Code of Federal Regulations · Section

§ 1.48E-2 — e-2 Qualified Investments In Qualified Facilities And Est For Purposes Of Section 48e

26 C.F.R. § 1.48E-2

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(a) Qualified investment with respect to a qualified facility—(1) In general. A qualified investment of a taxpayer for a taxable year with respect to a qualified facility is the total basis amount for the taxable year with respect to the qualified facility.

(2) Total basis amount. The total basis amount is the sum of:

(i) The basis of any qualified property that is a part of the qualified facility and that is placed in service by the taxpayer during the taxable year; plus

(ii) The amount of any expenditures paid or incurred by the taxpayer for qualified interconnection property (as defined in section § 1.48E-4(a)(2)) in connection with a qualified facility which has a maximum net output of not greater than five megawatts (as measured in alternating current), that was placed in service during the taxable year of the taxpayer, and that are properly chargeable to the capital account.

(b) Qualified facility—(1) In general. A qualified facility is a facility that:

(i) Is used for the generation of electricity, meaning that it is a net generator of electricity taking into account any electricity consumed by the facility;

(ii) Is placed in service by the taxpayer after December 31, 2024; and

(iii) Has an anticipated greenhouse gas emissions rate of not greater than zero (as determined under the rules provided in § 1.48E-5).

(2) Placed in service—(i) In general. A qualified facility is considered placed in service in the earlier of:

(A) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such qualified facility begins; or

(B) The taxable year in which the qualified facility is placed in a condition or state of readiness and availability to produce electricity, whether in a trade or business or in the production of income. A qualified facility in a condition or state of readiness and availability to produce electricity includes, but is not limited to, components of property that are acquired and set aside during the taxable year for use as replacements for a particular qualified facility (or facilities) in order to avoid operational time loss and equipment that is acquired for a specifically assigned function and is operational but is undergoing testing to eliminate any defects. However, components of property acquired to be used in the construction of a qualified facility are not considered in a condition or state of readiness and availability for a specifically assigned function.

(ii) Qualified facility subject to § 1.48-4 election to treat lessee as purchaser. Notwithstanding paragraph (b)(2)(i) of this section, a qualified facility with respect to which an election is made under section 50(d)(5) of the Code and § 1.48-4 to treat the lessee as having purchased such qualified facility is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee.

(c) Qualified property—(1) In general. For purposes of this paragraph (c), the term qualified property means all property owned by the taxpayer that meets all of the requirements of paragraphs (c)(1)(i) through (iii) of this section:

(i) The property is tangible personal property (as defined in paragraph (e)(1) of this section) or other tangible property (as defined in paragraph (e)(2) of this section) but only if such other tangible property is used as an integral part of the qualified facility;

(ii) Depreciation (or amortization in lieu of depreciation) is allowable (as defined in paragraph (e)(3) of this section) with respect to the property; and

(iii) Either—

(A) The construction, reconstruction, or erection of the property is completed by the taxpayer (as defined in paragraph (e)(4) of this section) with respect to the property; or

(B) The taxpayer acquires the property (as defined in paragraph (e)(5) of this section) and the original use of the property (as defined in paragraph (e)(6) of this section) commences with the taxpayer.

(2) Location of property. Any component of qualified property that otherwise satisfies the requirements of this paragraph (c) is part of a qualified facility regardless of where such component is located.

(d) Property included in qualified facility—(1) In general. A qualified facility includes a unit of a qualified facility (as defined in paragraph (d)(2) of this section) owned by the taxpayer. A qualified facility also includes components of qualified property owned by the taxpayer that are an integral part (as defined in paragraph (d)(3) of this section) of the qualified facility. Any component of qualified property that meets the requirements of this paragraph (d) is part of a qualified facility regardless of where such component of qualified property is located. A qualified facility does not include any electrical transmission equipment, such as electrical transmission lines and towers, or any equipment beyond the electrical transmission stage. See § 1.48E-4(b) regarding the Incremental Production Rule and § 1.48E-4(c) for rules regarding a retrofitted qualified facility (80/20 rule).

(2) Unit of a qualified facility—(i) In general. For purposes of the section 48E credit, a unit of a qualified facility includes all functionally interdependent components of property (as defined in paragraph (d)(2)(ii) of this section) owned by the taxpayer that are operated together and that can operate apart from other property to produce electricity. No provision of this section, § 1.48E-1, or §§ 1.48E-3 through 1.48E-5 uses the term unit in respect of a qualified facility with any meaning other than that provided in this paragraph (d)(2)(i).

