Code of Federal Regulations · Section

§ 1.48-15 — -15 Election To Treat Clean Hydrogen Production Facility As Energy Property

26 C.F.R. § 1.48-15

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(a) In general. Under section 48(a)(15) of the Internal Revenue Code (Code), a taxpayer that owns and places in service a specified clean hydrogen production facility (as defined in section 48(a)(15)(C) and paragraph (b) of this section) can make an irrevocable election under section 48(a)(15)(C)(ii)(II) to treat any qualified property (as defined in section 48(a)(5)(D)) that is part of the facility as energy property for purposes of section 48.

(b) Specified clean hydrogen production facility. The term specified clean hydrogen production facility means any qualified clean hydrogen production facility—

(1) That is placed in service after December 31, 2022;

(2) With respect to which no credit has been allowed under section 45V or 45Q of the Code, and for which the taxpayer makes an irrevocable election to have section 48(a)(15) apply; and

(3) For which an unrelated party has verified in the manner specified in paragraph (e) of this section that such facility produces hydrogen through a process or processes that results in lifecycle GHG emissions that are consistent with the hydrogen that such facility was designed and expected to produce under section 48(a)(15)(A)(ii) and paragraph (c) of this section.

(c) Energy percentage—(1) In general. In the case of a specified clean hydrogen production facility that is designed and reasonably expected to produce qualified clean hydrogen through a process or processes that results in a lifecycle GHG emissions rate of:

(i) Not greater than 4 kilograms of carbon dioxide equivalent (CO2e) per kilogram of hydrogen, and not less than 2.5 kilograms of CO2e per kilogram of hydrogen, the energy percentage is 1.2 percent;

(ii) Less than 2.5 kilograms of CO2e per kilogram of hydrogen, and not less than 1.5 kilograms of CO2e per kilogram of hydrogen, the energy percentage is 1.5 percent;

(iii) Less than 1.5 kilograms of CO2e per kilogram of hydrogen, and not less than 0.45 kilograms of CO2e per kilogram of hydrogen, the energy percentage is 2 percent; and

(iv) Less than 0.45 kilograms of CO2e per kilogram of hydrogen, the energy percentage is 6 percent.

(2) Designed and reasonably expected to produce. Hydrogen that a facility is designed and reasonably expected to produce means hydrogen produced through a process or processes that result in the lifecycle GHG emissions rate specified in the annual verification report described in paragraph (e)(2) of this section for the taxable year in which the election is made. In the case of a facility that is designed and reasonably expected to produce hydrogen through multiple processes, the lifecycle GHG emissions rate must be determined using the weighted average of the lifecycle GHG emissions rates of all hydrogen production processes.

(d) Time and manner of making the election—(1) In general. To make an election under section 48(a)(15)(C)(ii)(II), a taxpayer must claim the section 48 credit with respect to a specified clean hydrogen production facility on a completed Form 3468, Investment Credit, or any successor form(s), and file the form with the taxpayer's Federal income tax return or information return for the taxable year in which the specified clean hydrogen production facility is placed in service. The taxpayer must also attach a statement to its Form 3468, or any successor form(s), filed with its Federal income tax return or information return that includes the information required by the instructions to Form 3468, or any successor form(s), for each specified clean hydrogen production facility subject to an election. A separate election must be made for each specified clean hydrogen production facility that meets the requirements provided in section 48(a)(15) to treat the qualified property that is part of the facility as energy property. If any taxpayer owning an interest in a specified clean hydrogen production facility makes an election under section 48(a)(15)(C)(ii)(II) with respect to the specified clean hydrogen production facility, then that election is binding on all taxpayers that directly or indirectly own an interest in the specified clean hydrogen production facility.

