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
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.56
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57

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
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.57
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58
5.58

Bulletin No. 2024–32

Part IV
Notice of Proposed
Rulemaking
REG-119283-23
Section 45Y Clean
Electricity Production
Credit and Section
48E Clean Electricity
Investment Credit
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 clean
electricity production credit and the clean
electricity investment credit established by
the Inflation Reduction Act of 2022. The
proposed regulations would provide rules
for: determining greenhouse gas emissions rates resulting from the production
of electricity; petitioning for provisional
emissions rates; and determining eligibility for these credits in various circumstances. The proposed regulations would
affect all taxpayers who produce clean
electricity and claim the clean electricity
production credit with respect to a facility
or the clean electricity investment credit
with respect to a facility or energy storage
technology, as applicable, that is placed
in service after 2024. This document also
provides notice of a public hearing on the
proposed regulations.
DATES: Written or electronic comments
must be received by August 2, 2024. The
public hearing on these proposed regulations is scheduled to be held on August 12,
2024, at 10 a.m. (ET) and August 13, 2024,
at 10 a.m. (ET). On August 13, 2024, the
public hearing will be held by telephone
only. Requests to speak and outlines of
topics to be discussed at the public hearing
must be received by August 2, 2024. If no

outlines are received by August 2, 2024,
the public hearing will be cancelled.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemaking Portal at https://www.regulations.
gov (indicate IRS and REG-119283-23)
by following the online instructions for
submitting comments. 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:01:PR (REG119283-23), 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 notice of proposed rulemaking
contains proposed amendments to the
Income Tax Regulations (26 CFR part
1) to implement sections 45Y and 48E of
the Internal Revenue Code (Code), which
generally replace sections 45 and 48 of
the Code with respect to qualified facilities, and for section 48E, with respect to
energy storage technology, that is placed
in service after December 31, 2024.
The renewable electricity production
credit determined under section 45 of
the Code (section 45 credit) is generally
available for qualified facilities described
in section 45(d), which provides that the
construction of the qualified facilities

must begin before January 1, 2025. Similarly, other than for geothermal heat pump
equipment (described in section 48(a)(3)
(vii)1), the energy credit determined under
section 48 of the Code (section 48 credit),
which is an investment credit under section 46 of the Code, is generally available for energy property the construction
of which begins before January 1, 2025.
Therefore, as long as construction begins
on the relevant qualified facility or energy
property before January 1, 2025, a taxpayer may be able to claim a section 45
credit or section 48 credit, respectively,
even if the taxpayer places the qualified
facility or energy property in service after
December 31, 2024.
Sections 45Y and 48E were added to the
Code, respectively, by sections 13701(a)
and 13702(a) of Public Law 117-169, 136
Stat. 1818, 1982 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022 (IRA). Section 13701(c)
of the IRA provides that the clean electricity production credit determined under
section 45Y (section 45Y credit) applies to
facilities placed in service after December
31, 2024. Similarly, section 13702(c) of
the IRA provides that the clean electricity
investment credit determined under section 48E (section 48E credit) applies to
property placed in service after December
31, 2024.
Thus, in some cases, if a taxpayer
places in service a qualified facility or
energy property after 2024, the construction of which begins before 2025, the
qualified facility or energy property may
be eligible for more than one of the credits determined under section 45, 45Y,
48, or 48E, although a taxpayer can only
claim one of these credits with respect
to such qualified facility or energy property. Accordingly, a taxpayer must choose
which one of these credits to claim with
respect to such qualified facility or energy
property. Once the taxpayer has claimed
one of these credits with respect to a qualified facility or an energy property, the
taxpayer cannot claim any other of these
credits with respect to the same qualified
facility or energy property.

Section 48(a)(3)(vii) includes as energy property equipment that uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure
(geothermal heat pump property), but only with respect to property the construction of which begins before January 1, 2035.
1

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351

August 5, 2024

I. Overview of Section 45Y
Section 45Y(a)(1) provides that for purposes of the general business credit under
section 38 of the Code, the section 45Y
credit for any taxable year is an amount
equal to the product of the kilowatt hours
(kWh) of eligible electricity produced by
the taxpayer at a qualified facility, multiplied by the applicable amount with
respect to such qualified facility. For this
purpose, eligible electricity is electricity
that is either (1) sold by the taxpayer to an
unrelated person during the taxable year
or (2) in the case of a qualified facility that
is equipped with a metering device that is
owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year.
A. Amount of credit
For purposes of the applicable amount
used in calculating the section 45Y credit,
section 45Y(a)(2) provides a base amount
and a higher alternative amount. Section
45Y(a)(2)(A) provides that the applicable amount will be the base amount of
0.3 cents in the case of a qualified facility that does not satisfy the requirements
for the higher alternative amount. Section
45Y(a)(2)(B) provides that the alternative
amount of 1.5 cents applies in the case
of any qualified facility (1) with a maximum net output of less than 1 megawatt
(as measured in alternating current), (2)
the construction of which begins prior to
the date that is 60 days after the Secretary
of the Treasury or her delegate (Secretary)
publishes guidance on the requirements
of section 45Y(g)(9) (wage requirements)
and section 45Y(g)(10) (apprenticeship
requirements),2 or (3) that satisfies section
45Y(g)(9) and, with respect to the construction of such facility, satisfies section
45Y(g)(10).
Section 45Y(c)(1) provides for an
inflation adjustment for both the base and
alternative amounts. Section 45Y(c)(1)
provides that in the case of a calendar year
beginning after 2024, the 0.3 cent amount
in section 45Y(a)(2)(A) and the 1.5 cent
amount in section 45Y(a)(2)(B) will each
be adjusted by multiplying such amount

by the inflation adjustment factor for the
calendar year in which the sale, consumption, or storage of the electricity occurs.
Section 45Y(c)(1) also addresses the
rounding rules to be applied to this computation. Section 45Y(c)(2) provides that
the Secretary will, not later than April 1
of each calendar year, determine and publish in the Federal Register the inflation
adjustment factor for such calendar year
in accordance with section 45Y(c).
Section 45Y(g)(7) provides for an
increase in the section 45Y credit amount
for any qualified facility located in an
energy community, and section 45Y(g)
(11) provides for an increase in the section
45Y credit amount if the domestic content
bonus requirement is satisfied.
Section 45Y(g)(7) provides that in the
case of any qualified facility that is located
in an energy community (as defined in
section 45(b)(11)(B)), for purposes of
determining the amount of the credit
under section 45Y(a) with respect to any
electricity produced by the taxpayer at
such facility during the taxable year, the
applicable amount under section 45Y(a)
(2) will be increased by an amount equal
to 10 percent of the amount otherwise in
effect under such paragraph.
Section 45Y(g)(11) provides that in
the case of any qualified facility that satisfies the domestic content bonus requirement under section 45Y(g)(11)(B)(i), the
amount of the credit determined under
section 45Y(a) will be increased by an
amount equal to 10 percent of the amount
so determined (as determined without
application of section 45Y(g)(7)). Section
45Y(g)(11)(B)(i) generally provides that
the domestic content bonus requirement
is satisfied with respect to any qualified
facility if the taxpayer certifies to the Secretary (at such time, and in such form and
manner, as the Secretary may prescribe)
that any steel, iron, or manufactured product that is a component of such facility
(upon completion of construction) was
produced in the United States (as determined under section 661 of title 49, Code
of Federal Regulations). Section 45Y(g)
(11)(B)(iii) provides that for purposes of
the domestic content bonus requirement,
the manufactured products that are com-

