Internal Revenue Bulletin 2023-52 (PDF rendition): IRS Notices

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Bulletin No. 2023–52
December 26, 2023
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Rev. Proc. 2023-39, page 1590.
This revenue procedure provides specifications for the pri-
vate printing of red-ink and black-and-white substitutes for
the August 2023 revisions of Forms W-2c and W-3c. This
revenue procedure will be produced as the next revision of
Publication 1223. Rev. Proc. 2016-20, 2016-13 IRB dated
March 28, 2016, is superseded.
EMPLOYEE PLANS
Notice 2023-79, page 1581.
This notice sets forth the 2023 Required Amendments List
(2023 RA List). The 2023 RA List applies to both indi-
vidually designed plans qualified under section 401(a) of
the Internal Revenue Code (qualified individually designed
plans) and individually designed plans that satisfy the
requirements of section 403(b) (section 403(b) individually
designed plans).
EXEMPT ORGANIZATIONS
Announcement 2023-35, page 1615.
Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(c).
INCOME TAX
Notice 2023-80, page 1583.
This notice announces that Treasury and the IRS intend to
issue proposed regulations to address the application of the
foreign tax credit and related rules and the dual consolidated
loss (DCL) rules to certain types of taxes described in the
GloBE Model Rules. This notice also extends and modifies
the temporary relief described in Notice 2023-55 for deter-
mining whether a foreign tax is eligible for a foreign tax credit
under §§ 901 and 903.
REG-132569-17, page 1616.
This document contains proposed regulations that would
amend the regulations relating to the energy credit for the
taxable year in which eligible energy property is placed in
service. This document also withdraws and reproposes, for
additional clarity, portions of previously proposed regulations
regarding the increased energy credit amount available if pre-
vailing wage and registered apprenticeship requirements are
met.
Rev. Proc. 2023-41, page 1607.
The revenue procedure sets forth the unpaid loss discount
factors for the 2023 accident year for purposes of section
846 of the Internal Revenue Code. The revenue procedure
also prescribes the salvage discount factors for the 2023
accident year, which must be used to compute discounted
estimated salvage recoverable under section 832 of the
Internal Revenue Code.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
December 26, 2023 Bulletin No. 2023–52

Part III
2023 Required
Amendments List
for Individually
Designed Qualified and
Section 403(b) Plans
Notice 2023-79
I. PURPOSE
This notice sets forth the 2023 Required
Amendments List (2023 RA List). The
Required Amendments List (RA List)
applies to both individually designed
plans qualified under section 401(a) of
the Internal Revenue Code (Code) (qual-
ified individually designed plans) and
individually designed plans that satisfy
the requirements of section 403(b) (sec-
tion 403(b) individually designed plans).
Pursuant to sections 5.03(1)(c) and
6.01 of Rev. Proc. 2022-40, 2022-47 IRB
487, December 31, 2025, generally is
both the last day of the remedial amend-
ment period and the plan amendment
deadline with respect to (1) a disqual-
ifying provision arising as a result of a
change in qualification requirements that
appears on the 2023 RA List, and (2) a
form defect arising as a result of a change
in section 403(b) requirements that
appears on the 2023 RA List. Later dates
may apply to a governmental plan within
the meaning of section 414(d) pursuant
to section 5.03(2)(c) of Rev. Proc. 2022-
40. References to qualification require-
ments and to section 403(b) requirements
in Parts III and IV of this notice are
referred to, separately and collectively,
as “requirements.”
1
II. BACKGROUND
Section 401(b) of the Code provides
a remedial amendment period during
which a plan may be amended retroac-
tively to comply with the qualification
requirements under section 401(a). Treas.
Reg. § 1.401(b)-1 describes the disqual-
ifying provisions that may be amended
retroactively and the remedial amendment
period during which retroactive amend-
ments may be adopted. That regulation
also grants the Commissioner of Internal
Revenue the discretion to designate cer-
tain plan provisions as disqualifying
provisions and to extend the remedial
amendment period in guidance published
in the Internal Revenue Bulletin (IRB).
Section 5 of Rev. Proc. 2019-39,
2019-42 IRB 945, as modified by section
III.B.2(e) of Notice 2020-35, 2020-25
IRB 948, establishes a system of recur-
ring remedial amendment periods for
section 403(b) individually designed plan
form defects first occurring after June 30,
2020.
Section 5.03(1)(c) of Rev. Proc. 2022-
40 provides generally that, except as other-
wise provided by statute or in regulations
or other guidance published in the IRB, in
the case of an individually designed qual-
ified or section 403(b) plan that is not a
governmental plan within the meaning of
section 414(d), the remedial amendment
period for (1) a disqualifying provision or
(2) a form defect first occurring after June
30, 2020, that arises as a result of a change
in qualification requirements or sec-
tion 403(b) requirements, as applicable,
expires on the last day of the second cal-
endar year that begins after the issuance of
the RA List on which the change in qual-
ification requirements or section 403(b)
requirements appears. Section 5.03(2)(c)
provides a special rule for governmental
plans that may further extend the remedial
amendment period in some cases.
Section 6.01 of Rev. Proc. 2022-40 pro-
vides that the plan amendment deadline
with respect to (1) a disqualifying provi-
sion in a qualified individually designed
plan, or (2) a form defect first occurring
after June 30, 2020, in a section 403(b)
individually designed plan is the date on
which the remedial amendment period
expires in accordance with section 5 of
Rev. Proc. 2022-40 with respect to that
disqualifying provision or form defect.
Section 7 of Rev. Proc. 2022-40 pro-
vides that the Department of the Treasury
(Treasury Department) and the IRS pub-
lish an annual RA List. In general, a change
in qualification requirements or section
403(b) requirements will not appear on
an RA List until guidance with respect to
that change (including, any model amend-
ment, if applicable) has been provided in
regulations or in other guidance published
in the IRB. However, in the discretion
of the Treasury Department and the IRS,
a change in qualification requirements
or section 403(b) requirements may be
included on an RA List in other circum-
stances, such as in cases in which a stat-
utory change is enacted and the Treasury
Department and the IRS anticipate that no
guidance will be issued.
The remedial amendment period
applicable to a disqualifying provision
or form defect arising as a result of a
change in qualification requirements
or section 403(b) requirements may be
extended beyond the date that normally
would apply to an item included on an
RA List, if, for example, a statute, regu-
lation, or other guidance published in the
IRB provides for a later deadline. Section
501 of the SECURE 2.0 Act
2
provides, in
general, that a retirement plan or annuity
contract will be treated as being operated
in accordance with the terms of the plan
during a specified period and, except
as provided by the Secretary of the
Treasury (or the Secretary’s delegate),
a retirement plan will not fail to satisfy
the anti-cutback requirements of section
411(d)(6) of the Code or section 204(g)
of the Employee Retirement Income
Security Act of 1974, Pub. L. 93-406,
88 Stat. 829, as amended (ERISA), by
reason of a plan amendment made pur-
suant to any amendment made by the
SECURE 2.0 Act or pursuant to any
regulation issued by the Secretary of the
1
In order to help plan sponsors achieve operational compliance with changes in requirements, the IRS provides the Operational Compliance List, which is a list of changes in both qualification
requirements and section 403(b) requirements that are effective during a calendar year, on the IRS website at https://www.irs.gov/retirement-plans/operational-compliance-list. See generally
section 8 of Rev. Proc. 2022-40.
2
Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117-328, 136 Stat. 4459 (2022), known as the SECURE 2.0 Act of 2022 (SECURE 2.0 Act).
Bulletin No. 2023–52 1581 December 26, 2023

Treasury or the Secretary of Labor (or a
delegate of either such Secretary) under
the SECURE 2.0 Act, provided that:
(1) the amendment is adopted no later
than the last day of the first plan year
beginning on or after January 1, 2025, or,
for an applicable collectively bargained
plan (a plan maintained pursuant to one
or more collective bargaining agreements
between employee representatives and
one or more employers ratified before
December 29, 2022), or for a govern-
mental plan (within the meaning of sec-
tion 414(d) of the Code), the last day of
the first plan year beginning on or after
January 1, 2027, or such later date as the
Secretary may prescribe (the section 501
date);
(2) the amendment applies retroac-
tively to the effective date of the SECURE
2.0 Act provision or the regulations there-
under (or, in the case of an amendment not
required by a provision of the SECURE
2.0 Act or the regulations thereunder, the
effective date specified by the plan); and
(3) the plan or contract is operated as
if the amendment were in effect during
the period beginning on the effective date
of the SECURE 2.0 Act provision or the
regulations thereunder (or, in the case of
an amendment not required by a provision
of the SECURE 2.0 Act or the regulations
thereunder, the effective date specified by
the plan or contract) and ending on the
section 501 date or, if earlier, the date the
amendment is adopted.
Section 501(c) of the SECURE 2.0 Act
modifies section 601(b)(1) of the Setting
Every Community Up for Retirement
Enhancement Act of 2019 (SECURE
Act),
3
sections 2202(c)(2)(A) and 2203(c)
(2)(B)(i) of the Coronavirus Aid, Relief,
and Economic Security Act, and section
302(d)(2)(A) of Title III of the Taxpayer
Certainty and Disaster Tax Relief Act of
2020
4
to extend plan amendment dead-
lines with respect to these sections to coor-
dinate with the plan amendment deadlines
under section 501 of the SECURE 2.0 Act,
as applicable.
5
III. CONTENT AND
ORGANIZATION OF RA LIST
In general, an RA List includes statu-
tory and administrative changes in require-
ments that are first effective during the
plan year in which the list is published.
6

However, an RA List does not include:
• Guidance issued or legislation enacted
after the list has been prepared;
• Statutory changes in requirements
for which the Treasury Department
and the IRS expect to issue guidance
that would be included on an RA List
issued in a future year;
• Changes in requirements that permit
(but do not require) optional plan
provisions, in contrast to changes
in requirements that cause existing
plan provisions (which may include
optional plan provisions previously
adopted) to become disqualifying
provisions or section 403(b) form
defects;
7
or
• Changes in the tax laws affect-
ing qualified individually designed
plans or section 403(b) individually
designed plans that do not change the
requirements (such as changes to the
tax treatment of plan distributions, or
changes to the funding requirements
for qualified individually designed
plans).
The RA List is divided into two parts.
Part A covers changes in requirements that
generally would require an amendment to
most plans or to most plans of the type
affected by the change.
Part B includes changes in requirements
that the Treasury Department and the IRS
anticipate will not require amendments to
most plans but might require an amend-
ment because of an unusual plan provi-
sion in a particular plan. For example, if a
change affects a particular requirement that
most plans incorporate by reference, Part B
would include that change because a partic-
ular plan might not incorporate the require-
ment by reference and, thus, might include
language inconsistent with the change.
Annual, monthly, or other periodic
changes to (1) the various dollar lim-
its that are adjusted for cost of living
increases as provided in section 415(d)
or other Code provisions, (2) the spot
segment rates used to determine the
applicable interest rate under sec-
tion 417(e)(3), and (3) the applicable
mortality table under section 417(e)
(3), are treated as included on the RA
List for the year in which such changes
are effective even though they are not
directly referenced on that RA List. The
Treasury Department and the IRS antic-
ipate that few plans have language that
will need to be amended on account of
these changes.
The fact that a change in a requirement
is included on the RA List does not neces-
sarily mean that a plan must be amended
as a result of that change. Each plan spon-
sor must determine whether a particu-
lar change in a requirement requires an
amendment to its plan.
IV. 2023 REQUIRED AMENDMENTS
LIST
Part A. Changes in requirements that gen-
erally would require an amend-
ment to most plans or to most
plans of the type affected by the
change.
• None
Part B. Other changes in requirements
that may require an amendment.
• None
V. DRAFTING INFORMATION
The principal author of this notice
is Tom Morgan of the Office of
Associate Chief Counsel (Employee
Benefits, Exempt Organizations, and
Employment Taxes). For further infor-
mation regarding this notice, contact
Mr. Morgan at (202) 317-6700 (not a
toll-free number).
3
Division O of the Further Consolidated Appropriations Act, 2020, Pub. L. 116-94, 133 Stat. 2534 (2019).
4
Division EE of the Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134 Stat. 1182 (2020).
5
Section G of Notice 2020-68, 2020-38 IRB 567, extended the deadline to amend a plan to reflect section 104 of Division M of the Further Consolidated Appropriations Act, known as the
Bipartisan American Miners Act of 2019, to coordinate with the plan amendment deadlines provided in section 601 of the SECURE Act.
6
RA Lists also may include changes in requirements that were first effective in a prior year that were not included on a prior RA List under certain circumstances, such as changes in require-
ments that were issued or enacted after the prior year’s RA List was prepared.
7
The remedial amendment period and plan amendment deadline for discretionary changes to the terms of an individually designed qualified or section 403(b) plan are governed by sections
5.03(1)(b), 5.03(2)(b), and 6.02 of Rev. Proc. 2022-40. These deadlines for discretionary changes are not affected by the inclusion of a change in requirements on an RA List.
December 26, 2023 1582 Bulletin No. 2023–52

Bulletin No. 2023–52 1583 December 26, 2023
Guidance Regarding the
Foreign Tax Credit and
Dual Consolidated Losses
in Relation to the GloBE
Model Rules, and Extension
and Modification of
Temporary Relief in Notice
2023-55
Notice 2023-80
SECTION 1. OVERVIEW
.01 Purpose.
This notice announces that the
Department of the Treasury (Treasury
Department) and the Internal Revenue
Service (IRS) intend to issue proposed
regulations under §§ 59(l), 78, 704, 901,
903, 951A, 954, 960, and 1503(d) of the
Internal Revenue Code (Code)
1
to address
the application of those provisions, includ-
ing the foreign tax credit rules and the dual
consolidated loss rules, to certain types of
taxes described in the “Tax Challenges
Arising from the Digitalisation of the
Economy - Global Anti-Base Erosion
Model Rules (Pillar Two)” (GloBE Model
Rules).
2
The Treasury Department and the
IRS anticipate that the proposed regula-
tions will be consistent with the guidance
provided in sections 2 and 3 of this notice.
This notice also extends the relief
period for the temporary relief described
in Notice 2023-55 in determining whether
a foreign tax is eligible for a foreign tax
credit under §§ 901 and 903. In addition,
this notice addresses the application of the
temporary relief with respect to partner-
ships and their partners.
.02 Overview of the GloBE Model
Rules.
The GloBE Model Rules create a
coordinated system of minimum taxa-
tion intended to ensure that Multinational
Enterprise Groups (MNE Groups) with
annual revenue of EUR 750 million or
more pay a minimum level of tax on the
income arising in each jurisdiction in
which they operate.
3
Certain jurisdictions
have enacted, and others have proposed,
legislation to implement the GloBE Model
Rules for the IIR and Qualified Domestic
Minimum Top-up Tax (QDMTT), effec-
tive for Fiscal Years beginning on or after
December 31, 2023, and for the UTPR,
effective for Fiscal Years beginning on
or after December 31, 2024.
4
This notice
does not provide guidance regarding the
UTPR, except as provided in sections
2.03 and 3.03 of this notice. The Treasury
Department and the IRS continue to ana-
lyze issues related to the UTPR and intend
to issue additional guidance.
Under the GloBE Model Rules, an
in-scope MNE Group must calculate its
Effective Tax Rate (ETR) for each juris-
diction in which it operates. The ETR
determination for a jurisdiction involves
calculating the Net GloBE Income in that
jurisdiction, based on the net income or
loss reflected on financial statements with
certain adjustments, and Adjusted Covered
Taxes, which is a measure of taxes paid
with respect to that income (including,
when computing the ETR for the IIR or
UTPR, cross-border taxes such as those
imposed on income of a controlled for-
eign corporation (CFC) or foreign branch
located in the jurisdiction). If the ETR for
a jurisdiction is below the 15% Minimum
Rate, Top-up Tax may be imposed and col-
lected under the QDMTT, IIR, and UTPR.
The amount of Top-up Tax is determined
by multiplying the Top-up Tax Percentage
(the excess of 15% over the ETR in the
jurisdiction) by the Excess Profits (the
Net GloBE Income in such jurisdiction
that exceeds a Substance-based Income
Exclusion).
A jurisdiction that enacts a QDMTT
will collect tax with respect to low-taxed
income in that jurisdiction. Any Top-up
Tax not collected under a QDMTT may
be collected under the IIR or UTPR.
Jurisdictions enacting the QDMTT, IIR,
and UTPR into their domestic law may
separately enact each such tax or may
amend their existing corporate income
tax.
The GloBE Model Rules operate so
that taxes are imposed on Net GloBE
Income in the following order of priority:
(1) Covered Taxes (other than Controlled
Foreign Company Tax Regimes (CFC Tax
Regimes) and certain cross-border taxes);
(2) QDMTT; (3) CFC Tax Regimes and
certain other cross-border taxes; (4) IIR;
and (5) UTPR. Thus, for example, a
QDMTT is computed without regard to
taxes paid pursuant to a CFC Tax Regime.
SECTION 2. GLOBE MODEL RULES
AND THE FOREIGN TAX CREDIT
.01 Background.
Section 901 generally allows a credit
for the amount of any income, war prof-
its, and excess profits taxes (collectively,
foreign income taxes) paid or accrued
during the taxable year to any foreign
country or to any territory of the United
States, and in the case of a domestic cor-
poration, the taxes deemed to have been
paid under § 960. Section 903 provides
that foreign income taxes include a tax
paid in lieu of a generally-imposed for-
eign income tax.
This section 2 describes rules that
would address the treatment of cer-
tain taxes, including IIRs, UTPRs, and
QDMTTs, under §§ 59(l), 78, 275, 704,
901, 903, 951A, 954, and 960. For pur-
poses of section 2 of this notice, the term
IIR, the term UTPR, and the term QDMTT
mean a tax imposed under a foreign tax
law
5
that is consistent with the IIR, UTPR,
and QDMTT, respectively, described in
the GloBE Model Rules.
.02 Final Top-up Tax.
(1) In general. The Treasury
Department and the IRS intend to issue
proposed regulations consistent with the
guidance provided in this section 2.02,
which describes the treatment of final
top-up taxes under §§ 59(l), 78, 275, 704,
901, 903, 951A, 954, and 960.
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
2
Org. for Econ. Coop. & Dev. [OECD], Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) (Dec. 14, 2021), https://www.
oecd-ilibrary.org/taxation/tax-challenges-arising-from-digitalisation-of-the-economy-global-anti-base-erosion-model-rules-pillar-two_782bac33-en.
3
Capitalized terms used in this notice, but not defined herein, have the meanings ascribed to such terms under the GloBE Model Rules.
4
Under the European Union (EU) Directive requiring the adoption of the GloBE Model Rules, EU Member States will apply the UTPR for years beginning on or after December 31, 2023
but only in limited circumstances. See Council Directive 2022/2523, art. 50, 2022 OJ (L 328) 1, 55.
5
The term “foreign tax law” in this notice has the meaning in § 1.901-2(g)(4).

December 26, 2023 1584 Bulletin No. 2023–52
(2) Definition of final top-up tax. A
foreign income tax (tested tax) is a final
top-up tax if, in computing the tested tax,
the foreign tax law takes into account: (a)
the amount of tax imposed on the direct or
indirect owners of the entity subject to the
tested tax by other countries (including the
United States) with respect to the income
subject to the tested tax, or (b) in the case
of an entity subject to the tested tax on
income attributable to its branch in the
foreign country imposing the tested tax,
the amount of tax imposed on the entity
by its country of residence with respect to
such income.
(3) Treatment of a final top-up tax
under §§ 901 and 59(l). No credit is
allowed under §§ 901 or 59(l) to a person
for a final top-up tax if, under the foreign
tax law, any amount of United States
federal income tax liability of the person
would be taken into account in comput-
ing the final top-up tax (without regard
to whether the person has any amount of
United States federal income tax liability
that, in fact, is taken into account in such
computation).
(4) Treatment of a final top-up tax paid
by a partnership or CFC. In general, a
final top-up tax is treated as if it were a
creditable tax at the partnership and CFC
level, with the disallowance of the credit
pursuant to section 2.02(3) of this notice
applying at the level of the partner or U.S.
shareholder, as applicable. This treatment
is intended to facilitate appropriate results
where a final top-up tax is creditable as
to one partner or U.S. shareholder of a
partnership or CFC, as applicable, but not
as to another. Further, a final top-up tax
is not taken into account in determining
whether the high-tax exception to foreign
base company income in § 1.954-1(d) or
the high-tax exclusion from tested income
in § 1.951A-2(c)(7) applies.
(a) Creditable foreign tax expenditure.
A final top-up tax is treated as a creditable
foreign tax expenditure under § 1.704-
1(b)(4)(viii)(b).
(b) Eligible current year tax. A final
top-up tax is treated as an eligible current
year tax under § 1.960-1(b)(5).
(c) Application of the high-tax excep-
tions under §§ 951A and 954(b)(4). In
computing the effective rate of foreign
income tax under § 1.954-1(d)(2) and
§ 1.951A-2(c)(7)(vi), a final top-up tax
is excluded from the amount of foreign
income taxes described in § 1.954-1(d)
(2)(i) and § 1.951A-2(c)(7)(vi)(A), and
increases the amount of the net item of
income described in § 1.951-1(d)(2)(ii)
and the amount of the tentative tested
income item described in § 1.951A-2(c)
(7)(vi)(B), as applicable.
(5) Application of §§ 78 and 275(a)(4).
If a taxpayer chooses with respect to any
taxable year to claim a credit for foreign
income taxes, absent a specific statutory
provision to the contrary (such as § 901(j)
(3)), the gross-up rule of § 78 and the
deduction disallowance rule of § 275(a)
(4) apply to any foreign income tax paid
or accrued in such taxable year regardless
of whether a foreign tax credit is allowed
for the particular tax. The guidance in this
section would confirm that result in the
case of a final top-up tax, such as an IIR
that is a foreign income tax. As a result,
a taxpayer who chooses to credit foreign
income taxes would be required to include
in gross income under § 78 an amount
equal to the amount of a final top-up tax
deemed paid by the taxpayer under §§
960(a), (b), and (d), and would not be able
to claim a deduction for a final top-up tax
under § 275(a)(4).
(a) Section 78 gross-up amount. Section
78 applies to a final top-up tax deemed paid
by a domestic corporation that chooses to
have the benefits of subpart A of part III of
subchapter N for any taxable year.
(b) Section 275(a)(4) deduction dis-
allowance. Section 275 applies to deny
a deduction for a final top-up tax to any
person that chooses to take to any extent
the benefits of § 901.
(6) Examples. The following examples
illustrate the application of this section
2.02.
(a) Example 1—IIR that is a foreign income tax.
(i) Facts. Country X imposes an IIR on certain
entities resident in Country X. The IIR imposed
by Country X is a foreign income tax within the
meaning of § 1.901-2(a) and (b). Under Country
X tax law, in computing the amount of the IIR,
the foreign tax liability of the direct and indirect
owners of the Country X taxpayers that relates to
income subject to the IIR is taken into account if
those owners are part of the same MNE Group (as
defined under Country X tax law) as the Country X
taxpayers. USP is a domestic corporation that owns
all the stock of CFCX, a CFC that is organized in,
and is a tax resident of, Country X. CFCX owns all
the stock of CFCY, a CFC that is organized in, and
is a tax resident of, Country Y. Under Country X
tax law, USP is considered part of the same MNE
Group as CFCX and CFCY, and, therefore, any
U.S. tax liability of USP that relates to income sub-
ject to the IIR is taken into account in computing
the IIR. In 2024, CFCX is liable for 5u (units of
Country X currency) of the Country X IIR. At all
relevant times, 1u = $1. USP is deemed to pay $4 of
the Country X IIR under § 960(d). USP chooses to
credit foreign income taxes for 2024.
(ii) Analysis. The Country X IIR is a final top-up
tax because it is a foreign income tax that takes into
account the amount of tax imposed by other coun-
tries on the direct or indirect owners of the entity
subject to the Country X IIR with respect to the
income subject to the Country X IIR. No credit is
allowed under § 901 to USP for the $4 of Country
X IIR that USP is deemed to pay because, under
Country X tax law, USP’s U.S. federal income tax
liability may be taken into account in computing
the Country X IIR. This result does not depend on
whether USP has any amount of U.S. federal income
tax liability or whether any of that liability is, in fact,
taken into account in computing the Country X IIR.
The amount included in USP’s income by reason of
§ 78 and § 1.78-1(a) is $5.
(b) Example 2—Minority U.S. shareholder.
(i) Facts. The facts are the same as in Example 1,
except that: (i) USP and USM, a domestic corpora-
tion, own 70% and 30%, respectively, of the stock of
HoldCo, a CFC that is organized in, and is a tax res-
ident of, Country A, and HoldCo owns all the stock
of CFCX, (ii) USM is not considered part of the
same MNE Group as USP, CFCX and CFCY under
Country X tax law, (iii) CFCX is liable for 6.5u of
the Country X IIR, and (iv) under § 960(d), USP is
deemed to pay $3.64 of the Country X IIR, and USM
is deemed to pay $1.56 of the Country X IIR.
(ii) Analysis. Similar to the analysis in Example
1, the Country X IIR is a final top-up tax, and no
credit is allowed under § 901 to USP for the $3.64 of
Country X IIR that USP is deemed to pay because,
under Country X tax law, USP’s U.S. federal income
tax liability may be taken into account in computing
the Country X IIR. USM, however, may be allowed a
credit under § 901 for the $1.56 of the Country X IIR
that USM is deemed to pay under § 960(d) because,
under Country X tax law, no amount of USM’s U.S.
federal income tax liability can be taken into account
in computing the Country X IIR as USM is not
considered part of the same MNE Group as CFCX.
Under § 78 and § 1.78-1(a), the amount included in
USP’s income is $4.55, and the amount included in
USM’s income is $1.95.
(c) Example 3—QDMTT that is a foreign income
tax.
(i) Facts. The facts are the same as in Example
1, except that Country Y imposes a QDMTT. The
QDMTT imposed by Country Y is a foreign income
tax within the meaning of § 1.901-2(a) and (b).
Under Country Y tax law, in computing the amount
of the QDMTT, the foreign tax liability of direct and
indirect owners of the entity subject to the QDMTT
is not taken into account. Therefore, any U.S. tax lia-
bility of USP is not taken into account in computing
the QDMTT. In 2024, CFCX is liable for no amount
of Country X IIR, and CFCY is liable for 10y (units
of Country Y currency) of Country Y QDMTT. At all
relevant times, 1y= $1. USP is deemed to pay $8 of
the Country Y QDMTT under § 960(d).