(2) Special rule for partnerships and S corporations. In the case of a specified clean hydrogen production facility owned by a partnership or an S corporation, the election under section 48(a)(15)(C)(ii)(II) is made by the partnership or S corporation and is binding on all ultimate credit claimants (as defined in § 1.50-1(b)(3)(ii)). The partnership or S corporation must file a Form 3468, or any successor form(s), with its partnership or S corporation return for the taxable year in which the specified clean hydrogen production facility is placed in service to indicate that it is making the election, and attach a statement that includes all the information required by the instructions to Form 3468, or any successor form(s), for each specified clean hydrogen production facility subject to the election. The ultimate credit claimant must claim the section 48 credit on a completed Form 3468, or any successor form(s), and file such form on a timely filed (including extensions) Federal income tax return for the taxable year in which the ultimate credit claimant's distributive share or pro rata share of the section 48 credit is taken into account under section 706(a) of the Code or section 1366(a) of the Code, respectively. The partnership or S corporation making the election must provide the ultimate credit claimants with the necessary information to complete Form 3468, or any successor form(s), to claim the section 48 credit.

(3) Election irrevocable. The election to treat qualified property that is part of a specified clean hydrogen production facility as energy property is irrevocable.

(4) Election availability date. The election to treat qualified property that is part of a specified clean hydrogen production facility as energy property is available for property placed in service after December 31, 2022. In the case of any property placed in service after December 31, 2022, for which construction began before January 1, 2023, the election under section 48(a)(15)(C)(ii)(II) applies only to the extent of the basis of such property that is attributable to construction, reconstruction, or erection occurring after December 31, 2022.

(5) Beginning of construction safe harbor—(i) In general. A taxpayer may, in its discretion, make an irrevocable election effective for the remaining taxable years within the period described in paragraph (f)(3) of this section, to treat the latest version of 45VH2-GREET that was publicly available on the date when construction of the specified clean hydrogen facility began as the 45VH2-GREET Model. In the case of a facility owned by a taxpayer that began construction prior to December 26, 2023, such taxpayer may, in its discretion, make an irrevocable election effective for the remaining taxable years within the period described in paragraph (f)(3) of this section, to treat the first publicly-available version of 45VH2-GREET (that is, the version of 45VH2-GREET that was released in December 2023) as the 45VH2-GREET Model. For purposes of this paragraph (d)(5), in the case of a facility that is modified to produce qualified clean hydrogen under section 45V(d)(4) or a facility that is retrofitted in a manner that entitles the facility to a new placed in service date under § 1.45V-6(b), the date when construction of the facility began is the date when construction of such modification or retrofit began. An election under this paragraph (d)(5)(i) relates to the version of 45VH2-GREET and does not alter any other rules provided in this section.

(ii) Time and manner of making election—(A) In general. The taxpayer makes the election described in paragraph (d)(5)(i) of this section with respect to a specified clean hydrogen production facility by attaching a statement to the Form 3468 or any successor form(s). The taxpayer must make the election by no later than the due date for filing its Federal income tax return or information return (including extensions) for the taxable period in which such facility is placed in service.

(B) Special rule for facilities placed in service prior to January 1, 2024. In the case of a taxpayer that places in service a specified clean hydrogen production facility prior to January 1, 2024, the taxpayer must make the election described in paragraph (d)(5)(i) of this section by no later than the period of limitation on filing a claim for credit or refund under section 6511(a) for the taxable period in which such facility is placed in service.

(6) Provisional emissions rate—(i) In general. A taxpayer files a petition with the Secretary for a provisional emissions rate (PER) by following the procedures stated in § 1.45V-4(c)(3) through (5), except, in lieu of attaching the PER petition to the Form 7210 in the first taxable year of production as specified in § 1.45V-4(c)(3), the taxpayer must attach the PER petition to the Form 3468, or a successor form(s), attached to the taxpayer's Federal income tax return for the taxable year in which the specified clean hydrogen production facility is originally placed in service. A taxpayer may use such PER to calculate the amount of the section 48 credit with respect to a specified clean hydrogen production facility, provided—

(A) The lifecycle GHG emissions rate of the hydrogen produced at the specified clean hydrogen production facility has not been determined (for purposes of section 45V(c)(2)(C)) under the 45VH2-GREET Model;

(B) There are no material changes to the information about the taxpayer's hydrogen production process from the information provided to the DOE to obtain an emissions value pursuant to § 1.45V-4(c)(5); and

(C) All other requirements of section 48(a)(15) are met.

(ii) Material change. For purposes of paragraph (d)(6)(i)(B), a material change means any change that would cause a qualified verifier (as defined in § 1.45V-5(h)) to be unable to complete a verification under paragraph (e) of this section.

