§48E tax credit: Eligibility, value, and the §45Y election

The §48E clean electricity investment tax credit (ITC) is a technology-neutral federal tax credit covering a percentage of construction costs for qualifying clean electricity generation and energy storage facilities placed in service after December 31, 2024. It replaced the legacy §48 ITC and works alongside a companion credit, the §45Y clean electricity production tax credit (PTC) — projects can elect one or the other, but not both.

Legacy credits supported wind and solar development for decades, helping developers access capital and lower project costs across the US. Standalone battery storage, by contrast, only became eligible for a legacy credit in 2022, when the Inflation Reduction Act (IRA) added it as a qualifying technology under §48: previously, storage could only claim the credit if it was paired with and predominantly charged by a co-located solar facility. The same legislation also began the shift from these technology-specific credits to §45Y and §48E, designed to give developers long-term visibility into clean energy tax incentives while making it easier for new zero-emissions technologies to qualify as the energy industry evolves.

§48E vs. §45Y: Which tax credit should you claim?

A qualifying facility can elect either the §48E ITC or the §45Y PTC, but not both. The right choice generally comes down to a project's capital cost relative to its expected output: the ITC rewards upfront construction cost, while the PTC rewards sustained electricity production over time.

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*Wind and solar projects must begin construction by July 4, 2026, or be placed in service by Dec. 31, 2027, to claim either credit; see our safe harbor guidance and developer's guide to safe harbor rules for how to establish eligibility.

In practice, developers typically model both credits against a project's expected capacity factor before electing one. A facility with high construction costs relative to output, like standalone storage or a smaller solar installation, usually nets more value from the ITC's upfront percentage. A facility that generates electricity steadily over many years relative to its construction cost, like wind or geothermal, often nets more value from the PTC's per-kWh payout over a 10-year period. Because developers make the election once and can't change it afterward, they typically run this comparison early in project planning

Choosing between the ITC and PTC? Read our guide to determine which tax credit offers more benefits for your project.

§48E eligibility requirements

Are wind and solar still eligible for §48E?

Only under a narrower timeline than other technologies. The One Big Beautiful Bill (OBBB), signed into law July 4, 2025, ended open-ended eligibility for new wind and solar projects: a wind or solar facility must now begin construction by July 4, 2026, or be placed in service by December 31, 2027, to claim the §48E or §45Y tax credit. Other technologies, including storage, nuclear, and geothermal, aren't subject to this earlier cutoff and instead follow the general phaseout schedule described later in this guide. See Crux's safe harbor guidance and developer's guide to safe harbor rules for how to establish eligibility ahead of the deadline.

Why is §48E a technology-neutral tax credit?

Unlike the legacy ITC, which applied only to specific listed technologies, §48E is technology-neutral: any facility that generates electricity with no greenhouse gas emissions can qualify, without Congress needing to add each new technology by name. This lets emerging zero-emissions technologies qualify for the tax credit as they reach commercial viability, rather than waiting for legislative action.

What are the basic eligibility criteria for §48E  tax credits?

Qualification for §48E hinges on several factors:

• The taxpayer must own the facility, and it must enter service on or after January 1, 2025.
• The energy producer must not have claimed the legacy PTC or ITC (or meet the 80/20 threshold for a repowering).
• The facility must generate electricity.
• The facility must have an emissions rate of zero, as determined by the tech-neutral regulations.

Owners of eligible facilities that began construction before 2025 may still claim the legacy tax credits through a safe harbor provision. Companies claiming the safe harbor must typically demonstrate that they incurred at least 5% of the facility's cost prior to the expiration of the legacy ITC or PTC. Additionally, companies must demonstrate that they have continuously worked toward the facility's completion.  

Prohibited foreign entity (PFE) restrictions

For facilities beginning construction after Dec. 31, 2025, federal tax policy adds a further layer of eligibility tied to prohibited foreign entities (PFEs). The PFE framework significantly expands an earlier, narrower foreign entity of concern (FEOC) restriction that had applied only to the §30D clean vehicle credit; PFE rules now extend to six clean energy tax credits, including §48E and §45Y. Legacy §48 and §45 tax credits, for projects that began construction before 2025, are not subject to PFE restrictions.