Bulletin No. 2023–52 1585 December 26, 2023
(ii) Analysis. The Country Y QDMTT is not
a final top-up tax because Country Y tax law does
not take into account in computing the Country Y
QDMTT the amount of tax imposed by other coun-
tries on the direct and indirect owners of the entity
subject to the Country Y QDMTT. Therefore, USP
may be allowed a credit under § 901 for the $8 of
Country Y QDMTT deemed paid under § 960(d).
The amount included in USP’s income by reason of
§ 78 and § 1.78-1(a) is $10.
.03 Separate Levy Rules.
(1) In general. The Treasury
Department and the IRS intend to issue
proposed regulations consistent with the
guidance provided in this section 2.03,
which describes how the separate levy
rules of § 1.901-2(d) apply with respect
to an IIR, UTPR, and QDMTT. This treat-
ment would reflect that the amount of tax
imposed under an IIR, UTPR, or QDMTT
is computed separately from any other
levy imposed by a foreign country, and
would ensure consistent treatment of an
IIR, UTPR, and QDMTT regardless of the
manner in which a foreign country enacts
an IIR, UTPR, or QDMTT under its for-
eign tax law.
(2) Application of separate levy rules.
Each of an IIR, UTPR, and QDMTT
imposed by a foreign country is a separate
levy within the meaning of § 1.901-2(d)
from any other levy imposed by that coun-
try, even if the country imposes the IIR,
UTPR, or QDMTT by adjusting the base
of any other levy (such as through an addi-
tion to income or denial of deductions).
.04 Determining the Taxpayer for a
QDMTT.
(1) In general. The Treasury
Department and the IRS intend to issue
proposed regulations consistent with the
guidance provided in this section 2.04,
which describes rules for determining the
person by whom a QDMTT is considered
paid under § 1.901-2(f) when a QDMTT
is computed by reference to the income of
two or more persons.
(2) QDMTT on income of two or more
persons. The legal lability for a QDMTT
imposed on the income of two or more
persons is determined under the rules of
this section 2.04(2) through (4) rather than
under § 1.901-2(f)(3) (regarding taxes
imposed on combined income of two or
more persons). If a QDMTT is computed
by reference to the income of two or more
persons, foreign tax law is considered to
impose legal liability for the QDMTT on
each person in proportion to the person’s
QDMTT Allocation Key, as determined
under this section 2.04(2). A person’s
QDMTT Allocation Key is the product of
(i) the excess (if any) of the QDMTT Rate
over the person’s Separate Pre-QDMTT
ETR, and (ii) the person’s Separate
QDMTT Income (such terms as defined
in section 2.04(3)). If a person’s Separate
QDMTT Income is zero or less than zero,
then the person’s QDMTT Allocation Key
will be treated as zero. The rules of this
section 2.04 apply regardless of how the
foreign tax law allocates the QDMTT lia-
bility among two or more persons, which
person is obligated to remit the tax, which
person actually remits the tax, or which
person the foreign country could proceed
against to collect the tax in the event all or
a portion of the tax is not paid.
(3) Definitions. The following defini-
tions apply for purposes of this section
2.04.
(a) Person. Person means an individ-
ual or an entity (including a disregarded
entity described in § 301.7701-2(c)(2)
(i)) that is subject to a QDMTT imposed
by a foreign country. In determining the
amount of the QDMTT paid by an owner
of a partnership or a disregarded entity,
the rule described in section 2.04(2) first
applies to determine the amount of the
QDMTT paid by the partnership or dis-
regarded entity, and then § 1.901-2(f)(4)
applies to allocate the amount of such
QDMTT to the owner.
(b) QDMTT Rate. QDMTT Rate means
the minimum effective tax rate (ETR), as
stated in the foreign tax law, to which
the actual ETR of a person or persons is
compared for purposes of computing the
QDMTT.
(c) Separate Pre-QDMTT Taxes. A per-
son’s Separate Pre-QDMTT Taxes means
the taxes (whether positive or negative)
of the person that are taken into account
under the foreign tax law for purposes of
computing the QDMTT.
(d) Separate QDMTT Income. A per-
son’s Separate QDMTT Income means the
income or loss of the person that is taken
into account under the foreign tax law for
purposes of computing the QDMTT.
(e) Separate Pre-QDMTT ETR. A per-
son’s Separate Pre-QDMTT ETR means
the person’s Separate Pre-QDMTT Taxes
(whether positive or negative) divided by
the person’s Separate QDMTT Income.
(4) Separate QDMTT Income and
Separate Pre-QDMTT Taxes. A per-
son’s Separate QDMTT Income and a
person’s Separate Pre-QDMTT Taxes
are determined by reference to the rele-
vant amounts (not reduced by negative
amounts attributable to any other person)
provided on any return, schedule or other
document that, under the foreign tax law,
must be filed or maintained for purposes
of the QDMTT. If no return, schedule,
or other document that provides a per-
son’s Separate QDMTT Income and a
person’s Separate Pre-QDMTT Taxes is
required to be filed or maintained, then,
a person’s Separate QDMTT Income and
a person’s Separate Pre-QDMTT Taxes
are determined by reference to the rel-
evant amounts provided in the books of
account regularly maintained by or on
behalf of the person and used for pur-
poses of computing the QDMTT.
(5) Examples. The following examples
illustrate the application of this section
2.04(2) through (4).
(a) Example 1—QDMTT imposed on two or more
persons.
(i) Facts. Country X has enacted a QDMTT.
Under Country X tax law, entities that are resident
in, or have a taxable presence in, Country X and that
are members of the same MNE Group, are jointly
and severally liable for the QDMTT. USP is a United
States person that owns all of the stock of each of
CFC1 and CFC2, each of which is a CFC that is a
tax resident of Country X. CFC1 and CFC2 are
members of the same MNE Group under Country
X tax law. In Year 1, CFC1’s Separate QDMTT
Income is 100u (units of Country X currency) and
CFC1’s Separate Pre-QDMTT Taxes is 5u. In the
same year, CFC2’s Separate QDMTT Income is
50u, and CFC2’s Separate Pre-QDMTT Taxes is 5u.
The QDMTT Rate in Country X is 15%. Country X
imposes 12.5u of QDMTT with respect to CFC1 and
CFC2 collectively.
(ii) Analysis. Under Country X tax law, the
amount of the QDMTT is computed by reference
to the income of both CFC1 and CFC2. Under sec-
tion 2.04(2) through (4) of this notice, the 12.5u of
the Country X QDMTT is allocated between CFC1
and CFC2 in proportion to each person’s QDMTT
Allocation Key. CFC1’s QDMTT Allocation Key
is 10u ((15% - (5u / 100u)) x 100u), and CFC2’s
QDMTT Allocation Key is 2.5u ((15% - (5u / 50u))
x 50u). Accordingly, 10u of the Country X QDMTT
(12.5u x (10u / 12.5u)) is allocated to CFC1, and 2.5u
of the Country X QDMTT (12.5u x (2.5u / 12.5u)) is
allocated to CFC2.
(b) Example 2—Effect of SBIE.
(i) Facts. The facts are the same as in Example
1, except that CFC1 and CFC2 collectively have
15u of Substance-based Income Exclusion (SBIE)
which, under Country X tax law, can reduce an MNE
Group’s QDMTT liability. After taking into account

December 26, 2023 1586 Bulletin No. 2023–52
the SBIE, Country X imposes 11.25u of QDMTT
with respect to CFC1 and CFC2 collectively.
(ii) Analysis. The amount of SBIE (if any), and
the entity to which it may be attributable, is not
taken into account in the calculation of each person’s
QDMTT Allocation Key. The QDMTT Allocation
Key for each of CFC1 (10u) and CFC2 (2.5u) remains
the same as in Example 1 because each of CFC1
and CFC2 has the same Separate QDMTT Income
and Separate Pre-QDMTT Taxes as in Example 1.
Accordingly, 9u of the Country X QDMTT (11.25u
x (10u / 12.5u)) is allocated to CFC1, and 2.25u of
the Country X QDMTT (11.25u x (2.5u / 12.5u)) is
allocated to CFC2.
(c) Example 3—Negative Separate QDMTT
Income.
(i) Facts. The facts are the same as in Example 1,
except that USP also owns all of the stock of CFC3,
which is a CFC that is a tax resident of Country
X. CFC3 is a member of the same MNE Group as
CFC1 and CFC2 under Country X tax law. In Year
1, CFC3’s Separate QDMTT Income is a net loss
of 50u, and its Separate Pre-QDMTT Taxes is zero.
Country X imposes 5u of QDMTT with respect to
CFC1, CFC2, and CFC3 collectively.
(ii) Analysis. Under Country X tax law, the
amount of the QDMTT is computed by reference
to the income of CFC1, CFC2, and CFC3. Under
section 2.04(2) through (4) of this notice, the 5u
of Country X QDMTT is allocated among CFC1,
CFC2, and CFC3 in proportion to each person’s
QDMTT Allocation Key. The QDMTT Allocation
Key for CFC1 (10u) and for CFC2 (2.5u) remain
the same as in Example 1 because they have the
same Separate QDMTT Income and Separate Pre-
QDMTT Taxes as in Example 1. CFC3’s QDMTT
Allocation Key is treated as zero because its Separate
QDMTT Income is less than zero. Accordingly, 4u
of the Country X QDMTT (5u x (10u / 12.5u)) is
allocated to CFC1, 1u of the Country X QDMTT (5u
x (2.5u / 12.5u)) is allocated to CFC2, and none of
the Country X QDMTT (5u x 0u / 12.5u) is allocated
to CFC3.
(d) Example 4—Negative Separate Pre-QDMTT
Taxes.
(i) Facts. The facts are the same as in Example
1, except that: (i) in Year 1, CFC1’s Separate Pre-
QDMTT Taxes is -5u, representing a negative
amount of income tax expense (a tax benefit), and (ii)
Country X imposes 22.5u of QDMTT with respect to
CFC1 and CFC2 collectively.
(ii) Analysis. As in Example 1, under Country
X tax law, the amount of the QDMTT is computed
by reference to the income of both CFC1 and CFC2.
Under section 2.04(2) through (4) of this notice, the
22.5u of Country X QDMTT is allocated between
CFC1 and CFC2 in proportion to each person’s
QDMTT Allocation Key. The QDMTT Allocation
Key for CFC2 (2.5u) remains the same as in
Example 1 because CFC2 has the same Separate
QDMTT Income and Separate Pre-QDMTT Taxes
as in Example 1. However, CFC1’s QDMTT
Allocation Key is now 20u ((15% - (-5u / 100u)) x
100u), reflecting the change in CFC1’s Separate Pre-
QDMTT Taxes. Accordingly, 20u of the Country
X QDMTT (22.5u x (20u / 22.5u)) is allocated to
CFC1, and 2.5u of the Country X QDMTT (22.5u x
(2.5u / 22.5u)) is allocated to CFC2.
.05 The Non-duplication Requirement
for In Lieu of Taxes.
(1) In general. The Treasury
Department and the IRS intend to amend
the non-duplication requirement in §
1.903-1(c)(1)(ii) as described in this sec-
tion 2.05.
(2) Non-duplication requirement. A for-
eign tax, in order to qualify as an in lieu
of tax, need only be in substitution for a
generally-imposed net income tax and
not in substitution for all net income taxes
imposed by that country. Accordingly,
the first sentence of the non-duplication
requirement in § 1.903-1(c)(1)(ii) would
be revised as follows: “The generally-im-
posed net income tax for which the tested
foreign tax is imposed in substitution is not
also imposed, in addition to the tested for-
eign tax, on any persons with respect to any
portion of the income to which the amounts
(such as sales or units of production) that
form the base of the tested foreign tax relate
(the ‘excluded income’).” Conforming
changes to the second sentence of § 1.903-
1(c)(1)(ii) and the examples in § 1.903-1(d)
would be made as appropriate.
(3) Example.
(a) Facts. Country X imposes a net income tax
within the meaning of § 1.901-2(a)(3) on the income
of nonresident companies that is attributable to the
nonresident’s activities within Country X (NRCIT)
and that constitutes a generally-imposed net income
tax. The NRCIT applies to all nonresident corpora-
tions that engage in business in Country X except
for nonresident corporations that engage in activities
related to Industry B, which are instead subject to the
Industry B Tax. The NRCIT and the Industry B Tax
were enacted contemporaneously, and the statutory
language of the NRCIT expressly excludes gross
income derived by corporations engaged in activities
related to Industry B. Country X enacts a QDMTT
that is a net income tax within the meaning of
§ 1.901-2(a)(3). The Country X QDMTT is imposed
with respect to gross income that is also included in
the base of the Industry B Tax.
(b) Analysis. The Industry B Tax meets the
requirement in § 1.903-1(c)(1)(i) because Country X
has a generally-imposed net income tax, the NRCIT.
In addition, the Industry B Tax meets the require-
ment in § 1.903-1(c)(1)(ii), modified as described
in section 2.05(2), because the generally-imposed
net income tax for which the tested foreign tax is
imposed in substitution, the NRCIT, is not also
imposed, in addition to the Industry B Tax, on any
persons with respect to any portion of the income to
which the amounts that form the base of the Industry
B Tax relate (“excluded income”). It is not relevant
that the Country X QDMTT is also imposed on the
excluded income.
(4) Additional changes to § 1.903-1.
The Treasury Department and the IRS are
considering whether additional changes
to § 1.903-1 would be needed to ensure
that foreign taxes continue to be credit-
able only where consistent with the scope
and purposes of § 903. These additional
changes may include defining a general-
ly-imposed net income tax.
.06 Applicability Date and Reliance.
(1) Applicability date. It is anticipated
that the proposed regulations will pro-
vide that rules consistent with the rules
described in section 2 of this notice apply
to taxable years ending after December
11, 2023.
(2) Reliance. A taxpayer may rely on
the guidance described in sections 2.02
through 2.05 of this notice for taxable
years that end after December 11, 2023,
and on or before the date proposed regula-
tions are published in the Federal Register,
provided that the taxpayer consistently
follows the guidance in its entirety for all
those taxable years. Additionally, for tax-
able years that begin on or after December
28, 2021, and end on or before December
11, 2023, a taxpayer may rely on the
guidance described in section 2.05 of this
notice.
SECTION 3. GLOBE MODEL RULES
AND DUAL CONSOLIDATED
LOSSES
.01 Background.
Section 1503(d) and the regulations
thereunder (DCL rules) prevent “double
dipping” of losses, which occurs when
the same economic loss offsets or reduces
both income subject to U.S. tax (but not
a foreign jurisdiction’s tax) and income
subject to the foreign jurisdiction’s tax
(but not U.S. tax). See S. Rep. 313, 99th
Cong., 2d Sess., at 419-20 (1986). A dual
consolidated loss (DCL) is defined as a net
operating loss of a dual resident corpora-
tion and a net loss of a domestic corpora-
tion that is attributable to certain foreign
branches or interests in hybrid entities
(separate units). See § 1.1503(d)-1(b)(5).
Under the DCL rules, a DCL cannot off-
set the income of a domestic affiliate (a
domestic use), subject to certain excep-
tions. See § 1.1503(d)-4(b).
Under one exception, a domestic use
of a DCL is permitted if the taxpayer
makes a domestic use election, which
requires the taxpayer to certify that there

Bulletin No. 2023–52 1587 December 26, 2023
has not been, and will not be, a foreign
use of the DCL. See § 1.1503(d)-6(d)
and § 1.1503(d)-1(b)(20). In general, a
foreign use of a DCL occurs when any
portion of the DCL is made available
under the income tax laws of a foreign
country to offset or reduce, directly or
indirectly, any income that under U.S.
tax principles is income of a foreign cor-
poration or a direct or indirect owner of
certain interests in hybrid entities. See
§ 1.1503(d)-3(a)(1). In the event of a
foreign use (or other triggering event)
during the certification period, the tax-
payer must recapture the DCL as ordi-
nary income and pay an interest charge.
§ 1.1503(d)-6(e)(1). However, among
other exceptions, a foreign use is not con-
sidered to occur if the laws of a foreign
country provide an election that would
enable a foreign use and such election
is not made. § 1.1503(d)-3(c)(2). Under
this domestic use election, a taxpayer
effectively has the choice to put a DCL
to a domestic use or a foreign use (but
not both).
.02 Interaction with GloBE Model
Rules.
Under the GloBE Model Rules, an
MNE Group whose ETR for a jurisdic-
tion is below the 15% Minimum Rate
must compute the amount of Jurisdictional
Top-up Tax owed with respect to the juris-
diction. That Jurisdictional Top-up Tax
is based on, among other factors such as
Adjusted Covered Taxes, the Net GloBE
Income of Constituent Entities within the
jurisdiction. For this purpose, the GloBE
Model Rules take a jurisdictional blend-
ing approach under which all income and
loss of Constituent Entities in the same
jurisdiction are generally aggregated. This
aggregation can be viewed as giving rise to
double dipping concerns that the DCL rules
were intended to address. For example, if,
in determining Net GloBE Income of a
jurisdiction, a loss giving rise to a DCL is
aggregated with items that under U.S. tax
principles are items of a foreign corporation
in that jurisdiction, the loss would be avail-
able to reduce both U.S. tax (if a domes-
tic use election were permitted) and the
Jurisdictional Top-up Tax. These concerns
could exist with respect to a DCL incurred
in a taxable year ending before the time at
which the GloBE Model Rules are antici-
pated to be effective (for instance, a taxable
year ending on December 31, 2023) if tim-
ing differences between U.S. tax law and
applicable financial accounting standards
result in a portion of the loss comprising
the DCL being taken into account as an
expense under the GloBE Model Rules in
a later year.
Additionally, the GloBE Model Rules
include certain features that may differ
from traditional foreign income tax sys-
tems. For example, the GloBE Model
Rules do not include a mechanism through
which a taxpayer can decline aggregation,
with the result that the taxpayer might
effectively be required to put a DCL to a
foreign use (thereby removing what oth-
erwise may have been a choice between a
domestic use and a foreign use). In addi-
tion, a loss may never produce a benefit
under the Jurisdictional Top-up Tax, for
example, if the ETR in the jurisdiction
is at or above the Minimum Rate (with-
out regard to the loss) and the loss is not
carried over in determining Jurisdictional
Top-Up Tax in another year.
Accordingly, the Treasury Department
and the IRS are studying the extent to
which the DCL rules should apply with
respect to the GloBE Model Rules,
including the extent to which aggrega-
tion should result in a foreign use of a
DCL, and the extent to which the GloBE
Model Rules should cause an entity that
is not otherwise subject to an income tax
of a foreign jurisdiction to be a dual resi-
dent corporation or a hybrid entity under
§ 1.1503(d)-1(b)(2) or (3), or should pre-
vent such an entity from being a trans-
parent entity under § 1.1503(d)-1(b)(16).
The Treasury Department and the IRS are
also studying similar issues in the con-
text of other provisions (for example, the
interaction of the anti-hybrid rules under
§§ 245A(e) and 267A with the GloBE
Model Rules).
.03 Treatment of Legacy DCLs.
In the interest of providing certainty
while the Treasury Department and the
IRS develop guidance addressing the inter-
action of the DCL rules with the GloBE
Model Rules, the Treasury Department
and the IRS intend to issue proposed reg-
ulations with respect to DCLs incurred
in (i) taxable years ending on or before
December 31, 2023, or (ii) provided the
taxpayer’s taxable year begins and ends
on the same dates as the Fiscal Year of the
MNE Group that could take into account
as an expense any portion of a deduction
or loss comprising such a DCL, taxable
years beginning before January 1, 2024,
and ending after December 31, 2023
(collectively, legacy DCLs). Under this
proposed rule, a foreign use would not
be considered to occur with respect to a
legacy DCL solely because all or a portion
of the deductions or losses that comprise
the legacy DCL are taken into account in
determining the Net GloBE Income for a
particular jurisdiction. However, this pro-
posed rule would not apply to any DCL
that was incurred or increased with a view
to reducing the Jurisdictional Top-Up
Tax or qualifying for the proposed rule
described in this notice.
.04 Reliance.
Taxpayers may rely on the guidance
described in this section 3 until proposed
regulations are published in the Federal
Register.
SECTION 4. REQUEST FOR
COMMENTS
.01 Comments.
The Treasury Department and the IRS
request comments on the rules described
in sections 2 and 3 of this notice. The
Treasury Department and the IRS spe-
cifically solicit comments on the inter-
action of the DCL rules with the GloBE
Model Rules, including Article 3.2.7
of the GloBE Model Rules (relating to
Intragroup Financing Arrangements).
.02 Procedures for Submitting
Comments.
(1) Deadline. Written comments
should be submitted by February 9, 2024.
Consideration will be given, however,
to any written comment submitted after
February 9, 2024, if such consideration
will not delay the issuance of proposed
regulations.
(2) Form and manner. The subject line
for the comments should include a refer-
ence to Notice 2023-80. All commenters
are strongly encouraged to submit com-
ments electronically. However, comments
may be submitted in one of two ways:
(a) Electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type IRS-2023-0060 in the search
field on the regulations.gov homepage to
find this notice and submit comments); or

December 26, 2023 1588 Bulletin No. 2023–52
(b) By mail to: Internal Revenue
Service, CC:PA:LPD:PR (Notice 2023-
80), Room 5203, P.O. Box 7604, Ben
Franklin Station, Washington, D.C.,
20044.
(3) Publication of comments. The
Treasury Department and the IRS will
publish for public availability any com-
ment submitted electronically and on
paper to its public docket on regulations.
gov.
SECTION 5. EXTENSION AND
MODIFICATION OF TEMPORARY
RELIEF IN NOTICE 2023-55
.01 Background.
On January 4, 2022, the Treasury
Department and the IRS published
Treasury Decision 9959 in the Federal
Register (87 FR 276) (2022 FTC final
regulations), which contained final regu-
lations under §§ 901 and 903. Correcting
amendments to the 2022 FTC final reg-
ulations were published in the Federal
Register on July 27, 2022 (87 FR 45018).
On November 22, 2022, the Treasury
Department and the IRS published pro-
posed regulations (REG-112096-22) in
the Federal Register (87 FR 71271), which
included proposed rules relating to the
cost recovery requirement and the substi-
tution requirement for covered withhold-
ing taxes. On April 17, 2023, the Treasury
Department and the IRS published Notice
2023-31 in the Internal Revenue Bulletin
(IRB 2023-16) relating to proposed §
1.903-1(c)(2)(iii)(B) (the single-country
exception).
On August 7, 2023, the Treasury
Department and the IRS published Notice
2023-55 in the Internal Revenue Bulletin
(IRB 2023-32). Notice 2023-55 provides
temporary relief in determining whether a
foreign tax meets the definition of a foreign
income tax under §§ 901 and 903 for for-
eign taxes paid in any taxable year (a relief
year) beginning on or after December 28,
2021, and ending on or before December
31, 2023 (the relief period), provided that
the taxpayer satisfies certain requirements.
.02 Application of Temporary Relief in
Notice 2023-55 to Partnerships.
The Treasury Department and the IRS
have received questions regarding the
application of the temporary relief pro-
vided in Notice 2023-55 to partnerships,
including whether the partnership or its
partners would apply the temporary relief
with respect to foreign taxes paid or oth-
erwise required to be reported by such
partnership.
6

This section 5.02 provides that, with
respect to foreign taxes paid or otherwise
required to be reported by such partner-
ship,
7
which could include foreign taxes
paid by a CFC (collectively, the part-
nership’s foreign taxes), the partnership
would apply (or not apply) the temporary
relief. However, if, before December 11,
2023, a partnership did not apply the tem-
porary relief for a partnership’s relief year
ending on or before December 31, 2022 (a
partnership 2022 tax year), a partner may
apply the temporary relief to its share of
the partnership’s foreign taxes for a part-
nership 2022 tax year. In certain circum-
stances, the IRS may make adjustments
relating to the foreign tax credits claimed
by a partner with respect to such foreign
taxes on audit of the partner.
.03 Modification and Clarification of
the Consistent Application Requirement
and Single-Benefit Requirement of Notice
2023-55.
Section 3 of Notice 2023-55 states that,
if a taxpayer applies the temporary relief,
then the taxpayer must apply the tempo-
rary relief to (1) all foreign taxes paid by
the taxpayer in the taxpayer’s relief year,
and (2) all foreign taxes (i) that are paid
by any other person in a taxable year that
begins on or after December 28, 2021 and
that ends with or within the taxpayer’s
relief year, and (ii) for which the taxpayer
would be eligible to claim a credit, as pro-
vided in § 901 (determined without regard
to the limitations described in § 1.901-
1(b)), if the taxpayer applied the temporary
relief to such foreign taxes (the consistent
application requirement). Additionally,
the taxpayer may not apply the temporary
relief in a relief year to claim a credit, as
provided under § 901, for any amount
of foreign tax for which a deduction is
allowed in the relief year or any other tax-
able year (the single-benefit requirement).
This section 5.03 modifies and clarifies
the consistent application requirement and
the single-benefit requirement in Notice
2023-55 with respect to partnerships and
their partners.
Partnerships and their partners are
each subject to the consistent applica-
tion requirement. Therefore, a partner-
ship that applies the temporary relief to
a relief year must apply the temporary
relief to all the partnership’s foreign
taxes (as defined in section 5.02 of this
notice). For a partnership’s taxable year
beginning after December 31, 2022, a
partnership’s application (or non-appli-
cation) of the temporary relief for a relief
year will cause a partner to be required to
apply (or to be precluded from applying)
the temporary relief for the relief year to
all other foreign taxes for which the part-
ner would be eligible to claim a credit as
provided in § 901 (determined without
regard to the limitations described in §
1.901-1(b)), unless the partner does not
control whether the partnership applies
(or does not apply) the temporary relief
for the relief year.
8

Furthermore, partnerships and their
partners are each subject to the single-ben-
efit requirement. Therefore, a partnership
cannot apply the temporary relief to report
any amount of foreign tax as a creditable
foreign tax expenditure if the partnership
reports the amount as a deduction in the
relief year or any other taxable year.
.04 Extension of Temporary Relief.
Section 4 of Notice 2023-55 defines
the relief period as taxable years begin-
ning on or after December 28, 2021, and
ending on or before December 31, 2023,
and defines relief year as any taxable year
within the relief period. This section 5.04
modifies the relief period to mean taxable
years beginning on or after December 28,
2021, and ending before the date that a
notice or other guidance withdrawing or
6
For purposes of this section 5, references to a partnership only include partnerships with a U.S. federal tax return filing obligation under § 6031 in a relief year.
7
For the avoidance of doubt, “required to be reported” means foreign taxes which would be required to be reported if the partnership applied the temporary relief.
8
Whether a partner controls the partnership’s application (or non-application) of the temporary relief will be determined based on the facts and circumstances, including the partnership
agreement. For example, a partner may control a partnership’s application (or non-application) of the temporary relief by reason of being a general partner or owning, individually or together
with related persons, a majority of the capital or profits interests in the partnership.

Bulletin No. 2023–52 1589 December 26, 2023
modifying the temporary relief is issued
(or any later date specified in such notice
or other guidance).
If final regulations consistent with the
guidance provided in section 2 apply in a
relief year, those final regulations apply
regardless of whether the taxpayer applies
the temporary relief described in Notice
2023-55, as modified by section 5.02
through 5.04 of this notice, for the relief
year.
.05 Effect on Other Documents.
Sections 3 (Temporary Relief) and 4
(Relief Period) of Notice 2023-55, 2023-
32 I.R.B. 427, are modified.
SECTION 6. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice is
the Office of Associate Chief Counsel
(International). For further information
concerning section 3 of this notice, con-
tact Brady Plastaras at (202) 317-6937.
For further information regarding sec-
tion 5 of this notice, contact Moshe Dlott
at (202) 317-4967 or Larry Pounders at
(202) 317-5465. For all other sections,
contact Jeffrey Cowan at (202) 317-4924
or Hayley Rassuchine at (202) 317-5282
(not toll-free number).