ponents of a qualified facility upon completion of construction will be deemed to
have been produced in the United States if
not less than the adjusted percentage (as
determined under section 45Y(g)(11)(C))
of the total cost of all such manufactured
products of such facility are attributable to
manufactured products (including components) that are mined, produced, or manufactured in the United States.
B. Qualified facility
Section 45Y(b) provides guidance on
the meaning of a qualified facility for purposes of section 45Y. Subject to section
45Y(b)(1)(B) through (D), section 45Y(b)
(1)(A) defines a qualified facility to mean
a facility owned by the taxpayer that is
used for the generation of electricity, that
is placed in service after December 31,
2024, and for which the greenhouse gas
emissions rate (as determined under section 45Y(b)(2)) is not greater than zero.
Section 45Y(b)(1)(B) provides that
for purposes of section 45Y, a facility
will only be treated as a qualified facility
during the 10-year period beginning on
the date the facility was originally placed
in service.
Section 45Y(b)(1)(C) provides that a
qualified facility will include a new unit or
any additions of capacity that are placed in
service after December 31, 2024, if in connection with a facility described in section
45Y(b)(1)(A) (without regard to section
45Y(b)(1)(A)(ii) describing the requirement that the facility be placed in service
after December 31, 2024) that was placed
in service before January 1, 2025, but only
to the extent of the increased amount of
electricity produced at the facility due to
the new unit or addition of capacity.
Section 45Y(b)(1)(D) provides that
a qualified facility will not include any
facility for which a credit determined
under section 45, 45J, 45Q, 45U, 48, 48A,
or 48E of the Code is allowed under section 38 for the taxable year or any prior
taxable year.
Section 45Y(b)(2) describes the greenhouse gas emissions rate referenced in
section 45Y(b)(1)(A)(iii). Section 45Y(b)
(2)(A) defines greenhouse gas emissions

To meet this requirement, the construction of the qualified facility must begin prior to January 29, 2023. See proposed §1.45Y–3 as proposed in the notice of proposed rulemaking (REG–
100908–23) published in the Federal Register (88 FaR 60018) on August 30, 2023, and corrected at 88 FR 73807 on October 27, 2023.
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rate for purposes of section 45Y to mean
the amount of greenhouse gases emitted
into the atmosphere by a facility in the
production of electricity, expressed as
grams of CO2e per kWh. Section 45Y(e)
(1) defines CO2e per kWh for purposes of
section 45Y to mean, with respect to any
greenhouse gas, the equivalent carbon
dioxide (as determined based on global
warming potential) per kWh of electricity produced. Section 45Y(e)(2) defines
greenhouse gas for purposes of section
45Y to have the same meaning given such
term under section 211(o)(1)(G) of the
Clean Air Act (CAA) (42 U.S.C. 7545(o)
(1)(G)) as in effect on August 16, 2022.
Section 45Y(b)(2)(B) provides that in
the case of a facility that produces electricity through combustion or gasification, the greenhouse gas emissions rate
(GHG emissions rate) for such facility is
equal to the net rate of greenhouse gases
emitted into the atmosphere by such
facility (taking into account lifecycle
greenhouse gas emissions, as described
in section 211(o)(1)(H) of the CAA (42
U.S.C. 7545(o)(1)(H))) in the production
of electricity, expressed as grams of CO2e
per kWh.
Section 45Y(b)(2)(C) provides for the
establishment of GHG emissions rates for
facilities either through the publication
of emissions rates described in section
45Y(b)(2)(C)(i) or a provisional emissions rate as described in section 45Y(b)
(2)(C)(ii). Section 45Y(b)(2)(C)(i) states
that the Secretary will annually publish
a table that sets forth the GHG emissions
rates for types or categories of facilities,
that a taxpayer will use for purposes of
section 45Y. Section 45Y(b)(2)(C)(ii) provides that in the case of any facility for
which a GHG emissions rate has not been
established by the Secretary, a taxpayer
that owns such facility may file a petition
with the Secretary for determination of the
GHG emissions rate with respect to such
facility.
Section 45Y(b)(2)(D) provides that for
purposes of section 45Y(b) the amount of
greenhouse gases emitted into the atmosphere by a facility in the production of
electricity cannot include any qualified
carbon dioxide that is captured by the
taxpayer and either (1) disposed of by
the taxpayer in secure geological storage
pursuant to any regulations established

Bulletin No. 2024–32

under section 45Q(f)(2), or (2) utilized by
the taxpayer in a manner described in section 45Q(f)(5). Section 45Y(e)(3) defines
qualified carbon dioxide for purposes of
section 45Y to mean carbon dioxide captured from an industrial source that would
otherwise be released into the atmosphere
as industrial emission of greenhouse gas,
is measured at the source of capture and
verified at the point of disposal or utilization, and is captured and disposed or utilized within the United States (within the
meaning of section 638(1) of the Code) or
a United States territory, which for purposes of section 45Y and the section 45Y
regulations has the meaning of the term
“possession” of the United States (within
the meaning of section 638(2)).
C. Credit phase-out
Section 45Y(d) describes the credit
phase-out. Section 45Y(d)(1) provides
generally that the amount of the clean
electricity production credit under section 45Y(a) for any qualified facility the
construction of which begins during a
calendar year described in section 45Y(d)
(2) is equal to the product of the amount
of the credit determined under section
45Y(a) without regard to section 45Y(d),
multiplied by the phase-out percentage
under section 45Y(d)(2). Section 45Y(d)
(2) provides that the phase-out percentage
is 100 percent for a facility the construction of which begins during the first calendar year following the applicable year;
75 percent for a facility the construction
of which begins during the second calendar year following the applicable year;
50 percent for a facility the construction
of which begins during the third calendar
year following the applicable year; and 0
percent for a facility the construction of
which begins during any calendar year
subsequent to the calendar year described
in section 45Y(d)(2)(C). Section 45Y(d)
(3) defines the “applicable year” for purposes of section 45Y(d) to mean the later
of the calendar year in which the Secretary
determines that the annual greenhouse gas
emissions from the production of electricity in the United States are equal to or less
than 25 percent of the annual greenhouse
gas emissions from the production of electricity in the United States for calendar
year 2022, or 2032.

353

D. Special rules
Section 45Y(g) provides special rules
for section 45Y. Section 45Y(g)(1) provides that consumption, sales, or storage
is taken into account under section 45Y
only with respect to electricity the production of which is within the United States
(within the meaning of section 638(1)), or
a United States territory, which for purposes of section 45Y and the section 45Y
regulations has the meaning of the term
“possession” of the United States (within
the meaning of section 638(2)).
Section 45Y(g)(2) provides a rule for
combined heat and power system (CHP)
property. For purposes of section 45Y(a),
section 45Y(g)(2)(A) generally provides
that the kWh of electricity produced by a
taxpayer at a qualified facility will include
any production in the form of useful thermal energy by any CHP property within
such facility, and the amount of greenhouse gases emitted into the atmosphere
by such facility in the production of such
useful thermal energy will be included
for purposes of determining the GHG
emissions rate for such facility. Section
45Y(g)(2)(B) defines CHP property for
purposes of section 45Y(g)(2) to have the
same meaning given such term by section
48(c)(3) (without regard to section 48(c)
(3)(A)(iv), (B), and (D) thereof). Section
45Y(g)(2)(C) provides the necessary
conversion from BTU to kWh for a taxpayer to calculate a section 45Y credit
for useful thermal energy produced by a
CHP property.
Section 45Y(g)(3) provides that in the
case of a qualified 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 will be allocated
among such persons in proportion to their
respective ownership interests in the gross
sales from such facility.
Section 45Y(g)(4) provides that persons will be treated as related to each
other if such persons would be treated as
a single employer under the regulations
prescribed under section 52(b). In the
case of a corporation that is a member of
an affiliated group of corporations filing a
consolidated return, such corporation will
be treated as selling electricity to an unrelated person if such electricity is sold to

