Clean energy and manufacturing projects have relied upon valuable tax credits, the §45 production tax credit (PTC) and the §48 investment tax credit (ITC), since 1992 and 2005, respectively. These long-running and generous tax credits have supported capital access and lowered the cost of development for the majority of wind, solar, and battery storage projects in the US.

When Congress enacted the Inflation Reduction Act (IRA) in 2022, one of the key policy priorities was to provide the energy industry with long-term visibility into tax incentives, such as transferable tax credits, encouraging investment in clean energy technologies and manufacturing.  

The legislation outlined a transition from the legacy technology-specific investment tax credit and production tax credit to a new, tech-neutral credit designed to evolve with the energy industry over the long term. The new tech-neutral regime is designed to be more flexible in making new technologies eligible for tax credits and could drive an estimated 146–308 gigawatts (GW) of additional clean energy on the grid by 2030.  

Table of contents:

• Terms to know
• Understanding tech-neutral tax credits
• Comparing legacy and new tech-neutral tax credits
• The value of tech-neutral tax credits
• The future of tech-neutral tax credits

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Terms to know

• Transferability: The IRA permits the selling — or transfer — of clean energy and manufacturing tax credits from the project owner to another entity.
• 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.
• §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.
• §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.
• Combustion and gasification (C&G) facility: According to the Internal Revenue Service (IRS), a facility “that produces electricity through combustion or uses an input energy source to produce electricity.”

Understanding tech-neutral tax credits

What is the tech-neutral tax credit?

Since 2025, clean energy projects have had access to the new §48E clean electricity ITC and §45Y clean electricity PTC, also known as tech-neutral tax credits. The government has phased out the legacy §48 ITC and §45 PTC for projects starting construction after December 31, 2024, replacing them with tech-neutral tax credits.

Historically, as clean energy technologies have reached commercial viability (energy storage and offshore wind, for instance), each energy producer has had to obtain explicit access to tax credit support. Under the tech-neutral framework, new technologies that generate electricity with no greenhouse gas (GHG) emissions would automatically qualify for the IRS’ annual determination of eligible technologies.

Like the legacy PTC and ITC, §45Y and §48E credits are transferable for eligible taxpayers. Going forward, developers and manufacturers of new projects need to understand the details of the new tax credits, and tax credit buyers should understand the different qualification parameters under the tech-neutral tax credit regulations.

What are the qualifications for tech-neutral tax credits?

The tech-neutral tax credits took effect on January 1, 2025. Qualifying facilities that enter service from 2025 through 2032 can elect either the §45Y PTC or the §48E ITC. Qualification hinges upon several factors, including:

1. The taxpayer must own the facility, and it must enter service on or after January 1, 2025.
2. The energy producer must not have claimed the legacy PTC or ITC (or meet the 80/20 threshold for a repowering).
3. The facility must generate electricity.
4. 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 those 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.  

Facilities that enter service beginning in 2025 and qualify for a safe harbor can access tax credits through either the new §48E and §45Y tax credits or the legacy ITC/PTC. Facilities that start construction after 2025 will be eligible for the new tech-neutral tax credits and can opt for either the ITC or the PTC, subject to which tax credit provides more attractive economic benefits.

Qualification for the tech-neutral PTC or ITC for long-standing clean energy technologies such as wind, solar, and storage should not greatly complicate claiming and transferring the tax credits. The tech-neutral framework also creates opportunities for newer non-emitting, electric-generating technologies to qualify for tax credits.

What are the tech-neutral tax credit regulations?

Categorically zero-emissions facilities

The IRS finalized regulations for the tech-neutral §48E and §45Y tax credits on January 7, 2025. A key aspect of the regulations hinges upon the fact that an electricity-generating facility has a GHG emission rate of not greater than zero. 

The final guidance affirms that a category of electric-generating technologies is non-emitting by default. These technologies include:

• Solar
• Wind
• Battery storage
• Nuclear
• Geothermal

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 investment tax credit under the tech-neutral ITC or PTC.

Combustion and gasification facilities

Combustion and gasification facilities (C&G) 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. Scientists measure GHGs in carbon dioxide equivalent (CO2e) tons and adjust their values based on 100-year global warming potential. For instance, methane emissions are estimated to be 25 times more potent than CO2 over a 100-year period, and the CO2 equivalent value for methane is then 25 times greater than the volumetric methane emissions.

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:

1. 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.
2. 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.
3. Future guidance: The IRS suggested that taxpayers maintain third-party certification that verifies the facility meets LCA criteria.

For fuel cells, the IRS clarified that those operating on hydrogen produced by electrolyzers powered by clean energy can qualify for tech-neutral tax credits. However, those reliant on greenhouse gas–emitting energy would be classified as C&G facilities and might have different eligibility requirements. 

Overlap with other tax credits

Facilities that elect either the §48E tax credit or §45Y tax credit may not also elect other tax credits for which they could be eligible — companies will have to choose which credits to elect.

Facilities that have elected to use any of these credits (in the current or prior tax years) will not be eligible 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.

Comparing legacy and new tech-neutral 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

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, but federal tax policy expanded the program to a wider range of technologies. The §45Y tech-neutral PTC expands the scope of the PTC program to additional clean energy and manufacturing technologies.

Two categories of PTC qualification

The value of tech-neutral tax credits

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 credit mirrors the legacy §45 PTC, at 0.3 cents per KWh (adjusted for inflation), increased to 1.5 cents per KWh for facilities that meet prevailing wage and apprenticeship (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 5MWac. The value of each bonus adder increases the base value (either 0.3 cents or 1.5 cents) by 10%, except for certain low-income bonuses, which increase the value by 20%.

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 5MWac 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.

The future of tech-neutral tax credits

What will the phaseout for legacy tax credits look like?

Tech-neutral tax credits are available to all qualifying facilities that enter service through 2032, with one caveat. Congress directed that the IRS phase out the tech-neutral tax credits when power sector emissions decline to 25% of 2022 emissions, assuming that comes before 2032.

This point — whichever comes first — is called the applicable year. The tax credit value steps down annually following the applicable year: 

• In the first year (i.e., 2033 or the year after emissions reach 25% of 2022 levels), the tax credit value is 100%.
• The subsequent year’s tax credit values decline to 75%, 
• In the final year, tax credit values decline to 25%. 

The phaseout is not retroactive to projects that entered service prior to the phaseout period (in the case of PTCs) or qualify for a safe harbor by starting construction prior to the phaseout.

For context on the measure of emissions decline that triggers the phaseout, in 2022, the US power sector accounted for an estimated 1,685 million metric tons of CO2e emissions, according to the Energy Information Administration (EIA). A 75% reduction in emissions would mean that, in a given year, power sector emissions totaled 421.25 million metric tons or less — roughly equivalent to the annual emissions of the international aviation industry in 2022.

The EIA’s most recent long-term forecast, the 2023 Annual Energy Outlook, forecasts a decline in power sector emissions of 50% to 55% by 2032 from 2022. As such, it is possible, but not likely, that emissions reductions will reach or exceed a 75% decline from 2022 levels.

What role will tech-neutral tax credits play in 2025 and beyond?

The tech-neutral regime is intended to make it easier for new technologies to qualify for tax credits, increasing the flexibility and liquidity of the transferable tax credit market. Crux has seen significant interest in 2025 tax credits and expects demand to rise throughout the year. 

Crux has the largest network of tax credit sellers, buyers, and intermediaries, making it easy to find the best credits and counterparties. Contact us to start transacting on the Crux platform.