December 26, 2023 1590 Bulletin No. 2023–52
NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1223, General Rules and Specifications for Substitute Forms W-2c and
W-3c.
26 CFR 601.602: Ta x forms and instructions. (Also Part I, Sections 6041, 6051, 6071, 6081, 6091; 1.6041-1, 1.6041-2, 31.6051-1, 31.6051-2, 31.6071(a)-1, 31.6081(a)-
1, 31.6091-1.)
Rev. Proc. 2023-39
TABLE OF CONTENTS
Part 1 – SUBSTITUTE FORMS W-2C AND W-3C
Section 1.1 – Purpose ...............................................................................1591
Section 1.2 – What’s New ............................................................................1593
Section 1.3 – Filing Forms W-2c and W-3c Electronically ...................................................1593
Section 1.4 – Specifications for Red-Ink Substitute Forms W-2c (Copy A) and W-3c Filed With the SSA ..............1594
Section 1.5 – Specifications for Substitute Black-and-White Forms W-2c (Copy A) and W-3c Filed With the SSA ......1596
Section 1.6 – Requirements for Substitute Privately Printed Forms W-2c (Copies B, C, and 2) Furnished to Employees ..1599
Section 1.7 – Instructions for Employers ................................................................1600
Section 1.8 – OMB Requirements for Both Red-Ink and Black-and-White Copy A and W-3c Substitute Forms .........1601
Section 1.9 – Order Forms and Instructions ..............................................................1601
Section 1.10 – Effect on Other Documents ...............................................................1602
Section 1.11 – Exhibits ..............................................................................1602

Bulletin No. 2023–52 1591 December 26, 2023
Part 1
Substitute Forms W-2c and W-3c
Section 1.1 – Purpose
.01 The purpose of this revenue procedure is to state the requirements of the Internal Revenue
Service (IRS) and the Social Security Administration (SSA) regarding the preparation and use of
substitute forms for Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal
of Corrected Wage and Tax Statements.
.02 The official IRS Form W-2c is a six-part form and the official IRS Form W-3c is a one-part
form. Red-ink substitute forms that completely conform to the specifications contained in this
document may be privately printed without the prior approval of the IRS or the SSA. Only the
substitute black-and-white Form (Copy A) and substitute black-and-white W-3c forms need to be
submitted to the SSA for approval.
Note. Both paper substitute forms filed with the SSA, and those furnished to employees, that do
not totally conform to these specifications are not acceptable. Forms W-2c (Copy A) and Forms
W-3c that do not conform may be returned. In addition, penalties may be assessed by the IRS.
.03 Substitute red-ink forms should not be submitted to either the IRS or the SSA for specific
approval. If you are uncertain of any specification and want clarification, do the following.
1. Submit a letter to the appropriate address below citing the specification.
2. State your understanding of the specification; enclose an example.
3. Be sure to include your name, complete address, phone number, and, if applicable, your email
address with your correspondence.
.04 Any questions about the red-ink Form W-2c (Copy A) and Form W-3c, should be emailed
to substituteforms@irs.gov. Please enter “Substitute Forms” on the subject line. Or send your
questions to:
Internal Revenue Service
Attn: Substitute Forms Program
SE:W:CAR:MP:P:TP:TP
ATSC
4800 Buford Highway
Mail Stop 061-N
Chamblee, GA 30341
Note. Do not send completed forms to the Substitute Forms Program via email or mail as they are
unable to process those forms. Any examples/samples of substitute forms sent to the Substitute
Forms program should not contain taxpayer information.
Any questions about the substitute black-and-white Form W-2c (Copy A) and W-3c should be
emailed to copy.a.forms@ssa.gov or sent to:
Social Security Administration
Direct Operations Center
Attn: Substitute Black-and-White Copy A Forms, Room 341
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997

December 26, 2023 1592 Bulletin No. 2023–52
Do not email or mail completed Forms W-2c (Copy A) to the SSA Substitute Black-and-White
Copy A Forms address as they are unable to process those forms. Submitters should use the
address shown on the Form W-3c.
Note. You should receive a response from either the IRS or the SSA within 30 days.
.05 Some Forms W-2c that include logos, slogans, and advertisements (including advertisements
for tax preparation software) may be considered as suspicious or altered Forms W-2c (also known
as questionable Forms W-2c). An employee may not recognize the importance of the employee
copy for tax reporting purposes due to the use of logos, slogans, and advertisements. Thus, the
IRS has determined that logos, slogans, and advertising will not be allowed on Copy A of Forms
W-2c, Forms W-3c, or any employee copies reporting wages, with the following exceptions for
the employee copies:
• Forms may include the exact name of the employer or agent, primary trade name, trademark,
service mark, or symbol of the employer or agent.
• Forms may include an embossment or watermark on the information return (and copies) that
is a representation of the name, a primary trade name, trademark, service mark, or symbol of
the employer or agent.
• Presentation may be in any typeface, font, stylized fashion, or print color normally used by
the employer or agent; and used in a non-intrusive manner.
• These items do not materially interfere with the ability of the recipient to recognize,
understand, and use the tax information on the employee copies.
The IRS e-file logo on the IRS official employee copies may be included, but it is not required, on
any of the substitute form copies.
The information return and employee copies must clearly identify the employer’s name associated
with its employer identification number (EIN).
Note. Just as with the forms, an employee may not recognize the importance (or legitimacy) of
an envelope containing employee copies of Form W-2c if logos, slogans, and advertisements
(including coupons) are on the envelope. Therefore, such items are not allowed on envelopes
containing employee copies of Form W-2c.
Forms W-2c and W-3c are subject to annual review and possible change. This revenue procedure
may be revised to state other requirements of the IRS and the SSA regarding the preparation and
use of substitute forms for Form W-2c and Form W-3c for corrections to be made at a future date.
If you have comments about the prohibition against including slogans, advertising, and logos on
information returns and employee copies, email or send your comments to: substituteforms@
irs.gov or Internal Revenue Service, Attn: Substitute Forms Program, SE:W:CAR:MP:P:TP:TP,
ATSC, 4800 Buford Highway, Mail Stop 061-N, Chamblee, GA 30341.
.06 The Internal Revenue Service/Information Returns Branch (IRS/IRB) maintains a centralized
customer service call site to answer questions related to information returns (Forms W-2, W-3,
W-2c, W-3c, 1099 series, 1096, etc.).
You can reach the call site at 866-455-7438 (toll free) or 304-263-8700 (not a toll-free number).
Deaf or hard-of-hearing customers may call any of our toll-free numbers using their choice of relay
service. You may also email questions to mccirp@irs.gov. Do not submit employee information
via email because it is not secure and the information may be compromised.
File paper or electronic Forms W-2c (Copy A) with the SSA. The IRS/IRB does not process
Forms W-2c (Copy A).

Bulletin No. 2023–52 1593 December 26, 2023
.07 The following form instructions and publications provide more detailed filing procedures for
certain information returns.
• General Instructions for Forms W-2 and W-3 (Including Forms W-2AS, W-2CM, W-2GU,
W-2VI, W-3SS, W-2c, and W-3c).
• Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3.
Section 1.2 – What’s New
.01 Electronic filing of returns. The Department of the Treasury and the IRS issued final
regulations (T.D. 9972) that changed the rules for mandatory electronic filing of correction forms,
including Form W-2c, as authorized under the Taxpayer First Act, enacted July 1, 2019. If you
were required to electronically file the original Form W-2, you must electronically file any Form
W-2c correcting that form. If the original Form W-2 was permitted to be filed on paper and you
filed on paper, then you must file any Form W-2c correcting that form on paper. See Regulations
section 301.6011-2 for more information.
.02 IRS address change. Inquiries about the red-ink Form W-2c (Copy A) and Form W-3c
should be sent to the IRS at: Internal Revenue Service, Attn: Substitute Forms Program,
SE:W:CAR:MP:P:TP:TP, ATSC, 4800 Buford Highway, Mail Stop 061-N, Chamblee, GA 30341.
.03 Exhibits. All of the exhibits in this publication were updated for the August 2023 revisions
of those forms.
.04 Editorial changes. We made editorial changes throughout, including to update references and
correspond more closely to Publication 1141. Redundancies were eliminated as much as possible.
Section 1.3 – Filing Forms W-2c and W-3c Electronically
.01 If an employer was required to electronically file the original Form W-2, they must
electronically file any Form W-2c correcting that form. If the original Form W-2 was permitted to
be filed on paper and was filed on paper, then the employer must file any Form W-2c correcting
that form on paper. See Regulations section 301.6011-2(c)(4)(ii) for more information. SSA
publication EFW2C, Specifications for Filing Forms W-2c Electronically, contains specifications
and procedures for filing Forms W-2c. Employers are cautioned to obtain the most recent revision
of EFW2C (and supplements) due to any subsequent changes in specifications and procedures.
Instead of the EFW2C upload format, the employer can use SSA’s W-2c Online fill-in forms to
create, save, print, and submit up to 25 Forms W-2c at a time to the SSA. For more information,
go to SSA.gov/employer/.
.02 You may obtain a copy of the EFW2C by accessing the SSA website at SSA.gov/employer/
EFW2&EFW2C.
.03 Electronic filers do not file a paper Form W-3c. See the SSA publication EFW2C for guidance
on transmitting Form W-2c (Copy A) information to the SSA electronically.
.04 Employers who do not comply with the electronic filing requirements for Form W-2c (Copy A)
and who are not granted a waiver by the IRS may be subject to penalties. Employers who file Form
W-2c information with the SSA electronically must not send the same data to the SSA on paper
Forms W-2c (Copy A). Any duplicate reporting may subject filers to unnecessary contacts by the
SSA or the IRS.

December 26, 2023 1594 Bulletin No. 2023–52
Section 1.4 – Specifications for Red-Ink Substitute Forms W-2c (Copy A) and W-3c Filed With the SSA
.01 The official IRS-printed red dropout ink Form W-2c (Copy A) and W-3c and their exact
substitutes are referred to as red-ink in this revenue procedure. Employers may file substitute
Forms W-2c (Copy A) and W-3c with the SSA. The substitute forms must be exact replicas of
the official IRS forms with respect to layout and content because they will be read by scanner
equipment. Even the slightest deviation can result in incorrect scanning, and may affect money
amounts reported for employees.
.02 Color and paper quality for Form W-2c (Copy A) (cut sheets and continuous pin-fed forms) and
Form W-3c must be white 100% bleached chemical wood, optical character recognition (OCR)
bond. The contractor must initiate or have a quality control program to assure OCR ink density.
•Acidity: Ph value, average, not less than . . . . . . . . . . . . . .4.5
•Basis weight: 17 x 22 inch 500 cut sheets, pound ..........18–20
•Metric equivalent—gm./sq. meter
(a tolerance of +5 pct. is allowed) ..................68–75
•Stiffness: Average, each direction, not less than—milligrams
Cross direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Machine direction ..........................80
•Tearing strength: Average, each direction, not less
than—grams .............................40
•Opacity: Average, not less than—percent...............82
•Reflectivity: Average, not less than—percent.............68
•Thickness: Average—inch ......................0.0038
Metric equivalent—mm .......................0.097
(a tolerance of +0.0005 inch (0.0127 mm) is allowed). Paper cannot
vary more than 0.0004 inch (0.0102 mm) from one edge to the other.
•Porosity: Average, not less than—seconds . . . . . . . . . . . . . . 10
•Finish (smoothness): Average, each side—seconds..........20–55
(for information only) the Sheffield equivalent—units .......170-d200
•Dirt: Average, each side, not to exceed—parts per million......8
Note. Reclaimed fiber in any percentage is permitted, provided the requirements of this standard
are met.
.03 All printing of substitute Forms W-2c (Copy A) and W-3c must be in Flint J-6983 red OCR
dropout ink except as specified below. The following must be printed in nonreflective black ink:
• Identifying number “44444” for Forms W-2c (Copy A) or “55555” for Form W-3c at the top
of the forms.
• The four (4) corner register marks on the forms.
• The form identification number (“W-3c”) at the bottom of Form W-3c.
• All the instructions below Form W-3c beginning with “Purpose of Form” to the end of Form
W-3c.
.04 The vertical and horizontal spacing on Forms W-2c and W-3c must meet specifications. See
Exhibits A and B.

Bulletin No. 2023–52 1595 December 26, 2023
• On Form W-3c and Form W-2c (Copy A), all the perimeter rules must be 1-point (0.014-
inch), while all other rules must be one-half point (0.007-inch). Vertical rules must be parallel
to the left edge of the form; horizontal rules parallel to the top edge.
• The top, left, and right margins on Form W-2c (Copy A) and Form W-3c must be 0.50 inches.
The width of a substitute Form W-2c (Copy A) or W-3c must be 7.50 inches. See Exhibits A
and B.
• The first three columns on Form W-2c (Copy A) and Form W-3c must measure 1.90 inches
in width.
• The last column on Form W-2c (Copy A) and Form W-3c must measure 1.80 inches in width.
.05 The official red-ink Form W-3c and Form W-2c (Copy A) are 7.50 inches wide. Employers
filing Forms W-2c (Copy A) with the SSA on paper must also file a Form W-3c. One Form W-2c
(Copy A) or Form W-3c is contained on a standard-size, 8.5 x 11-inch page.
.06 The top, left, and right margins for the Form W-2c (Copy A) and Form W-3c are 0.50 inches
(1/2 inch). All margins must be free of printing except for the words “DO NOT CUT, FOLD,
OR STAPLE THIS FORM” on red-ink Form W-2c (Copy A) and “DO NOT CUT, FOLD, OR
STAPLE” on red-ink Form W-3c.
.07 The identifying numbers are “44444” for Form W-2c and “55555” for Form W-3c. No printing
should appear anywhere near the identifying numbers.
Note. The identifying number must be printed in nonreflective black ink in OCR-A font of 10
characters per inch.
.08 Continuous pin-fed Forms W-2c (Copy A) must be separated into 11-inch deep pages. The
pin-fed strips must be removed when Forms W-2c (Copy A) are filed with the SSA.
.09 Box 12 of Form W-2c (Copy A) contains four entry boxes – 12a, 12b, 12c, and 12d. Do not
make more than one entry per box. Enter your first code in box 12a (for example, enter Code D in
box 12a, not 12d, if it is your first entry). If more than four items need to be reported in box 12, use
a second Form W-2c to report the additional items (see Multiple forms in the most recent General
Instructions for Forms W-2 and W-3). Do not report the same federal tax data to the SSA on more
than one Form W-2c (Copy A). However, repeat the identifying information (employee’s name,
address, and SSN; employer’s name, address, and EIN) on each additional form.
.10 The checkboxes in box 13 of Form W-2c (Copy A) must be 0.14 inches each. Each space
before the first checkbox is 0.20 inches; each space between the first checkbox and second
checkbox should be 0.36 inches; each space between the second and third checkboxes should be
0.44 inches; and each space between the third checkbox to the margin of box 13 should be 0.48
inches. The checkboxes in box c of Form W-3c must also be 0.14 inches.
Note. More than 50% of an applicable checkbox must be covered by an “X.”
.11 All substitute Forms W-2c (Copy A) and W-3c in the red-ink format must have the form
number and form title printed on the bottom face of each form using type identical or a close
approximation to that of the official IRS form. The red-ink substitute must have the form producer’s
(not the form filer’s) EIN entered in red in place of the Cat. No. (directly to the left of “Department
of the Treasury” on Form W-2c (Copy A) and at the bottom on Form W-3c).
.12 The words “For Privacy Act and Paperwork Reduction Act Notice, see the separate
instructions.” must be printed on all Forms W-2c (Copy A) and Forms W-3c.

December 26, 2023 1596 Bulletin No. 2023–52
.13 The Office of Management and Budget (OMB) Number must be printed on substitute Forms
W-3c and W-2c (Copy A) (on each ply) in the same location as on the official IRS forms.
.14 All substitute Forms W-3c must include the instructions that are printed on the same sheet
below the official IRS form.
.15 The appropriate SSA filing address information must be printed on the front of Form W-3c
below the body of the form as shown below.
Send this entire page with Copy A of Form W-2c to:
Social Security Administration
Direct Operations Center
P.O. Box 3333
Wilkes-Barre, PA 18767-3333
Note: If you use “Certified Mail” or an IRS-approved private delivery service to file, add
“Attn: W-2c Process, 1150 E. Mountain Dr.” to the address and change the ZIP code to
“18702-7997.” See Pub. 15 (Circular E), Employer’s Tax Guide, for a list of IRS-approved
private delivery services.
.16 The back of substitute Form W-2c (Copy A) and Form W-3c must be free of all printing.
.17 All copies must be clearly legible. Fading must be minimized to assure legibility.
.18 Chemical transfer paper is permitted for Form W-2c (Copy A) only if the following standards
are met:
• Only chemically backed paper is acceptable for Form W-2c (Copy A). Front and back
chemically treated paper cannot be processed properly by scanning equipment.
• Chemically transferred images must be black.
• Carbon-coated forms are not permitted.
.19 The Government Printing Office (GPO) symbol and the Catalog Number (Cat. No.) must be
deleted from substitute Form W-2c (Copy A) and Form W-3c.
.20 The sequence for assembling the copies of Form W-2c is as follows.
• Copy A—For Social Security Administration
• Copy 1—For State, City, or Local Tax Department
• Copy B—To Be Filed With Employee’s FEDERAL Tax Return
• Copy C—For EMPLOYEE’S RECORDS
• Copy 2—To Be Filed With Employee’s State, City, or Local Income Tax Return
• Copy D—For Employer
Section 1.5 – Specifications for Substitute Black-and-White Forms W-2c (Copy A) and W-3c Filed With the SSA
.01 The SSA-approved substitute black-and-white Forms W-2c (Copy A) and W-3c are referred
to as substitute black-and-white Form W-2c (Copy A) and W-3c. Specifications for the substitute

Bulletin No. 2023–52 1597 December 26, 2023
black-and-white Form W-2c (Copy A) and W-3c are similar to the red-ink forms (Section 4)
except for the items that follow (see Exhibits C and D). You may contact the SSA via email at
copy.a.forms@ssa.gov for more information.
Note. Exhibits are samples only and may not show the required typeface and/or font. Exhibits
must not be downloaded to meet tax obligations.
1. Forms must be printed on 8.5 x 11-inch single-sheet paper only, not on continuous pin-fed
paper. There must be one Form W-2c (Copy A) or W-3c printed on a page.
2. All forms and data must be printed in nonreflective black ink only.
3. The data and forms must be programmed to print simultaneously. Forms cannot be produced
separately from wage data entries.
4. The forms must not contain corner register marks.
5. The forms must not contain any shaded areas including those boxes that are entirely shaded
on the red-ink forms.
6. Identifying numbers on both Form W-2c (“44444”) and Form W-3c (“55555”) must be
preprinted in 14-point Arial bold font or a close approximation.
7. The form numbers (“W-2c” and “W-3c”) must be in 18-point Arial font or a close
approximation.
8. No part of the box titles or the data printed on the forms may touch any of the vertical or
horizontal lines, nor should any of the data intermingle with the box titles. The data should be
centered in the boxes.
9. Do not print any information in the margins of the black-and-white forms (for example, do
not print “DO NOT CUT, FOLD, OR STAPLE” in the top margin of Form W-3c).
10. The word “Code” must not appear in box 12 on Form W-2c (Copy A).
11. A 4-digit vendor code (not filer code) preceded by four zeros and a slash (for example,
0000/9876) must appear in 12-point Arial font, or a close approximation, in place of the Cat.
No. to the left of “Department of the Treasury” on Form W-2c (Copy A) and in the bottom
right corner of Form W-3c.
Note. Do not display the form producer’s EIN. The vendor code will be used to identify the
form producer.
12. Do not print Catalog Numbers (Cat. No.) on either Form W-2c (Copy A) or Form W-3c.
13. Do not print dollar signs. If there are no money amounts being reported, the entire field should
be left blank.
Note. Although substitute Copy 1 of Form W-2c can be printed in black instead of the red dropout
ink, it should conform as closely as possible to Copy A of the official IRS form in content, format,
and layout in order to satisfy state and local reporting requirements.
.02 The dimensions for the substitute black-and-white Forms W-2c (Copy A) and W-3c are as
follows. See Exhibits C and D.
1. The top, left, and right margins on Form W-2c (Copy A) and Form W-3c must measure 1/2
(0.50) inch.
2. The distance from the top line of Form W-3c to the bottom line of the form must measure
7 3/16 (7.19) inches.

December 26, 2023 1598 Bulletin No. 2023–52
3. The distance from the top line of Form W-2c (Copy A) to the bottom line of the form must
measure 9 1/3 (9.33) inches.
4. Each box on Form W-2c (Copy A) and Form W-3c must measure 1/3 (0.33) inch in height
except as otherwise established.
5. Box b on Form W-3c must measure one (1.00) inch in height.
6. Box a on Form W-2c (Copy A) must measure 1 1/3 (1.33) inches in height and box 14 must
measure 5/6 (0.83) inch in height.
7. The first three columns on the right of Form W-2c (Copy A) and Form W-3c must measure
1 9/10 (1.90) inches in width.
8. The last column on the right of Form W-2c (Copy A) and Form W-3c must measure 1 8/10
(1.80) inches in width.
9. The “Explain decreases here” box must measure 1/3 (0.33) inch and the “Signature” box on
Form W-3c must measure 1/2 (0.50) inch in height.
.03 You must submit samples of your black-and-white substitute Forms W-2c (Copy A) and W-3c
to the SSA. Only black-and-white substitute Forms W-2c (Copy A) and W-3c will be accepted for
approval by the SSA. All checkboxes on the dummy-data substitute black-and-white Form W-3c
must be electronically checked in box c (Kind of Payer, Kind of Employer, and Third-party sick
pay). Questions regarding other forms (that is, red-ink Forms W-2, W-2c, W-3, W-3c, 1099 series,
1096, etc.) must be directed to the IRS. Also, see IRS Publications 1141 and 1179.
.04 You will be required to send one set of blank and one set of dummy-data substitute black-
and-white Form W-2c (Copy A) and W-3c for approval. Sample data entries should be filled in to
the maximum length for each box entry, preferably using numeric data or alpha data, depending
upon the type required to be entered. Include in your submission the name, telephone number, fax
number, and email address of a contact person who can answer questions regarding your sample
forms.
.05 To receive approval, you may first contact the SSA at copy.a.forms@ssa.gov to obtain a
template and further instructions. You can either submit your sample substitute black-and-white
Forms W-2c (Copy A) and Forms W-3c in a PDF version electronically for approval to the
copy.a.forms@ssa.gov or send your paper sample substitute black-and-white Forms W-2c (Copy
A) and Forms W-3c to:
Social Security Administration
Direct Operations Center
Attn: Substitute Black-and-White Copy A Forms, Room 341
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
Send your sample forms via private mail carrier or certified mail in order to verify their receipt.
You can expect approval (or disapproval) by the SSA within 30 days of receipt of your sample
forms.
Do not mail completed Forms W-2c (Copy A) and W-3c to the Substitute Black-and-White
Forms (Copy A) address. Submitters should use the address shown on the Form W-3c.
.06 Vendor codes from the National Association of Computerized Tax Processors (NACTP) are
required by those companies producing the W-2 family of forms as part of a product for resale to
be used by multiple employers and payroll professionals. Employers developing Forms W-2c or
W-3c to be used only for their individual company require a vendor code issued by the SSA.

Bulletin No. 2023–52 1599 December 26, 2023
.07 The 4-digit vendor code preceded by four zeros and a slash (0000/9876) must be preprinted
on the sample black-and-white substitute Forms W-2c and W-3c. Forms not containing a vendor
code will be rejected and will not be submitted for testing or approval. If you have a valid vendor
code provided to you through the NACTP, you should use that code. If you do not have a valid
vendor code, contact the SSA at copy.a.forms@ssa.gov to obtain an SSA-issued code. (Additional
information on vendor codes may be obtained from the SSA or the NACTP via email at president@
nactp.org.)
.08 If you use forms produced by a vendor and have questions concerning approval, do not
send the forms to the SSA for approval. Instead, you may contact the software vendor to obtain a
copy of SSA’s dated approval notice supplied to that vendor.
Section 1.6 – Requirements for Substitute Privately Printed Forms W-2c (Copies B, C, and 2) Furnished to Employees
Note. Rules in Section 1.6 apply only to employee copies of Form W-2c (Copies B, C, and
2). Printers are cautioned that the paper filers who send Forms W-2c (Copy A) to the SSA must
follow the requirements in Sections 1.4 and/or 1.5 above.
.01 All employers (including those who file electronically) must furnish employees with at least
two copies of Form W-2c (three or more for employees required to file a state, city, or local income
tax return). Employee copies do not require approval as long as these requirements are followed.
.02 Chemical transfer paper for employee copies must be clearly legible, have the capability to be
photocopied, and not fade to such a degree as to preclude legibility and the ability to photocopy.
.03 The paper for all copies must be white and printed in black ink. The substitute Copy B (or its
equal), which employees are instructed to attach to their federal income tax returns, as well as all
other copies furnished to employees, should be at least 9-pound paper (basis 17 x 22-500). See
Section 1.4.02.
.04 Type must be substantially identical in size and shape to that on the official form.
.05 Substitute forms for employees need to contain only the payment boxes and captions that
are applicable. These boxes, box numbers, and box titles must, when applicable, match the IRS-
printed form. In all cases, the employee name, address, and SSN, as well as the employer name,
address, and EIN, must be present.
.06 The dimensions of the boxes on these copies (Copies B, C, and 2), but not Copy A, may be
adjusted to allow space for conveying additional information. This may permit the employer to
eliminate other statements or notices that would otherwise be furnished to employees.
.07 The maximum allowable dimensions for employee copies of Form W-2c are no more than
11.00 inches deep by 8.50 inches wide. The minimum allowable dimensions for employee copies
of Form W-2c are 2.67 inches deep by 4.25 inches wide.
Note. These maximum and minimum size specifications are subject to future change.
.08 Either horizontal or vertical format is permitted for substitute employee copies of Forms W-2c.
That is, the width of the form may be either greater or less than the depth of the form.
.09 All copies of Form W-2c must clearly and prominently display the form number and the form
title together in one area of the form. It is recommended (but not required) that this be located
on the bottom left of Form W-2c. The reference to the “Department of the Treasury – Internal
Revenue Service” must be on all copies of Form W-2c. It is recommended (but not required) that
this be located on the bottom right of Form W-2c.

December 26, 2023 1600 Bulletin No. 2023–52
.10 If the substitute Forms W-2c are not labeled as to the disposition of the copies, then written
notification must be provided to each employee as specified below.
• The first copy of Form W-2c (Copy B) is filed with the employee’s federal tax return.
• The second copy of Form W-2c (Copy C) is for the employee’s records.
• If applicable, the third copy (Copy 2) of Form W-2c is filed with the employee’s state, city,
or local income tax return.
If the substitute Forms W-2c are labeled, the forms must contain the applicable description as
stated on the official form.
.11 Instructions similar to those on the back of Form W-2c (Copy C) of the official form must be
provided to each employee.
Section 1.7 – Instructions for Employers
.01 Privately printed substitute Forms W-2c are not required to contain a copy to be retained by
employers (Copy D). However, employers must retain copies of the Forms W-2c (Copy A) filed
with SSA or have the ability to reconstruct the data for at least four years. Employers must be able
to generate a facsimile of Form W-2c (Copy A), in case of loss.
.02 If Copy D is provided for the employer, instructions contained on the back of Copy D of the
official form must appear on the back of the substitute form. If Copy D is not provided, these
instructions must be furnished to the employer on a separate statement.
.03 Only originals or compliant substitute copies of Forms W-2c (Copy A) and Forms W-3c may
be filed with the SSA. Carbon copies and photocopies are unacceptable.
.04 Employers should type or machine-print entries on plain paper forms whenever possible and
provide good quality data entries by using a high quality type face, inserting data in the middle of
blocks that are well separated from other printing and guidelines, and taking any other measures
that will guarantee clear, sharp images.
.05 Because employers must file a machine-scannable Form W-2c, they should meet the following
requirements.
• Use 12-point Courier font or a close approximation for data entries.
• Proportional-spaced fonts are unacceptable.
• Do not print any data in the top margin of the forms.
.06 The employer must also provide employee copies of Forms W-2c (Copies B, C, and 2) that are
legible and able to be photocopied (by the employee).
.07 When Forms W-2c or W-3c are typed, black ink must be used with no script type, inverted
font, italics, or dual-case alpha characters.
.08 Forms W-2c (Copy A) require decimal entries for wage data. Do not print dollar signs with
money amounts on Forms W-2c (Copy A) and Form W-3c.
.09 The filer’s employer identification number (EIN) must be entered in box (b) of Form W-2c
and box (e) of Form W-3c.

Bulletin No. 2023–52 1601 December 26, 2023
.10 The employer’s name, address, EIN, and state ID number may be preprinted.
.11 Employers must not truncate the employee’s SSN on Copy A of Forms W-2c. See the General
Instructions for Forms W-2 and W-3 for more information.
Section 1.8 – OMB Requirements for Both Red-Ink and Black-and-White Copy A and W-3c Substitute Forms
.01 The Paperwork Reduction Act (the Act) of 1995 (Public Law 104-13) requires the following.
• The Office of Management and Budget (OMB) approves all IRS tax forms that are subject to
the Act.
• Each IRS form contains (in or near the upper right corner) the OMB approval number, if
assigned—the official OMB numbers may be found on the official IRS printed forms and are
also shown on the forms in the exhibits.
• Each IRS form (or its instructions) states:
1. Why the IRS needs the information,
2. How it will be used, and
3. Whether or not the information is required to be furnished to the IRS.
.02 This information must be provided to any users of official or substitute IRS forms or
instructions.
.03 The OMB requirements for substitute IRS Form W-2c and Form W-3c are the following.
• Any substitute form or substitute statement to a recipient must show the OMB number as it
appears on the official IRS form.
• The OMB number for both Form W-2c (Copy A) and Form W-3c is 1545-0008 and must
appear exactly as shown on the official IRS form.
• For any copy of Form W-2c, other than Copy A, the OMB number must use one of the
following formats.
1. OMB No. 1545-xxxx (preferred) or
2. OMB # 1545-xxxx (acceptable).
.04 Any substitute Form W-3c and Form W-2c (Copy A only) must state “For Privacy Act and
Paperwork Reduction Act Notice, see the separate instructions.” If no instructions are provided to
users of your forms, you must furnish them with the exact text of the Privacy Act and Paperwork
Reduction Act Notice in the General Instructions for Forms W-2 and W-3.
Section 1.9 – Order Forms and Instructions
.01 You can order official IRS Forms W-2c, Forms W-3c, and the General Instructions for Forms
W-2 and W-3 (Including Forms W-2AS, W-2CM, W-2GU, W-2VI, W-3SS, W-2c, and W-3c),
online at IRS.gov/OrderForms.
Only contact the IRS, not the SSA, for forms.