August 5, 2024

such a person by another member of such
group.
Section 45Y(g)(5) provides that under
regulations prescribed by the Secretary,
rules similar to the rules of section 52(d)
will apply to a pass-thru in the case of
estates and trusts.
Section 45Y(g)(6) provides for the
allocation of the credit to patrons of an
agricultural cooperative.
Section 45Y(g)(8) provides that rules
similar to the rules of section 45(b)(3) will
apply to a credit reduced for tax-exempt
bonds.
Section 45Y(g)(9) provides that rules
similar to the rules of section 45(b)(7)
apply with respect to wage requirements.
Section 45Y(g)(10) provides rules similar
to the rules of section 45(b)(8) apply with
respect to apprenticeship requirements.
II. Overview of Section 48E
For purposes of the general business
credit under section 38, which includes
the investment credit under section 46,
section 48E(a)(1) provides a credit for any
taxable year in which a qualified investment is made with respect to any qualified
facility and any energy storage technology
(EST).
A. Amount of credit
The amount of the section 48E credit is
equal to the applicable percentage of the
qualified investment in any qualified facility and any EST. Section 48(E)(a)(2) provides a base rate and a higher alternative
rate for the applicable percentage. Section
48E(a)(2)(A)(i) provides that in the case
of a qualified facility that does not satisfy
the requirements for the higher alternative rate, the base rate will be 6 percent.
Section 48E(a)(2)(A)(ii) provides that the
alternative rate of 30 percent applies in
the case of any qualified facility (1) with a
maximum net output of less than 1 megawatt (as measured in alternating current),
(2) the construction of which begins prior
to the date that is 60 days after the Secretary publishes guidance on the prevail-

ing wage requirements of section 48E(d)
(3) and the apprenticeship requirements
of section 48E(d)(4),3 or (3) that satisfies the prevailing wage requirements of
section 48E(d)(3) and, with respect to the
construction of such facility, satisfies the
apprenticeship requirements of section
48E(d)(4).
Similarly, section 48E(a)(2)(B)(ii) provides that the alternative rate of 30 percent
applies in the case of an EST (1) with a
capacity of less than 1 megawatt, (2) the
construction of which begins prior to the
date that is 60 days after the Secretary
publishes guidance on the requirements
of section 48E(d)(3) and (4)4 (prevailing
wage and apprenticeship requirements,
respectively), or (3) that satisfies section
48E(d)(3) and with respect to the construction of such EST, satisfies section 48E(d)
(4). Section 48E(a)(2)(B)(i) provides that
in the case of an EST that does not satisfy
the requirements for the alternative rate,
the base rate will be 6 percent.
Section 48E(a)(3)(A) provides for
an increase in credit rate for a qualified
facility or EST located in an energy community (as defined in section 45(b)(11)
(B)) and section 48E(a)(3)(B) similarly
provides for an increase in credit rate for
a qualified facility or EST that meets the
domestic content bonus requirements.
B. Qualified investment with respect to
a qualified facility
Section 48E(b) describes a qualified
investment with respect to a qualified
facility. Generally, for purposes of section
48E(a), section 48E(b)(1)(A) and (B)(i)
provide that the qualified investment with
respect to a qualified facility for any taxable year is the sum of the basis of any
qualified property placed in service by the
taxpayer during such taxable year that is
part of a qualified facility, plus the amount
of expenditures that are paid or incurred
by the taxpayer for qualified interconnection property that is properly chargeable to
capital account of the taxpayer.
Section 48E(b)(2) provides that for
purposes of section 48E, qualified prop-

erty means property that is tangible personal property, or other tangible property
(not including a building or its structural
components), but only if such property
is used as an integral part of the qualified
facility; with respect to which depreciation
(or amortization in lieu of depreciation) is
allowable; and the construction, reconstruction, or erection of which is completed by the taxpayer, or that is acquired
by the taxpayer provided the original use
of such property commences with the taxpayer.
Section 48E(b)(1)(B)(i)(I) and (II) provide that qualified interconnection property must be in connection with a qualified
facility that has a maximum net output of
not greater than 5 megawatts (as measured
in alternating current) and be placed in
service during the taxable year of the taxpayer. Section 48E(b)(4) provides that the
term “qualified interconnection property”
has the meaning given such term in section 48(a)(8)(B).
Section 48E(b)(3)(A) provides that for
purposes of section 48E, the term “qualified facility” means a facility that is used
for the generation of electricity, which
is placed in service after December 31,
2024, and for which the anticipated GHG
emissions rate (as determined under section 48E(b)(3)(B)(ii)) is not greater than
zero.
Section 48E(b)(3)(B) provides additional rules for a qualified facility. Section 48E(b)(3)(B)(i) provides rules on
an expansion of facility and incremental
production stating that rules similar to the
rules of section 45Y(b)(1)(C) apply for
purposes of section 48E(b)(3). Section
48E(b)(3)(B)(ii) provides rules to determine the GHG emissions rate of a qualified facility by stating that rules similar
to the rules of section 45Y(b)(2) apply for
purposes of section 48E(b)(3).
Section 48E(b)(3)(C) provides that
a qualified facility will not include any
facility for which a renewable electricity
production credit determined under section 45, an advanced nuclear power facility production credit determined under
section 45J, a carbon oxide sequestration

To meet this requirement, the construction of the qualified facility must begin prior to January 29, 2023. See proposed §1.48E–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
To meet this requirement, the construction of the EST must begin prior to January 29, 2023. See proposed §1.48E–3 as proposed in the notice of proposed rulemaking (REG–100908–23)
published in the Federal Register at 88 FR 60018 on August 30, 2023, and corrected at 88 FR 73807 on October 27, 2023.
3

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credit determined under section 45Q, a
zero-emission nuclear power production
credit determined under section 45U, a
clean electricity production credit determined under section 45Y, an energy credit
determined under section 48, or a qualifying advanced coal project credit under
section 48A, is allowed under section 38
for the taxable year or any prior taxable
year. Section 48E(b)(5) provides a rule for
coordination with the rehabilitation credit
stating that the qualified investment with
respect to any qualified facility for any
taxable year will not include that portion
of the basis of any property that is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2) of the
Code).
Section 48E(b)(6) provides that for purposes of section 48E(b), the terms “CO2e
per kWh” and “greenhouse gas emissions
rate” have the same meaning given such
terms under section 45Y. Section 48E(f)
provides that, in section 48E, the term
“greenhouse gas” has the same meaning
given such term under section 45Y(e)(2).
C. Qualified investment with respect to
an energy storage technology
Section 48E(c) describes a qualified
investment with respect to EST. For purposes of section 48E(a), section 48E(c)(1)
provides that the qualified investment with
respect to EST for any taxable year is the
basis of any EST placed in service by the
taxpayer during such taxable year. Section 48E(c)(2) provides that for purposes
of section 48E, the term “energy storage
technology” has the meaning given such
term in section 48(c)(6) (except that section 48(c)(6)(D) will not apply). Section
48(c)(6)(A)(i) defines “energy storage
technology” to mean property (other than
property primarily used in the transportation of goods or individuals and not for
the production of electricity) that receives,
stores, and delivers energy for conversion
to electricity (or, in the case of hydrogen,
which stores energy), and has a nameplate
capacity of not less than 5 kWh. Section
48(c)(6)(A)(ii) provides that the term
“energy storage technology” also includes
thermal energy storage property. Section