Compliance is assessed through three tests: ownership, effective control, and material assistance. A taxpayer cannot claim §48E if it is itself a specified foreign entity (SFE, generally an entity with ties to China, Russia, North Korea, or Iran), or if it qualifies as a foreign-influenced entity (FIE). This means one or more SFEs collectively hold 40% or more of its ownership, a single SFE holds 25% or more, SFEs hold 15% or more of its debt, or an SFE has authority to appoint its officers or directors. A taxpayer can also become an FIE, and therefore ineligible, by making a payment to an SFE under a contract or license that gives the SFE effective control over the project; this rule took effect for tax years beginning after Jan. 1, 2026.

Separately, facilities must meet a material assistance cost ratio (MACR), the share of a facility's or energy storage technology's costs sourced from outside prohibited foreign entities. For qualified facilities and energy storage technology, the threshold starts at 40% for construction beginning in 2026 and rises five percentage points annually through 2030. A facility can fall short of this threshold and become ineligible even if the taxpayer itself has no ties to a prohibited foreign entity.

The Internal Revenue Service (IRS) released interim guidance for calculating the MACR in Notice 2026-15 (Feb. 12, 2026), including several elective safe harbors developers can rely on instead of a full cost-ratio calculation. Additional proposed regulations, covering the ownership and effective control tests, are expected later in 2026. For the latest on PFE guidance, see Crux's PFE resource hub.

Per Crux's 2026 Mid-Year Market Intelligence Report, tax credit deals involving §48E, §45Y, and §45X are projected to grow to at least 25% of the transferable tax credit market in the second half of 2026, up from 20%.

How does the IRS define an eligible §48E facility?

Categorically zero-emissions facilities

The IRS finalized regulations for the tech-neutral §48E and §45Y tax credits on January 7, 2025. The final guidance affirms that a category of electric-generating technologies is non-emitting by default; a qualifying facility must have a greenhouse gas (GHG) emissions rate of zero or less. These technologies include:

• Solar*
• Wind*
• Battery storage
• Nuclear (for new nuclear generation; existing nuclear facilities can claim the §45U tax credit)
• Geothermal

*Subject to the OBBB construction deadline: see "Are wind and solar still eligible for §48E?" above.

Based upon the presumption that these facilities have zero GHG emissions, projects incorporating at least one of these technologies would be eligible to generate a clean electricity tax credit under the tech-neutral ITC or PTC.

Combustion and gasification facilities

Combustion and gasification (C&G) facilities comprise a second category of potentially eligible generating facilities. According to the IRS, a C&G facility is one “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 this definition, a fuel cell facility using hydrogen from an electrolyzer powered partially by GHG-emitting generators would be classified as a C&G facility, for example, due to the emissions from the power plants supplying energy to the electrolyzer. Alternatively, fuel cells that operate exclusively using hydrogen produced by an electrolyzer powered by clean energy would not be considered a C&G facility, because there is no combustion in the electricity production process or in the fuel supply chain.

The final regulations from the IRS recognize that the statute has different rules for determining GHG emissions rates for C&G and non-C&G facilities. The regulations clarify that emissions included in the determination of GHG emissions are those that occur from the processes that transform the input energy source into electricity. 

As a result of the final guidance, facilities such as natural gas generators with carbon capture, utilization, and storage (CCUS) or biogas-fired generation will likely be able to make better use of the new, tech-neutral credits.

Biogas, renewable natural gas (RNG), and fuel cells

Biogas, RNG, and fuel cells are often derived from fugitive methane emissions and can have negative GHG values, representing a net reduction in emissions associated with their use. Final guidance from the IRS clarified a number of questions about the availability of tech-neutral tax credits for biogas generation:

• Lifecycle analysis: Facilities using biogas or RNG must demonstrate net-zero GHG emissions through a lifecycle assessment (LCA). The LCA must consider all stages of the fuel’s lifecycle, from production to electricity generation.
• First productive use: While the IRS considered a “first productive use” requirement, it was not included in the final regulations due to concerns about substantiation and verification.
• Future guidance: The IRS suggested that taxpayers maintain third-party certification that verifies the facility meets LCA criteria.

Overlap with other tax credits

Facilities that have claimed any of the following tax credits (in the current or prior tax years) are ineligible for the §48E or §45Y tax credits:

• Legacy ITC or PTC.
• Any of the §45Q carbon capture and sequestration tax credits.
• §45U nuclear production tax credit.
• §45J advanced nuclear production tax credit.
• §48A advanced coal investment tax credit.

New to tax credit transfers? Read Crux's guide to buying and selling transferable tax credits.