December 26, 2023 1602 Bulletin No. 2023–52
.02 Copies of Form W-2c (Copy A) and Form W-3c downloaded from IRS.gov cannot be used
for filing with the SSA. These copies of Forms W-2c and W-3c are for information purposes only.
Section 1.10 – Effect on Other Documents
.01 Revenue Procedure 2016-20, 2016-13 I.R.B. dated March 28, 2016, (reprinted as Publication
1223, Revised 03-2016), is superseded.
Section 1.11 – Exhibits
Exhibits A through D provide the general measurements for Forms W-2c and W-3c as discussed
in this revenue procedure. Exhibits are samples only and may not show the required typeface and/
or font. Exhibits must not be downloaded to meet tax obligations. Certain exhibits show a 0000/
in the location designated for your vendor code. See Section 1.5.01, item 11, and Section 1.5.06
for more information.
Exhibit A — Form W-2c (Copy A) (Red-Ink) 08-2023
Exhibit B — Form W-3c (Red-Ink) 08-2023
Exhibit C — Form W-2c (Copy A) (Substitute Laser/ Black-and-White) 08-2023
Exhibit D — Form W-3c (Substitute Laser/Black-and-White) 08-2023

Bulletin No. 2023–52 1603 December 26, 2023
15

December 26, 2023 1604 Bulletin No. 2023–52
16

Bulletin No. 2023–52 1605 December 26, 2023
17

December 26, 2023 1606 Bulletin No. 2023–52
18

Bulletin No. 2023–52 1607 December 26, 2023
26 CFR 601.201: Rulings and determination letters.
(Also: Part I, Sections 832, 846; 1.832-4, 1.846-1.)
Rev. Proc. 2023-41
SECTION 1. PURPOSE
This revenue procedure prescribes dis-
count factors for the 2023 accident year
for use by insurance companies in com-
puting discounted unpaid losses under
§ 846 of the Internal Revenue Code and
discounted estimated salvage recoverable
under § 832. This revenue procedure also
provides, for convenience, discount fac-
tors for losses incurred in the 2022 acci-
dent year and earlier accident years for use
in taxable years beginning in 2023. The
discount factors for accident years before
2023 were prescribed in earlier revenue
procedures. See, e.g., Rev. Proc. 2023-
10, 2023-3 I.R.B. 411. For background
concerning the loss payment patterns and
application of the discount factors, see
Rev. Proc. 2023-10.
SECTION 2. SCOPE
This revenue procedure applies to any
insurance company that is required to
discount unpaid losses under § 846 for a
line of business using the discount factors
published by the Secretary. This revenue
procedure also applies to any insurance
company that is required to discount esti-
mated salvage recoverable under § 832.
SECTION 3. DISCOUNT FACTORS
FOR THE 2023 ACCIDENT YEAR
.01 The tables in this section 3 sepa-
rately present for each line of business
the discount factors for losses incurred in
the 2023 accident year for use by insur-
ance companies in computing discounted
unpaid losses under § 846 and estimated
salvage recoverable under § 832. The dis-
count factors presented in this section are
generally determined by using the applica-
ble interest rate for 2023 under § 846(c),
which is 2.90 percent, determined using
semiannual compounding. The exceptions
are the discount factors for long-tail lines
of business determined using the com-
posite method described in section V of
Notice 88-100, 1988-2 C.B. 439. These
discount factors are to be used in tax-
able years beginning in 2033 for losses
incurred in accident years not separately
reported on the annual statement for 2033.
For taxable years beginning after 2033,
the discount factors to be used for losses
incurred in the 2023 accident year will
be those determined using the composite
method for later accident years. These
discount factors will be published in later
years. All discount factors are determined
by assuming that all loss payments occur
in the middle of the calendar year.
.02 Section V of Notice 88-100 sets
forth a composite method for computing
discounted unpaid losses for accident
years that are not separately reported on
the annual statement. Tables 1 and 2 sep-
arately provide discount factors for insur-
ance companies that have elected to use
the composite method of Notice 88-100.
See Rev. Proc. 2002-74, 2002-2 C.B. 980.
The discount factors computed using the
composite method are unrelated to the
composite discount factors referred to in
§ 1.846-1(b)(1)(ii) and (4) of the Income
Tax Regulations, which apply to lines of
business for which the Secretary has not
published discount factors. The compos-
ite discount factors for use with respect
to such lines of business are labelled
“Short-Tail Composite” (in Table 1, part
B) and “Long-Tail Composite” (in Table
2, part B). The “Miscellaneous Casualty”
discount factors referenced in § 1.846-
1(b)(2) are not set forth in tables but are
equivalent to the “Short-Tail Composite”
discount factors.
Table 1 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business
Taxable Year
Beginning in
Auto Physical
DamageFidelity/Surety
Financial
Guaranty/
Mortgage
GuarantyInternationalOther*
202398.382695.747795.251195.884296.9968
202497.171997.171997.171997.171997.1719
Taxpayer Not Using Composite Method
Years after 202498.570798.570798.570798.570798.5707
Taxpayer Using the Composite Method
202598.570798.570798.570798.570798.5707
Years after 2025Use composite method discount factors published for the relevant accident year.**
*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount
factor for taxable year 2023 is 98.5707 percent. This is also the discount factor used in later taxable years for taxpayers
not using the composite method. For taxpayers using the composite method, the discount factor for losses incurred in
2023 is the discount factor published for Accident and Health lines of business for losses incurred in the accident year
coinciding with the taxable year.
**The relevant accident year is the accident year that is two years prior to the specified taxable year.

December 26, 2023 1608 Bulletin No. 2023–52
Table 1 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business
Taxable
Year
Beginning
in
Reinsurance -
Nonproportional
Assumed
Financial Lines
Reinsurance -
Nonproportional
Assumed
Liability
Reinsurance -
Nonproportional
Assumed
Property
Special Property
(Fire,
Allied Lines,
Inland Marine,
Earthquake,
Burglary & Theft)Warranty
Short-Tail
Composite
202395.857494.926096.211097.593198.374297.2238
202497.171997.171997.171997.171997.171997.1719
Taxpayer Not Using Composite Method
Years after
202498.570798.570798.570798.570798.570798.5707
Taxpayer Using the Composite Method
202598.570798.570798.570798.570798.570798.5707
Years after
2025Use composite method discount factors published for the relevant accident year.**
**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Bulletin No. 2023–52 1609 December 26, 2023
Table 2 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business
Taxable Year
Beginning in
Commercial
Auto/Truck
Liability/
Medical
Medical
Professional
Liability -
Claims-Made
Medical
Professional
Liability -
Occurrence
Multiple Peril
Lines
Other
Liability -
Claims-Made
Other
Liability -
Occurrence
202394.066991.701286.883195.438291.423790.0155
202494.665792.780788.787793.873292.362890.8746
202595.218593.102590.180393.906692.406191.5784
202695.523493.957791.551293.841492.613391.9264
202795.425093.787892.354393.627592.547392.2284
202894.958894.420592.742093.883692.591591.2169
202994.980393.994993.127093.964492.239791.1996
203095.452694.860292.993095.712093.916091.9425
203196.411696.175294.799296.537096.413192.9346
203298.255997.631896.469197.972196.998694.7538
Taxpayer Not Using Composite Method
203398.570798.570797.754898.570798.344796.0789
203498.570798.570798.570798.570798.570797.3969
Years after
203498.570798.570798.570798.570798.570798.5707
Taxpayer Using the Composite Method
203398.570798.570797.964398.587698.369997.0305
Years after
2033Use composite method discount factors published for the relevant accident year.**
**The relevant accident year is the accident year that is ten years prior to the specified taxable year.

December 26, 2023 1610 Bulletin No. 2023–52
Table 2 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business
Taxable
Year Beginning
in
Private
Passenger
Auto Liability/
Medical
Products
Liability -
Claims-Made
Products
Liability -
Occurrence
Workers'
Compensation
Long-Tail
Composite
202395.856289.178088.531788.955193.4051
202495.520290.494789.902887.478192.7019
202595.601290.736991.011286.894592.4617
202695.520389.799891.587586.421791.8247
202794.628691.285391.913086.714991.5295
202894.013592.870792.381486.112791.0702
202994.579494.595293.298486.703091.3120
203094.725395.031393.589388.185392.6078
203195.471096.276794.608589.593293.9475
203297.613897.934296.608990.510495.2242
Taxpayer Not Using Composite Method
203398.570798.570797.897591.780396.5456
203498.570798.570798.570793.073997.8319
203598.570798.570798.570794.391598.5707
203698.570798.570798.570795.732798.5707
203798.570798.570798.570797.095798.5707
203898.570798.570798.570798.469098.5707
Years after 203898.570798.570798.570798.570798.5707
Taxpayer Using the Composite Method
203398.570796.688898.222092.809096.9820
Years after 2033Use composite method discount factors published for the relevant accident year.**
**The relevant accident year is the accident year that is ten years prior to the specified taxable year.
SECTION 4. DISCOUNT FACTORS
FOR TAXABLE YEARS BEGINNING
IN 2023
.01 The tables in this section 4 pres-
ent separately for each line of business
discount factors for losses incurred in the
2023 accident year and earlier accident
years for use by insurance companies in
computing discounted unpaid losses under
§ 846 and estimated salvage recoverable
under § 832 in taxable years beginning in
2023.
.02 Tables 3 and 4 separately provide
discount factors for insurance companies
that have elected to use the composite
method of Notice 88-100. See Rev. Proc.
2002-74. The discount factors computed
using the composite method are unre-
lated to the composite discount factors
referred to in § 1.846-1(b)(1)(ii) and
(4), which apply to lines of business for
which the Secretary has not published
discount factors. The composite dis-
count factors for use with respect to such
lines of business are labelled “Short-
Tail Composite” (in Table 3, part B)
and “Long-Tail Composite” (in Table 4,
part B). The “Miscellaneous Casualty”
discount factors referenced in § 1.846-
1(b)(2) are not set forth in tables but are
equivalent to the “Short-Tail Composite”
discount factors.

Bulletin No. 2023–52 1611 December 26, 2023
Table 3 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
Short-Tail Lines of Business
Accident Year
Auto Physical
DamageFidelity/Surety
Financial
Guaranty/
Mortgage
GuarantyInternationalOther*
202398.382695.747795.251195.884296.9968
202297.391197.391197.391197.391197.3911
Taxpayer Not Using Composite Method
202198.599998.599998.599998.599998.5999
202098.483498.483498.483498.483498.4834
201998.478598.478598.478598.478598.4785
Years before 201998.551398.551398.551398.551398.5513
Taxpayer Using the Composite Method
Years before 202298.599998.599998.599998.599998.5999
*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount
factor for taxable year 2023 is 98.5707 percent.

December 26, 2023 1612 Bulletin No. 2023–52
Table 3 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
Short-Tail Lines of Business
Accident
Year
Reinsurance -
Nonproportional
Assumed
Financial Lines
Reinsurance -
Nonproportional
Assumed
Liability
Reinsurance -
Nonproportional
Assumed
Property
Special
Property
(Fire,
Allied Lines,
Inland
Marine,
Earthquake,
Burglary &
Theft)Warranty
Short-Tail
Composite
202395.857494.926096.211097.593198.374297.2238
202297.391197.391197.391197.391197.391197.3911
Taxpayer Not Using Composite Method
202198.599998.599998.599998.599998.599998.5999
202098.483498.483498.483498.483498.483498.4834
201998.478598.478598.478598.478598.478598.4785
Years
before 201998.551398.551398.551398.551398.551398.5513
Taxpayer Using the Composite Method
Years
before 202298.599998.599998.599998.599998.599998.5999

Bulletin No. 2023–52 1613 December 26, 2023
Table 4 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
Long-Tail Lines of Business
Accident Year
Commercial
Auto/Truck
Liability/
Medical
Medical
Professional
Liability -
Claims-Made
Medical
Professional
Liability -
Occurrence
Multiple Peril
Lines
Other
Liability -
Claims-Made
Other
Liability -
Occurrence
202394.066991.701286.883195.438291.423790.0155
202295.067993.316889.604194.330092.925391.5404
202195.434493.084290.780994.155492.444891.0405
202095.109692.834691.458092.907591.900790.5269
201994.970792.960092.421691.005091.724090.2502
201895.049893.303593.506991.603992.604090.7542
201795.326094.242394.318991.315493.077090.7788
201694.980495.129194.999391.017793.837891.9830
201596.410296.016096.122093.520094.926492.6228
201498.358597.750397.790294.853096.687694.4974
Taxpayer Not Using the Composite Method
201398.551398.551398.551396.189598.003395.8511
201298.551398.551398.551397.504598.551397.2176
Years before
201298.551398.551398.551398.551398.551398.5513
Taxpayer Using the Composite Method
Years before
201498.5513
98.551398.551396.918598.092096.7300

December 26, 2023 1614 Bulletin No. 2023–52
Table 4 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
Long-Tail Lines of Business
Accident Year
Private
Passenger
Auto Liability/
Medical
Products
Liability -
Claims-Made
Products
Liability -
Occurrence
Workers'
Compensation
Long-Tail
Composite
202395.856289.178088.531788.955193.4051
202295.858991.188390.639688.356693.2372
202195.404888.496390.199085.875891.7095
202094.663583.131590.812583.318089.8805
201993.956084.415189.411882.690988.2413
201894.282486.418489.930982.890588.6421
201794.520587.804090.852783.256788.6258
201695.055089.038891.807284.103689.1661
201595.647390.296992.199284.715090.3858
201497.728291.578594.413386.594692.1457
Taxpayer Not Using the Composite Method
201398.551392.883895.773987.806593.4541
201298.551394.212497.157189.041494.7812
201198.551395.562998.551390.299596.1195
201098.551396.929998.551391.581397.4421
200998.551398.286898.551392.886798.5513
200898.551398.551398.551394.215498.5513
200798.551398.551398.551395.566198.5513
200698.551398.5513
98.551396.933498.5513
200598.551398.551398.551398.291398.5513
Years before 200598.551398.551398.551398.551398.5513
Taxpayer Using the Composite Method
Years before 201498.551394.728896.690391.257995.0968
SECTION 5. DRAFTING
INFORMATION
The principal author of this revenue
procedure is James G. Carpino of the Office
of Associate Chief Counsel (Financial
Institutions & Products). For further infor-
mation regarding this revenue procedure
contact Mr. Carpino at (202) 317-6995
(not a toll-free number).

Bulletin No. 2023–52 1615 December 26, 2023
Part IV
Deletions From Cumulative
List of Organizations,
Contributions to Which are
Deductible Under Section
170 of the Code
Announcement 2023-35
The Internal Revenue Service has
revoked its determination that the organi-
zation listed below qualifies as an organi-
zation described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the IRS will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organiza-
tion ceases to qualify under section 170(c)
(2) if the organization has not timely filed
a suit for declaratory judgment under sec-
tion 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declar-
atory judgment has been timely filed,
contributions from individuals and orga-
nizations described in section 170(c)(2)
that are otherwise allowable will continue
to be deductible. Protection under section
7428(c) would begin on and would end
on the date the court first determines the
organization is not described in section
170(c)(2) as more particularly set for in
section 7428(c)(1). For individual contrib-
utors, the maximum deduction protected
is $1,000, with a husband and wife treated
as one contributor. This benefit is not
extended to any individual, in whole or in
part, for the acts or omissions of the orga-
nization that were the basis for revocation.
The Following organization is no lon-
ger qualified as an organization exempt
from income tax under Internal Revenue
Code (the “Code”) Section 501(a) as an
organization described in Section 501(c)
(3) of the Code:
NAME OF ORGANIZATION
EFFECTIVE DATE OF
REVOCATIONLOCATION
CHILDRENS CANCER COOPERATIVE INC1/1/2020SUMMERVILLE, SC

December 26, 2023 1616 Bulletin No. 2023–52
Definition of Energy
Property and Rules
Applicable to the Energy
Credit
REG-132569-17
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing, public hearing, and partial withdrawal
of notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations that would amend the
regulations relating to the energy credit
for the taxable year in which eligible
energy property is placed in service. This
document also withdraws and reproposes,
for additional clarity, portions of previ-
ously proposed regulations regarding the
increased energy credit amount available if
prevailing wage and registered apprentice-
ship requirements are met. In connection
with the Inflation Reduction Act of 2022,
the proposed regulations would: update the
types of energy property eligible for the
energy credit, including additional types of
energy property added by that law; clarify
the application of new credit transfer rules
to the energy credit recapture rules appli-
cable to failures to satisfy the prevailing
wage requirements, including notification
requirements for eligible taxpayers; and
include qualified interconnection costs
in the basis of some lower-output energy
properties. The proposed regulations would
also provide additional requirements and
rules generally applicable to energy prop-
erty, such as rules regarding: functionally
interdependent components; property that
is an integral part of an energy property;
application of an “80/20 Rule” to retrofitted
energy property; dual use property; sepa-
rate ownership of components of an energy
property; property that could be eligible
for multiple Federal income tax credits;
and the election to treat qualified facilities
eligible for the renewable electricity pro-
duction credit instead as property eligible
for the energy credit. The proposed regu-
lations would impact taxpayers who invest
in energy property eligible for the energy
credit.
DATES: Written or electronic comments
must be received by January 22, 2024. A
public hearing on these proposed regula-
tions is scheduled to be held on February
20, 2024, at 10 a.m. ET. Requests to speak
and outlines of topics to be discussed
at the public hearing must be received
by January 22, 2024. If no outlines are
received by January 22, 2024, the public
hearing will be cancelled. Requests to
attend the public hearing must be received
by 5 p.m. on February 15, 2024. The pub-
lic hearing will be made accessible to
people with disabilities. Requests for spe-
cial assistance during the hearing must be
received by 5 p.m. on February 14, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at www.regulations.gov (indicate IRS and
REG-132569-17) by following the online
instructions for submitting comments.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited or
withdrawn. The Department of Treasury
(Treasury Department) and the IRS will
publish for public availability any com-
ments submitted, whether electronically
or on paper, to the IRS’s public docket.
Send paper submissions to:
CC:PA:LPD:PR (REG-132569-17),
Room 5203, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station,
Washington DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the pro-
posed regulations, Office of Associate
Chief Counsel (Passthroughs & Special
Industries) at (202) 317-6853 (not a toll-
free number); concerning submissions of
comments or the public hearing, Vivian
Hayes, (202) 317-6901 (not toll-free num-
ber) or by email to publichearings@irs.
gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This notice of proposed rulemaking
consists of several proposed amendments
to the existing Income Tax Regulations
(26 CFR part 1) under section 48 of the
Internal Revenue Code (Code) addressing
the energy credit determined under sec-
tion 48 (section 48 credit) for purposes of
sections 38 and 46 of the Code (proposed
regulations). This notice of proposed
rulemaking also withdraws and reproposes
portions of another notice of proposed
rulemaking (REG-100908-23) proposing
regulations under section 48 that were
published in the Federal Register (88 FR
60018) on August 30, 2023. This notice of
proposed rulemaking would also propose
additional regulations under section 6418
of the Code to supplement a notice of
proposed rulemaking (REG-101610-23)
published in the Federal Register (88 FR
40496) on June 21, 2023.
Section 38 allows certain business
credits against the Federal income tax
imposed by chapter 1 of the Code (chap-
ter 1). Among the credits allowed by
section 38 are the investment credit deter-
mined under section 46, which includes
the energy credit determined under sec-
tion 48. See sections 38(b)(1) and 46(2).
Section 48(a)(1) generally provides that
the energy credit for any taxable year is
the energy percentage of the basis of each
energy property placed in service during
such taxable year. For most types of
energy property, eligibility for the section
48 credit and, in some cases, the amount
of the section 48 credit for which energy
property is eligible, are dependent upon
meeting certain deadlines for beginning
construction of the energy property and
for placing the energy property in service.
Section 48 was originally enacted by
section 2 of the Revenue Act of 1962,
Public Law 87-834, (76 Stat. 960, 963)
to spur economic growth by encourag-
ing investments in various capital proj-
ects across many industries including
energy, transportation, and communica-
tions. Section 48 has been amended many
times since its enactment, most recently
by section 13102 of Public Law 117-169,
136 Stat. 1818 (August 16, 2022), com-
monly known as the Inflation Reduction
Act of 2022 (IRA). The IRA amended
section 48 in several ways, including by
making additional types of energy prop-
erty eligible for the section 48 credit,
providing a special rule to allow certain
lower-output energy properties to include
qualified interconnection costs in the
basis of associated energy property, and

Bulletin No. 2023–52 1617 December 26, 2023
providing an increased credit amount for
energy projects that satisfy prevailing
wage and apprenticeship requirements,
a domestic content bonus credit amount,
and an increase in credit rate for energy
communities.
The current Income Tax Regulations
at §1.48-9, which provide definitions and
eligibility rules for determining whether
property is energy property eligible for
the section 48 credit, were published on
January 23, 1981 (T.D. 7765, 46 FR 7287).
Those regulations were amended on July
21, 1987 (T.D. 8147, 52 FR 27336), to
provide rules for dual use property, but
have not been updated since 1987, before
many of the current types of energy prop-
erty became eligible for the section 48
credit.
Prior to proposing amendments to the
existing regulations under section 48, the
Treasury Department and the IRS have
twice requested comments on issues to
be addressed. On October 26, 2015, the
Treasury Department and the IRS pub-
lished Notice 2015-70, 2015-43 I.R.B.
604, to request comments regarding stat-
utory updates to section 48 preceding
those made by the IRA. On October 24,
2022, in response to the passage of the
IRA, the Treasury Department and the
IRS published Notice 2022-49, 2022-43
I.R.B. 321, to request general as well as
specific comments on issues arising under
section 48, among other sections, that
were amended or added by the IRA. After
consideration of comments submitted in
response to Notice 2015-70 and Notice
2022-49, and after consultation with
the Department of Energy, the Treasury
Department and the IRS propose the revi-
sions to the existing regulations under
section 48 contained in this notice of pro-
posed rulemaking.
On August 30, 2023, the Treasury
Department and the IRS published in
the Federal Register (88 FR 60018) a
notice of proposed rulemaking (REG-
100908-23) proposing rules regarding
the increased credit amount available for
taxpayers satisfying prevailing wage and
registered apprenticeship requirements
established by the IRA (August Proposed
Regulations). The August Proposed
Regulations provided rules addressing
the recapture under section 48(a)(10)(C)
of increased credit amounts from only
initially satisfying the prevailing wage
requirements under section 48(a)(10)(A)
and (B). Comments were requested and
a public hearing has been scheduled for
November 21, 2023. This notice of pro-
posed rulemaking withdraws certain por-
tions of the August Proposed Regulations
and reproposes regulations that would
provide additional guidance on the pre-
vailing wage and apprenticeship require-
ments under section 48, including the
statutory exception for energy projects
with a maximum output of less than one
megawatt (MW) and the recapture rules
under section 48(a)(10)(C) related to the
prevailing wage requirements.
Although this notice of proposed
rulemaking withdraws certain portions
of the August Proposed Regulations,
the Explanation of Provisions section
in the preamble to the August Proposed
Regulations generally remains relevant.
Therefore, to the extent not inconsistent
with the Summary of Comments and
Explanation of Provisions section of this
preamble, the Explanation of Provisions
section of the August Proposed Regulations
is incorporated by reference in this notice
of proposed rulemaking. This notice of
proposed rulemaking does not address
written comments that were submitted in
response to the regulations proposed in
the August Proposed Regulations. Any
comments received in response to this
notice of proposed rulemaking, including
comments on the reproposed regulations,
will be addressed in the Treasury Decision
adopting these regulations as final regu-
lations. This notice of proposed rulemak-
ing does not extend the comment period
or affect the scheduled hearing for the
August Proposed Regulations.
On June 21, 2023, the Treasury
Department and the IRS published in
the Federal Register (88 FR 40496) a
notice of proposed rulemaking (REG-
101610-23) proposing rules concerning
the election under section 6418 of the
Code established by the IRA to transfer
certain Federal income tax credits, includ-
ing the section 48 credit (June Proposed
Regulations). The June Proposed
Regulations provided proposed rules
addressing notification requirements and
the impact of credit recapture rules under
sections 50(a), 49(b), and 45Q(f)(4) of the
Code in proposed §1.6418-5. Comments
were requested and a public hearing on the
June Proposed Regulations was held on
August 23, 2023. This document amends
those June Proposed Regulations to add
guidance to proposed §1.6418-5 that
describes the recapture rules relating to
failing to satisfy the prevailing wage and
apprenticeship requirements under section
48(a)(10) and (11), including the statutory
exception for energy projects with a max-
imum output of less than 1 MW in sec-
tion 48(a)(9)(B)(i), and the recapture rules
under section 48(a)(10)(C) related to the
prevailing wage requirements. This notice
of proposed rulemaking does not address
written comments that were submitted
in response to the regulations proposed
in the June Proposed Regulations. Any
comments received in response to this
notice of proposed rulemaking, includ-
ing the amendments to the June Proposed
Regulations, will be addressed in the
Treasury Decision adopting these regula-
tions as final regulations. This notice of
proposed rulemaking does not otherwise
extend the comment period for the June
Proposed Regulations.
Summary of Comments and
Explanation of Provisions
I. Requirements for Energy Property
For purposes of the section 48 credit,
energy property consists of all the com-
ponents of property that meet the statu-
tory requirements for an energy property
as defined by section 48. Components of
an energy property are those that would
be included in a unit of energy property
because they are functionally interdepen-
dent (as described in proposed §1.48-9(f)
(2)(ii)) as well as property owned by the
same taxpayer that is an integral part of
such energy property (as described in pro-
posed §1.48-9(f)(3)). Additionally, com-
ponents of property must not be a type
of property specifically excluded from
energy property (as described in proposed
§1.48-9(d)).
Section 48(a)(3)(B)-(D) provides gen-
eral requirements for all types of energy
property. Section 48(a)(3)(B)(i) defines
energy property as property that is con-
structed, reconstructed, or erected by
the taxpayer. Alternatively, section 48(a)
(3)(B)(ii) provides that energy property

December 26, 2023 1618 Bulletin No. 2023–52
can also include property which the tax-
payer acquires if the original use of such
property commences with the taxpayer.
Section 48(a)(3)(C) provides that to be
eligible as energy property, deprecia-
tion (or amortization in lieu of deprecia-
tion) must be allowable for the property.
Section 48(a)(3)(D) provides that to be
eligible as energy property, the property
must also meet any performance and qual-
ity standards that have been prescribed by
the Secretary of the Treasury or her del-
egate (Secretary), after consultation with
the Secretary of Energy, and are in effect
at the time of the taxpayer’s acquisition
of the property. Under section 48(a)(3),
energy property does not include property
that is part of a qualified facility the pro-
duction from which is allowed a renewable
electricity production credit determined
under section 45 (section 45 credit) for
the taxable year or any prior taxable year.
Lastly, where section 48 provides dates
by which construction of energy property
must begin or when energy property must
be placed in service, such energy prop-
erty must meet those deadlines to be eli-
gible for the section 48 credit at specified
energy percentages. Proposed §1.48-9(a)
would provide this general overview of
the definition of energy property.
A. Definitions related to requirements for
energy property
Before 1990, section 48 defined the
term “section 38 property” to include,
among other types of property, energy
property eligible for the section 48 credit.
The Revenue Reconciliation Act of 1990,
Public Law 101-508, 104 Stat. 1388
(November 5, 1990) removed the term
“section 38 property” in amending sec-
tion 48. However, section 48 is one of the
credits that comprise the investment credit
for any taxable year determined under
section 46, which is included in section
38(b)(1) and remains subject to the gen-
eral business credit rules under section
38. As a result, rules related to “section
38 property” remain generally applica-
ble to the section 48 credit. The Treasury
Department and the IRS published regu-
lations under §§1.48-1 and 1.48-2 to pro-
vide guidance with respect to section 38
property. Section 1.48-1 was last substan-
tially revised on October 11, 1988 (T.D.
8233, 53 FR 39592) and §1.48-2 was last
revised on June 28, 1985 (T.D. 8031, 50
FR 26698). Although subsequent amend-
ments to section 48 have made some of the
rules provided by these regulations inap-
plicable, those rules continue to provide
useful definitions, some of which §1.48-9
of these proposed regulations (proposed
§1.48-9) would adopt.
1. Construction, Reconstruction, or
Erection of Energy Property
Section 48(a)(3)(B)(i) defines energy
property as property that is constructed,
reconstructed, or erected by the taxpayer.
Existing §1.48-2(b)(1) provides that
property is considered as constructed,
reconstructed, or erected by the taxpayer
if the work is performed for the taxpayer
in accordance with the taxpayer’s speci-
fications. Proposed §1.48-9(b)(1) would
largely adopt the definition of the term
“constructed, reconstructed, or erected”
from existing §1.48-2(b)(1) while modi-
fying it to address energy property.
2. Acquisition and Original Use of
Energy Property
Section 48(a)(3)(B)(ii) provides that
energy property includes property that
is acquired by the taxpayer if the orig-
inal use of such property commences
with the taxpayer. Existing §1.48-2(b)
(6) provides that property is deemed to
be acquired when reduced to physical
possession or control by the taxpayer.
Proposed §1.48-9(b)(2) would adopt the
concepts from existing §1.48-2(b)(6),
and provide additional clarification that
the term “acquisition of energy prop-
erty” means a transaction by which a tax-
payer obtains rights and obligations with
respect to energy property, including
title to the energy property under the law
of the jurisdiction in which the energy
property is placed in service, unless the
property is possessed or controlled by the
taxpayer as a lessee, and physical posses-
sion or control of the energy property. In
addition, existing §1.48-2(b)(7) defines
the term “original use” as the first use
to which the property is put, whether or
not such use corresponds to the use of
such property by the taxpayer. Proposed
§1.48-9(b)(3) largely would adopt the
§1.48-2(b)(7) definition of original use
while modifying it to address energy
property.
3. Depreciation Allowable
Section 48(a)(3)(C) requires that
energy property be property with respect
to which depreciation (or amortization
in lieu of depreciation) is allowable, and
existing §1.48-1(b) explains when depre-
ciation is allowable with respect to sec-
tion 38 property. Specifically, §1.48-1(b)
provides that a deduction for depreciation
is allowable if the property is of a char-
acter subject to the allowance for depre-
ciation under section 167 of the Code
and the basis (or cost) of the property is
recovered through a method of deprecia-
tion, including, for example, the unit of
production method and the retirement
method as well as methods of deprecia-
tion that measure the life of the property
in terms of years. Proposed §1.48-9(b)
(4)(i) generally would adopt the §1.48-
1(b) rule for determining whether depre-
ciation is “allowable” under section 48,
with certain modifications to update
the described methods of depreciation
and to make the definition specific to
energy property as defined in section 48.
Proposed §1.48-9(b)(4)(i) would also
clarify that the 100-percent additional
first year depreciation provided by sec-
tion 168(k) of the Code is considered a
method of depreciation.
In addition, existing §1.48-1(b)(3) pro-
vides language describing when depreci-
ation is not allowable to the taxpayer for
purposes of defining section 38 property.
Section 1.48-1(b)(3) provides that if the
cost of property is not recovered through
a method of depreciation but through a
deduction of the full cost in one taxable
year, for purposes of §1.48-1(b)(1) a
deduction for depreciation with respect
to such property is not allowable to the
taxpayer. However, if an adjustment with
respect to the income tax return for such
taxable year requires the cost of such
property to be recovered through a method
of depreciation, a deduction for deprecia-
tion will be considered as allowable to the
taxpayer.
Proposed §1.48-9(b)(4)(ii) generally
would adopt this rule from §1.48-1(b)
(3) to determine when depreciation is