(ii) Functionally interdependent. Components of property are functionally interdependent if the placing in service of each of the components is dependent upon the placing in service of the other components to generate electricity.

(3) Integral part—(i) In general. For purposes of the section 48E credit, a component of property owned by a taxpayer is an integral part of a qualified facility if it is used directly in the intended function of the qualified facility and is essential to the completeness of such function. Property that is an integral part of a qualified facility is part of the qualified facility. A taxpayer may not claim the section 48E credit for any property not owned by the taxpayer that is an integral part of the qualified facility owned by the taxpayer.

(ii) Power conditioning and transfer equipment. Power conditioning equipment and transfer equipment are integral parts of a qualified facility. Power conditioning equipment includes, but is not limited to, transformers, inverters and converters, which modify the characteristics of electricity into a form suitable for use, transmission, or distribution. Parts related to the functioning or protection of power conditioning equipment are also treated as power conditioning equipment and include, but are not limited to, switches, circuit breakers, arrestors, and hardware used to monitor, operate, and protect power conditioning equipment. Transfer equipment includes components of property that allow for the aggregation of electricity generated by a qualified facility and components of property that alter voltage to permit electricity to be transferred to a transmission or distribution line. Transfer equipment does not include transmission or distribution lines. Examples of transfer equipment include, but are not limited to, wires, cables, and combiner boxes that conduct electricity. Parts related to the functioning or protection of transfer equipment are also treated as transfer equipment and may include items such as current transformers used for metering, electrical interrupters (such as circuit breakers fuses, and other switches) and hardware used to monitor, operate, and protect transfer equipment.

(iii) Roads. Roads that are integral to the intended function of the qualified facility such as onsite roads that are used to operate and maintain the qualified facility are an integral part of a qualified facility. Roads used primarily to access 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.

(iv) Fences. Fencing is not an integral part of a qualified facility because it is not integral to the intended function of the qualified facility.

(v) Buildings. Generally, buildings are not integral parts of a qualified facility because they are not integral to the intended function of the qualified facility. For purposes of section 48E, a structure that is essentially an item of machinery or equipment is not considered a building. In addition, a structure is not a building if it houses components of property that are integral to the intended function of the qualified facility and 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.

(vi) Shared integral property. Multiple qualified facilities (whether owned by one or more taxpayers), including qualified facilities with respect to which a taxpayer has claimed a credit under section 48E or another Federal income tax credit, may include shared property that may be considered an integral part of each qualified facility so long as the cost basis for the shared property is properly allocated to each qualified facility and the taxpayer only claims a section 48E credit with respect to the portion of the cost basis properly allocable to a qualified facility for which the taxpayer is claiming a section 48E credit. The total cost basis of such shared property divided among the qualified facilities may not exceed 100 percent of the cost of such shared property. In addition, a component of property that is shared by a qualified facility as defined by section 48E(b)(3) (48E Qualified Facility) and a qualified facility as defined in section 45Y(b) (45Y Qualified Facility) that is an integral part of both qualified facilities will not affect the eligibility of the 48E Qualified Facility for the section 48E credit or the 45Y Qualified Facility for the section 45Y credit.

(vii) Examples. This paragraph (d)(3)(vii) provides examples illustrating the rules of this paragraph (d).

(A) Example 1. Co-located qualified facilities owned by the same taxpayer that share integral property. X constructs and owns a solar facility (Solar Facility) and nearby also constructs and owns a wind facility (Wind Facility) that are each a qualified facility. The Solar Facility and Wind Facility each connect to a shared transformer that steps up the electricity produced by each qualified facilities to electrical grid voltage before it is transmitted to the electrical grid through an intertie. X assigns 50% of the cost of the shared transformer to the Solar Facility and the Wind Facility, respectively. The fact that the Solar Facility and Wind Facility share property that is integral to both does not impact the ability of X to claim a section 48E credit for both qualified facilities. When X places the qualified facilities in service, 50% of the cost of the transformer is included in X's basis in each of the qualified facilities for purposes of computing the section 48E credit.