§48E and §45Y vs. legacy tax credits

How does the §48E tax credit differ from the legacy §48 ITC?

The value of the §48E tax credit and legacy §48 ITC are similarly determined as a percentage of the cost of development of an eligible facility. There are distinctions between technologies that qualify for the legacy ITC and the tech-neutral ITC — only technologies that generate electricity or function as energy storage are eligible to receive the tech-neutral tax credit.

Four categories of ITC qualification

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To be eligible for the §48E tax credit, biogas and RNG facilities must generate electricity. This distinction is significant because RNG and biogas have a wide range of transportation, industrial, and retail applications that do not require electric generation. Crux has observed that many RNG project tax credits are not electricity-generating facilities.

How does the §45Y tax credit differ from the legacy §45 PTC?

The new tech-neutral PTC offers eligible recipients a tax credit for each unit of electricity generated and sold to a third party. The credit is earned over 10 years, beginning in the year the facility is placed in service.

Prior to 2023, only wind facilities were eligible for the PTC. Federal tax policy has since expanded the program to a wider range of electricity-generating technologies, and §45Y broadens that scope further to include any zero-emissions electricity source. 

Two categories of PTC qualification

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§48E and §45Y tax credit values

What is the value of the §48E tax credit?

The §48E tax credit value mirrors the legacy §48 ITC. The tax credit has a base value of 6% of eligible construction costs incurred by the taxpayer. This value rises to 30% for projects that can demonstrate that they meet PWA standards.

Projects can also get a 10-percentage point bonus to the tax credit by locating the project in an energy community or meeting domestic content standards (or both). Projects smaller than 5 MWac may apply for the low-income communities bonus, which is additive to the base value plus any other bonuses and increases the ITC value by either 10 or 20 percentage points.

What is the value of the §45Y tax credit?

The §45Y tax credit value is determined per unit of electricity production. The base value of the §45Y tax credit is $0.006 per kWh for 2025 and 2026 (adjusted annually for inflation), increased to $0.030 per kWh for facilities that meet PWA standards.

Companies can increase the value of the §45Y tax credit by siting a project in a designated energy community, satisfying domestic content adder requirements, and/or qualifying for a low-income bonus for projects smaller than 5 MWac. Each bonus adder increases the base value (either $0.006 or $0.030) by 10%, except for certain low-income bonuses, which increase the value by 20%.

Explore the domestic content bonus. Learn how the domestic content safe harbor can help projects qualify for the tax credit adder.

How long are §45Y and §48E available?

Tech-neutral tax credits are available to non-solar or wind qualifying facilities that begin construction through 2033 , and to all qualifying solar or wind facilities that begin construction before July 4, 2026, or are placed in service by December 31, 2027. In 2033, credits will begin a phaseout schedule as follows: 

• 100% credit for facilities beginning construction in 2033.
• 75% credit for facilities beginning construction in 2034.
• 50% credit for facilities beginning construction in 2035.
• 0% credit for facilities beginning construction after December 31, 2035.

Crux's 2026 Mid-Year Market Intelligence Report estimated more than 170 GW of solar and wind capacity was safe-harbored ahead of the July 4, 2026, construction deadline. The report also found that 32% of tax credit market participants reported shifting development focus toward storage specifically to maintain access to the §48E tax credit.

Monetizing §45Y and §48E tax credits

Like legacy tax credits, §45Y and §48E tax credits are transferable, allowing eligible project owners to sell credits to another taxpayer for cash. However, credits cannot be transferred to a specified foreign entity under current prohibited foreign entity restrictions.

Tax-exempt organizations, state and local governments, Indian tribal governments, and other entities without sufficient tax liability to use the credit directly can elect direct pay under Section 6417, receiving the value of the §48E or §45Y tax credit as a direct payment from the IRS rather than as a credit offset or a sale to another taxpayer. Direct pay is generally not available to standard taxable businesses, which instead rely on transferability to monetize tax credits.

Like any investment tax credit, §48E also carries recapture risk if a facility later ceases to qualify or triggers a foreign-entity-related violation, see Crux's guide to recapture risk in tax credit transactions for how this shapes deal structuring and diligence.