Bulletin No. 2023–52 1619 December 26, 2023
not allowable, with certain modifica-
tions to update the described methods of
depreciation and to make the definition
specific to energy property as defined
in section 48. Proposed §1.48-9(b)(4)
would provide that if the basis or cost of
energy property is not recovered through
a method of depreciation but through a
deduction of the full cost in one taxable
year, a deduction for depreciation with
respect to such property is not allowable
to the taxpayer.
However, proposed §1.48-9(b)(4)(i)
would provide that if an IRS adjustment
with respect to an income tax return or
information return for such taxable year
requires the basis or cost of such property
to be recovered using a method of depre-
ciation, including any additional first year
depreciation deduction provision in the
Code, a deduction for depreciation will be
considered as allowable to the taxpayer.
4. Performance and Quality Standards for
Energy Property
Section 48(a)(3)(D) provides that
energy property is property that meets the
performance and quality standards (if any)
that have been prescribed by the Secretary
by regulations (after consultation with the
Secretary of Energy), and are in effect at
the time of the acquisition of the prop-
erty. Existing §1.48-9(m)(1) provides that
“energy property must meet quality and
performance standards, if any, that have
been prescribed by the Secretary (after
consultation with the Secretary of Energy)
and are in effect at the time of acquisition.”
Proposed §1.48-9(c)(2) would adopt this
rule for performance and quality standards
for energy property from §1.48-9(m)(1).
After consultation with the Department
of Energy, proposed §1.48-9(c)(2)(ii)
would provide special rules for perfor-
mance and quality standards with respect
to both small wind and electrochromic
glass property. These clarifications are
needed to ensure that the intended energy
production or savings occurs.
a. Performance and quality standards for
small wind energy property
Proposed §1.48-9(c)(2)(ii)(A) would
provide that small wind energy property
must meet the performance and quality
standards in effect at the time of acqui-
sition of the small wind turbine set forth
in one of the following: the American
Wind Energy Association Small Wind
Turbine Performance and Safety Standard
9.1-2009, or subsequent revisions
(AWEA); International Electrotechnical
Commission 61400-1, 61400-2, 61400-
11, 61400-12, or subsequent revisions
(IEC); or the ANSI/ACP 101-1-2021,
the Small Wind Turbine Standard, or
subsequent revisions (ACP). Proposed
§1.48-9(c)(2)(ii)(A) would also provide
that certification requirements applicable
to such performance and quality stan-
dards for small wind energy property are
provided in guidance published in the
Internal Revenue Bulletin, such as Notice
2015-4, 2015-5 I.R.B. 407, and its succes-
sor, Notice 2015-51, 2015-31 I.R.B. 133.
b. Performance and quality standards for
electrochromic glass property
As described in part I.C.2.b of this
Summary of Comments and Explanation
of Provisions, electrochromic glass is
incorporated into either an electrochromic
window or secondary glazing product.
Accordingly windows, including second-
ary glazings, that incorporate electrochro-
mic glass are electrochromic glass property
for purposes of the section 48 credit.
Proposed §1.48-9(c)(2)(ii)(B) would also
adopt the requirement that windows that
incorporate electrochromic glass must
be rated in accordance with the National
Fenestration Rating Council (NFRC) and
would provide that secondary glazing
systems must be rated in accordance with
the Attachments Energy Rating Council
(AERC) Rating and Certification Process,
or subsequent revisions.
c. Time of acquisition
Existing §1.48-9(m)(2) provides that
the time of acquisition for purposes of
applying quality and performance stan-
dards for energy property is either (i) the
date the taxpayer enters into a binding
contract to acquire the property; or (ii)
for property constructed, reconstructed, or
erected by the taxpayer, the earlier of the
date that the taxpayer begins construction,
reconstruction, or erection of the property,
or the date the taxpayer and another person
enter into a binding contract requiring the
other person to construct, reconstruct, or
erect property and place the property in
service for an agreed upon use. Proposed
§1.48-9(c)(2)(iii) would adopt the rule for
the “time of acquisition” from §1.48-9(m)
(2) only for purposes of applying the per-
formance and quality standards for energy
property.
d. Binding contract
Section 1.168(k)-2(b)(5)(iii)(A) pro-
vides the following definition of a binding
contract in the context of the acquisition
of qualified property for the allowance of
additional first year depreciation under
section 168(k) of the Code:
A contract is binding only if it is
enforceable under State law against the
taxpayer or a predecessor, and does not
limit damages to a specified amount
(for example, by use of a liquidated
damages provision). For this purpose,
a contractual provision that limits dam-
ages to an amount equal to at least five
percent of the total contract price will
not be treated as limiting damages to a
specified amount.
Proposed §1.48-9(c)(2)(iv) would
adopt this definition of the term “binding
contract” from §1.168(k)-2(b)(5)(iii)(A)
for purposes of applying the performance
and quality standards for energy property.
5. Placed in Service
Section 48(a) provides that the energy
credit for any taxable year is the energy
percentage of the basis of each energy
property placed in service during such
taxable year. As part of the regulations
under section 46 for the investment credit,
§1.46-3(d)(1) provides general rules for
determining when a taxpayer has placed
a property in service for the section 48
credit. Property is considered placed in
service in the earlier of the taxable year
in which, under the taxpayer’s deprecia-
tion practice, the period for depreciation
with respect to such property begins; or
the taxable year in which the property is
placed in a condition or state of readiness
and availability for a specifically assigned
function, whether in a trade or business, in

December 26, 2023 1620 Bulletin No. 2023–52
the production of income, in a tax-exempt
activity, or in a personal activity.
Proposed §1.48-9(b)(5) largely would
adopt the general rules from §1.46-3(d)
(1) for determining whether a taxpayer
has placed an energy property in service
with certain modifications. As discussed
previously, to be eligible for the section
48 credit, energy property must be prop-
erty with respect to which depreciation
(or amortization in lieu of depreciation)
is allowable. Further, one requirement for
determining if depreciation is allowable
with respect to energy property is that
the basis or cost of such energy property
is recovered using a method of deprecia-
tion. Accordingly, proposed §1.48-9(b)(5)
(i) clarifies that the taxable year in which
energy property is placed in service would
be the earlier of the taxable year in which
the period for depreciation of such prop-
erty begins, or the taxable year in which
the energy property is placed in a condi-
tion or state of readiness and availability
for a specifically assigned function in
either a trade or business or in the produc-
tion of income.
In addition, section 50(b)(3) of the
Code provides that tax-exempt organi-
zations cannot determine an investment
tax credit, including the section 48 credit,
unless the property is used predominantly
in an unrelated trade or business, so the
proposed regulations do not include a rule
applicable to tax-exempt use. However,
section 6417(d)(2) of the Code provides
that an applicable entity (as defined
in section 6417(d)(1), and including a
tax-exempt organization) making an
elective payment election under section
6417 can determine an applicable credit
(defined in section 6417(b), and includ-
ing the section 48 credit) without regard
to section 50(b)(3), by treating any
property with respect to which the sec-
tion 48 credit is determined as used in a
trade or business of the applicable entity.
(See the rules of proposed §1.6417-2(c)
(2) contained in the notice of proposed
rulemaking (REG-101607-23) published
in the Federal Register (88 FR 40528) on
June 21, 2023.) Thus, if the rules under
section 6417(d)(2) apply, the general
rule adopted in proposed §1.48-9(b)(5)
(i) would apply to determine when the
energy property is placed in service by
an applicable entity.
Section 1.46-3(d)(3) provides that not-
withstanding the provisions of §1.46-3(d)
(1), property with respect to which an
election is made under §1.48-4 to treat the
lessee as having purchased such property
is considered placed in service by the les-
sor in the taxable year in which possession
is transferred to such lessee. Proposed
§1.48-9(b)(5)(ii) would adopt the special
rule from §1.46-3(d)(3) for determining
when a leased property has been placed in
service.
B. Property excluded from energy
property
Section 48(a)(5) generally provides
an election to treat certain types of qual-
ified facilities as defined in section 45(d),
referred to as a “qualified investment
credit facility,” as energy property for
purposes of section 48. However, section
48(a)(5)(B) provides that no section 45
credit is allowed for any taxable year with
respect to any qualified investment credit
facility. Section 48(a)(5)(C) provides,
in part, that the term “qualified invest-
ment credit facility” means any qualified
facility with respect to which no section
45 credit has been allowed for which
the taxpayer makes an irrevocable elec-
tion. Accordingly, proposed §1.48-9(d)
would exclude from energy property any
property that is part of a qualified facility
with respect to which a section 45 credit
is allowed for any taxable year, including
any prior taxable year.
The Treasury Department and the IRS
understand that energy storage technolo-
gies eligible for the section 48 credit are
often co-located with qualified facilities
eligible for the section 45 credit and may
share power conditioning and transfer
equipment. In consideration of this prac-
tice, the proposed rules would provide that
power conditioning and transfer equip-
ment that is shared by a qualified facility
(as defined in section 45(d)) and an energy
property may be treated as an integral part
of the section 48 energy property. Such
shared property is not considered part of a
qualified facility and, therefore, the shar-
ing of such property will not impact the
ability of a taxpayer to claim the section
48 credit for the energy property or the
section 45 credit for the qualified facil-
ity. The Treasury Department and the
IRS request comments regarding whether
additional guidance is needed on this rule.
C. Types of energy property
Proposed §1.48-9(e) would expand
upon the definitions of energy property
provided in existing §1.48-9 to account
for new technologies that were added by
amendments to section 48, including by
section 13102 of the IRA. Generally, the
definitions of the types of energy prop-
erty provided in the proposed regulations
do not provide specific beginning of con-
struction or placed in service deadlines.
Taxpayers should refer to the current stat-
utory language of section 48 for specific
requirements applicable to each type of
energy property with respect to any par-
ticular taxable year. The following defi-
nitions in proposed §1.48-9(e) for the
different types of energy properties were
developed by the Treasury Department
and the IRS in consultation with the
Department of Energy.
1. Solar Energy Property
Section 48(a)(3)(A)(i) provides that
energy property includes solar energy
property and defines solar energy prop-
erty as any property that is equipment that
uses solar energy to generate electricity, to
heat or cool (or provide hot water for use
in) a structure, or to provide solar process
heat, excepting property used to generate
energy for the purposes of heating a swim-
ming pool.
Existing §1.48-9(d)(1) defines solar
energy property as including equipment
and materials (and parts related to the func-
tioning of such equipment) that use solar
energy directly to (i) generate electricity,
(ii) heat or cool a building or structure,
or (iii) provide hot water for use within
a building or structure. Further, existing
§1.48-9(d)(3), in part, defines solar elec-
tric generation equipment as equipment
that uses solar energy to generate elec-
tricity through a process that involves the
transformation of sunlight into electricity
through the use of such devices as solar
cells or other collectors.
In response to Notice 2015-70, com-
menters requested that the Treasury
Department and the IRS provide guid-
ance regarding specific components that

Bulletin No. 2023–52 1621 December 26, 2023
may be considered solar energy property,
including in photovoltaic (PV) systems
(including concentrated PV systems),
non-PV concentrated solar power systems
(passive solar), solar process, and thermal
systems. Several commenters requested
that the regulations explicitly list certain
types of technologies as solar energy
property, such as integrated thermoplas-
tic roofing and racking systems. Other
commenters requested that the regula-
tions simply define solar energy property
to include common components such as
controllers to manage use of solar energy,
mounting structures, energy storage tech-
nology, power conditioning equipment,
and step-up transformers.
Proposed §1.48-9(e)(1)(i) would
depart from the existing definition of
solar energy property at §1.48-9(d)(1) by
adopting a modified version of the cur-
rent statutory definition, which provides
that solar energy property is equipment
that uses solar energy to generate elec-
tricity, to heat or cool a structure, or to
provide solar process heat, and parts
related to the functioning of such equip-
ment. Proposed §1.48-9(e)(1)(ii) would
define the term “solar electric generation
equipment” as equipment that converts
sunlight into electricity through the use
of devices such as solar cells or other col-
lectors, while adopting the current statu-
tory exclusion for any property used to
generate energy for the purposes of heat-
ing a swimming pool. The proposed reg-
ulations would eliminate the exclusion
for passive solar in existing §1.48-9(d)
(2) because section 48 does not distin-
guish between passive and active solar
energy systems. Finally, the proposed
regulations would apply the functional
interdependence test as described in part
I.D.2 of this Summary of Comments and
Explanation of Provisions to determine
whether components are included as part
of solar energy property.
Existing §1.48-9(d)(7) provides that
solar energy property does not include
equipment that uses solar energy to gen-
erate steam at high temperatures for use in
industrial or commercial processes (solar
process heat). This definition conflicts
with section 48(a)(3)(A)(i). Accordingly,
the proposed regulations would adopt the
statutory language by explicitly including
solar process heat within the definition of
the term “solar energy property.” After
consultation with the Department of
Energy, proposed §1.48-9(e)(1)(iii) would
define “solar process heat equipment” as
equipment that uses solar energy to gen-
erate heat for use in industrial or commer-
cial processes.
2. Fiber-optic Solar Energy Property and
Electrochromic Glass Property
a. Fiber-optic solar energy property
Section 48(a)(3)(A)(ii) provides that
energy property includes equipment that
uses solar energy to illuminate the inside
of a structure using fiber-optic distrib-
uted sunlight. The Treasury Department
and the IRS received no comments in
response to Notice 2022-49 regard-
ing fiber-optic solar energy property.
Accordingly, proposed §1.48-9(e)(2)
(i) would adopt the statutory definition
of fiber-optic solar energy property.
Additionally, the proposed regulations
would apply the functional interdepen-
dence test as described in part I.D.2 of this
Summary of Comments and Explanation
of Provisions to determine whether com-
ponents are included as part of fiber-optic
solar energy property.
b. Electrochromic glass property
Section 48(a)(3)(A)(ii) was modified
by the IRA to add electrochromic glass
property as a type of energy property.
That provision defines electrochromic
glass property as equipment that uses
electricity to change its light transmit-
tance properties in order to heat or cool a
structure. The Treasury Department and
IRS consulted with the Department of
Energy to determine the types of property
eligible as electrochromic glass property.
Accordingly, §1.48-9(e)(2)(ii) would
provide that there are only two types of
electrochromic glass property: (i) elec-
trochromic glass incorporated into a full
window that is installed directly into a
building or (ii) electrochromic glass incor-
porated into a secondary window (known
as secondary glazing) that is installed on
top of an existing window. For each type
of electrochromic glass property, there is
a separate control package consisting of
electronics, power supply, sensors, and
software necessary to control the oper-
ations of the electrochromic glass prop-
erty. Thus, electrochromic glass property
is not only comprised of electrochromic
glass but also the relevant window or
secondary glazing property that incorpo-
rates the electrochromic glass property.
Therefore, in addition to the electronic
controls package that includes the power
electronics, sensors, wires, and software
systems, the electrochromic window or
secondary glazing also includes the elec-
trochromic glass coating and the balance
of window and installation components
including glass, flashing, framing, and
sealants, as applicable, to the type of
electrochromic glass property.
In response to Notice 2022-49, sev-
eral commenters provided input on the
definition of electrochromic glass prop-
erty. Several commenters requested a
narrow definition. Other commenters
suggested adopting a broader definition
of electrochromic glass property. One
commenter stated that interpretations
of the terms “electrochromic glass” or
“dynamic glass” should be expanded to
include any material or technology that
meets or exceeds the performance criteria
for such components established by the
most recent Energy Star or International
Energy Conservation Code (IECC) stan-
dards in effect at the time such component
is placed in service.
In response to the comments and after
consultation with the Department of
Energy, the proposed regulations would
clarify the definition of electrochromic
glass property. Proposed §1.48-9(e)(2)
(ii) would adopt the statutory definition
of electrochromic glass property while
providing that light transmittance prop-
erties include both visible light and near
infrared light. Additionally, as mentioned
previously, proposed §1.48-9(c)(2)(ii)(B)
would adopt the performance and qual-
ity standards that new electrochromic
windows must be rated in accordance
with the NFRC and secondary glazing
systems must be rated in accordance
with the AERC Rating and Certification
Process, or subsequent revisions. The
application of these performance and
quality standards are needed to ensure
that the intended energy savings occurs
from the installation of electrochromic
glass property.

December 26, 2023 1622 Bulletin No. 2023–52
The Treasury Department and the IRS
received comments requesting guidance
concerning the eligible components of
electrochromic glass property. Similar to
the other energy properties, the proposed
regulations would apply the functional
interdependence test as described in part
I.D.2 of this Summary of Comments and
Explanation of Provisions to determine
whether components are included as part
of electrochromic glass property. This
approach provides a technology-neutral
way to determine what is considered
included in the energy property that is
broad enough to encompass techno-
logical changes. In the case of electro-
chromic glass property, for example, an
electrochromic glass system includes
the full controls package, the electro-
chromic glass coating, and the balance
of window and installation components
including glass, flashing, framing, and
sealants.
3. Geothermal Energy Property
Section 48(a)(3)(A)(iii) provides that
energy property includes geothermal
property, and defines geothermal property
as equipment used to produce, distribute,
or use energy derived from a geothermal
deposit (within the meaning of section
613(e)(2) of the Code), but only, in the
case of electricity generated by geother-
mal power, up to (but not including) the
electrical transmission stage.
Existing §1.48-9(c)(10)(i) defines
“geothermal equipment” as equipment
that produces, distributes, or uses energy
derived from a geothermal deposit.
Existing §1.48-9(c)(10) generally pro-
vides that geothermal property includes
production and distribution equipment.
Proposed §1.48-9(e)(3)(i) would adopt
this definitional framework by providing
that geothermal energy property is equip-
ment used to produce, distribute, or use
energy derived from a geothermal deposit
(within the meaning of section 613(e)(2)),
and includes production equipment (as
defined in proposed §1.48-9(e)(3)(ii)) and
distribution equipment (as defined in pro-
posed §1.48-9(e)(3)(iii)).
Proposed §1.48-9(e)(3)(ii) would adopt
a modified definition of production equip-
ment from existing §1.48-9(c)(10)(ii) in
three respects. First, proposed §1.48-9(e)
(3)(ii) would provide, in part, that produc-
tion equipment includes equipment nec-
essary to bring geothermal energy from
the subterranean deposit to the surface.
Second, while existing §1.48-9(c)(10)(ii)
provides that reinjection wells required
for production may qualify as produc-
tion equipment, proposed §1.48-9(e)(3)
(ii) would expand the types of wells that
may qualify as production equipment to
production, injection, and monitoring
wells. Third, proposed §1.48-9(e)(3)(ii)
would also include the electricity gener-
ating equipment as production equipment
for those projects that convert geothermal
energy to electricity.
Proposed §1.48-9(e)(3)(iii) would
adopt a modified definition of distribution
equipment from existing §1.48-9(c)(10)
(iii). The existing regulations provide that
distribution equipment includes compo-
nents of a heating system, such as pipes
and ductwork that distribute the energy
derived from the geothermal deposit
within a building. Proposed §1.48-9(e)
(3)(iii) would also add components of a
building’s heating or cooling system as
distribution equipment. The proposed
regulations would apply the functional
interdependence test as described in part
I.D.2 of this Summary of Comments and
Explanation of Provisions to determine
whether components are included as part
of geothermal energy property.
In response to Notice 2015-70, one
commenter requested that the regulations
be modified to include as credit eligible
costs incurred to drill failed or non-pro-
ducing wells, and in some scenarios, for
the margin or contingency that a subsid-
iary contractor requires to be paid to per-
form under an engineering, procurement,
and construction (EPC) contract. While
the proposed regulation would expand the
types of wells that may be considered pro-
duction equipment, it would not specifi-
cally include costs incurred to drill failed
or non-producing wells. In many cases
costs incurred to drill failed or non-pro-
ducing geothermal wells are already
recoverable through intangible drilling
costs under §1.612-5. It is also unclear
whether the margin or contingency that a
subsidiary contractor requires to be paid
to perform under an EPC contract can
be recovered by a taxpayer. However, if
such costs are recoverable, such recovery
would likely occur through capitalizing
the costs to the underlying mineral interest
and claiming depletion deductions under
section 613(e). Therefore, the Treasury
Department and the IRS have determined
that these costs cannot be included in the
basis of the geothermal energy property
for purposes of calculating the section 48
credit.
4. Qualified Fuel Cell Property
Section 48(a)(3)(A)(iv) provides that
energy property includes qualified fuel
cell property. As modified by the IRA,
section 48(c)(1) defines “qualified fuel
cell property” as a fuel cell power plant
that has a nameplate capacity of at least
0.5 kilowatt (kW) (1 kW in the case of a
fuel cell power plant with a linear genera-
tor assembly) of electricity using an elec-
trochemical process or electromechanical
process and an electricity-only genera-
tion efficiency greater than 30 percent.
Electricity-only generation efficiency
may be calculated by dividing the heat
rate of the fuel cell (for example, kilo-
watt-hours (kWh) electricity produced
per kilogram (kg) of fuel consumed) by
the higher heating value of the fuel (for
example, kWh per kg). Section 48(c)
(1)(C) defines the term “fuel cell power
plant” as an integrated system comprised
of a fuel cell stack assembly, or linear
generator assembly, and associated bal-
ance of plant components that converts
a fuel into electricity using electrochemi-
cal or electromechanical means.
The Treasury Department and the IRS
received few comments regarding qual-
ified fuel cell property in response to
Notice 2022-49. As discussed, the pro-
posed regulations are intended to provide
a technology-neutral way to determine
what is included in energy property that
is broad enough to encompass technolog-
ical changes and do not include rules for
a particular type of product. As a result,
proposed §1.48-9(e)(4) would adopt the
statutory definition of qualified fuel cell
property. The proposed regulations would
also apply the functional interdependence
test as described in part I.D.2 of this
Summary of Comments and Explanation
of Provisions to determine whether com-
ponents are included as part of qualified
fuel property.

Bulletin No. 2023–52 1623 December 26, 2023
5. Qualified Microturbine Property
Section 48(a)(3)(A)(iv) provides that
energy property includes qualified micro-
turbine property. Section 48(c)(2) defines
“qualified microturbine property” as a sta-
tionary microturbine power plant that has
a nameplate capacity of less than 2,000
kW and an electricity-only generation
efficiency of not less than 26 percent at
International Standard Organization con-
ditions. Section 48(c)(2)(C) provides that
a “stationary microturbine power plant” is
an integrated system comprised of a gas
turbine engine, a combustor, a recuperator
or regenerator, a generator or alternator,
and associated balance of plant compo-
nents that convert a fuel into electricity and
thermal energy. A stationary microturbine
power plant also includes all secondary
components located between the existing
infrastructure for fuel delivery and the
existing infrastructure for power distribu-
tion, including equipment and controls for
meeting relevant power standards, such as
voltage, frequency, and power factors.
The Treasury Department and the IRS
received no comments regarding qualified
microturbine property in response to the
request for comment published in Notice
2022-49. Therefore, proposed §1.48-9(e)
(5) would adopt the statutory definition
of qualified microturbine property. The
proposed regulations would also apply
the functional interdependence test as
described in part I.D.2 of this Summary of
Comments and Explanation of Provisions
to determine whether components are
included as part of qualified microturbine
property.
6. Combined Heat and Power System
Property
Section 48(a)(3)(A)(v) includes com-
bined heat and power system (CHP) prop-
erty as a type of energy property. Section
48(c)(3)(A) defines CHP property as
property comprising a system that uses
the same energy source for the simulta-
neous or sequential generation of elec-
trical power, mechanical shaft power, or
both, in combination with the generation
of steam or other forms of useful thermal
energy (including heating and cooling
applications). Section 48(c)(3)(A) further
provides, in part, that a CHP property
must produce at least 20 percent of its
total useful energy in the form of thermal
energy that is not used to produce elec-
trical or mechanical power (or combina-
tion thereof), and at least 20 percent of its
total useful energy in the form of electri-
cal or mechanical power (or combination
thereof), and that the energy efficiency
percentage of the system must exceed 60
percent.
Section 48(c)(3)(B) provides that the
credit for CHP property is reduced to the
extent that a CHP property has an electri-
cal or mechanical capacity in excess of
applicable limits. Subject to the exception
for CHP property that uses closed or open-
loop biomass as feedstock, CHP property
with capacity in excess of the applicable
capacity limit (15 MW or a mechanical
capacity of more than 20,000 horsepower
or an equivalent combination of electri-
cal and mechanical energy capacities)
is eligible for only a fraction of the oth-
erwise allowable section 48 credit. The
fraction is equal to the applicable capacity
limit divided by the capacity of the CHP
property. However, CHP property with a
capacity in excess of 50 MW or a mechan-
ical energy capacity in excess of 67,000
horsepower or an equivalent combina-
tion of electrical and mechanical energy
capacities does not qualify for the section
48 credit.
Section 48(c)(3)(C) provides that the
energy efficiency percentage of a CHP
property is the fraction (1) the numera-
tor of which is the total useful electrical,
thermal, and mechanical power produced
by the system at normal operating rates,
and expected to be consumed in its nor-
mal application, and (2) the denomina-
tor of which is the lower heating value
of the fuel sources for the system. The
energy efficiency percentage and the per-
centages under section 48(c)(3)(A)(ii)
are determined on a British thermal unit
(Btu) basis. Section 48(c)(3)(C)(iii) spe-
cifically provides that the term “combined
heat and power system property” does
not include property used to transport the
energy source to the facility or to distrib-
ute energy produced by the facility.
Additionally, section 48(c)(3)(D) pro
-
vides that a CHP property with a fuel
source that is at least 90 percent from
closed or open-loop biomass that would
otherwise qualify for the section 48 credit
but for the failure to meet the efficiency
standard is eligible for a credit reduced
in proportion to the degree to which the
system fails to meet the efficiency stan-
dard. For example, a system that would
otherwise be required to meet the 60-per-
cent efficiency standard, but which only
achieves 30-percent efficiency, would be
permitted to claim a credit equal to one-
half of the otherwise allowable credit (that
is, a five percent credit).
In response to Notice 2015-70, several
commenters requested that the definition
of CHP property be modified by relax-
ing certain requirements. Specifically,
commenters requested that the definition
of CHP property be modified by elimi-
nating or reducing the requirement that a
facility produce at least 20 percent of its
total useful energy in the form of electri-
cal or mechanical power (or combination
thereof). This modification would allow
waste heat to power (WHP) property,
which uses waste heat from industrial
processes to generate electricity, to qual-
ify as CHP property despite its inability
to meet certain statutory requirements.
Since the comments to Notice 2015-70
were received, Congress amended section
48 by adding waste energy recovery prop-
erty (WERP) as a type of energy property
in the Consolidated Appropriations Act,
2021, Public Law 116-260, 134 Stat. 1182
(Dec. 27, 2020). Additional information
on requirements for WERP is provided in
part I.C.9 of this Summary of Comments
and Explanation of Provisions.
Proposed §1.48-9(e)(6)(i) would adopt
a simplified version of the statutory defi-
nition of CHP property. Additionally, pro-
posed §1.48-9(e)(6)(ii) would provide that
CHP property does not include property
used to transport the energy source to the
generating facility or to distribute energy
produced by the facility. The proposed
regulations would also apply the func-
tional interdependence test as described in
part I.D.2 of this Summary of Comments
and Explanation of Provisions to deter-
mine whether components are included as
part of CHP property.
7. Qualified Small Wind Energy Property
Section 48(a)(3)(A)(vi) provides that
energy property includes qualified small
wind energy property. Section 48(c)(4)