(iii) Subsequent inclusion safe harbor—(A) In general. The taxpayer may, in its discretion, make an irrevocable election, effective for the remaining taxable years within the period described in paragraph (f)(3) of this section, to treat the first version of 45VH2-GREET that includes the taxpayer's specified clean hydrogen production facility's hydrogen production pathway, as described in § 1.45V-4(c)(2)(i), as the 45VH2-GREET Model.

(B) Time and manner of making election. The taxpayer makes the election described in paragraph (d)(6)(iii) of this section with respect to a specified clean hydrogen production facility by attaching a statement to the Form 3468 or any successor form(s). The taxpayer must make the election by no later than the due date for filing its Federal income tax return or information return (including extensions) for the taxable period in which such facility is placed in service.

(C) Special rule for facilities placed in service prior to January 1, 2024. In the case of a taxpayer that places in service a specified clean hydrogen production facility prior to January 1, 2024, the taxpayer must make the election described in paragraph (d)(6)(iii)(A) of this section by no later than the close of the period of limitation for filing a claim for credit or refund under section 6511(a) for the taxable period in which such facility is placed in service.

(iv) Special rule for facilities that receive an emissions value prior to the beginning of construction. Notwithstanding the requirement of paragraph (d)(6)(i)(A) of this section, a taxpayer who received an emissions value from the DOE with respect to a specified clean hydrogen production facility (pursuant to § 1.45V-4(c)(5)) before the date when construction of the facility began, may, in its discretion, continue to use the PER determined by the Secretary and the associated emissions value to calculate the lifecycle GHG emissions rate of the hydrogen produced at the specified clean hydrogen production facility for the remainder of the period described in paragraph (f)(3) of this section, provided that the taxpayer continues to satisfy the requirements of paragraphs (d)(6)(i)(B) and (C) of this section.

(v) Not an examination of books and records. The Secretary's PER determination is not an examination or inspection of books of account for purposes of section 7605(b) of the Code and does not preclude or impede the IRS (under section 7605(b) or any administrative provisions adopted by the IRS) from later examining a return or inspecting books or records with respect to any taxable year for which the section 48 credit is claimed. For example, the annual verification report submitted under section 48(a)(15)(C)(iii) and paragraph (e)(2) of this section and any information, representations, or other data provided to the DOE in support of the request for an emissions value are still subject to examination. Further, a PER determination does not signify that the IRS has determined that the requirements of section 48(a)(15), including the cross-references to section 45V, have been satisfied for any taxable year.

(e) Third-party verification—(1) In general. In the case of a taxpayer that makes an election under section 48(a)(15)(C)(ii)(II) to treat any qualified property that is part of a specified clean hydrogen production facility as energy property for purposes of the section 48 credit, the taxpayer must obtain an annual verification report for the taxable year in which the election under section 48(a)(15)(C)(ii)(II) is made for the facility and for each taxable year thereafter during the recapture period specified in paragraph (f)(3) of this section. The taxpayer must also submit the annual verification report as an attachment to the Form 3468, or any successor form(s), for the taxable year in which the election under section 48(a)(15)(C)(ii)(II) is made for the facility.

(2) Annual verification report—(i) In general. For purposes of paragraph (e)(1) of this section, the annual verification report must be signed under penalties of perjury by a qualified verifier (as defined in § 1.45V-5(h)) and contain an attestation providing all of the following—

(A) The information specified in § 1.45V-5(b) and (d) through (h);

(B) A statement attesting to the lifecycle GHG emissions rate of the hydrogen produced through a process (determined under section 45V(c) and § 1.45V-4), or the weighted average of the lifecycle GHG emissions rate of the hydrogen produced through processes, by which all hydrogen was produced at the specified clean hydrogen production facility for the taxable year to which the annual verification report relates and that the operation, during such taxable year, of the specified clean hydrogen production facility, and any qualifying energy attribute certificates applied pursuant to § 1.45V-4(d) for the purpose of accounting for such facility's emissions, are accurately reflected in the data that the taxpayer entered into the 45VH2-GREET Model (as defined in § 1.45V-1(a)(9)(ii)) (or that the taxpayer provided to the Department of Energy (DOE) in support of the taxpayer's request for an emissions value), to determine the lifecycle GHG emissions rate of the hydrogen undergoing verification; and

(C) A statement attesting that the facility produced hydrogen through a process or processes that results in a lifecycle GHG emissions rate that is consistent with, or lower than, the lifecycle GHG emissions rate of the hydrogen that such facility was designed and expected to produce.