5

48(c)(6)(B) describes a rule for modifications of certain property.
Section 48(c)(6)(C)(i) defines “thermal energy storage property” to mean for
purposes of section 48(c)(6), subject to
section 48(c)(6)(C)(ii), property comprising a system that is directly connected to
a heating, ventilation, or air conditioning
system, removes heat from, or adds heat
to, a storage medium for subsequent use,
and provides energy for the heating or
cooling of the interior of a residential or
commercial building. Section 48(c)(6)(C)
(ii) describes the exclusion that thermal
energy storage property will not include
a swimming pool, combined heat and
power system property, or a building or its
structural components.
Section 48E(d) provides special rules
for section 48E, all of which refer to other
provisions. Section 48E(d)(1) provides a
rule for qualified progress expenditures,
stating that rules similar to the rules of
former section 46(c)(4) and (d) (as in
effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) apply for purposes of
section 48E(a).5 Section 48E(d)(2) provides a special rule for property financed
by subsidized energy financing or private
activity bonds, stating that rules similar to
the rules of section 45(b)(3) apply. Section
48E(d)(3) provides a rule for prevailing
wage requirements, stating that rules similar to the rules of section 48(a)(10) apply.
Likewise, section 48E(d)(4) provides a
rule for apprenticeship requirements stating that rules similar to the rules of section
45(b)(8) apply. Lastly, section 48E(d)(5)
provides a rule for the domestic content
requirement for elective payment stating
that in the case of a taxpayer making an
election under section 6417 with respect
to a credit under section 48E, rules similar
to the rules of section 45Y(g)(12) apply.
D. Credit phase-out
Section 48E(e) describes the credit
phase-out. Section 48E(e)(1) provides
generally that the amount of the clean
electricity investment credit under section
48E(a) for any qualified investment with
respect to any qualified facility or EST the

construction of which begins during a calendar year described in section 48E(e)(2)
is equal to the product of the amount of the
credit determined under section 48E(a)
without regard to section 48E(e), multiplied by the phase-out percentage under
section 48E(e)(2). Section 48E(e)(2) provides that the phase-out percentage is 100
percent for any qualified investment with
respect to any qualified facility or EST the
construction of which begins during the
first calendar year following the applicable
year; 75 percent for any qualified investment with respect to any qualified facility
or EST the construction of which begins
during the second calendar year following the applicable year; 50 percent for any
qualified investment with respect to any
qualified facility or EST the construction
of which begins during the third calendar
year following the applicable year; and 0
percent for any qualified investment with
respect to any qualified facility or EST the
construction of which begins during any
calendar year subsequent to the calendar
year described in section 48E(e)(2)(C).
Section 48E(e)(3) defines the “applicable
year” for purposes of section 48E(e) to
have the same meaning given such term in
section 45Y(d)(3).
E. Recapture rules
For purposes of the recapture rules
under section 50(a), section 48E(g) provides a special recapture rule applicable
to qualified facilities. Specifically, section 48E(g) provides that, for purposes
of section 50, if the Secretary determines
that the GHG emissions rate for a qualified facility is greater than 10 grams of
CO2e per kWh, any property for which a
credit was allowed under section 48E with
respect to such facility ceases to be investment credit property in the taxable year in
which the determination is made.
III. Notice 2022-49
On October 24, 2022, the Treasury
Department and the IRS published Notice
2022-49, 2022-43 I.R.B. 321. The notice
requested general comments on issues
arising under sections 45Y and 48E, as

The rules provided by §1.46-5 related to qualified progress expenditures apply for purposes of section 48E(a).

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August 5, 2024

well as on issues relating to three other
credits. For section 45Y, the notice specifically requested comments concerning
(1) industry standards for taxpayer eligibility for the credit, (2) what the Treasury
Department and the IRS should consider,
including around the scope and factors,
for the annual GHG emissions rate table,
(3) whether guidance is needed to clarify
cases in which a metering device is owned
and operated by an unrelated person or in
which electricity produced at such a qualified facility with such a device is sold,
consumed or stored by the taxpayer, and
(4) what procedures the Treasury Department and the IRS should provide for a
taxpayer whose facility does not have an
emissions rate established by the annual
rate table, and what should the Secretary
consider in making such a determination.
For section 48E, the notice specifically
requested comments concerning what
industry mechanisms currently exist for a
taxpayer to demonstrate eligibility for the
credit.
The Treasury Department and the IRS
received over 100 comments specifically
addressing sections 45Y and 48E from
industry participants and other stakeholders. The Treasury Department and the IRS
appreciate the commentors’ interest and
engagement on these issues. These comments have been carefully considered in
the preparation of these proposed regulations.
IV. Prior Guidance
On August 30, 2023, the Treasury
Department and the IRS published a notice
of proposed rulemaking and a notice of
public hearing (REG-100908-23) in the
Federal Register (88 FR 60018), providing guidance on the prevailing wage and
registered apprenticeship (PWA) requirements under sections 45, 45Y, 48, 48E and
several other sections of the Code (August
Proposed Regulations). The August Proposed Regulations also proposed guidance
on the one-megawatt exception under sections 45, 45Y, 48, and 48E (One-Megawatt
Exception). Under this exception, with
respect to certain facilities with a maximum net output (or capacity for energy
storage technology under section 48E) of
less than one megawatt, increased credit
amounts are available.

August 5, 2024

On November 22, 2023, the Treasury
Department and the IRS published a notice
of proposed rulemaking and a notice of
public hearing (REG- 132569-17) in the
Federal Register (88 FR 82188), providing guidance under section 48 of the Code.
Among other matters, the proposed regulations under section 48 (Section 48 Proposed Regulations) withdrew and reproposed the regulations in §1.48-13 from the
August Proposed Regulations regarding
the PWA requirements under section 48,
the One-Megawatt Exception under section 48(a)(9)(B)(i), and the recapture rules
under section 48(a)(10)(C).
Explanation of Provisions
I. Rules Applicable to the Clean
Electricity Production Tax Credit
The proposed regulations under section
45Y are organized in five sections, proposed §§1.45Y-1 through 1.45Y-5 (section 45Y regulations). Proposed §1.45Y-1
would provide an overview of the section
45Y regulations, generally applicable
definitions, and general rules applicable
to section 45Y, including a rule for calculating the credit for a CHP property. Proposed §1.45Y-2 would provide rules relating to qualified facilities for purposes of
the section 45Y credit. Section 1.45Y-3 is
reserved for rules relating to the increased
credit amount for meeting the prevailing
wage and apprenticeship requirements. A
cross reference will be added to §1.45Y-3
in the final regulations after §1.45Y-3 is
finalized. Proposed §1.45Y-4 would provide the rules of general application under
section 45Y, including rules that attribute
production to the taxpayer, rules for the
expansion of a facility and incremental
production, and rules for retrofits of an
existing facility. Proposed §1.45Y-5 would
provide rules pertaining to the determination of a GHG emissions rate for a facility
under section 45Y.
A. Amount of credit
Proposed §1.45Y-1 would provide an
overview of the section 45Y regulations
and definitions of terms for purposes of
the section 45Y regulations, including
the terms “combined heat and power system (CHP) property,” “metering device,”