(B) Example 2. Co-located qualified facilities owned by different taxpayers that share integral property. X constructs and owns a solar facility (Solar Facility), and nearby Y constructs and owns a wind facility (Wind Facility) that are each a qualified facility. The Solar Facility and the Wind Facility both connect to a shared transformer that steps up the electricity produced by both qualified facilities to electrical grid voltage before it is transmitted to the electrical grid through an intertie. X and Y each pay 50% of the cost of the shared transformer. The fact that the Solar Facility and Wind Facility share property that is integral to both does not impact the ability of X or Y to claim a section 48E credit for their respective qualified facilities. When X and Y place their respective qualified facilities in service, 50% of the cost of the transformer is included in X's and Y's basis in their respective qualified facilities for purposes of computing the section 48E credit.

(C) Example 3. Co-located qualified facility and Energy Storage Technology (EST) owned by the same taxpayer. X constructs and owns a wind facility (Wind Facility) that is co-located with an EST that X also constructs and owns. The Wind Facility and EST share transfer equipment that is integral to both. X assigns 50% of the cost of the shared transfer equipment to the Wind Facility and 50% of the cost to the EST. The fact that the Wind Facility and EST share property that is integral to both does not impact the ability of X to claim a section 48E credit for the Wind Facility and the EST. X may include 50% of the cost of the transfer equipment in its basis to determine a section 48E credit for the Wind Facility and the EST.

(D) Example 4. Co-located qualified facility and Energy Storage Technology owned by different taxpayers. X constructs and owns a solar facility that is a qualified facility (Solar Facility) and is co-located with an EST constructed and owned by Y. The Solar Facility and EST share transfer equipment that is integral to both. X and Y each incur 50% of the cost of the transfer equipment. The fact that the Solar Facility and EST share property that is integral to both does not impact the ability of X to claim a section 48E credit for the Solar Facility or Y to claim a section 48E credit for the EST. When X and Y place in service the Solar Facility and EST, for purposes of computing the section 48E credit, 50% of the cost of the transfer equipment is included in X's basis in the Solar Facility and 50% of the cost is included in Y's basis in the EST.

(E) Example 5. Qualified facility with integral property owned by a different taxpayer. X constructs and owns a hydropower production facility that is a qualified facility (Hydropower Facility). The Hydropower Facility connects to a dam owned by Y, a government entity, that is an integral part of the Hydropower Facility. X pays for upkeep of the dam. The fact that X does not own the dam does not impact the ability of X to claim a section 48E credit for the Hydropower Facility. When X places in service the Hydropower Facility, for purposes of computing the section 48E credit, the cost incurred by X related to the dam would not be included in X's basis in the Qualified Facility because X does not own the dam.

(e) Definitions related to requirements for qualified property—(1) Tangible personal property. The term tangible personal property means any tangible property except land or improvements thereto, such as buildings or other inherently permanent structures (including items that are structural components of such buildings or structures. Tangible personal property includes all property (other than structural components) that is contained in or attached to a building. Further, all property that is in the nature of machinery (other than structural components of a building or other inherently permanent structure) is considered tangible personal property even though located outside a building. Machinery located outside of a building is qualified property if it is used for the generation of electricity and the components of machinery are functionally interdependent. Local law does not control whether property is tangible property or is tangible personal property for purposes of the section 48E credit. Thus, tangible property may be tangible personal property for purposes of the section 48E credit even though under local law the property is considered a fixture and therefore is real property under local law.

(2) Other tangible property. The term other tangible property means tangible property other than tangible personal property (not including a building and its structural components) that is used as an integral part of furnishing electricity by a person engaged in a trade or business of furnishing any such service. Other tangible property may be tangible property for purposes of the section 48E credit even though under local law the property is considered a fixture and is therefore real property under local law.

(3) Depreciation allowable—(i) In general. For purposes of applying paragraph (c) of this section, depreciation (or amortization in lieu of depreciation) (collectively, depreciation) is allowable with respect to the property if such property is of a character subject to the allowance for depreciation under section 167 of the Code and the basis or cost of such property is recovered using a method of depreciation (for example, the straight line method), which includes any additional first year depreciation deduction method of depreciation (for example, under section 168(k) of the Code). Further, if an adjustment with respect to the Federal income tax or Federal return, as appropriate, for such taxable year requires the basis or cost of such qualified property to be recovered using a method of depreciation, depreciation is allowable to the taxpayer with respect to the qualified property.