Learn more about how transferable tax credits work

§48E and §45Y tax credit glossary

• §45Y PTC: A PTC established by federal tax policy that allows a tax credit based on the amount of clean electricity generated and sold by a facility. It is a tech-neutral tax credit, meaning any zero-emission electricity generation can receive federal funds.
• §48E ITC: An ITC that applies to any facility that generates electricity with net-zero emissions; in other words, not specific to a single technology.
• Combustion and gasification (C&G) facility: According to the IRS, a facility “that produces electricity through combustion or uses an input energy source to produce electricity.”
• Investment tax credit (ITC): A one-time federal tax incentive based on a percentage of a project’s cost.
• Production tax credit (PTC): An ongoing federal tax incentive based on how much energy a project generates or how many components a facility manufactures over time.
• Prohibited foreign entity (PFE) restrictions: Rules introduced under the One Big Beautiful Bill (OBBB) that restrict eligibility for and transfer of §48E and §45Y tax credits based on a taxpayer's or facility's ties to a specified foreign entity (SFE) or foreign-influenced entity (FIE). PFE status is assessed through three separate tests — ownership, effective control, and material assistance (MACR) — and credits cannot be transferred to a PFE regardless of the underlying project's own compliance.
• Transferability: Federal tax policy  permits the selling — or transfer — of clean energy and manufacturing tax credits from the project owner to another entity.

Frequently asked questions

What is the §48E tax credit?

The §48E clean electricity investment tax credit (ITC) is a technology-neutral federal tax credit that covers a percentage of construction costs for qualifying clean electricity generation and energy storage facilities placed in service after Dec. 31, 2024. It replaced the legacy §48 ITC and applies to any facility with a zero greenhouse gas emissions rate, regardless of technology.

Is the §48E tax credit still available?

Yes, but availability now depends on technology and construction timing. Solar and wind facilities must begin construction by July 4, 2026, or be placed in service by Dec. 31, 2027. Other technologies, including storage, geothermal, and nuclear, remain eligible for full value through 2033, with a phasedown through 2035.

What's the difference between §48E and §45Y, and how do I choose?

Section 48E is an investment tax credit based on a percentage of project cost; §45Y is a production tax credit based on electricity output over 10 years. A facility can elect one or the other, but not both — see the comparison table above for how the choice typically depends on a project's expected capacity factor and capital intensity.

Can a facility claim both §48E and §45Y?

No. A facility can elect either §48E or §45Y, but not both for the same qualified investment or production activity.

What are the PFE restrictions on the §48E tax credit?

Compliance is assessed through three tests: ownership, effective control, and material assistance. A taxpayer is ineligible if it is itself a specified foreign entity (SFE) or a foreign-influenced entity (FIE), or if it makes a payment to an SFE that confers effective control over the project. Separately, for facilities beginning construction after Dec. 31, 2025, a facility must meet a material assistance cost ratio (MACR) — the share of project costs not sourced from a prohibited foreign entity (PFE) — starting at 40% in 2026 and rising five percentage points annually.

Is the §48E tax credit eligible for direct pay?

Yes. Tax-exempt and governmental organizations can access the §48E credit through direct pay under Section 6417, rather than through tax liability offset or credit transfer.

Can §48E tax credits be recaptured?

Yes. Section 48E follows the standard five-year ITC recapture rule, triggered by disposition of the facility or cessation of qualifying use. As with any ITC, if the credit has been sold, recapture liability follows the buyer, not the original developer.

A separate, PFE-specific rule can also trigger 100% recapture within 10 years of a facility being placed in service, but only for tax years beginning after July 4, 2027, and only if the entity operating the project makes a payment conferring effective control to a specified foreign entity. This liability follows the same rule as standard recapture: it falls on whoever holds the credit at the time, even though only the operating entity can control whether the triggering payment occurs. Because of this mismatch, tax credit buyers typically rely on restrictive covenants and indemnities to manage this risk rather than assuming it will simply not apply to them.

When does the §48E tax credit expire?

For technologies other than solar and wind, full tax credit value applies to facilities beginning construction through 2033, phasing down to 75% in 2034 and 50% in 2035, before ending for construction beginning after 2035. Solar and wind follow a separate, earlier cutoff tied to the July 4, 2026 / Dec. 31, 2027 dates above.

What is a tech-neutral tax credit?

A tech-neutral, or technology-neutral, tax credit is a federal tax incentive that qualifies any facility meeting a performance standard — in this case, a zero greenhouse gas emissions rate — rather than listing specific eligible technologies by name. Sections 48E and 45Y are both tech-neutral: new zero-emissions technologies can qualify automatically as they reach commercial viability, without Congress adding them individually the way it did under the legacy §48 and §45 credits.