356

“related person,” “unrelated person,” and
“qualified facility.”
Proposed §1.45Y-1(a)(5)(i) would
define, for purposes of section 45Y(a)(1)
(A)(ii)(II), the term “metering device” as
equipment that is owned and operated by
an unrelated person (as defined in paragraph (a)(11) of this section) for energy
revenue metering to measure and register
the continuous summation of an electricity quantity with respect to time. Further,
proposed §1.45Y-1(a)(5)(ii) would provide standards for maintaining and operating a metering device for purposes of
section 45Y(a)(1)(A)(ii)(II) and proposed
§1.45Y-1(a)(5) by requiring a metering
device to be maintained in proper working order according to the instructions of
its manufacturer. Proposed §1.45Y-1(a)
(5)(ii) would also provide that a metering
device should meet the requirements of
the American National Standards Institute
C12.1-2022 standard, or subsequent revisions, be revenue grade with a +/- 0.5%
accuracy, and be properly calibrated. Proposed §1.45Y-1(a)(5)(iii) would provide
that for purposes of monitoring the metering device, the unrelated person may share
network equipment, such as spare fiber
optic cable owned by the taxpayer that
produces the electricity, and may co-locate network equipment in the taxpayer’s facilities. Proposed §1.45Y-1(a)(5)
(iv) would provide examples illustrating
the proposed rules provided by proposed
§1.45Y-1(a)(5).
Proposed §1.45Y-1(a)(7)(i) would provide that for purposes of section 45Y(a),
the term “related person” means a person who is related to another person if
such person would be treated as a single
employer under the regulations in 26 CFR
chapter 1 under section 52(b) of the Code.
Proposed §1.45Y-1(a)(7)(ii) would provide that in the case of a corporation that
is a member of a consolidated group (as
defined in §1.1502-1(h)), such corporation
will be treated as selling electricity to an
unrelated person if such electricity is sold
to an unrelated person by another member
of such group.
Proposed §1.45Y-1(a)(11) would provide that for purposes of section 45Y(a),
the term “unrelated person” means a
person who is not a related person as
defined in section 45Y(g)(4) and proposed
§1.45Y-1(a)(7). In the case of sales of

Bulletin No. 2024–32

electricity to an individual consumer, such
sales will be treated as sales to an unrelated party for purposes of the section 45Y
credit. Proposed §1.45Y-1(a)(11) provides
an example illustrating the application of
these rules.
Proposed
§1.45Y-1(b)(1)
would
describe the calculation of the section
45Y credit, providing that the credit is an
amount equal to the product of the kWh
of electricity that is produced by the taxpayer at a qualified facility (as defined in
proposed §1.45Y-2(a)) and sold by the
taxpayer to an unrelated person during the
taxable year, multiplied by the applicable
amount (as described in proposed §1.45Y1(b)) with respect to such qualified facility. Proposed §1.45Y-1(b)(1) would further provide that in the case of a qualified
facility that is equipped with a metering
device that is owned and operated by an
unrelated person, the section 45Y credit
for any taxable year is an amount equal to
the product of the kWh of electricity that
is both produced at the qualified facility
(as defined in proposed §1.45Y-2(a)) and
sold, consumed, or stored by the taxpayer
during the taxable year, multiplied by the
applicable amount with respect to such
qualified facility. Proposed §1.45Y-1(b)
(1) would also provide that only one section 45Y credit may be claimed for each
kWh of electricity produced by the taxpayer at a qualified facility.
Proposed §1.45Y-1(b)(2)(i) would
define the applicable amount as the base
amount described in §1.45Y-1(b)(2)(ii)
or the alternative amount described in
§1.45Y-1(b)(2)(iii). Proposed §1.45Y1(b)(2)(i) would further provide that the
applicable amount is subject to the inflation adjustment as provided in section
45Y(c)(1) and proposed §1.45Y-1(b)
(3), and that the applicable amount may
also be increased as provided in section
45Y(g)(7)) and proposed §1.45Y-1(b)
(4), in the case of a qualified facility that
is located in an energy community. Proposed §1.45Y-1(b)(2)(ii) would describe
the base amount as 0.3 cents in the case
of any qualified facility that does not satisfy the requirements provided in section
45Y(a)(2)(B). Proposed §1.45Y-1(b)(2)
(iii) would describe the alternative amount
as 1.5 cents if prevailing wage and apprenticeship requirements are satisfied as provided in section 45Y(a)(2)(B).

Bulletin No. 2024–32

Proposed §1.45Y-1(b)(3) would provide the rules related to the inflation
adjustment factor applicable to the section 45Y credit. Proposed §1.45Y-1(b)
(4) would provide the rules applicable to
the energy communities increase in credit.
Proposed §1.45Y-1(b)(5) would provide
the domestic content bonus credit amount.
Proposed §1.45Y-1(c) would provide
the credit phase-out rules. Generally,
proposed §1.45Y-1(c)(1) would provide
that the amount of the clean electricity
production credit under section 45Y(a)
for any qualified facility the construction
of which begins during a calendar year
described in section 45Y(d)(2) is equal
to the product of the amount of the credit
determined under section 45Y(a) without
regard to the credit phaseout rules of section 45Y(d) (credit phase-out), multiplied
by the phase-out percentage provided in
section 45Y(d)(2). Proposed §1.45Y-1(c)
(2) would provide that the phase-out percentage is 100 percent for a facility the
construction of which begins during the
first calendar year following the applicable year; 75 percent for a facility the
construction of which begins during the
second calendar year following the applicable year; 50 percent for a facility the
construction of which begins during the
third calendar year following the applicable year; and 0 percent for a facility the
construction of which begins during any
calendar year subsequent to the calendar
year described in section 45Y(d)(2)(C).
Proposed §1.45Y-1(c)(3) would define
the “applicable year” for purposes of proposed §1.45Y-1(c) to mean the later of
the calendar year in which the Secretary
makes the determination that the annual
greenhouse gas emissions from the production of electricity in the United States
are equal to or less than 25 percent of the
annual greenhouse gas emissions from
the production of electricity in the United
States for calendar year 2022, or 2032.
Proposed §1.45Y-1(c)(4) would provide
that, for the purposes of determining the
applicable year, the annual greenhouse
gas emissions from the production of electricity in the United States for any year
must be assessed separately using both
the Energy Information Administration’s
(EIA) Electric Power Annual, using the
sum of the annual carbon dioxide emissions data from conventional power plants

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and combined heat and power plants
as currently listed in Table 9.1 and the
Monthly Energy Review annual carbon
dioxide emissions from the combustion
of biomass to produce electricity in the
electric power sector as currently listed
in Table 11.7, and the U.S. Environmental Protection Agency (EPA) Inventory
of U.S. Greenhouse Gas Emissions and
Sinks (GHGI) annual electric power-related carbon dioxide, methane, and nitrous
oxide emissions data including carbon
dioxide emissions from the combustion
of biomass to produce electricity. In the
most current version of the GHGI, annual
fossil and biogenic CO2 from electricity
production in the electric power sector is
available in Table 2-11 and Tables 3-120
and 3-122, respectively; and CH4 and
N2O from electricity production in the
electric power sector is available in Table
3-8 and Table 3-9, respectively. Based on
current and publicly available data in the
2024 GHGI, the estimate for 2022 GHG
emissions associated with the production
of electricity is 1,613 million metric tons
(MMT) CO2e. Currently, explicit data on
industrial and commercial sector GHG
emissions from the production of electricity is not disaggregated from overall sectoral totals. See GHGI, https://www.epa.
gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks.
For 2022, the EIA Electric Power
Annual states that the annual carbon dioxide emissions from conventional power
plants and combined heat and power
plants are 1,650 MMT, and the Monthly
Energy Review annual carbon dioxide
emissions from the combustion of biomass
to produce electricity in the electric power
sector are 35 MMT. Thus, the EIA’s data
reflects a total of 1,685 MMT in 2022. See
EIA Electric Power Annual (https://www.
eia.gov/electricity/annual); MER (https://
eia.gov/totalenergy/monthly/).
Proposed §1.45Y-1(c)(5) would provide that, for the purposes of determining the applicable year, the Secretary
will make such determination only if the
annual greenhouse gas emissions from
the production of electricity in the United
States, as determined separately under
both of the data sources described in proposed §1.45Y-1(c)(4), for the year is equal
to or less than 25 percent of the annual
greenhouse gas emissions from the pro-