(ii) Exclusions from allowable. For purposes of paragraph (c) of this section, depreciation is not allowable with respect to a qualified facility if the basis or cost of such qualified facility is not recovered through a method of depreciation but, instead, such basis or cost is recovered through a deduction of the full basis or cost of the qualified facility in one taxable year (for example, under section 179 of the Code).

(4) Construction, reconstruction, or erection of the property. The term construction, reconstruction, or erection of the property means work performed to construct, reconstruct, or erect property either by the taxpayer or for the taxpayer in accordance with the taxpayer's specifications.

(5) Acquisition of qualified property. The term acquisition of qualified property means a transaction by which a taxpayer acquires the rights and obligations to establish tax ownership of the property for Federal tax purposes.

(6) Original use of the property. The term original use of the property means the first use to which the unit of property is put, whether or not such use is by the taxpayer.

(7) Retrofitted qualified facility. A retrofitted qualified facility acquired by the taxpayer will not be treated as being put to original use by the taxpayer unless the rules in § 1.48E-4(c) regarding retrofitted qualified facilities (80/20 Rule) apply. The question of whether a qualified facility meets the 80/20 Rule is a facts and circumstances determination.

(f) Coordination with other credits—(1) In general. The term qualified facility (as defined in section 48E(b)(3)) and paragraph (b) of this section does not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 45Y, 48, or 48A is allowed under section 38 of the Code for the taxable year or any prior taxable year. A taxpayer that directly owns a qualified facility (as defined in section 48E(b)(3)) for which the taxpayer is eligible for both a section 48E credit and another Federal income tax credit is eligible for the section 48E credit only if the other Federal income tax credit was not allowed to the taxpayer with respect to the qualified facility. Nothing in this paragraph (f) precludes a taxpayer from claiming a section 48E credit with respect to a qualified facility (as defined in section 48E(b)(3)) that is co-located with another facility for which a credit determined under section 45, 45J, 45Q, 45U, 45Y, 48, or 48A is allowed under section 38 of the Code for the taxable year or any prior taxable year.

(2) Allowed. For purposes of this paragraph (f), the term allowed only includes credits that taxpayers have claimed on a Federal income tax return or Federal return, as appropriate, and that the Internal Revenue Service (IRS) has not challenged in terms of the taxpayer's eligibility.

(3) Examples. This paragraph (f)(3) provides examples illustrating the rules provided in this paragraph (f).

(i) Example 1. Taxpayer claims a section 45Y credit on a solar farm and section 48E credit on co-located Energy Storage Technology. X owns a solar farm that is a qualifying facility (as defined in § 1.45Y-2(a)) (Solar Qualified Facility), and a co-located EST (Energy Storage). The Energy Storage is not part of the Solar Qualified Facility, and therefore X may claim the section 45Y credit based on the kWh of electricity produced by the Solar Qualified Facility, and X may also claim the section 48E credit based on its qualified investment in the Energy Storage.

(ii) Example 2. Different taxpayers claim a section 45Y credit for a solar farm and a co-located Energy Storage Technology. X owns a solar farm that is a qualifying facility (as defined in § 1.45Y-2(a)) (Solar Qualified Facility), and Y owns a co-located EST (Energy Storage). The Energy Storage is not part of the Solar Qualified Facility, and therefore, X may claim the section 45Y credit based on the kWh of electricity produced by the Solar Qualified Facility, and Y may claim the section 48E credit based on its qualified investment in the Energy Storage.

(iii) Example 3. Taxpayer claiming a section 48E credit; another credit is not allowed. X owns a wind facility that satisfies the requirements of a qualified facility under section 48E as well as the requirements of a qualified facility as defined in § 1.45Y-2(a) under section 45Y. X claims a section 45Y credit with respect to the wind facility. While a credit may be available with regard to the wind facility under section 48E, because X has already claimed a section 45Y credit with respect to the wind facility, a section 48E credit is not allowed. Local law is not controlling for purposes of determining whether property is or is not tangible property or tangible personal property. Thus, tangible property may be personal property for purposes of the energy credit even though under local law the property is considered a fixture and therefore real property.