December 26, 2023 1624 Bulletin No. 2023–52
defines qualified small wind energy prop-
erty as property using a qualifying small
wind turbine (which has a nameplate
capacity of not more than 100 kW) to gen-
erate electricity. The Treasury Department
and the IRS received no comments regard-
ing qualified small wind energy property in
response to Notice 2015-70. Accordingly,
proposed §1.48-9(e)(7) would adopt the
statutory definition of qualified small wind
energy property. The proposed regulations
would apply the functional interdepen-
dence test as described in part I.D.2 of this
Summary of Comments and Explanation
of Provisions to determine whether com-
ponents are included as part of qualified
small wind energy property.
8. Geothermal Heat Pump Equipment
Section 48(a)(3)(A)(vii) provides that
energy property includes geothermal heat
pump equipment. The statute provides, in
part, that geothermal heat pump equip-
ment is equipment that uses the ground or
ground water as a thermal energy source
to heat a structure or as a thermal energy
sink to cool a structure. The Treasury
Department and the IRS received no com-
ments regarding geothermal heat pump
equipment in response to Notice 2015-70.
As a result, proposed §1.48-9(e)(8) would
adopt the statutory definition of qualified
geothermal heat pump equipment while
providing the modification that in addi-
tion to the ground and ground water, other
underground working fluids may be used
as a thermal energy source or as a ther-
mal energy sink. The proposed regulations
would apply the functional interdepen-
dence test as described in part I.D.2 of this
Summary of Comments and Explanation
of Provisions to determine whether com-
ponents are included as part of geothermal
heat pump equipment.
Additionally, while section 48(a)(3)
(A)(vii) does not specify energy distri-
bution equipment and components of a
building’s heating and/or cooling system
as components of geothermal heat pump
equipment, such equipment may be inte-
gral to the function of the geothermal
heat pump equipment, to heat or cool a
structure. Thus, energy distribution equip-
ment may be considered geothermal heat
pump equipment. See section I.E.3. of this
preamble for a discussion of an integral
part of energy property.
9. Waste Energy Recovery Property
(WERP)
Section 48(a)(3)(A)(viii) provides that
energy property includes WERP. Section
48(c)(5)(A) defines WERP as property
(with a capacity not in excess of 50 MW)
that generates electricity solely from heat
from buildings or equipment if the pri-
mary purpose of such building or equip-
ment is not the generation of electricity.
Additionally, section 48(c)(5)(C) prevents
taxpayers from claiming a double benefit
by providing that any property that could
be treated as WERP (determined without
regard to section 48(c)(5)), which is part
of a CHP property is not treated as WERP
for purposes of section 48 unless the tax-
payer elects not to treat such system as a
CHP property for purposes of section 48.
Proposed §1.48-9(e)(9), would adopt
the statutory definition of WERP. The
proposed regulations would also apply
the functional interdependence test as
described in part I.D.2 of this Summary of
Comments and Explanation of Provisions
to determine whether components are
included as part of WERP. Additionally,
after consultation with the Department
of Energy, proposed §1.48-9(e)(9) would
provide examples of buildings or equip-
ment the primary purpose of which is not
the generation of electricity including, but
not limited to, manufacturing plants, med-
ical care facilities, facilities on college
campuses, pipeline compressor stations,
and associated equipment.
10. Energy Storage Technology
Section 48(a)(3)(A)(ix) was added
by the IRA to provide that energy prop-
erty includes energy storage technology.
Section 48(c)(6)(A)(i) defines energy
storage technology to mean 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 (or, in the case
of hydrogen, that stores energy), and has
a nameplate capacity of not less than 5
kWh. Section 48(c)(6)(A)(ii) provides
that thermal energy storage property is
also energy storage technology.
Section 48(c)(6)(B) provides a rule for
modifications of energy storage technol-
ogy. In the case of any property that either
was placed in service before August 16,
2022, and would be described in section
48(c)(6)(A)(i), except that such property
has a 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 is
energy storage technology (as described
in section 48(c)(6)(A)(i)) and is modified
in a manner that such property (after such
modification) has an increase in name-
plate capacity of not less than 5 kWh, such
property is treated as energy storage tech-
nology (as described in section 48(c)(6)
(A)(i)) except that the basis of any exist-
ing property prior to such modification
is not taken into account for purposes of
section 48.
Section 48(c)(6)(C) defines thermal
energy storage property, for purposes of
section 48(c)(6) as property comprising
a system that: is directly connected to a
heating, ventilation, or air conditioning
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. Section 48(c)(6)(C)
(ii) provides that thermal energy storage
property does not include a swimming
pool, a combined heat and power system
property, or a building or its structural
components.
The Treasury Department and the IRS
received comments addressing energy
storage technologies in response to Notice
2022-49. Some comments discussed
the definition of energy storage tech-
nology and how broadly energy storage
technology should be interpreted in the
regulations. For example, a commenter
requested that guidance define energy
storage broadly based on its characteris-
tics and capabilities, rather than using a
technology-based definition that could
unintentionally exclude developing tech-
nologies. Some commenters requested
that the definition of energy storage tech-
nology focus more on capability and
less on a particular technology. Other
commenters requested confirmation that

Bulletin No. 2023–52 1625 December 26, 2023
certain specific technologies would be
included within the definition of energy
storage technology and that the definition
be based on the underlying definition for
the technology provided in section 48(c)
(6), as opposed to the specific function-
alities of the energy storage technology.
After consideration of these comments,
proposed §1.48-9(e)(10) would adopt
the statutory definition of energy storage
technology.
Commenters also provided input on
hydrogen storage, including a variety
of recommendations on what the defini-
tion of hydrogen storage property should
include. For example, one commenter
suggested that “energy storage technol-
ogy” with respect to hydrogen storage
includes all equipment, facilities, storage
receptacles, dedicated vehicles and ves-
sels used to compress, liquify, store, and
distribute hydrogen and hydrogen car-
riers, such as ammonia, methanol, and
other forms of hydrogen carriers. Another
commenter requested that regulations
include a broad list of components of
energy storage technologies including the
storage receptacle itself and all pressure
vessels, piping, valves, and tanks among
many other components. This commenter
also suggested that property that facili-
tates use of ammonia, methanol and other
hydrogen carriers be included as hydrogen
energy storage technology. Another com-
menter noted that the regulations should
provide specific use limitations for stored
hydrogen such as for use solely in ener-
gy-related activities.
Section 48(c)(6)(A) already defines
energy storage technology (including
hydrogen storage) and thermal energy
storage property based on the general
functions of the relevant energy storage
technology. Hydrogen energy storage
property must store hydrogen that is solely
used for the production of energy and not
for the production of end products, such as
fertilizer. For example, this would include,
but is not limited to, hydrogen used to
produce heat, to generate electricity, or
to be used in a fuel cell vehicle. The type
of hydrogen storage medium (for exam-
ple, physical based or material based),
is not limited. Proposed §1.48-9(e)(10)
(iv) therefore would adopt that rule. The
Treasury Department and the IRS request
comments on alternative approaches to
assessing limitations on the use of hydro-
gen energy storage property, including
whether additional clarification is needed
regarding the production of energy from
hydrogen, and what type of documenta-
tion would be needed to demonstrate that
a hydrogen energy storage property was
used to store hydrogen solely used for the
production of energy.
Proposed §1.48-9(e)(10) would apply
the functional interdependence test as
described in part I.D.2 of this Summary of
Comments and Explanation of Provisions
to determine whether components are
included as part of an energy storage tech-
nology. This approach provides a tech-
nology-neutral way to determine what is
considered energy storage technology and
is broad enough to encompass technolog-
ical changes. The proposed regulations
would, however, provide additional guid-
ance in the form of a non-exclusive list of
examples of different types of energy stor-
age technologies. The list is non-exclusive
because it would be impossible to list all
the types of technologies that could qual-
ify currently, and the Treasury Department
and the IRS acknowledge the importance
of leaving the language broad to allow
future technological advances in energy
storage technologies to qualify.
Additionally, rechargeable electro-
chemical batteries of all types meet the
functional definition by receiving energy
in the form of electricity, storing elec-
tro-chemical energy, and producing
electricity. A commenter requested that
re-used or “second life” batteries should
be considered “new energy property.”
Generally, used property cannot be con-
sidered “new property” for purposes of
the 80/20 Rule, which is described in part
III.A. of this Summary of Comments and
Explanation of Provisions. However, pro-
posed §1.48-9(e)(10)(v) would provide
that recycled components may be used to
meet the modification rule for energy stor-
age technology. The Treasury Department
and the IRS request comments on whether
“second life” batteries should be consid-
ered new components for purposes of the
80/20 Rule. Additionally, the Treasury
Department and the IRS request com-
ment on what types of components may
be used to modify an existing energy
storage technology, and whether there are
any challenges with recycled components
being used to meet the modification rule.
Energy storage technology excludes
property primarily used in the transpor-
tation of goods or individuals and not for
the production of electricity under section
48(c)(6)(A)(i). The Treasury Department
and the IRS understand that this exclusion,
at a minimum, would apply to batteries and
other energy storage technology that are
incorporated into or otherwise physically
integrated within motor vehicles and other
modes of transportation of goods or indi-
viduals and from which an electric motor
of such vehicle or other mode of trans-
portation draws electricity for propulsion.
The Treasury Department and the IRS do
not intend that this exclusion apply to bat-
teries and other energy storage technology
that may be used to charge or recharge
such vehicles or other modes of transpor-
tation, if the batteries and other energy
storage technologies are physically sepa-
rate from such vehicles or other modes of
transportation. The Treasury Department
and the IRS request comments as to how
the exclusion for property primarily used
in the transportation of goods or individu-
als and not for the production of electricity
should be defined and the specific types of
property that may be covered or not cov-
ered by this exclusion.
Although the list of examples of energy
storage technologies that proposed §1.48-
9(e)(10) would provide is nonexclusive,
and therefore many other technologies
that are not addressed would meet these
functional definitions, there are some
examples that do not meet the functional
definition. For example, some technolo-
gies are marketed as “virtual batteries,”
which are aggregations of controllable
electricity demand providing similar elec-
trical grid services to an electrical grid
battery. Such “virtual batteries” receive
energy in the form of electricity, but they
do not store it for later discharge as elec-
tricity. The function of “virtual batter-
ies” is to shift demand to different points
in time. Because such demand shifting
is not a storage activity for purposes of
section 48(c)(6), this technology is not
an energy storage technology. There are
other technologies for which the determi-
nation of whether they meet the statutory

December 26, 2023 1626 Bulletin No. 2023–52
requirements of section 48(c)(6) is less
clear. The Treasury Department and the
IRS request comments on whether these
other types of technologies should be con-
sidered energy storage technologies.
11. Qualified Biogas Property
Section 48(a)(3)(A)(x) was added
by the IRA to provide that energy prop-
erty includes qualified biogas property.
Section 48(c)(7)(A) defines qualified
biogas property as property comprising a
system that converts biomass (as defined
in section 45K(c)(3), as in effect on the
date of enactment of section 48(a)(3)(A)
(August 16, 2022)) into a gas that consists
of not less than 52 percent methane by
volume, or is concentrated by such system
into a gas that consists of not less than 52
percent methane, and captures such gas
for sale or productive use, and not for dis-
posal via combustion. Section 48(c)(7)(B)
provides that qualified biogas property
includes any property that is part of such
system that cleans or conditions such gas.
In response to Notice 2022-49, the
Treasury Department and the IRS received
several comments regarding qualified bio-
gas property. Many commenters supported
adopting a broad definition of qualified
biogas property to include all the related
technologies that commenters stated could
be utilized in qualified biogas property.
After consideration of these comments,
proposed §1.48-9(e)(11) would adopt the
statutory definition of qualified biogas
property.
Additionally, at least one commenter
stated that when gas is being upgraded and
injected into a pipeline, upgrading equip-
ment is necessary to condition the gas
into the appropriate mixture for injection
into the pipeline and should be part of the
qualified biogas property. In the comment-
er’s view, the eligibility of this upgrading
equipment hinges on the meaning of the
phrase “captures such gas for sale or pro-
ductive use.” The commenter asserted
that the statute should encompass such
conversion of biogas to a more portable
product such as a compressed or liquified
gas. Therefore, the commenter asserted
that upgrading equipment be included
in a qualified biogas property because it
captures such biogas for sale or produc-
tive use and includes any property that is
part of such qualified biogas property that
cleans or conditions such gas.
After consideration of these comments,
proposed §1.48-9(e)(11) would provide
that components of property are consid-
ered qualified biogas property if they are
functionally interdependent, that is, if
the placing in service of each component
is dependent upon the placing in service
of each of the other components in order
to perform the intended function of the
qualified biogas property as described in
proposed §1.48-9(e)(11)(i). This approach
would provide a technology-neutral way
to determine what is considered included
in a qualified biogas property and is
broad enough to encompass technological
changes. Additionally, proposed §1.48-
9(e)(11)(i) provides examples of func-
tionally interdependent components of the
qualified biogas property including, but
not limited to, a waste feedstock collec-
tion system, a landfill gas collection sys-
tem, mixing or pumping equipment, and
an anaerobic digester.
Regarding the upgrading equipment
that is necessary to condition biogas into
the appropriate mixture for injection into
the pipeline, this equipment is not func-
tionally interdependent with the qualified
biogas property that converts biomass into
a gas containing not less than 52 percent
methane and captures such gas for sale or
productive use as specified in the statute.
While this upgrading equipment makes
the injection of biogas into a pipeline pos-
sible, such upgrading equipment is not
necessary to satisfy the statutory require-
ments that the biogas converted from
biomass contain not less than 52 percent
methane, and that it be captured for sale
or productive use. In support of including
upgrading equipment necessary to prepare
the biogas for injection into the pipeline,
commenters point to the statutory language
that qualified biogas property includes any
property that is part of such system that
cleans or conditions such gas. However,
unlike upgrading equipment that is nec-
essary for injection of the biogas into the
pipeline, cleaning and conditioning equip-
ment is part of the necessary process to
convert biomass into gas that is not less
than 52 percent methane and capture gas
for sale or productive use. Therefore, pro-
posed §1.48-9(e)(11)(i) would clarify that
upgrading equipment is not a functionally
interdependent component of qualified
biogas property. The Treasury Department
and the IRS request comments regard-
ing what types of components may be
included within the definition of cleaning
and conditioning property provided in the
definition of qualified biogas property in
section 48(c)(7)(B).
One commenter had recommendations
about the application of the requirement
in section 48(c)(7)(A)(ii) that a qualified
biogas property captures such gas for sale
or productive use, and not for disposal via
combustion. This commenter noted that
some properties that produce electricity
from gas using a combustion process, may
flare waste or tail gas, including during
commissioning or maintenance periods.
The commenter recommended a de mini-
mis exception so that sale or use of gas in
this manner will not prevent a property that
produced such gas from being a qualified
biogas property. The Treasury Department
and the IRS request additional comments
on whether such an exception is necessary
and what should be considered de minimis
for this purpose.
Lastly, several comments addressed
the methane requirements in the statutory
definition by commenting on how and
when methane content should be mea-
sured and whether methane monitoring
is required. After consideration and coor-
dination with the Department of Energy,
the proposed regulations would adopt a
rule addressing the production point at
which methane content must be mea-
sured. Proposed §1.48-9(e)(11)(ii) would
provide that the methane requirements
described in section 48(c)(7)(A)(i)(I) and
section 48(c)(7)(A)(i)(II) are measured
at the point at which gas exits the biogas
production system (which may include an
anerobic digester, landfill gas collectors,
or thermal gasification equipment) of a
qualified biogas property. This is the point
at which a taxpayer generally must deter-
mine whether it will convert the biogas to
fuel for sale or use it directly to generate
heat or fuel an electricity generation unit.
12. Microgrid Controllers
Section 48(a)(3)(A)(xi) was added
by the IRA to provide that energy prop-
erty includes microgrid controllers.
Section 48(c)(8)(A) defines a microgrid

Bulletin No. 2023–52 1627 December 26, 2023
controller as equipment that is part of
a qualified microgrid and designed and
used to monitor and control the energy
resources and loads on such microgrid.
Section 48(c)(8)(B) defines a quali-
fied microgrid as an electrical system
that includes equipment that is capable
of generating not less than 4 kW and
not greater than 20 MW of electricity;
is capable of operating in connection
with the electrical grid and as a single
controllable entity with respect to such
electrical grid, and independently (and
disconnected) from such electrical grid;
and is not part of a bulk-power system
(as defined in section 215 of the Federal
Power Act (16 U.S.C. 824o)).
In response to Notice 2022-49, the
Treasury Department and the IRS received
several comments requesting clarification
on the definition of microgrid controllers,
with some commenters suggesting a broad
interpretation and others suggesting a nar-
row interpretation. Additionally, several
commenters identified certain compo-
nents that should be included as part of an
eligible microgrid controller.
Several commenters asserted that the
focus of the microgrid controller defi-
nition should be on capability and not
the availability of an interconnection
with the utility grid. In response to these
comments, proposed §1.48-9(e)(12)(ii)
would clarify that an eligible microgrid
includes an electrical system that is capa-
ble of operating in connection with the
larger electrical grid whether or not the
microgrid is physically connected to the
electrical grid. For example, a microgrid
located in a remote area that does not
have a larger electrical grid to which it
can physically connect can still be a qual-
ified microgrid.
After consideration of these comments,
proposed §1.48-9(e)(12)(i) would adopt
the statutory definition of a microgrid
controller. The Treasury Department and
the IRS request comments on whether
the rules for functionally interdependent
property provided in proposed §1.48-9(f)
(2)(ii) would be sufficient to determine
the components that should be included as
part of a microgrid controller, or whether
another test is needed due to the specific
role of microgrid controllers and their
components.
13. Other Property Included in Section 48
Because future legislation may add
additional types of energy property to sec-
tion 48, proposed §1.48-9(e)(13) would
provide that any other property specified
by section 48 as energy property is treated
as energy property for purposes of these
proposed regulations. The general rules
and requirements applicable to energy
property provided in these proposed regu-
lations would also apply to such property.
D. Definition of energy property and
scope of included components
Since shortly after the enactment of
section 48, energy property eligible for the
section 48 credit has been interpreted by
the Treasury Department and the IRS to
include, in addition to energy generation
property, costs related to components such
as power conditioning equipment, transfer
equipment, and parts related to the func-
tioning of that equipment.
On November 9, 1978, the Energy Tax
Act of 1978, amended section 48 by add-
ing a new subsection (then section 48(l))
to define “energy property.” Public Law
95-816, 92 Stat. 2174. On January 23,
1981, the Treasury Department and the
IRS promulgated T.D. 7765 to provide
additional guidance regarding the defini-
tion of energy property. 46 FR 7287-01.
The preamble to T.D. 7765 states that “[i]
n response to comments, the definition
of solar energy property was expanded
to make it clear that it includes storage
devices, power conditioning equipment,
transfer equipment, and property solely
related to the functioning of those items.
However, such equipment does not
include transmission equipment.”
The preamble to T.D. 7765 also pro-
vides that “[a] number of comments cited
specific legislative history to the effect that
wind energy property includes ‘transfer
equipment.’” The preamble to T.D. 7765
defines “transfer equipment” as including
equipment that permits the aggregation of
electricity generated by several windmills
and equipment that alters voltage in order
to permit transfer to a transmission line.
The preamble to T.D. 7765 concludes that
transfer equipment is specifically added
to the definition of wind energy property,
however, transfer equipment does not
include transmission lines.
Existing §1.48-9(d)(3) defines “solar
energy property” as equipment that uses
solar energy to generate electricity, and
includes storage devices, power condi-
tioning equipment, transfer equipment,
and parts solely related to the functioning
of those items. This section also provides
that solar energy property used to generate
electricity includes only equipment up to
(but not including) the stage that transmits
or uses electricity.
Existing §1.48-9(e) defines “wind
energy property” as consisting of a wind-
mill, wind-driven generator, storage
devices, power conditioning equipment,
transfer equipment, and parts solely
related to the functioning of those items.
Section 48(a)(3) no longer includes wind
energy property as a type of energy prop-
erty. However, qualified wind facilities
(including qualified offshore wind facil-
ities) may be qualified investment credit
facilities that a taxpayer may elect to treat
as energy property if they meet all the
requirements provided in section 48(a)(5).
While not specifically addressed in
section 48, Internal Revenue Bulletin
guidance interpreting section 48 has pro-
vided that functionally interdependent
components, are considered components
of energy property eligible for the sec-
tion 48 credit. In Notice 2018-59, 2018-
28 I.R.B. 196, the Treasury Department
and the IRS clarified what components
are considered part of an energy property.
Section 7.01(1) of Notice 2018-59 states
that an energy property generally includes
all components of property that are func-
tionally interdependent (unless such
equipment is an addition or modification
to an energy property). Notice 2018-59
provides that components of property are
functionally interdependent if the placing
in service of each component is dependent
upon the placing in service of each of the
other components in order to generate
electricity. Further, Notice 2018-59 relies
upon the rationale provided in Revenue
Ruling 94-31, 1994-1 C.B. 16, to provide
that functionally interdependent compo-
nents of property that can be operated and
metered together and can begin producing
electricity separately from other compo-
nents of property within a larger energy

December 26, 2023 1628 Bulletin No. 2023–52
project will be considered an energy
property.
In the context of defining “section 38
property,” §1.48-1(d)(4) provides that
“section 38 property” is “used as an inte-
gral part of one of the specified activities
if it is used directly in the activity and is
essential to the completeness of the activ-
ity.” Section 1.48-1(d)(4) also provides
that “[p]roperty shall be considered used
as an integral part of one of the specified
activities if so used either by the owner of
the property or by the lessee of the prop-
erty.” Notice 2018-59 incorporates the
concept of integral property from §1.48-
1(d) to provide that certain property that
is an integral part of an energy property is
included in energy property for purposes
of the section 48 credit. While Notice
2018-59 explained that property that is
“functionally interdependent” to the gen-
eration of electricity was treated as a unit
of energy property, it also provided that
certain other property that was integral to
the production of electricity are included
in determining what costs to include in
the basis of energy property and the date
on which construction began. Section
7.02(1) of Notice 2018-59 includes an
example illustrating that, while a trans-
mission tower located at a site where
energy property is located is not energy
property because transmission is not an
integral part of the activity performed by
the energy property, a custom-designed
transformer that steps up the voltage of
electricity produced at an energy prop-
erty to the voltage needed for transmis-
sion is power conditioning equipment,
which is an integral part of the activity
performed. In addition, section 7.02(2) of
Notice 2018-59 explains that onsite roads
used to operate and maintain the energy
property are integral to the production of
electricity, but not roads used primarily to
access the site or primarily for employee
or visitor vehicles. Similarly, sections
7.02(3) and (4) of Notice 2018-59 explain
that fences are not integral to the pro-
duction of electricity nor are buildings,
unless the building is essentially an item
of machinery or equipment, or a structure
that houses property that is integral to
the activity of an energy property if the
use of the structure is so closely related
to the use of the housed energy property
that the structure clearly can be expected
to be replaced when the energy property it
initially houses is replaced.
In response to a request for com-
ments regarding the definition and scope
of energy property in Notice 2015-70,
several commenters requested that the
regulations provide a specific list of eli-
gible components and define each type
of component. Commenters specifically
requested that the regulations provide
definitions for conversion equipment,
power conditioning equipment, transfer
equipment, and other property commonly
used in conjunction with energy property.
Further, some commenters requested that
the regulations include safety equipment
such as electrical panels, rapid shut-down
equipment, and utility disconnection
equipment as eligible components when
used in conjunction with energy property.
Conversely, several commenters recom-
mended that the regulations not provide a
technical definition or list of components
because innovations in energy property
may require that such a definition would
need to be continually updated.
Commenters requested that the regu-
lations be clarified to include as energy
property all components located before
the point at which voltage of the electric-
ity is increased to the voltage of the trans-
mission line, referred to as the “separation
point,” such as step-up transformers, dead
end structures, switches, switch gear build-
ings, voltage regulators, and hardware and
software used to monitor, operate, and
protect such property. Additionally, one
commenter requested that the regulations
be clarified to include as energy property
all components located beyond the sep-
aration point, such as switches, circuit
breakers, lighting or surge arrestors, and
metering equipment, if the use of such
components is primarily related to the
functioning or protection of components
located at or before the separation point.
One challenge in providing definitions
of what components to include in energy
property is in determining what compo-
nents are common to all energy property,
without limiting or constraining future
technological advances. To avoid limiting
future energy technologies, the Treasury
Department and the IRS consulted with
the Department of Energy and determined
that the best option is to adopt a func-
tion-oriented approach to describe the
types of components that are considered
energy property. Accordingly, proposed
§1.48-9(f) would adopt the concepts of
functional interdependence and prop-
erty that is an integral part of an energy
property as provided in Internal Revenue
Bulletin guidance issued previously by the
Treasury Department and the IRS.
1. Unit of Energy Property
Proposed §1.48-9(f)(2)(i) would pro-
vide that a unit of energy property consists
of all functionally interdependent compo-
nents of property (as defined in proposed
§1.48-9(f)(2)(ii)) owned by the taxpayer
that are operated together and that can
operate apart from other energy properties
within a larger energy project (as defined
in proposed §1.48-13(d) and discussed in
part II.C of this Summary of Comments
and Explanation of Provisions).
2. Functional Interdependence
Proposed §1.48-9(f)(2)(ii) would pro-
vide that components of property are
functionally interdependent if the placing
in service of each component is depen-
dent upon the placing in service of each
of the other components in order to gener-
ate or to store electricity, thermal energy,
or hydrogen, or otherwise perform its
intended function as provided in section
48(c) and as described in proposed §1.48-
9(e). Energy property, with certain excep-
tions, includes all components necessary
to generate or store electricity or thermal
energy for transmission, distribution, or
use up to (but not including) the stage that
transmits, distributes, or uses electricity or
thermal energy. In the case of qualified bio-
gas property, microgrid controllers, elec-
trochromic glass property, and fiber-optic
solar energy property, components of such
energy property are functionally interde-
pendent if the placing in service of each
component is dependent upon the placing
in service of each of the other components
in order to perform the intended function
of the energy property as provided by sec-
tion 48(c) and as described in proposed
§1.48-9(e). Additionally, energy property
generally would not include equipment
that is an addition or modification to an
existing energy property unless the rules
regarding retrofitted energy property