August 5, 2024

duction of electricity in the United States
for calendar year 2022. Proposed §1.45Y1(c)(5) would provide that if a data source
described in proposed §1.45Y-1(c)(4)
becomes unavailable (for example, it is no
longer published or it does not provide the
specified data), the Secretary must designate a similar data source to replace the
unavailable data source. Requiring the
applicable year to be determined using data
from the EIA’s Electric Power Annual and
Monthly Energy Review and the EPA’s
GHGI ensures that this important determination is made transparently and based
on reliable information. Both well-established data sources are representative of
the annual greenhouse gas emissions from
the production of electricity in the United
States, but there are slight differences in
the greenhouse gases and the emissions
sources covered by each data source.
There are other United States Government greenhouse gas datasets that could
serve as the basis for the Secretary’s
determination as to whether the annual
greenhouse gas emissions from the production of electricity in the United States
are equal to or less than 25 percent compared to 2022. Two such datasets are the
EPA Greenhouse Gas Reporting Program
(GHGRP) and Emissions & Generation
Resource Integrated Database (eGRID).
The Treasury Department and the IRS
request comment on which datasets are
most appropriate to determine the applicable year and why.
Proposed §1.45Y-1(d) would provide requirements for CHP property and
special rules for calculating the section
45Y credit for CHP property. Proposed
§1.45Y-1(d)(1) would provide that CHP
property must produce at least 20 percent
of its total useful energy in the form of
thermal energy that is not used to produce
electrical or mechanical power (or combination thereof), and at least 20 percent
of its total useful energy in the form of
electrical or mechanical power (or combination thereof). Proposed §1.45Y-1(d)
(1) would further provide that the energy
efficiency percentage of CHP property
must exceed 60 percent, and that these
percentages are determined on a British
thermal unit (Btu) basis. Section 45Y(g)
(2)(B) incorporates these requirements by
providing that the term “combined heat
and power system property” has the same

August 5, 2024

meaning given such term by section 48(c)
(3) (without regard to section 48(c)(3)(A)
(iv), (B), and (D)).
Proposed
§1.45Y-1(d)(2)
would
describe the energy efficiency percentage
of a CHP property stating that it is the
fraction the numerator of which is the total
useful electrical, thermal, and mechanical
power produced by the system at normal
operating rates, and expected to be consumed in its normal application, and the
denominator of which is the lower heating
value of the fuel sources for the system,
which is a measure of heat content based
on the net energy content of a combustible
fuel.
Proposed §1.45Y-1(d)(3) would provide a special rule for calculating electricity produced by CHP property. For
purposes of section 45Y(a) and proposed
§1.45Y-1(b), the kWh of electricity produced by a taxpayer at a qualified facility
will include any production in the form of
useful thermal energy by any CHP property within such facility, and the amount
of greenhouse gases emitted into the
atmosphere by such facility in the production of such useful thermal energy will be
included for purposes of determining the
GHG emissions rate for such facility.
Proposed §1.45Y-1(d)(3)(ii)(A) would
provide a conversion from Btu to kWh.
Proposed §1.45Y-1(d)(3)(ii))(A) would
provide that for purposes of section
45Y(g)(2)(A)(i) and §1.45Y-1(d)(3), the
amount of kWh of electricity produced in
the form of useful thermal energy is equal
to the quotient of the total useful thermal
energy produced by the CHP property
within the qualified facility, divided by the
heat rate for such facility.
Proposed §1.45Y-1(d)(3)(ii)(B) would
define the term “heat rate” to mean the
amount of energy used by the qualified
facility to generate 1 kWh of electricity,
expressed as Btus per net kWh generated.
In calculating the heat rate of a qualified
facility that includes CHP property that
uses combustion, a taxpayer must use the
annual average heat rate, defined as the
total annual fuel consumption of the CHP
property (in Btus, using the lower heating value of the fuel) during the taxable
year for which the section 45Y credit is
claimed, divided by the annual net electricity generation (in kWh) of the CHP
property during such taxable year.

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Section 45Y(g)(2), by cross reference to section 48(c)(3), requires that the
energy efficiency percentage of the CHP
property must exceed 60 percent, calculated as (1) the total useful electrical,
thermal, and mechanical power produced
by the system at normal operating rates,
and expected to be consumed in its normal
application, divided by (2) the lower heating value (LHV) of the fuel sources for
the system. The LHV is calculated based
on combustion. Some CHP property may
not involve combustion, such as nuclear
cogeneration. In these scenarios, because
there is no calculable LHV, the energy
efficiency percentage of the CHP property
cannot be determined using the calculation provided in the statute.
The Treasury Department and the IRS
request comments regarding the application of the energy efficiency percentage
requirements to CHP property for which
there is no combustion. Relatedly, comment is requested on whether the existing
definition of heat rate provided in section
45Y(g)(2)(C)(ii) for purposes of calculating the section 45Y credit for CHP property that does not use combustion should
be clarified.
B. Qualified facility
Proposed §1.45Y-2(a) would define
a “qualified facility” to mean a facility
owned by the taxpayer and used for the
generation of electricity, that is placed in
service after December 31, 2024, and has
a GHG emissions rate of not greater than
zero (as determined under rules provided
in proposed §1.45Y-5).
1. Property Included in Qualified Facility
Proposed §1.45Y-2(b) would provide
a description of the property included in
a qualified facility. Proposed §1.45Y-2(b)
(1) would provide that a qualified facility includes a unit of qualified facility (as
defined in proposed §1.45Y-2(b)(2)(i))
that meets the requirements of proposed
§1.45Y-2(b)(2)(ii). Proposed §1.45Y-2(b)
(1) would provide that a qualified facility
also includes qualified property owned by
the taxpayer that is an integral part of a
qualified facility (as defined in proposed
§1.45Y-2(b)(3)). Section 45Y is silent
regarding the credit eligibility of compo-

Bulletin No. 2024–32

nents that are part of a qualified facility
but located in different locations. Proposed §1.45Y-2(b)(1) would clarify that
any property that meets the requirements
of a qualified facility described in proposed §1.45Y-2(b) is part of a qualified
facility, regardless of where such property is located. Proposed §1.45Y-2(b)(1)
would provide that a qualified facility also
generally does not include equipment that
is an addition or modification to an existing qualified facility, however, proposed
§1.45Y-2(b)(1) would reference proposed
§1.45Y-4(c) for rules regarding the expansion of a facility or incremental production and proposed §1.45Y-4(d) for rules
regarding a retrofitted qualified facility
(80/20 Rule).
2. Unit of Qualified Facility
Proposed §1.45Y-2(b)(2)(i) would
provide that for purposes of the section
45Y credit, the unit of qualified facility
includes all functionally interdependent
components of property (as defined in
proposed §1.45Y-2(b)(2)(ii)) owned by
the taxpayer that are operated together and
that can operate apart from other property
to produce electricity. Proposed §1.45Y2(b)(2)(i) would clarify that no provision
of this section, §1.45Y-1, or §1.45Y-4
through §1.45Y-5 uses the term “unit”
in respect of a qualified facility with any
meaning other than that provided in proposed §1.45Y–2(b)(2)(i). A reference to
§1.45Y-3 will also be added to the previous sentence in proposed §1.45Y-2(b)
(2)(i) when proposed §1.45Y-2(b)(2)(i)
is finalized, but it cannot be added until
§1.45Y-3 is finalized.
Proposed §1.45Y-2(b)(2)(ii) would
provide that components are functionally
interdependent if placing in service each
component is dependent upon placing in
service other components to produce electricity. See the discussion in section I.A.
of the Explanation of Provisions regarding
the special rule for CHP property.
3. Integral Part
Proposed §1.45Y–2(b)(3)(i) would
provide that for purposes of the section
45Y credit, a component of property
owned by a taxpayer is an integral part
of a facility if it is used directly in the