(iv) Example 4. Interaction of section 48E and section 45Q credits for single qualified facility. X owns a qualified facility (Facility A) that includes carbon capture equipment, which is needed for the facility to meet the zero greenhouse gas requirement, so it is functionally interdependent to the production of electricity by the Facility A. X uses the carbon capture equipment to capture and utilize (as described in section 45Q(f)(5)) qualified carbon dioxide and claimed a section 45Q credit in the current taxable year. As a result, X cannot claim a section 48E credit for its 48E Facility A because a qualified facility does not include a facility for which a credit determined under section 45Q is allowed.

(v) Example 5. Interaction of section 48E and section 45Q credits for co-located qualified facilities. Assume the same facts as in paragraph (f)(3)(iv) of this section (Example 4), except that X owns a co-located qualified facility (Facility B) that also includes carbon capture equipment, which is needed for the facility to meet the zero greenhouse gas requirement, so it is functionally interdependent to the production of electricity by the Facility B. X uses the carbon capture equipment to capture and utilize (as described in section 45Q(f)(5)) qualified carbon dioxide, but does not claim a section 45Q credit with respect to the Facility B. While X claimed a section 45Q credit in the current taxable year for the Facility A (see Example 4), the Facility B is not part of the Facility A, and, therefore, X may claim the section 48E credit for its Facility B.

(g) EST—(1) Property included in EST. An EST includes a unit of energy storage technology (unit of EST) (as defined in paragraph (g)(2) of this section) that meets the requirements of paragraph (g)(2)(ii) of this section. An EST also includes property owned by the taxpayer that is an integral part (as defined in paragraph (g)(3) of this section) of the EST. An EST does not include equipment that is an addition or modification to an existing EST. For purposes of the section 48E credit, EST includes electrical energy storage property (as described in paragraph (g)(6)(i) of this section), thermal energy storage property (as described in paragraph (g)(6)(ii) of this section), and hydrogen energy storage property (as described in paragraph (g)(6)(iii) of this section).

(2) Unit of EST—(i) In general. For purposes of the section 48E credit, a unit of EST includes all functionally interdependent components of property (as defined in paragraph (g)(2)(ii) of this section) owned by the taxpayer that are operated together and that can operate apart from other property to perform the intended function of the EST. No provision of this section, § 1.48E-1, or §§ 1.48E-3 through 1.48E-5 uses the term unit in respect of an EST with any meaning other than that provided in this paragraph (g)(2)(i).

(ii) Functionally interdependent. Components of property are functionally interdependent if the placing in service of each of the components is dependent upon the placing in service of each of the other components to perform the intended function of the EST.

(3) Integral part. For purposes of the section 48E credit, property owned by a taxpayer is an integral part of an EST owned by the same taxpayer if it is used directly in the intended function of the EST and is essential to the completeness of such function. Property that is an integral part of an EST is part of that EST. A taxpayer may not claim the section 48E credit for any property not owned by the taxpayer that is an integral part of EST owned by the taxpayer.

(4) Qualified investment with respect to EST. The qualified investment with respect to any EST for any taxable year is the basis of any EST placed in service by the taxpayer during such taxable year.

(5) Placed in service—(i) In general. An EST is considered placed in service in the earlier of:

(A) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such EST begins; or

(B) The taxable year in which the EST is placed in a condition or state of readiness and availability for the intended function of the EST, whether in a trade or business or in the production of income. An EST in a condition or state of readiness and availability for its intended function includes, but is not limited to, components of property that are acquired and set aside during the taxable year for use as replacements for a particular EST (or ESTs) in order to avoid operational time loss and equipment that is acquired for a specifically assigned function and is operational but is undergoing testing to eliminate any defects. However, components of property acquired to be used in the construction of an EST are not considered in a condition or state of readiness and availability for a specifically assigned function.

(ii) EST subject to § 1.48-4 election to treat lessee as purchaser. Notwithstanding paragraph (g)(5)(i) of this section, EST with respect to which an election is made under section 50(d)(5) of the Code and § 1.48-4 to treat the lessee as having purchased such EST is considered placed in service by the lessor in the taxable year in which possession is transferred to such lessee.

(6) Types of EST—(i) Electrical energy storage property. Electrical energy storage property is 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, and has a nameplate capacity of not less than 5 kWh. For example, subject to the exclusion for property primarily used in the transportation of goods or individuals, electrical energy storage property includes but is not limited to rechargeable electrochemical batteries of all types (such as lithium-ion, vanadium redox flow, sodium sulfur, and lead-acid); ultracapacitors; physical storage such as pumped storage hydropower, compressed air storage, flywheels; and reversible fuel cells.