(ii) Inconsistent lifecycle GHG emissions. In the event the facility produces hydrogen through a process (or processes) that results in a lifecycle GHG emissions rate that is greater than the lifecycle GHG emissions rate that such facility was designed and expected to produce (and thus the qualified verifier cannot provide the attestation specified in paragraph (e)(2)(i)(C) of this section), resulting in a reduced energy percentage under section 48(a)(15)(A)(ii) with respect to such facility, an emissions tier recapture event under paragraph (f)(2) of this section will occur.

(iii) Designed and expected to produce. Hydrogen that the facility was designed and expected to produce means hydrogen specified in paragraph (c)(2) of this section.

(iv) Timely annual verification report. The annual verification report must be signed and dated by the qualified verifier no later than the due date, including extensions, of the Federal income tax return for the taxable year in which the hydrogen undergoing verification was produced.

(v) Records retention. In addition to the recordkeeping requirements set forth in paragraph (g) of this section, the taxpayer must retain the annual verification report for at least six years after the due date, with extensions, for filing the Federal income tax return for the taxable year in which the hydrogen undergoing verification was produced.

(f) Recapture—(1) In general. Pursuant to of section 48(a)(15)(E), in any taxable year of the recapture period specified in paragraph (f)(3) of this section in which an emissions tier recapture event (as defined in paragraph (f)(2) of this section) occurs, the tax imposed on the taxpayer under chapter 1 of the Code for the taxable year of the emissions tier recapture event is increased by the recapture amount specified in paragraph (f)(4) of this section.

(2) Emissions tier recapture event. For purposes of paragraph (f)(1) of this section, an emissions tier recapture event is any of the following occurrences—

(i) The taxpayer fails to obtain an annual verification report by the deadline for filing its Federal income tax return or information return (including extensions) for any taxable year in which an annual verification report is required under paragraph (e)(1) of this section;

(ii) The specified clean hydrogen production facility actually produced hydrogen through a process (or processes) that results in a lifecycle GHG emissions rate that can only support a lower energy percentage than the energy percentage used to calculate the amount of the section 48 credit for the facility for the taxable year in which the facility is placed in service; or

(iii) The specified clean hydrogen production facility actually produced hydrogen through a process (or processes) that results in a lifecycle GHG emissions rate of greater than 4 kilograms of CO2e per kilogram of hydrogen.

(3) Recapture period. For purposes of paragraph (f) of this section, the recapture period begins on the first day of the taxable year after the taxable year in which the facility was placed in service and ends on the close of the fifth taxable year following the close of the taxable year in which the facility was placed in service.

(4) Recapture amount—(i) In general. In the case of an emissions tier recapture event under paragraph (f)(2) of this section, the recapture amount for the taxable year in which the emissions tier recapture event occurred is equal to 20 percent of the excess of the section 48 credit allowed to the taxpayer for the specified clean hydrogen production facility for the taxable year in which the facility was placed in service, over the section 48 credit that would have been allowed to the taxpayer for the facility if the taxpayer had used the energy percentage supported by the actual production to calculate the amount of the section 48 credit.

(ii) Carrybacks and carryovers. In the case of any emissions tier recapture event described in paragraph (f)(2) of this section, the carrybacks and carryovers under section 39 must be adjusted by reason of the emissions tier recapture event.

(iii) Recapture amount in case of recapture events under paragraph (f)(2)(i) or (iii) of this section. For purposes of paragraph (f)(4)(i) of this section, in the case of an emissions tier recapture event under paragraph (f)(2)(i) or (iii) of this section, the amount of the section 48 credit that would have been allowed to the taxpayer for the specified clean hydrogen production facility if the taxpayer had used the energy percentage supported by the actual production is zero. Accordingly, the recapture amount in the taxable year of an emissions tier recapture event under paragraph (f)(2)(i) or (iii) of this section, is 20 percent of the section 48 credit allowed to the taxpayer for such specified clean hydrogen production facility.