Bulletin No. 2024–32

intended function of the qualified facility and is essential to the completeness of
such function.
Proposed §1.45Y–2(b)(3)(ii) would
provide that components of property that
are an integral part of a qualified facility include power conditioning equipment and transfer equipment. Proposed
§1.45Y–2(b)(3)(ii) would provide that
power conditioning equipment includes
equipment that modifies the characteristics of electricity into a form suitable for
use or transmission or distribution. Proposed §1.45Y–2(b)(3)(ii) would provide
that parts related to the functioning or protection of power conditioning equipment
are also treated as power conditioning
equipment and includes examples.
Proposed §1.45Y–2(b)(3)(ii) would
provide that transfer equipment includes
components that permit the aggregation
of electricity generated by components of
qualified facilities and components that
alter voltage in order to permit transfer to a
transmission or distribution line. Proposed
§1.45Y–2(b)(3)(ii) would also clarify that
transfer equipment does not include transmission or distribution lines. Proposed
§1.45Y–2(b)(3)(ii) would provide that
examples of transfer equipment include,
but are not limited to, wires, cables, and
combiner boxes that conduct electricity.
Proposed §1.45Y–2(b)(3)(ii) would provide that parts related to the functioning or
protection of transfer equipment are also
treated as transfer equipment and include
examples.
Proposed §1.45Y-2(b)(3)(iii) would
provide that roads that are an integral part
of a qualified facility are those roads integral to the intended function of the qualified facility, such as onsite roads that are
used to operate and maintain the qualified
facility. Proposed §1.45Y–2(b)(3)(iii)
would also clarify that roads used primarily for access to the site, or roads used
primarily for employee or visitor vehicles,
are not integral to the intended function of
the qualified facility and thus are not an
integral part of a qualified facility.
Proposed §1.45Y–2(b)(3)(iv) and (v)
would also provide that fences and buildings (also referred to as structures) are
generally not integral parts of a qualified
facility because they are not integral to the
intended function of the qualified facility.
However, a building (or structure) may be

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an integral part of a qualified facility if it is
essentially an item of machinery or equipment and a structure that houses components of property that are integral to the
intended function of the qualified facility
if the use of the structure is so closely
related to the use of the housed components of property therein that the structure
clearly can be expected to be replaced if
the components of property it initially
houses are replaced.
Proposed §1.45Y-2(b)(3)(vi) would
provide a rule for shared integral property
by stating that multiple qualified facilities
(whether owned directly by one or more
taxpayers), including qualified facilities with respect to which a taxpayer has
claimed a credit under section 45Y or section 48E, may include shared property that
can be considered an integral part of each
qualified facility. Proposed §1.45Y-2(b)
(3)(vi) would also provide that a component of property that is shared by a qualified facility (as defined in section 45Y(b))
(45Y Qualified Facility) and a qualified
facility (as defined in section 48E(b)(3))
(48E Qualified Facility) that is an integral
part of both qualified facilities will not
affect the eligibility of the section 45Y
Qualified Facility to claim the section 45Y
credit or the section 48E Qualified Facility to claim a section 48E credit. Proposed
§1.45Y-2(b)(3)(vii) would provide examples illustrating proposed §1.45Y-2(b)(3).
4. Coordination with Other Credits
Proposed §1.45Y-2(c)(1) would provide that the term “qualified facility” (as
defined in section 45Y(b)) will not include
any facility for which a credit determined
under section 45, 45J, 45Q, 45U, 48, 48A,
or 48E is allowed under section 38 of the
Code for the taxable year or any prior taxable year. Proposed §1.45Y-2(c)(1) would
further clarify that a taxpayer that directly
owns a qualified facility (as defined in
section 45Y(b)) that is eligible for both
a section 45Y credit and another Federal
income tax credit is eligible for the section 45Y credit only if the other Federal
income tax credit was not allowed with
respect to the qualified facility. Proposed
§1.45Y-2(c)(1) would also add that nothing in §1.45Y-2(c) precludes a taxpayer
from claiming a section 45Y credit with
respect to a qualified facility (as defined

August 5, 2024

in section 45Y(b)) that is co-located with
another facility for which a credit determined under section 45, 45J, 45Q, 45U,
48, 48A, or 48E is allowed under section
38 for the taxable year or any prior taxable
year. Proposed §1.45Y-2(c)(2) would clarify that for purposes of proposed §1.45Y2(c)(1), the term “allowed” only includes
credits that taxpayers have claimed on
a Federal income tax return or Federal
return, as appropriate, and that the IRS
has not challenged in terms of the taxpayer’s eligibility. Proposed §1.45Y-2(c)(3)
includes several examples illustrating the
rules of §1.45Y-2(c).
C. Rules of general application to section
45Y
1. Only Production in the United States
Taken into Account
Proposed §1.45Y-4(a) would provide
that consumption, sales, or storage of electricity are taken into account for purposes
of the section 45Y credit only with respect
to electricity produced within the United
States (as defined in section 638(1)), or a
United States territory, which for purposes
of section 45Y and the section 45Y regulations has the meaning of the term “possession” of the United States (as defined in
section 638(2)).
2. Production Attributable to the
Taxpayer and Section 761(a) Elections
Proposed §1.45Y-4(b)(1) would provide that in the case of a qualified facility in which more than one person has an
ownership share (and such arrangement is
not treated as a partnership for Federal tax
purposes), production from the qualified
facility is allocated among such persons
in proportion to their respective ownership share in the gross sales from such
qualified facility during the taxable year.
The respective owners each determine
their respective section 45Y credit under
section 45Y(a) based on their respective
ownership shares in the gross sales from
such qualified facility. Proposed §1.45Y4(b)(2) would provide an example demonstrating the application of this rule.
Proposed §1.45Y-4(b)(3) would provide that if a qualified facility is owned
through an unincorporated organization

August 5, 2024

that has made a valid election under section 761(a) of the Code, each member’s
undivided ownership share in the qualified
facility will be treated as a separate qualified facility owned by such member.
3. Expansion of Facility; Incremental
Production
Proposed §1.45Y-4(c)(1) would provide, solely for purposes of proposed
§1.45Y-4(c), that the term “qualified
facility” includes either a new unit or an
addition of capacity placed in service after
December 31, 2024, in connection with a
facility described in section 45Y(b)(1)(A)
(without regard to clause (ii) of such paragraph), which was placed in service before
January 1, 2025, but only to the extent of
the increased amount of electricity produced at the facility by reason of such
new unit or addition of capacity. Proposed
§1.45Y-4(c)(1) would also provide that a
new unit or an addition of capacity will be
treated as a separate qualified facility. Proposed §1.45Y-4(c)(1) would provide for
purposes of proposed §1.45Y-4(c), that a
new unit or an addition of capacity require
the addition or replacement of components
of property, including any new or replacement integral property, added to a facility
necessary to increase capacity. If applicable for purposes of proposed §1.45Y-4(c),
taxpayers must use modified or amended
facility operating licenses or the International Standard Organization (ISO) conditions to measure the maximum electrical
generating output of a facility to determine its nameplate capacity. Additionally,
proposed §1.45Y-4(c)(1) would provide
that for purposes of section 45Y(a)(2)(B)
(i) (that is, the One-Megawatt Exception),
the capacity for a new unit or an addition
of capacity is the sum of the nameplate
capacity of the added qualified facility
and the nameplate capacity of the facility
to which the qualified facility was added.
Proposed §1.45Y-4(c)(2) would provide that solely for purposes of §1.45Y4(c), a facility that is decommissioned
or in the process of decommissioning
and restarts can be considered to have
increased capacity if the following conditions are met: (1) the existing facility must
have ceased operations; (2) the existing
facility must have a shutdown period of
at least one calendar year during which it

