§ 1.48-15. Election to treat clean hydrogen production facility as energy property.

¶(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.

¶(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—

¶(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—

¶(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—

¶(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.

¶(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—

¶(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.

¶(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.

¶(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.

¶(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.

¶(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:

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