(5) Example. The following example illustrates the application of paragraphs (f)(1) through (4) of this section.

(i) Facts. On June 1, 2024, Taxpayer, a calendar-year taxpayer, originally places in service Facility X, a specified clean hydrogen production facility. At such time, Taxpayer's basis in qualified property that is part of Facility X is $100,000,000. In the taxable year in which Facility X was originally placed in service (taxable year 2024), Facility X produces qualified clean hydrogen through a process that results in a lifecycle GHG emissions rate of 0.44kg of CO2e per kilogram of hydrogen. Taxpayer submits with its 2024 Federal income tax return an annual verification report attesting that, for the taxable year 2024, Facility X produced hydrogen through a process that resulted in a lifecycle GHG emissions rate of 0.44kg of CO2e per kilogram of hydrogen, which is consistent with the lifecycle GHG emissions rate of the hydrogen that the facility was designed and expected to produce. Taxpayer makes a valid election under section 48(a)(15)(C)(ii)(II) with respect to Facility X on its Federal income tax return for the taxable year 2024. In the first year of the recapture period (taxable year 2025), Taxpayer fails to obtain an annual verification report by the deadline (including extensions) for filing its 2025 Federal income tax return. In the second year of the recapture period (taxable year 2026), Facility X produces qualified clean hydrogen through a process that results in a lifecycle GHG emissions rate of 1.4kg of CO2e per kilogram of hydrogen and obtains an annual verification report attesting to such lifecycle GHG emissions rate. In the third, fourth, and fifth years of the recapture period (taxable years 2027, 2028, and 2029), Facility X produces qualified clean hydrogen through a process that results in a lifecycle GHG emissions rate of 0.44kg of CO2e per kilogram of hydrogen and obtains an annual verification report attesting to such lifecycle GHG emissions rate, and attesting that such lifecycle GHG emissions rate is consistent with the lifecycle GHG emissions rate of the hydrogen that the facility was designed and expected to produce, by the deadline (including extensions) for filing its 2027, 2028, and 2029 Federal income tax returns, respectively.

(ii) Analysis. Facility X is designed and reasonably expected to produce hydrogen through a process that results in a lifecycle GHG emissions rate of 0.44kg of CO2e per kilogram of hydrogen, which is the rate specified in Taxpayer's annual verification report submitted with Taxpayer's Federal income tax return for the taxable year in which the election under section 48(a)(15)(C)(ii)(II) with respect to Facility X was made. Under paragraph (c)(1)(iv) of this section, Facility X's energy percentage is therefore 6 percent. For the taxable year 2024, the year in which Taxpayer places in service Facility X, Taxpayer claims a section 48 credit for its basis in qualified property that is part of Facility X in the amount of $6,000,000 (6 percent of $100,000,000). In taxable year 2025 there is an emissions tier recapture event under paragraph (f)(2)(i) of this section because Taxpayer failed to obtain an annual verification report. Under paragraph (f)(4)(i) of this section, the amount of the section 48 credit recaptured in 2025 is $1,200,000. This reflects 20 percent of the section 48 credit allowed ($6,000,000) for Facility X. In taxable year 2026, there is an emissions tier recapture event under paragraph (f)(2)(ii) of this section because Facility X produced hydrogen through a process that resulted in a lifecycle GHG emissions rate that could only support an energy percentage of 2 percent, which is lower than the energy percentage used to calculate the amount of the section 48 credit for Facility X. Under paragraph (f)(4)(i) of this section, the amount of the section 48 credit recaptured in 2026 is $800,000. This reflects 20 percent of the difference between the amount of the section 48 credit allowed ($6,000,000) and the amount of the section 48 credit that would have been allowed for Facility X if Taxpayer had used the energy percentage supported by the actual production ($2,000,000). There is no emissions tier recapture event in taxable years 2027, 2028, or 2029 because, in those years, Facility X produced hydrogen through a process that resulted in a lifecycle GHG emissions rate that was consistent with the lifecycle GHG emissions rate of the hydrogen that Facility X was designed and expected to produce, and Taxpayer obtained an annual verification report attesting to such by the deadline (with extensions) for filing its Federal income tax return for each of those taxable years.