360

is without a valid operating license from
its respective Federal regulatory authority
(that is, the Federal Energy Regulatory
Commission (FERC) or the Nuclear Regulatory Commission (NRC)); and (3) the
increased capacity of the restarted facility
must have a new, reinstated, or renewed
operating license issued by either FERC
or NRC.
Proposed
§1.45Y-4(c)(3)
would
describe how to compute the increased
amount of electricity produced as a result
of a new unit or an addition of capacity.
Proposed §1.45Y-4(c)(3) would provide
that to determine the increased amount of
electricity produced by a facility by reason of a new unit or an addition of capacity, a taxpayer must multiply the amount
of electricity that the facility produces
during a taxable year after the new unit or
addition of capacity is placed in service
by a fraction, the numerator of which is
the added nameplate capacity that results
from the new unit or addition of capacity,
and the denominator of which is the total
nameplate capacity of the facility with the
new unit or addition of capacity added.
Proposed §1.45Y-4(c)(4) would illustrate the application of these rules to determine the increased amount of electricity
attributable to a new unit or an addition of
capacity described in §1.45Y-4(c).
4. Retrofit of an Existing Facility (80/20
Rule)
Proposed §1.45Y-4(d)(1) would provide that for purposes of section 45Y(b)
(1)(B), a facility may qualify as originally
placed in service even if it contains some
used components of property within the
unit of qualified facility, provided the fair
market value of the used components of
the unit of qualified facility is not more
than 20 percent of the total value of the
unit of qualified facility (that is, the cost of
the new components of property plus the
fair market value of the used components
of property within the unit of qualified
facility) (80/20 Rule). Proposed §1.45Y4(d)(1) would further provide that if a
facility satisfies the requirements of the
80/20 Rule, then the date on which such
qualified facility is considered originally
placed in service for purposes of section
45Y(B)(1)(b) is the date on which the
new components of property of the unit

Bulletin No. 2024–32

of qualified facility are placed in service.
Proposed §1.45Y-4(d)(2) would provide
that, for purposes of this 80/20 Rule, the
cost of new components of the unit of
qualified facility includes all costs properly included in the depreciable basis of
the new components of property. Lastly,
proposed §1.45Y-4(d)(3) would provide
examples demonstrating the 80/20 Rule.
D. Greenhouse gas emissions rates
Section 45Y(b)(2) provides rules for
determining GHG emissions rates. Proposed §1.45Y-5(a) would provide an overview of the rules pertaining to GHG emissions rates for facilities under section 45Y.
1. Definitions Related to Greenhouse Gas
Emissions Rates
Proposed §1.45Y-5(b) would provide
definitions of terms relevant to determining GHG emissions rates. Section 45Y(e)
(1) defines the term “CO2e per kWh” as,
with respect to any greenhouse gas, the
equivalent carbon dioxide (as determined
based on global warming potential) per
kWh of electricity produced. Proposed
§1.45Y-5(b)(1) would clarify that the term
“CO2e per kWh” means with respect to
any greenhouse gas, the equivalent carbon
dioxide (as determined based on the 100year time horizon global warming potential (GWP-100)) per kWh of electricity
produced. Proposed §1.45Y-5(b)(1) would
also provide global warming potentials for
certain greenhouse gases from the Intergovernmental Panel on Climate Change’s
Fifth Assessment Report (AR5).
Proposed §1.45Y-5(b)(8) would provide that the term “fuel” means material
directly used to produce electricity or
energy inputs that are used to produce
electricity. Proposed §1.45Y-5(b)(9)
would provide that the term “feedstock”
means any raw material used in a process
for electricity generation or to produce an
intermediate product or finished fuel used
for electricity generation.
Section 45Y(b)(2)(B) provides rules
for determining a GHG emissions rate
for a facility that produces electricity
through combustion or gasification. Proposed §1.45Y-5(b)(2) would provide that
the term “combustion” means a rapid exothermic chemical reaction, specifically the

Bulletin No. 2024–32

oxidation of a fuel, which liberates energy
including heat and light. This proposed
definition of “combustion” would include,
for example, burning fossil fuels, but it
would not include the reaction that produces electricity inside a fuel cell.
Gasification produces fuel but not electricity. Proposed §1.45Y-5(b)(3) would
provide that the term “gasification” means
a thermochemical process that converts
carbon-containing materials into syngas, a
gaseous mixture that is composed primarily of carbon monoxide, carbon dioxide,
and hydrogen. Because gasification does
not produce electricity, the inclusion of
the term “gasification” as a category separate from “combustion” in section 45Y(b)
(2)(B) would have no independent significance unless it is interpreted as applying
to the production of an energy source that
is ultimately used by the facility to generate electricity (for example, syngas used to
make electricity). Thus, proposed §1.45Y5(b)(4) would interpret the phrase “facility which produces electricity through
combustion or gasification” in section
45Y(b)(2)(B) as applying to facilities that
produce electricity through combustion or
use an input energy source to produce electricity, which energy source was produced
through a fundamental transformation, or
multiple transformations, of one energy
source into another using combustion or
gasification. The Treasury Department
and the IRS request comment on this proposed interpretation, including whether
the application of this proposed interpretation should be clarified with respect to
any type of fundamental transformation of
an energy source and any related activities
or operations. Comment is also requested
on supply chain tracing requirements that
the Treasury Department and the IRS may
apply to verify whether or not a feedstock
or fuel (including energy inputs) used by
a facility to produce electricity was produced using combustion or gasification.
Section 45Y(b)(2)(B) provides that in
the case of electricity produced through
combustion or gasification, the GHG
emissions rate for such facility is equal to
the net rate of greenhouse gases emitted
into the atmosphere by such facility (taking into account lifecycle greenhouse gas
emissions, as described in section 211(o)
(1)(H) of the CAA (42 U.S.C. 7545(o)(1)
(H)) in the production of electricity. Pro-

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posed §1.45Y-5(b)(4) would provide that a
“facility that produces electricity through
combustion or gasification” (C&G Facility) means a facility that produces electricity through combustion or uses an input
energy source to produce electricity, if the
input energy source was produced through
a fundamental transformation, or multiple
transformations, of one energy source into
another using combustion or gasification.
Under proposed §1.45Y-5(b)(4), a facility
that produces electricity using any fuel
that was produced using electricity that
had been produced, in whole or in part,
from the combustion of fossil fuels would
be considered a C&G Facility. For example, a hydrogen fuel cell would be considered a C&G Facility if it produced electricity using hydrogen that was produced
by an electrolyzer powered, in whole or in
part, by electricity from the grid because
some of the electricity from the grid was
produced through combustion or gasification. A fuel cell facility such as a solid
oxide fuel cell, which uses methane as
fuel, would be considered a C&G Facility, because the methane reforming reaction that produces syngas within the fuel
cell prior to the production of electricity
would be considered a gasification reaction. In contrast, a hydrogen fuel cell facility using hydrogen produ

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A0f9967376a155c60. Public record. Not legal advice.