Bulletin No. 2023–52 1629 December 26, 2023
described in proposed §1.48-14(a) and
part III.A. of this Summary of Comments
and Explanation of Provisions apply.
3. Integral Part of an Energy Property
Proposed §1.48-9(f)(3)(i) would pro-
vide that property owned by a taxpayer
that is an integral part of an energy prop-
erty owned by that same taxpayer is energy
property. To be part of an energy property,
such property must be used directly in
the intended function of the energy prop-
erty as provided by section 48(c) and as
described in §1.48-9(e) and be essential to
the completeness of the intended function.
Proposed §1.48-9(f)(3)(ii) would describe
power conditioning equipment and trans-
fer equipment, and would provide that
such components, and parts related to
the functioning of those components, are
energy property when they meet the defi-
nition of integral part provided in §1.48-
9(f)(3)(i).
Many commenters requested clar-
ification on the eligible components
of an offshore wind facility. Proposed
§1.48-9(f)(5)(iii) would provide an
example that applies the integral part
rule to include power conditioning and
transfer equipment as part of a quali-
fied offshore wind facility but excludes
transmission and distribution equipment
from being part of the qualified offshore
wind facility. This example is consistent
with the view of the Joint Committee
on Taxation in the General Explanation
of Tax Legislation Enacted in the 116th
Congress, JCS 1-22 (February 2022).
According to that document, “[q]uali-
fied offshore wind facilities are qualified
wind facilities . . . and include property
owned by the taxpayer necessary to con-
dition electricity for use on the electrical
grid such as subsea cables and voltage
transformers.” Id. at 498.
Furthermore, consistent with Notice
2018-59, proposed §1.48-9(f)(3)(iii)
would provide as further examples of
integral property onsite roads that are
used for equipment to operate and main-
tain the energy property. Section 1.48-
9(f)(3)(iii) would also clarify that roads
primarily for access to the site, or roads
used primarily for employee or visi-
tor vehicles, are not integral parts of an
energy property. Proposed §1.48-9(f)
(3)(iv) and (v) would also provide that
fences and buildings (also referred to
as structures) are generally not integral
parts of an energy property because
they are not integral to the activity of
the energy property. However, a build-
ing may be an integral part of a unit of
energy property if it is essentially an item
of machinery or equipment, or a structure
that houses property that is integral to the
activity of an energy property, if the use
of the structure is so closely related to the
use of the housed energy property that
the structure clearly can be expected to
be replaced when the energy property it
initially houses is replaced. The Treasury
Department and the IRS request com-
ments on whether additional types of
property meet the requirements provided
in proposed §1.48-9(f)(3) and could be
considered an integral part of an energy
property.
4. Location of Energy Property
Section 48 and the existing regulations
thereunder are silent regarding the credit
eligibility of components of an energy
property located in different locations.
However, the Treasury Department and
the IRS have provided analogous guid-
ance regarding the credit eligibility of off-
site components for the residential energy
efficient property tax credit under section
25D of the Code (section 25D credit).
In Notice 2013-70, 2013-47 I.R.B.
528, the Treasury Department and the
IRS provided guidance addressing the
eligibility for the section 25D credit
for offsite components of solar elec-
tric property. Specifically, Q&A #25 of
Notice 2013-70 addressed the issue of
whether a taxpayer that installs solar
panels as part of solar electric property
other than directly on the taxpayer’s
home may claim the section 25D credit.
Q&A #25 concluded that the taxpayer
would be able to claim the section 25D
credit because the solar electric property
expenditure was made for property that,
consistent with the requirements of the
section 25D credit, uses solar energy to
generate electricity for use in a dwelling
unit that is used as a residence by the tax-
payer. The fact that the solar panels were
not directly located on the taxpayer’s
home did not change the analysis or the
eligibility of the taxpayer’s expenditure
for purposes of the section 25D credit.
Similarly, Q&A #26 of Notice 2013-70
addressed a scenario in which a taxpayer
purchases solar panels that are placed on
an offsite solar array (community solar
project) and connected to the local pub-
lic utility’s electrical grid that supplies
electricity to the taxpayer’s residence.
The taxpayer enters into a direct contrac-
tual arrangement with the utility to allow
the taxpayer to provide electricity to the
electrical grid using a net metering system
that measures the amount of electricity
produced by the taxpayer’s solar pan-
els and transmitted to the electrical grid
and the amount of electricity used by the
taxpayer’s residence and drawn from the
electrical grid. The contract states that the
taxpayer owns the electricity transmitted
by the solar panels to the electrical grid
until drawn from the electrical grid at his
residence. Q&A #26 determined that off-
site solar panels under this type of con-
tractual arrangement with a utility that
supplies electricity to the taxpayer’s res-
idence also meet the definition of a solar
electric property expenditure eligible to
claim the section 25D credit. In response
to Notice 2015-70, many commenters ref-
erenced Notice 2013-70 when requesting
that existing §1.48-9 be modified to allow
components of energy property to be situ-
ated in different locations without affect-
ing the eligibility of the energy property
for the section 48 credit.
After consideration of the comments
received, the Treasury Department and
the IRS have determined that if property
is a functionally interdependent part of an
energy property (as defined in §1.48-9(f)
(2)(ii)), or an integral part of an energy
property (as defined in §1.48-9(f)(3)(i)),
such property is part of an energy property
regardless of where it is located. Proposed
§ 1.48-9(f)(4) would adopt this position.
5. Property Excluded from Energy
Property
Proposed §1.48-9(d)(2) would also clar-
ify that certain types of intangible prop-
erty, such as power purchase agreements,
renewable energy certificates, goodwill,
and going concern value, are not energy
property because they are not functionally
interdependent with other components of

December 26, 2023 1630 Bulletin No. 2023–52
an energy property as defined in proposed
§1.48-9(f)(2)(ii) and are not an integral part
of an energy property as defined in pro-
posed §1.48-9(f)(3)(i).
II. Rules Relating to the Increased
Credit Amount for Prevailing Wages and
Apprenticeships.
The IRA amended several sections
of the Code including section 48 to pro-
vide increased credit amounts for tax-
payers who satisfy certain requirements,
including an increased credit amount for
satisfying prevailing wage and appren-
ticeship (PWA) requirements. This same
increased credit amount is also generally
available under certain sections of the
Code including section 48 with respect
to energy projects with a maximum net
output of less than one megawatt (One-
Megawatt Exception). Additionally, this
same increased credit amount is available
under certain sections of the Code includ-
ing section 48 if beginning of installa-
tion or beginning of construction (BOC)
occurs before January 29, 2023 (BOC
Exception).
The Treasury Department and the IRS
issued proposed §1.48-13 as part of the
August Proposed Regulations to provide
guidance concerning the increased credit
amount available for taxpayers satisfy-
ing the PWA requirements. This notice of
proposed rulemaking withdraws §1.48-
13 as proposed in the August Proposed
Regulations and reproposes in a new
§1.48-13 (proposed §1.48-13) the sub-
stance of the withdrawn rules with minor
changes and additional rules with respect
to the increased credit amount available
for taxpayers under section 48(a)(9).
Proposed §1.48-13 would provide spe-
cial rules affecting the basis of energy
property that include: (i) the definition of
an energy project for purposes of the PWA
requirements as well as other delineated
purposes discussed in part II.C of this
Summary of Comments and Explanation
of Provisions and (ii) guidance concerning
the One-Megawatt Exception discussed in
part II.D of this Summary of Comments
and Explanation of Provisions. These pro-
posed regulations also provide guidance
on the recapture rules under section 48(a)
(10)(C) applicable to failures to satisfy the
PWA requirements.
A. General rules
For properties placed in service after
December 31, 2022, the section 48 credit
is generally six percent of the basis of
energy property described in section 48(a)
(2)(A)(i) and two percent of the basis
of energy property described in section
48(a)(2)(A)(ii). If a taxpayer satisfies the
PWA requirements, the One-Megawatt
Exception, or the BOC Exception, then
the section 48 credit for the basis of each
energy property placed in service during
the taxable year is multiplied by five.
To satisfy the prevailing wage require-
ments under section 48(a)(10)(A) and (B)
(Prevailing Wage Requirements), a tax-
payer must ensure that any laborers and
mechanics employed by the taxpayer or
any contractor or subcontractor in: (i) the
construction of any energy project, and
(ii) the alteration or repair of that energy
project (for the five-year period begin-
ning on the date such project is originally
placed in service), are paid wages at rates
not less than the prevailing rates for con-
struction, alteration, or repair of a simi-
lar character in the locality in which that
energy project is located as most recently
determined by the Secretary of Labor, in
accordance with subchapter IV of chap-
ter 31 of title 40, United States Code
(Davis-Bacon Act). Section 48(a)(10)(B)
provides that rules similar to the rules of
section 45(b)(7)(B) apply for purposes
of the correction and penalty related to
the failure to satisfy the Prevailing Wage
Requirements.
Section 48(a)(10)(C) provides a recap-
ture rule applicable to failures to satisfy
the Prevailing Wage Requirements with
respect to alterations or repairs that occur
during the five-year period after the energy
project is placed in service (section 48(a)
(10)(C) recapture). Specifically, section
48(a)(10)(C) instructs the Secretary, by
regulations or other guidance, to provide
for recapturing the benefit of any increase
in the credit allowed by the Prevailing
Wage Requirements with respect to
failures to satisfy the Prevailing Wage
Requirements during the five-year period
after the energy project is placed in ser-
vice. Section 48(a)(10)(C) clarifies that
the failures during the five-year period
remain subject to the correction and pen-
alty provisions in section 45(b)(7)(B) (as
referenced in section 48(a)(10)(B)) and
provides that the period and percentage of
the credit that is recaptured is determined
under rules similar to the rules in section
50(a). Subject to the section 48(a)(10)
(C) recapture (including the correction
and penalty provisions in section 45(b)(7)
(B)), the taxpayer is deemed at the time
the energy project is placed in service to
satisfy the Prevailing Wage Requirements
for alterations or repairs for the five-year
period beginning after such project is
originally placed in service. Section 48(a)
(11) provides that rules similar to the rules
of section 45(b)(8) apply for purposes of
the apprenticeship requirements.
The August Proposed Regulations
provided guidance for taxpayers claiming
an increased credit amount under section
48(a)(9)(A)(i) with respect to an energy
project that satisfies the PWA require-
ments, the One-Megawatt Exception,
or the BOC Exception. The August
Proposed Regulations provided that to
satisfy the PWA requirements, the energy
project must meet the Prevailing Wage
Requirements of section 48(a)(10)(A)
and proposed §1.45-7(b)-(d), the appren-
ticeship requirements of section 45(b)(8)
and proposed §1.45-8, and the record-
keeping and reporting requirements of
proposed §1.45-12. In addition, under the
August Proposed Regulations, to satisfy
the Prevailing Wage Requirements with
respect to section 48(a)(10)(A)(ii), a tax-
payer also would be required to ensure
that any laborer and mechanic employed
by the taxpayer or any contractor or
subcontractor in the construction of any
energy project, as well any alteration or
repair of an energy project in the five-year
period beginning on the date a project is
placed in service, are paid wages at rates
not less than the prevailing rates for con-
struction, alteration, or repair of a simi-
lar character in the locality in which the
energy project is located in accordance
with the Davis-Bacon Act. The August
Proposed Regulations also provided that
the increased credit amount was subject
to section 48(a)(10)(C) recapture for any
project that failed to satisfy the Prevailing
Wage Requirements in proposed §1.45-7
with respect to an alteration or repair
of such project for the five-year period
beginning on the date such project is
originally placed in service (but that does

Bulletin No. 2023–52 1631 December 26, 2023
not cease to be investment credit prop-
erty within the meaning of section 50(a)
of the Code).
B. Section 48(a)(10)(C) recapture rules
The Treasury Department and the IRS
have determined that additional guidance
on the section 48(a)(10)(C) recapture rules
is necessary. Proposed §1.48-13 would
provide additional guidance on the sec-
tion 48(a)(10)(C) recapture rules related
to the Prevailing Wage Requirements. The
proposed regulations also provide other
minor technical corrections to the August
Proposed Regulations.
In addition to largely restating the
general rules in the August Proposed
Regulations, proposed §1.48-13 would
clarify that a taxpayer that has claimed an
increased credit amount under section 48(a)
(9)(A)(i) and 48(a)(9)(B)(iii) but failed to
satisfy the Prevailing Wage Requirements
set forth in proposed §1.45-7(b)-(d) with
respect to any period during the five-year
period beginning on the date a project is
placed in service is subject to section 48(a)
(10)(C) recapture of a portion (up to 100
percent) of the increased credit amount.
Proposed §1.48-13 would also clarify that
the failure to satisfy the Prevailing Wage
Requirements in proposed §1.45-7(b)-(d)
with respect to any period during the five-
year period beginning on the date a project
is placed in service remains subject to the
correction and penalty provisions in pro-
posed §1.45-7(c)(1).
Section 48(a)(10)(C) requires that the
recapture period and percentage of such
recapture be determined under rules simi-
lar to the rules of section 50(a). Consistent
with that requirement, proposed §1.48-13
would also clarify that the five-year recap-
ture period under section 48(a)(10)(C)
would begin on the day an energy project
is placed in service and end on the day that
is five full years after the placed-in-ser-
vice date. Proposed §1.48-13 would also
provide that each 365-day period (366-
day period in case of a leap year) within
the recapture period is a separate recap-
ture year. The proposed regulations would
provide that the recapture amount is deter-
mined consistent with the percentages set
forth in section 50(a) based on the year in
which the section 48(a)(10)(C) recapture
event is determined to have occurred.
The Treasury Department and the IRS
understand that the five-year recapture
period is unlikely to align with a taxpay-
er’s taxable year. The proposed regula-
tions would provide that whether a section
48(a)(10)(C) recapture event has occurred
is determined at the close of taxable year
that begins or ends within the five-year
recapture period. In addition to the report-
ing and recordkeeping requirements con-
tained in proposed §1.45-12, the proposed
regulations would provide for an annual
information reporting requirement that
verifies compliance with the Prevailing
Wage Requirements following the close
of each recapture year consistent with the
forms and instructions prescribed by the
IRS. The IRS anticipates that the annual
compliance reporting obligation will be
made at the time the taxpayer files its
income tax or other annual return follow-
ing the close of each recapture year.
Under proposed §1.48-13, if the
increased credit amount is subject to
section 48(a)(10)(C) recapture, then the
increase in tax under chapter 1 for the
recapture of the increased credit amount
would be assessed with respect to the tax-
able year in which the section 48(a)(10)
(C) recapture event occurred. The pro-
posed regulations also clarify that a tax-
payer whose increased credit amount is
subject to section 48(a)(10)(C) recapture
may still be entitled to the base amount
of the energy credit under section 48(a)
if they meet the requirements to claim the
credit. Additionally, the proposed regula-
tions clarify the application of the trans-
ferability rules under section 6418 to a
section 48(a)(10)(C) recapture event and
include a proposed addition to §1.6418-5
confirming the notification requirements
for an eligible taxpayer and that a trans-
feree taxpayer is responsible for any
amount of tax increase under section 48(a)
(10)(C).
C. Definition of energy project
Under section 48(a)(9)(A)(ii), an
energy project is a project consisting
of one or more energy properties that
are part of a single project. Proposed
§1.48-13(d) would provide a definition
of “energy project” for purposes of the
increased credit amount for the PWA
requirements (provided by section 48(a)
(9)), the domestic content bonus credit
amount (provided by section 48(a)(12)),
and the increase in credit rate for energy
communities (provided in section 48(a)
(14)). For these purposes, the term energy
project means one or more energy prop-
erties that are operated as part of a sin-
gle project. Section 45 qualified facilities
that are co-located with section 48 energy
property will not be considered part of an
energy project (unless they elect under
section 48(a)(5) to be treated as energy
property). Multiple energy properties
would be treated as one energy project,
if at any point during the construction of
the multiple energy properties, they are
owned by a single taxpayer (subject to
the related taxpayer rule discussed later
in this part) and any two or more of the
following factors (also set forth in section
7.01(2)(a) of Notice 2018-59 as factors
indicating that multiple energy properties
are operated as part of a single project)
are present:
1. The energy properties are con-
structed on contiguous pieces of land;
2. The energy properties are described
in a common power purchase, thermal
energy, or other off-take agreement or
agreements;
3. The energy properties have a com-
mon intertie;
4. The energy properties share a com-
mon substation, or thermal energy off-
take point;
5. The energy properties are described
in one or more common environmental or
other regulatory permits;
6. The energy properties are con-
structed pursuant to a single master con-
struction contract; or
7. The construction of the energy prop-
erties are financed pursuant to the same
loan agreement.
Under proposed §1.48-13(d)(2),
related taxpayers would be treated as one
taxpayer in determining whether multiple
energy properties are treated as an energy
project. Related taxpayers would be
defined as members of a group of trades or
businesses that are under common control
(as defined in §1.52-1(b)).
Proposed §1.48-13(d)(3) would also
provide that if multiple energy properties
are treated as a single project for begin-
ning of construction purposes with respect
to the section 48 credit, the multiple

December 26, 2023 1632 Bulletin No. 2023–52
energy properties would also be treated
as one energy project for purposes of the
PWA requirements, the domestic content
bonus credit amount, and the increase in
section 48 credit rate for energy commu-
nities. This rule would apply to an energy
project for which construction begins after
the date final regulations are published in
the Federal Register.
D. One-Megawatt exception
Section 48(a)(9)(B)(i) and §1.48-13 of
the August Proposed Regulations would
provide that the increased credit amount
is also available under section 48 with
respect to energy projects with a maxi-
mum net output of less than 1 MW of elec-
trical (as measured in alternating current)
or thermal energy. The August Proposed
Regulations do not address how to deter-
mine the maximum net output of a project.
The Department of Energy has advised
the Treasury Department and the IRS that
for energy projects that generate electric-
ity, the determination of an energy proj-
ect’s nameplate capacity will provide
the necessary guidance to determine the
maximum electrical generating output in
MWs of electrical (as measured in alter-
nating current) or thermal energy that the
unit is capable of producing on a steady
state basis and during continuous opera-
tion under standard conditions. Proposed
§1.48-13(e) would thus provide a rule for
the determination of nameplate capac-
ity as expressed in MWs of electrical (as
measured in alternating current) or ther-
mal energy. Because electrochromic glass
property, fiber-optic solar, and microgrid
controllers do not generate electricity or
thermal energy, these energy properties
are not eligible for the One-Megawatt
Exception. The Treasury Department and
the IRS request comments on whether
other methods of measurement may allow
these energy properties to use the One-
Megawatt Exception.
Under proposed §1.48-13(e)(1), the
nameplate capacity for an electrical gen-
erating unit would mean the maximum
electrical generating output in MWs
that the unit is capable of producing on
a steady-state basis and during continu-
ous operation under standard conditions,
as measured by the manufacturer and
consistent with the definition provided
in 40 CFR 96.202. Where applicable,
those rules provide that the International
Standard Organization (ISO) conditions
are used to measure the maximum electri-
cal generating output.
Proposed §1.48-13(e)(2) through (4)
would provide rules for energy storage
technologies. Generally, electrical energy
storage property would look to the stor-
age device’s nameplate capacity in MWs
under proposed §1.48-13(e)(2). As with
energy properties that generate electric-
ity, nameplate capacity for an electrical
energy storage property would mean the
maximum electrical generating output in
MWs that the unit is capable of producing
on a steady state basis and during contin-
uous operation under standard conditions,
as measured by the manufacturer and con-
sistent with the definition provided in 40
CFR §96.202.
Proposed §1.48-13(e)(3) would pro-
vide that for thermal energy storage prop-
erty, taxpayers must use the equivalent
value of 3.4 million British Thermal Units
per hour (mmBtu/hour) for heating and
284 tons for cooling to determine whether
the thermal energy storage property sat-
isfies the One-Megawatt Exception (Btu
per hour/3,412,140 = MW). The Treasury
Department and the IRS request com-
ments on whether these tests are suitable
or whether another test should apply for
measuring the One-Megawatt Exception
for thermal energy storage property.
Proposed §1.48-13(e)(4) would pro-
vide that for hydrogen energy storage
property, 1 MW is equivalent to 3.4
mmBtu/hour, and using the higher heat-
ing value of hydrogen, this can be con-
verted to 10,500 scf per hour. Therefore,
proposed §1.48-13(e)(4) would pro-
vide that for a hydrogen energy storage
property to satisfy the One-Megawatt
Exception, an eligible hydrogen produc-
ing, or hydrogen storage energy property
must be designed to have a maximum net
output of less than 3.4 mmBtu/hour of
hydrogen or equivalently 10,500 scf per
hour of hydrogen.
Proposed §1.48-13(e)(3) through (5)
would provide that to apply the One-
Megawatt Exception to energy projects
that produce thermal energy or fuels, tax-
payers must use the equivalent value of
3.4 million British thermal units (mmB-
tus) per hour (Btu per hour/3,412,140 =
MW). For certain technologies that pro-
duce fuels, such as qualified biogas prop-
erty (proposed §1.48-13(e)(5)), hydrogen
energy storage property (proposed §1.48-
13(e)(4)), and specified hydrogen pro-
duction facilities (as defined in section
48(a)(15)(C)) (proposed §1.48-13(e)(4)),
taxpayers may use equivalent maximum
fuel volume flows in standard cubic feet
(scf) per hour to assess the One-Megawatt
Exception. Taxpayers can use equiva-
lent volume flows using the default high
heat value conversion factors found in
Table C-1 to Subpart C of Part 98, Title
40 of the Greenhouse Gas Reporting
Rule promulgated by the Environmental
Protection Agency. Otherwise, taxpayers
may calculate their own equivalent volu-
metric flow if the heat content of the gas
is known.
For property generating thermal
energy, proposed §1.48-13(e)(3) would
provide that the equivalents for 1 MW
that should be used are 3.4 mmBtu/hour
for heating and equivalently 284 tons
for cooling should be used to determine
whether the energy property satisfies
the One-Megawatt Exception. Proposed
§1.48-13(e)(3) would also specify that for
projects delivering thermal energy to a
building or buildings, the One-Megawatt
Exception can be assessed as either the
aggregate maximum thermal output of
all individual heating or cooling elements
within the building or buildings or as the
maximum thermal output that the entire
project is capable of delivering to a build-
ing or buildings at any given moment.
III. Rules Applicable to Energy Property.
A. Retrofitted energy property (80/20
Rule)
The Treasury Department and the IRS
have published several pieces of Internal
Revenue Bulletin guidance regarding the
eligibility of retrofitted equipment added
to qualified facilities and energy prop-
erty for purposes of the section 45 and
48 credits. In Notice 2016-31, 2016-23
I.R.B. 1025, the Treasury Department
and the IRS considered the application
of the Five Percent Safe Harbor provided
in section 5.01 of Notice 2013-29, 2013-
20 I.R.B. 1085, to retrofitted qualified
facilities for purposes of applying the

Bulletin No. 2023–52 1633 December 26, 2023
beginning of construction requirement
to the section 45 credit. Section 6.01 of
Notice 2016-31 cites to Revenue Ruling
94-31 and Notice 2008-60, 2008-2 C.B.
178, for the concept that a qualified
facility may qualify as originally placed
in service even though it contains some
used property, provided the fair market
value of the used property is not more
than 20 percent of the qualified facility’s
total value (that is, the cost of the new
property plus the value of the used prop-
erty). This concept has become known as
the “80/20 Rule.”
Similarly, Notice 2018-59 addressed
the application of the 80/20 Rule to ret-
rofitted energy property for purposes of
the applying the beginning of construc-
tion rules to the section 48 credit. Section
7.05(1) of Notice 2018-59 provides that
retrofitted energy property may qualify as
originally placed in service even though it
contains some used components of prop-
erty, provided it satisfies the 80/20 Rule.
Further, this section of the notice provided
that, for purposes of the 80/20 Rule, the
cost of the new energy property includes
all properly capitalized costs of the new
energy property.
In response to requests for comment in
Notice 2015-70 and Notice 2022-49, sev-
eral commenters requested that the regula-
tions address the applicability of the 80/20
Rule to energy property for purposes of
the section 48 credit. After consideration
of the comments, proposed §1.48-14(a)
would apply the 80/20 Rule to energy
property for purposes of the section 48
credit.
B. Dual use property
Existing §1.48-9 includes a dual use
equipment rule (Dual Use Rule). The pre-
amble to T.D. 8147 notes that the regu-
lations prior to amendment by T.D. 8147
required that equipment must use only
energy from a single qualifying source
(solar energy property, wind energy prop-
erty, or geothermal equipment) to qualify
as energy property. In changing from a
single source rule to the Dual Use Rule,
the preamble to T.D. 8147 explained that
the Treasury Department and the IRS
reconsidered the legislative history of
the investment tax credit and determined
that, “while Congress did not intend that
property that does not use qualified energy
be eligible for the business energy credit
as solar, wind, or geothermal property,
Congress also did not intend to adopt an
all or nothing rule for dual use solar, wind,
or geothermal energy property.”
Accordingly, the Dual Use Rule in
existing §1.48-9 provides that a solar
energy property, wind energy property,
and geothermal equipment are eligible
for the section 48 credit to the extent of
the property’s basis or cost allocable to
its annual use of energy from a qualified
source, provided the use of energy from
“non-qualifying” sources does not exceed
25 percent of the total energy input of
the property during an annual measuring
period. Notably, the Dual Use Rule pro-
vided in §1.48-9 also precludes an energy
property from receiving and aggregating
energy from a combination of qualify-
ing sources (solar energy property, wind
energy property, and geothermal equip-
ment). Because the Dual Use Rule requires
that a solar energy property, wind energy
property, or geothermal equipment must
use a minimum of 75 percent of energy
from a qualified source during an annual
measuring period to qualify for a section
48 credit. This rule became known as the
“75-percent Cliff.”
The Dual Use Rule provided in existing
§1.48-9 also provides that, if in the first
annual measuring period, the applicable
percentage (based on usage from a qual-
ifying source) is between 75 percent and
100 percent, only a proportionate amount
of the eligible basis of the energy property
should be taken into account in computing
the amount of the section 48 credit. If less
than 75 percent of the energy used is from
qualifying sources, then the eligible basis
is zero, and the property is not eligible for
the section 48 credit.
1. Alternatives to the 75-percent Cliff
In response to Notice 2015-70, many
commenters requested that the regulations
be modified to reduce the Dual Use Rule’s
current 75-percent Cliff to a 50-percent
Cliff. Commenters cited as support for this
proposal the statutory language of section
25D(d)(1), which allows for full credit eli-
gibility if a solar water heating property
receives at least 50 percent of its energy
inputs from the sun. Applying this premise
to the investment tax credit under section
48 would allow an energy property to be
eligible for 100 percent of the section 48
credit if it receives at least 50 percent of its
energy input from a qualifying source but
would render the energy property ineligi-
ble for the section 48 credit if less than 50
percent of its energy input is from a qual-
ifying source. Commenters asserted that a
50-percent Cliff would be more equitable
than the 75-percent Cliff.
Several commenters also recom-
mended that the regulations be modified
to provide that if greater than 50 percent
of energy received by an energy property
is from a qualifying source that the energy
property is eligible for a full section 48
credit. Conversely, if the energy prop-
erty receives less than 50 percent of its
energy input from a qualifying source, the
qualifying basis of the energy property is
reduced incrementally for the annual mea-
suring period. Importantly, this rule would
reduce the credit but not disqualify the
energy property entirely from credit eligi-
bility. The benefit of adopting this rule is
that it would eliminate the “all or nothing”
dynamic of the current 75-percent Cliff
and, as a result, would provide certainty
that an energy property will remain credit
eligible. The main obstacle to adopting
this rule is that it would be expensive for
taxpayers to measure with great accuracy
the relative amounts of energy input from
different qualifying sources.
Many commenters suggested chang-
ing the Dual Use Rule to a “Primary Use
Rule” modeled on the “Primary Use”
Test for asset class depreciation deter-
minations, changes in use, and for asset
disposition purposes. According to com-
menters, this approach is popular because
the Primary Use Test could be performed
at the same time (on the placed in service
date) and manner in which the taxpayer
determines the primary use of the asset for
depreciation purposes. The challenge of
this approach is that it also depends upon
taxpayers correctly using the deprecia-
tion asset class determination procedures
and reporting any changes in primary use
to the IRS for recapture. Moreover, the
scope of the Primary Use Test seems inap-
propriate for the section 48 credit because
the Primary Use Test merely serves to
determine how the property is depre-
ciated rather than whether the property

December 26, 2023 1634 Bulletin No. 2023–52
can be depreciated. Applying this test to
determine credit eligibility may increase,
beyond what was intended, the credit
available to a taxpayer.
After consideration of the comments,
the Treasury Department and the IRS
have determined it would be most con-
sistent with statutory intent to reduce
the applicable threshold of the Dual Use
Rule to 50 percent resulting in the adop-
tion of a 50-percent Cliff. Therefore, pro-
posed §1.48-14(b)(2)(i) would require
an energy property to derive a minimum
of 50 percent of energy from a qualify-
ing source during an annual measuring
period. Similar to the operation of the
75-percent Cliff in existing §1.48-9, if
the energy used from qualifying sources
is between 50 percent and 100 percent,
only a proportionate amount of the eli-
gible basis of the energy property will
be taken into account in computing the
amount of the section 48 credit. If less
than 50 percent of the energy used is
from qualifying sources, then the eligi-
ble basis is zero, and the property is not
eligible for the section 48 credit. The
Treasury Department and the IRS recog-
nize that the Dual Use Rule is no longer
relevant to determining the eligibility of
energy storage technology placed in ser-
vice after December 31, 2022, because
the IRA added energy storage technology
as an energy property effective for prop-
erty placed in service after December 31,
2022. However, the Dual Use Rule may
still have other applications under section
48. The Treasury Department and the
IRS request comments on the application
of the Dual Use Rule to section 48 after
its amendment by the IRA.
2. Aggregation of Energy Inputs
While T.D. 8147 significantly amended
existing §1.48-9 to permit 25 percent of
energy used by energy property from
non-qualifying sources, it did not allow
the aggregation of energy from multiple
energy properties to be treated as energy
from qualifying sources for purposes of
the Dual Use Rule.
In response to Notice 2015-70, sev-
eral commenters requested a revised rule
to permit taxpayers to calculate credit
basis by aggregating all inputs from
qualifying sources that would otherwise
individually qualify for the section 48
credit (all types of energy property and
any qualified facilities for which an
election is made to claim the section 48
credit as a “qualified investment credit
facility” under section 48(a)(5)). After
consideration of the comments received,
proposed §1.48-14(b)(2)(ii) would revise
the Dual Use Rule to permit the aggrega-
tion of energy inputs from more than one
energy property.
3. Measurement Period
Existing §1.48-9(c)(10)(iv) and (d)(6)
provides that an annual measuring period
is the period during which the portion of
dual use property’s basis or cost allocable
to use of energy from a qualified source
is measured. An annual measuring period
for an item of dual use property is defined
as the 365-day period beginning with the
day it is placed in service or a 365-day
period beginning the day after the last day
of the immediately preceding annual mea-
suring period.
In response to Notice 2015-70, several
commenters requested that the regula-
tions provide a clarification of the annual
measurement rules applicable to dual use
property. Several of these commenters’
concerns were tied to energy storage tech-
nology. Because the IRA now includes
energy storage technology as eligible
property, many of these specific concerns
may have been eliminated. However, the
proposed regulations would still address
these concerns by adopting these annual
measurement rules for application to the
Dual Use Rule. Accordingly, a taxpayer
may claim the section 48 credit when it
places an energy property in service, and
all relevant time periods, including depre-
ciation and recapture, begin on that date.
After consideration of the comments, pro-
posed §1.48-14(b)(2)(iii) would provide
that an annual measuring period for an
item of dual use property is any period of
365 consecutive days (366 days in a leap
year) beginning with the day the dual use
property is placed in service.
4. Dual Use Property and Microgrid
Controllers
Certain equipment is necessary for
a microgrid controller to perform its
functions, but such equipment may also
have been required to be installed even
without the presence of a microgrid. An
example is a communications system (for
example, a local ethernet network or a
commercial wireless network). A microg-
rid controller must be connected to a com-
munications system to operate properly.
Such a communications system could be
considered part of the microgrid control-
ler itself. However, the communications
system could also be used for other pur-
poses and may not be dedicated to the
microgrid system. The Dual Use Rule
would be inapplicable in this scenario
because the scenario does not involve
the use of energy derived from both a
qualifying source and from sources other
than a qualifying source (non-qualifying
source). The Treasury Department and
the IRS request comments on whether a
rule is needed to address this situation for
microgrid controllers or other potentially
similar situations for which the Dual Use
Rule would not apply.
C. Energy property that could be eligible
for multiple credits
Section 48 and the existing regulations
thereunder are silent regarding the eligi-
bility of components of energy property
for multiple credits. However, in Notice
2013-70, the Treasury Department and
the IRS considered the ability of a sin-
gle taxpayer to claim section 25D and
section 48 credits for different uses of
the same energy property. In Q&A #27
of Notice 2013-70, a taxpayer purchased
and installed solar electric property to
generate electricity for the taxpayer’s
residence. The taxpayer also expected
the solar electric property to generate
excess electricity that would be sold to
a utility. Q&A #27 determined that the
taxpayer may not claim the section 25D
credit for the full amount of the solar
electric property expenditure because the
property not only generates electricity
for use in the taxpayer’s residence, but it
also generates electricity for sale by the
taxpayer. As a result, the taxpayer may
only claim the section 25D credit for
the portion of the solar electric property
expenditure that relates to the electricity
generated for use in the taxpayer’s home.
However, the taxpayer may be able to