(6) Coordination with sections 50(a) and 48(a)(10)(C) of the Code—(i) In general. In each taxable year of the recapture period specified in paragraph (f)(3) of this section for any credit allowed under section 48 with respect to a specified clean hydrogen production facility, the recapture rules, if applicable, apply in the following order:

(A) Section 50(a);

(B) Section 48(a)(10)(C), as provided in § 1.48-13; and

(C) Section 48(a)(15)(E).

(ii) The following examples illustrate the application of paragraph (f)(6) of this section.

(A) Example 1—(1) Facts. The facts are the same as in paragraph (f)(5)(i) of this section (Example), except that, in addition to failing to obtain an annual verification report by the deadline (including extensions) for filing its 2025 Federal income tax return, on August 1, 2025, Taxpayer disposes of Facility X. Taxpayer has not been allowed any other credits under section 38.

(2) Analysis. For taxable year 2025, under section 50(a)(1)(B)(ii), because the period of time between when Facility X was placed in service is more than 1, but less than 2 full years, the applicable recapture percentage is 80 percent. Taxpayer has an increase in tax for taxable year 2025 under section 50(a) of $4,800,000 ($6,000,000 aggregate decrease in credit allowed multiplied by 0.80). Under paragraph (f)(6) of this section, because the credit was recaptured under section 50(a), no further amounts would be recaptured under either section 48(a)(10)(C) (had Taxpayer claimed the increased credit amount under section 48(a)(9)) or section 48(a)(15)(E) (on account of Taxpayer's failure to obtain an annual verification report).

(B) Example 2—(1) Facts. The facts are the same as in paragraph (f)(5)(i) of this section (Example), except that, in taxable year 2025, Facility X produces qualified clean hydrogen through a process that results in a lifecycle GHG emissions rate of 1.4 kilograms of CO2e per kilogram of hydrogen and obtains an annual verification report attesting to such lifecycle GHG emissions rate. On August 1, 2026, Taxpayer disposes of Facility X. Taxpayer has not been allowed any other credits under section 38.

(2) Analysis. In taxable year 2025, there is an emissions tier recapture event under paragraph (f)(2)(ii) of this section because Facility X produced hydrogen through a process that resulted in a lifecycle GHG emissions rate that could only support an energy percentage of 2 percent, which is lower than the energy percentage used to calculate the amount of the section 48 credit for Facility X. Under paragraph (f)(4)(i) of this section, the amount of the section 48 credit recaptured in 2025 is $800,000. In taxable year 2026, under section 50(a)(1)(B)(iii), because the period of time between when Facility X was placed in service is more than 2, but less than 3 full years, the applicable recapture percentage is 60 percent. Taxpayer has an increase in tax under section 50(a) of $3,120,000 ($5,200,000 aggregate decrease in credit allowed ($6,000,000 credit allowed minus $800,000 amount recaptured under paragraph (f)(2)(ii) of this section in taxable year 2025) multiplied by 0.60).

(g) Recordkeeping. Consistent with section 6001 of the Code, a taxpayer making the election under section 48(a)(15)(C)(ii)(II) with respect to a specified clean hydrogen production facility must maintain and preserve records sufficient to establish the amount of the section 48 credit claimed by the taxpayer. At a minimum, those records include the annual verification report required under paragraph (e)(2) of this section, records to substantiate the information required to be included in the annual verification report, records establishing that the facility meets the definition of a specified clean hydrogen production facility under section 48(a)(15)(C) and paragraph (b) of this section, records of past credit claims under section 45Q by any taxpayer with respect to carbon capture equipment included at the facility, and records establishing the date the specified clean hydrogen production facility was placed in service. If the increased section 48 credit amount was allowed under section 48(a)(9), then the taxpayer must also maintain records in accordance with § 1.45-12. Taxpayers must also retain all raw data used for submission of a request for an emissions value to the DOE for at least six years after the due date (including extensions) for filing the Federal income tax return or information return to which the provisional emissions rate (PER) (as defined in § 1.45V-4(c)(1)) petition is ultimately attached.

(h) Applicability date. This section applies to taxable years beginning after December 26, 2023.

26 C.F.R. § 1.48-14 26 C.F.R. § 1.48-2

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