Clean electricity investment tax credit (48E)

• Qualifying generation property must be integral tangible property, excluding buildings and their structural components. Depreciation or amortization must be allowable, and you must construct it or acquire it with original use starting with you. Storage includes qualifying equipment of at least 5 kWh and qualifying thermal storage that stores heat or cooling for later use in a building’s heating or cooling system. The thermal-storage category excludes swimming pools, combined heat-and-power systems, buildings and their structural components, and equipment that initially converts other energy into heat. Equipment primarily used to transport goods or people rather than produce electricity is also excluded.
• Property used mainly outside the United States is generally excluded, subject to the section 168(g)(4) exceptions. Other investment-credit exclusions apply to governmental or foreign use, lodging and certain expensed property; the instructions preserve specific exceptions and an elective-payment route for eligible tax-exempt and governmental entities.
• The 30% exception covers generation facilities below 1 MW AC or storage below 1 MW, and projects whose construction began before January 29, 2023. Otherwise, prevailing wage means paying laborers and mechanics at least the applicable prevailing rates during construction and alterations or repairs during the five-year recapture period. Apprenticeship rules require 10% to 15% of construction labor hours to be performed by registered apprentices, depending on when construction began, and cover daily apprentice-to-journeyworker ratios, and participation when an employer has four or more workers.
• For wind or solar facilities whose construction begins after July 4, 2026, no credit is allowed if they enter service after December 31, 2027. For projects not already begun before September 2, 2025, establishing earlier construction normally requires significant physical work and continuous construction. This can include work on foundations or solar mounting racks, or manufacture of components under a qualifying contract; planning, design and arranging finance do not count as physical work. Solar facilities no greater than 1.5 MW AC can also use the Five Percent Safe Harbor, an alternative rule for establishing when construction began, as described in Notice 2025-42.
• For tax years beginning after July 4, 2025, no credit is allowed to a specified foreign entity or an entity that meets the foreign-influence tests. “Specified foreign entity” covers the statutory restricted-entity list categories and entities meeting the statutory foreign-control definition; it does not mean every overseas company. Foreign-influence tests include a specified entity having direct authority to appoint a covered officer, one specified entity owning at least 25%, specified entities owning at least 40% together, or at least 15% of debt issued to specified entities. Notice 2026-15 provides different rules for entities whose securities trade regularly on qualifying markets and entities at least 80% owned by them: ownership reporting requirements and a separate publicly traded debt test matter, so the general tests above should not be applied unchanged to those entities. Payments in the previous tax year under arrangements granting a specified foreign entity control of the facility or storage can also trigger exclusion; the notice describes control of operations, output, access and intellectual-property licensing.
• Facilities, interconnection property and storage with construction beginning after 2025 cannot receive prohibited foreign entity material assistance. The material-assistance cost ratio is the share of total direct costs of incorporated manufactured products, including components, remaining after subtracting costs attributable to products made by prohibited entities. The project fails the test if that remaining share is below the threshold for its construction year. Apply the valuation and safe-harbor rules in Notice 2026-15.
• A facility cannot receive 48E if a credit under section 45, 45J, 45Q, 45U, 45Y, 48 or 48A was allowed for it in the current or any earlier tax year. For tax years starting after July 4, 2025, the instructions also exclude the specified residential solar-electric and wind property rented or leased to a third party.
• Selling property or changing its qualifying use within five full years can require repayment of some or all of the credit. If domestic-content rules are not met and no small-facility or statutory exception applies, elective payment is reduced to 90% of the credit for construction begun in 2024, 85% for construction begun in 2025, and zero for construction begun after 2025. The small-facility exception uses output below 1 MW AC. Increased-cost and non-availability exceptions concern whether US-made products are too costly or unavailable; the instructions describe transitional procedures requiring a signed good-faith statement attached to Form 3468.

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• Claim through the annual tax return for qualifying property placed in service after 2024; special wind and solar construction and service cutoffs apply.

Complete Form 3468 and file it with your annual tax return to the Internal Revenue Service. Use Part V for section 48E. If claiming the increased credit for meeting prevailing wage and apprenticeship requirements, also file Form 7220 for each facility or storage technology. Attach the applicable increased-rate, domestic-content and other required statements.

For elective payment or a transfer, first complete IRS pre-filing registration and obtain a registration number. Report the credit and election on the required tax forms. A transfer also requires an unrelated buyer paying cash and a transfer-election statement in both parties’ returns; eligible tax-exempt and governmental entities use the applicable return, including Form 990-T where required.