(ii) Thermal energy storage property—(A) In general. Thermal energy storage property is property comprising a system that is directly connected to a heating, ventilation, or air conditioning (HVAC) 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. Thermal energy storage property includes equipment and materials, and parts related to the functioning of such equipment, to store thermal energy for later use to heat or cool, or to provide hot water for use in heating a residential or commercial building. It does not include property that transforms other forms of energy into heat in the first instance. Property that “removes heat from, or adds heat to, a storage medium for subsequent use” is property that is designed with the particular purpose of substantially altering the time profile of when heat added to or removed from the thermal storage medium can be used for heating or cooling of the interior of a residential or commercial building. Paragraph (g)(6)(ii)(B) of this section provides a safe harbor for determining whether a thermal energy storage property has such a purpose. Thermal energy storage property does not include a swimming pool, combined heat and power system property (as defined in section 45Y(g)(2)), or a building or its structural components. For example, thermal energy storage property includes, but is not limited to, a system that adds heat to bricks heated to high temperatures that later use this stored energy to heat a building through the HVAC system; thermal ice storage systems that use electricity to run a refrigeration cycle to produce ice that is later connected to the HVAC system as an exchange medium for air conditioning a building, heat pump systems that store thermal energy in an underground tank, an artificial pit, an aqueous solution, a borehole field, or a solid-liquid phase change material to be extracted for later use for heating and/or cooling; and air-to-water heat pump systems with a water storage tank. However, consistent with § 1.48-14(d), if thermal energy storage property, such as a heat pump system, includes equipment, such as a heat pump, that also serves a purpose in an HVAC system that is installed in connection with the thermal energy storage property, the taxpayer's qualified investment with respect to the thermal energy storage property includes the total cost of the thermal energy storage property and HVAC system less the cost of an HVAC system without thermal storage capacity that would meet the same functional heating or cooling needs as the heat pump system with a storage medium, other than time shifting of heating or cooling. See § 1.48-14(h) for application of the Incremental Cost Rule.

(B) Safe harbor. A thermal energy storage property will be deemed to have the purpose of substantially altering the time profile of when heat added to or removed from the thermal storage medium can be used to heat or cool the interior of a residential or commercial building if that thermal energy storage property is capable of storing energy that is sufficient to provide heating or cooling of the interior of a residential or commercial building for a minimum of one hour.

(iii) Hydrogen energy storage property. Hydrogen energy storage property is property (other than property primarily used in the transportation of goods or individuals and not for the production of electricity) that stores hydrogen and has a nameplate capacity of not less than 5 kWh, equivalent to 0.127 kg of hydrogen or 52.7 standard cubic feet (scf) of hydrogen. Hydrogen energy storage property includes, but is not limited to, above ground storage tanks, underground storage facilities, and associated compressors. Property that is an integral part of hydrogen energy storage property includes, but is not limited to, hydrogen liquefaction equipment and gathering and distribution lines within a hydrogen energy storage property.

(7) Modification of EST. With respect to an electrical energy storage property or a hydrogen energy storage property, modified as set forth in this paragraph (g)(7), such property will be treated as an electrical energy storage property (as described in paragraph (g)(6)(i) of this section) or a hydrogen energy storage property (as described in paragraph (g)(6)(iii) of this section), except that the basis of any existing electrical energy storage property or hydrogen energy storage property prior to such modification is not taken into account for purposes of this paragraph (g)(7) and section 48E. This paragraph (g)(7) applies to any electrical energy storage property and hydrogen energy storage property that either:

(i) Was placed in service before August 16, 2022, and would be described in section 48(c)(6)(A)(i), except that such property had a nameplate capacity of less than 5 kWh and is modified in a manner that such property (after such modification) has a nameplate capacity of not less than 5 kWh; or

(ii) Is described in section 48(c)(6)(A)(i) and is modified in a manner that such property (after such modification) has an increase in nameplate capacity of not less than 5 kWh. The increase in nameplate capacity is equal to the difference between nameplate capacity immediately after the modification and nameplate capacity immediately prior to the modification.

(h) Applicability date. This section applies to qualified facilities and EST placed in service after December 31, 2024, and during a taxable year ending on or after January 15, 2025.

26 C.F.R. § 1.48E-1 26 C.F.R. § 1.48E-3

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