Bulletin No. 2023–52 1635 December 26, 2023
claim the section 48 credit for a portion
of the solar electric property expenditure
if the requirements of section 48 are sat-
isfied. Notice 2013-70 did not separately
analyze whether the taxpayer had met
the requirements to claim the section 48
credit.
Several commenters requested a
modification of the regulations to allow
section 48 credit eligibility in scenarios
involving different taxpayers that claim
different credits related to different com-
ponents of an energy property. This may
also occur in situations in which differ-
ent taxpayers own components of energy
property as discussed in part III.E.1 of this
Summary of Comments and Explanation
of Provisions. After consideration of
these comments, proposed §1.48-14(c)(1)
would provide that the same energy prop-
erty may be eligible for both the section
48 credit and another credit subject to cer-
tain limitations that proposed §1.48-14(c)
(2) would provide.
D. Incremental cost
Existing guidance under section 48
provides that only the incremental cost of
energy property is included in the eligible
basis for purposes of determining the sec-
tion 48 credit. Existing §1.48-9(k) defines
incremental cost as the excess of the total
cost of equipment over the amount that
would have been expended for the equip-
ment if the equipment were not used for a
qualifying purpose related to the section
48 credit. The existing regulations pro-
vide as an example, a scenario in which
energy property costing $100 performs
a pollution control function as well as a
non-qualifying function. The example
states that it would cost $60 solely to per-
form the non-qualifying function, thus the
incremental cost to the energy property
would be $40.
The Treasury Department and the
IRS received no comments regarding the
incremental cost rule in response to Notice
2015-70. Thus, proposed §1.48-14(d)(1)
would continue to apply this incremental
cost approach and would provide that only
the incremental cost of energy property is
included in the eligible basis of the energy
property for purposes of computing the
section 48 credit.
E. Special rules concerning ownership
1. Separate Ownership of Energy
Property
Section 48 and the existing regulations
thereunder are silent regarding whether
the components of an energy property
can be owned by multiple taxpayers. In
Revenue Ruling 78-268, 1978-2 C.B.
10, the Treasury Department and the IRS
addressed a situation involving four own-
ers that shared a common tenancy in an
electric generating facility: two inves-
tor-owned utilities, a tax-exempt coopera-
tive, and a tax-exempt municipality-owned
utility. The specific issue raised in this
Revenue Ruling was whether ownership
by the tax-exempt entities disqualified
the entire electric generating facility from
the investment tax credit. Former section
48(a)(4) effectively stated that property
owned by a tax-exempt entity could not be
investment tax credit property. Revenue
Ruling 78-268 concluded that the two
investor-owned utilities were eligible for
the investment tax credit despite the fact
that the electric generating facility was not
credit-eligible property in the hands of the
tax-exempt entities. This revenue ruling
has been interpreted to stand for the prop-
osition that fractional interests in common
tenancies should be treated as separate
assets for Federal income tax purposes.
Several commenters requested the
adoption of a rule that separate parties that
own an interest in energy property are eli-
gible for the section 48 credit to the extent
of their fractional ownership interests.
Further, these commenters also requested
the adoption of a rule that, if components
of energy property are owned by sepa-
rate taxpayers, each taxpayer would be
eligible for the section 48 credit to the
extent of their cost basis in the compo-
nents of energy property that they own.
These commenters cite Revenue Ruling
78-268 as support for the proposition that
fractional interests in common tenancies
should be treated as separate assets for
Federal income tax purposes.
Many commenters requested that the
regulations address situations involving
energy property with multiple owners,
such as solar condos and community solar
facilities. These commenters requested
that the regulations be clarified to state
that shared ownership does not affect the
credit eligibility of an energy property,
regardless of the ownership structure. To
support this position, several commenters
cite to section 25C(e)(1) (redesignated
as section 25C(f)(1) of the Code by the
IRA) and section 25D(e)(5) that treat a
tenant-stockholder (as defined in section
216 of the Code) in a cooperative hous-
ing corporation (as defined in section
216) as making his or her proportionate
share (as defined in section 216(b)(3))
of any expenditures of such corporation.
Similarly, sections 25C(f)(1) and 25D(e)
(6) treat an individual member of a condo-
minium management association as hav-
ing made the individual’s proportionate
share of any expenditures of such asso-
ciation. As a result, a tenant-stockholder
in a cooperative or a member of a condo-
minium association may claim a section
25C or 25D credit for their proportional
share of the expenditure of the coopera-
tive or condominium association for credit
eligible property.
Several commenters expressed con-
cerns about credit eligibility and the
ownership of offshore wind property. For
example, a group of commenters requested
confirmation that certain transfer and
power conditioning equipment necessary
to deploy offshore wind is eligible for a
section 48 credit, but also that the trans-
fer and power conditioning equipment is
eligible for section 48 even if owned by a
separate entity from the entity that owns
the offshore wind turbines or if the trans-
fer and power conditioning equipment is
shared between multiple offshore wind
facilities as part of a shared transmission
solution.
The Treasury Department and the IRS
have determined that a taxpayer that owns
an energy property is eligible for the sec-
tion 48 credit only to the extent of the
taxpayer’s eligible basis in the energy
property. In the case of multiple parties
that hold ownership shares in an energy
property, each party is eligible for the sec-
tion 48 credit to the extent of the party’s
fractional ownership interest. Proposed
§1.48-14(e)(2) would adopt this position.
Proposed §1.48-14(e)(4) also would pro-
vide examples illustrating the treatment of
multiple owners of an energy property.

December 26, 2023 1636 Bulletin No. 2023–52
As described in part I.D.3 of this
Summary of Comments and Explanation
of Provisions with regard to qualified off-
shore wind property, functionally interde-
pendent components do not include power
conditioning and transfer equipment such
as subsea cables and voltage transformers
necessary to condition electricity for use
on the electrical grid. However, the power
conditioning and transfer equipment are
integral parts of the qualified offshore
wind property, and thus, are energy prop-
erty. In contrast, transmission and distri-
bution equipment are not functionally
interdependent components of an energy
property nor are they an integral part of an
energy property. If the taxpayer owns both
the unit of energy property and at least a
portion of the related power condition-
ing and transfer equipment, that taxpayer
would be able to calculate the section 48
credit on the eligible basis of the energy
property, including the taxpayer’s basis
in the integral power conditioning and
transfer equipment. In the case of multi-
ple parties that hold ownership shares in
an energy property, each party is eligible
for the section 48 credit to the extent of
its fractional ownership interest. If power
conditioning and transfer equipment
owned by one taxpayer is an integral part
of an energy property owned by an unre-
lated taxpayer, the taxpayer that owns the
power conditioning and transfer equip-
ment would not be eligible for the section
48 credit but the taxpayer that owns the
energy property would be eligible for the
section 48 credit.
For example, if Taxpayer A owns only
power conditioning and transfer equip-
ment that is an integral part of an energy
property owned by unrelated Taxpayer B,
Taxpayer A would not be eligible for the
section 48 credit. However, this would not
prevent Taxpayer B from claiming a sec-
tion 48 credit on the basis of the energy
property that it owns. In addition, if unre-
lated taxpayers Taxpayer A and Taxpayer
B jointly own power conditioning and
transfer equipment that is an integral part
of a qualified offshore wind facility, but
only Taxpayer B owns the unit of energy
property (that is, the qualified offshore
wind facility), only Taxpayer B may
claim the section 48 credit. The amount
of Taxpayer B’s section 48 credit is calcu-
lated by taking into account both Taxpayer
B’s share of the basis in the power con-
ditioning and transfer equipment and
Taxpayer B’s basis in the unit of energy
property (that is, Taxpayer B’s basis in
qualified offshore wind facility).
2. Related Taxpayers
Section 48 does not define the term
“related taxpayers.” This term was defined
in existing §1.48-9(q)(10)(i) in the context
of qualified intercity buses. This provision
states that related taxpayers are treated as
one taxpayer in determining the increase
in operating capacity of qualifying inter-
city buses and in determining the qualified
investment in qualified intercity buses
for the energy credit. Existing §1.48-9(q)
(10)(i) also provides that related taxpay-
ers are members of a group of trades or
businesses that are under common control
(as defined in §1.52–1(b)). The Treasury
Department and the IRS received no com-
ments regarding the related taxpayer rule
in response to Notice 2015-70. As a result,
proposed §1.48-14(e)(3) would incor-
porate the rule provided in the existing
regulations.
F. Coordination with other code
provisions
1. Election to Treat Qualified Facilities as
Energy Property
Section 48(a)(5) allows a taxpayer that
owns a qualified facility (as defined in
section 45(d)) to elect to claim the section
48 credit in lieu of the section 45 credit.
Section 48(a)(5)(A) provides that if the
taxpayer makes an election, the qualified
facility will be treated as part of a quali-
fied investment credit facility, and there-
fore deemed energy property eligible for
a section 48 credit. A qualified investment
credit facility is defined in section 48(a)
(5)(C) as a qualified facility described
in section 45(d)(1) – (4), (6), (7), (9), or
(11), with respect to which no credit has
been allowed under section 45, and for
which the taxpayer makes an irrevocable
election to claim the section 48 credit in
lieu of any section 45 credit. Qualified
facilities for which a taxpayer is eligible
to make an election under section 48(a)
(5) include wind, closed- and open-loop
biomass, geothermal, solar, landfill gas,
trash, hydropower, marine and hydroki-
netic facilities.
Only with respect to a qualified invest-
ment credit facility, section 48(a)(5)(D)
defines “qualified property” as tangi-
ble personal property or other tangible
property (not including a building or its
structural components), but only if such
property is used as an integral part of the
qualified investment credit facility; with
respect to which depreciation (or amorti-
zation in lieu of depreciation) is allowable;
that is constructed, reconstructed, erected,
or acquired by the taxpayer; and the orig-
inal use of the property commences with
the taxpayer.
Notice 2009-52, 2009-25 I.R.B. 1094,
provides taxpayers with procedures to
make an election under section 48(a)(5).
Proposed §1.48-14(f)(6) would adopt the
procedures in Notice 2009-52 and, as a
result, Notice 2009-52 will be obsoleted
upon the publication of the final regula-
tions in the Federal Register.
a. Interaction of section 45 credit
requirements with section 48 credit
In response to Notice 2015-70, several
commenters requested that the regulations
address whether and to what extent the
definition of “qualified investment credit
facility” provided in section 48(a)(5)
(C) makes the rules that generally apply
for determining a taxpayer’s section 45
credit applicable to qualified facilities for
which the taxpayer makes an election.
Additionally, Notice 2022-49 requested
comments on whether guidance is needed
to determine whether a qualified invest-
ment credit facility that elects to claim the
section 48 credit in lieu of the section 45
credit is subject to all of the requirements
of section 45, including the requirement
that electricity generated by the qualified
investment credit facility be sold to an
unrelated person, and what factors the
Treasury Department and the IRS should
consider regarding such guidance. Several
commenters responded and generally were
not supportive of imposing the require-
ments of section 45 on a qualified invest-
ment credit facility that elects to claim the
section 48 credit in lieu of the section 45
credit. One commenter pointed out, for
example, that section 48 only cross-ref-
erences specific provisions of section

Bulletin No. 2023–52 1637 December 26, 2023
45(d) and not all of section 45(d) nor all
of section 45. This commenter noted that
because section 48 is an investment tax
credit rather than a production tax credit,
the rationale for requiring sales of energy
from a qualified investment credit facility
to unrelated persons is inapplicable.
Section 45(a) sets forth the amount of
the production tax credit for a taxable year.
It does not determine whether a facility
is a “qualified facility” (that definition is
set forth in section 45(d)). Section 45(a)
specifies the amount of the credit for a
qualified facility by formula (0.3 cents
(increased credit amount under section
45(a)(6) if the requirements of 45(a)(6)(B)
are met) multiplied by the kWh of elec-
tricity generated and sold to an unrelated
person. This statutory structure appears to
make the requirement that electricity be
sold to an unrelated person relevant only
for determining the amount of the section
45 tax credit, not eligibility for the section
48 tax credit. Therefore, after consider-
ation of these comments, the Treasury
Department and the IRS have determined
that the requirements of section 45 are not
imposed on a qualified investment credit
facility that elects to claim the section
48 credit in lieu of the section 45 credit.
Proposed §1.48-14(f)(1) would adopt this
position.
b. Time and manner of making election
Section 2 of Notice 2009-52 provides
that, to make the election with respect to a
qualified facility, a taxpayer must claim the
energy credit on a completed Form 3468,
Investment Credit, and file such form with
the taxpayer’s income tax return for the
year in which the property is placed in
service. The taxpayer must make a sepa-
rate election for each qualified facility that
is to be treated as a qualified investment
credit facility. Proposed §1.48-14(f)(6)
(i) would adopt this procedure with some
modifications. If any taxpayer owning an
interest in a qualified investment credit
facility makes an election under section
48(a)(5), that election would be binding
on all taxpayers that directly or indirectly
own an interest in the facility.
Additionally, proposed §1.48-14(f)
(6)(ii) would provide a similar special
rule for partnerships and S corporations,
which would require that the election be
made at the entity level and is binding on
all ultimate credit claimants (as defined
in §1.50-1(b)(3)(ii)) who must claim
the credit in proportion to their respec-
tive qualified investment in the energy
property. The credit is claimed on each
claimant’s completed Form 3468, or any
successor form(s), and filed with a timely
filed (including extensions) return for the
taxable year in which the partnership or S
corporation makes the election.
2. Coordination Between Section 42 and
48 Credits
Section 50(c)(3)(A) provides the gen-
eral rule that a taxpayer’s basis in an
energy property is reduced by 50 per-
cent of the amount of a section 48 credit
determined with respect to the taxpayer’s
investment in the energy property. Section
13102(i) of the IRA amended section 50(c)
to provide an exception to that rule for
property placed in service after December
31, 2022. As a result, a taxpayer that has
claimed a section 48 credit with respect
to its basis in an energy property is not
required to reduce its basis in the energy
property when determining eligible basis
for purposes of calculating a low-income
housing credit under section 42 of the
Code (section 42 credit). Accordingly, the
basis of energy property may be used to
determine a section 48 credit and may also
be included in eligible basis when deter-
mining a section 42 credit.
G. Rules for certain lower-output
energy properties to include qualified
interconnection costs in the basis of
associated energy property.
Section 13102(j) of the IRA added
section 48(a)(8)(A) to the Code, which
provides that, for purposes of determin-
ing the section 48 credit with respect to
energy property (as defined in section
48(a)(3)) that has a maximum net output
of not greater than 5 MW (as measured
in alternating current) (Five-Megawatt
Limitation), a taxpayer may include
amounts paid or incurred by the taxpayer
for qualified interconnection property in
connection with the installation of the
energy property to provide for the trans-
mission or distribution of the electric-
ity produced or stored by such energy
property. Additionally, these costs must be
properly chargeable to the capital account
of the taxpayer.
Section 48(a)(8)(B) defines “qualified
interconnection property” to mean, with
respect to an energy project that is not a
microgrid controller, any tangible property
that is part of an addition, modification, or
upgrade to a transmission or distribution
system that is required at or beyond the
point at which the energy project inter-
connects to such transmission or distribu-
tion system in order to accommodate such
interconnection; either that is constructed,
reconstructed, or erected by the taxpayer,
or for which the cost with respect to the
construction, reconstruction, or erection of
such property is paid or incurred by such
taxpayer; and the original use of which,
pursuant to an interconnection agreement,
commences with a utility.
Section 48(a)(8)(C) defines an “inter-
connection agreement” as an agreement
with a utility for the purposes of inter-
connecting the energy property owned by
such taxpayer to the transmission or distri-
bution system of such utility.
Section 48(a)(8)(D) defines the term
“utility” for purposes of section 48(a)(8)
as the owner or operator of an electrical
transmission or distribution system that
is subject to the regulatory authority of a
State or political subdivision thereof, any
agency or instrumentality of the United
States, a public service or public utility
commission or other similar body of any
State or political subdivision thereof, or
the governing or ratemaking body of an
electric cooperative.
Section 48(a)(8)(E) provides a special
rule for interconnection property. In the
case of expenses paid or incurred for inter-
connection property, amounts otherwise
chargeable to capital account with respect
to such expenses must be reduced under
rules similar to the rules of section 50(c).
1. Qualified Interconnection Property
Notice 2022-49 requested comments
on several aspects of the treatment of qual-
ified interconnection property, specifically
the types of eligible costs, the required
documentation, and the Five-Megawatt
Limitation.
Qualified interconnection property
costs arise from installation of tangible

December 26, 2023 1638 Bulletin No. 2023–52
property that is part of an addition, modifi-
cation, or upgrade to a transmission or dis-
tribution system at or beyond the point of
interconnection. Energy property includes
all functionally interdependent property
owned by the taxpayer. Additionally,
property owned by the taxpayer that is an
integral part of such energy property is
energy property. This may include power
conditioning equipment owned by the
taxpayer and used to condition electricity
into a form suitable for use or transmis-
sion. However, qualified interconnection
property, which is most similar in function
to transmission and distribution property,
is neither property that is a functionally
interdependent component of an energy
property nor an integral part of an energy
property. Therefore, qualified intercon-
nection property is not energy property.
Accordingly, proposed §1.48-14(g)(2)
would clarify that qualified interconnec-
tion property is not taken into account in
determining whether an energy property
satisfies the requirements for the domestic
content bonus credit amount referenced in
section 48(a)(12)(B) and the increase in
credit rate for energy communities pro-
vided in section 48(a)(14).
Consistent with section 48(a)(8)(A),
however, proposed §1.48-14(g) would
clarify that, in connection with the instal-
lation by a taxpayer of energy property
(as defined in section 48(a)(3)) that has a
maximum net output of not greater than 5
MW (as measured in alternating current),
amounts paid or incurred by the taxpayer
for qualified interconnection property that
is required to accommodate the inter-
connection are included in the basis of
a related energy property. Additionally,
proposed §1.48-14(g)(3) would provide
that the maximum net output of an energy
property is measured only by nameplate
generating capacity of the unit of energy
property (or, in the case of energy stor-
age technology, the nameplate capacity
of such energy storage technology) at
the time the energy property is placed in
service.
2. Costs Included in Basis of Related
Energy Property
Proposed §1.48-14(g)(1) would pro-
vide that only amounts paid or incurred by
a taxpayer for property that is constructed,
reconstructed, or erected by the taxpayer,
or for which the cost with respect to the
construction, reconstruction, or erection of
such property is paid or incurred by such
taxpayer, will be included in the basis of a
related energy property. A taxpayer that is
reimbursed for these costs may not include
such reimbursed costs in the amount paid
or incurred by the taxpayer for qualified
interconnection property. Proposed §1.48-
14(g)(6) would adopt this rule. In the case
of a utility reimbursing a taxpayer for
costs the taxpayer pays or incurs for qual-
ified interconnection property, the utility
should provide the taxpayer with informa-
tion regarding such costs by the date on
which the project is placed in service.
The Treasury Department and the IRS
are aware of common situations where a
taxpayer could ultimately receive a pay-
ment, credit, or service from another
entity, including a utility, related to the
costs the taxpayer pays or incurs for qual-
ified interconnection property. For exam-
ple, one taxpayer may place in service
energy property and make payments to a
utility with respect to qualified intercon-
nection property involving the addition,
modification, or upgrade to the utility’s
transmission system related to such energy
property. Subsequently, a different tax-
payer may, at a later date, place in service
energy property and make payments to the
same utility related to the same additions,
modifications, or upgrades to the utili-
ty’s transmission system that were made
in response to the first taxpayer’s inter-
connection. The utility may pay, credit,
or provide services to the first taxpayer
in an amount related to the costs paid by
the second taxpayer. The likely amount or
timing of any such payment, credit, or ser-
vice would not be known at the time the
first taxpayer interconnects to the utility’s
transmission system.
The Treasury and the IRS request com-
ment on whether such payment, credit, or
service received by the first taxpayer, as
the result of subsequent payments made to
a utility by other parties, should be treated
as a reimbursement to the first taxpayer and
impact the amount of the costs of qualified
interconnection property that the first tax-
payer may include in its basis for purposes
of the section 48 credit. The Treasury and
the IRS also request comment on whether
the costs paid by the second taxpayer
should be treated as amounts paid or
incurred for qualified interconnection
property in connection with the instal-
lation of the second taxpayer’s energy
property. The Treasury and IRS request
comment on industry practices relevant to
the determination of costs paid or incurred
for qualified interconnection property,
including the accounting treatment of
costs paid or incurred for qualified inter-
connection property. The Treasury and
the IRS also request comment on whether
any clarifications are needed regarding the
tax treatment of amounts paid or incurred
for qualified interconnection property,
including reimbursement of costs paid or
incurred by a taxpayer for qualified inter-
connection costs.
In section 3.02(1)(b)(ii) of Notice
2022-49, the Treasury Department and
the IRS requested comments concerning
what type of documentation, in addition to
interconnection agreements and cost cer-
tification reports, is readily available for
a taxpayer to demonstrate that they have
paid or incurred interconnection costs.
Taxpayers must retain documentation in
compliance with section 6001 of the Code.
The proposed regulations do not provide
any specific type of required documenta-
tion, and any documentation that satisfies
section 6001 will suffice to substantiate
that a taxpayer has paid or incurred qual-
ified interconnection costs. Commenters
to Notice 2022-49 provided feedback on
the documentation that taxpayers may use
to substantiate costs paid or incurred for
qualified interconnection property.
Qualified interconnection property
is either constructed, reconstructed, or
erected by the taxpayer, or the taxpayer
pays or incurs the cost with respect to the
construction, reconstruction, or erection
of such property; and the original use of
which, pursuant to an interconnection
agreement, commences with a utility.
Therefore, in some cases, taxpayers will
have the necessary information and doc-
umentation on these costs. In other cases,
the taxpayers will need to receive this
information from the utility, which, the
Treasury Department and the IRS under-
stand, will be a common scenario. For sit-
uations in which property is constructed,
reconstructed, or erected by a party other
than the taxpayer, final information with
conclusive details such as a true-up report

Bulletin No. 2023–52 1639 December 26, 2023
with the actual costs, final invoices, proof
of payment or reimbursement, and per-
mission to operate documentation or
any other final project accounting docu-
mentation should be maintained. Other
examples of cost documentation records
include, but are not limited to, the inter-
connection agreement, interconnection
study, signed customer contracts, and cost
certification reports.
3. Five-Megawatt Limitation
Under section 48(a)(8)(A), energy
property includes amounts paid or incurred
by the taxpayer for qualified interconnec-
tion property in connection with the instal-
lation of energy property only if it has a
maximum net output of not greater than 5
MW (as measured in alternating current).
The addition of amounts paid or incurred
by the taxpayer for qualified interconnec-
tion property in section 48(a)(8)(A) is tied
to the installation of “energy property.”
The statute clearly ties the 5 MW limita-
tion to the energy property; therefore, as
long as an energy property is 5 MW or
less, the statute is satisfied. Additionally,
measurement at the level of the energy
property provides certainty for taxpayers
and the IRS because it is measured by the
energy property’s maximum net output
when it is placed in service. Therefore,
proposed §1.48-14(g)(3) would provide
that the Five-Megawatt Limitation must
be measured at the level of the energy
property. Proposed §1.48-14(g)(7) also
would provide examples illustrating the
application of this rule.
In accordance with proposed §1.48-
14(g)(3), if an energy project comprised of
multiple energy properties has a combined
nameplate capacity in excess of 5 MW,
each of the energy properties would none-
theless be eligible to include amounts paid
or incurred by the taxpayer for qualified
interconnection property if each energy
property satisfies the Five-Megawatt
Limitation. The Treasury Department
and the IRS request comments regard-
ing the application of the Five-Megawatt
Limitation to a single energy property,
including whether the definition of an
energy property is sufficiently clear for
this purpose. In addition, the Treasury
Department and the IRS request com-
ments regarding the circumstances under
which multiple energy properties each
with a nameplate capacity of less than 5
MW would utilize common power con-
ditioning equipment for economic or
regulatory reasons and/or common inter-
connection agreements, or would instead
utilize separate power conditioning equip-
ment and/or interconnection agreements.
4. Non-application to Certain Types of
Energy Properties
The definition of qualified interconnec-
tion property specifically excludes inter-
connection property installed with respect
to an energy project that is a microgrid
controller. Additionally, taxpayers may not
include the costs of qualified interconnec-
tion property in the basis of electrochro-
mic glass property and fiber optic solar
energy property because these types of
energy property do not require additions,
modifications, or upgrades to a transmis-
sion or distribution system. Similarly, in
the case of energy properties that generate
thermal energy, such as certain geother-
mal property and qualified biogas prop-
erty, this provision is inapplicable.
Effect on Other Documents
Notice 2009-52 will be obsoleted upon
publication of the final regulations in the
Federal Register. Notice 2009-52, in rele-
vant part, provides procedures for taxpay-
ers to make an irrevocable election under
section 48(a)(5) to treat qualified property
that is part of a qualified investment credit
facility as energy property eligible for a
section 48 credit in lieu of a section 45
credit.
Proposed Applicability Dates
Except for the provisions of proposed
§§1.48-13 and 1.6418-5(f), these regula-
tions generally are proposed to apply with
respect to property that is placed in service
after December 31, 2022, and during a
taxable year beginning after the date final
regulations are published in the Federal
Register. Proposed §1.6418-5(f) is pro-
posed to apply to taxable years ending on
or after the date final regulations are pub-
lished in the Federal Register. A taxpayer
may rely on proposed §§ 1.48-9, 1.48-14,
and 1.6418-5(f) with respect to property
that is placed in service after December
31, 2022, and during a taxable year begin-
ning on or before the date final regulations
are published in the Federal Register, pro-
vided the taxpayer and all related persons
(within the meaning of sections 267(b)
and 707(b) of the Code) apply proposed
§§ 1.48-9 and 1.48-14 in their entirety and
in a consistent manner.
Proposed §1.48-13 is proposed to apply
to projects placed in service in taxable
years ending after the date final regulations
are published in the Federal Register, and
the construction of which begins after
the date final regulations are published in
the Federal Register. However, proposed
§1.48-13(d) is proposed to apply to energy
projects the construction of which begins
after November 22, 2023. Taxpayers may
rely on §1.48-13 with respect to construc-
tion of a property or project beginning on
or after January 29, 2023, and on or before
the date these regulations are published as
final regulations in the Federal Register,
provided, that beginning after the date
that is 60 days after August 29, 2023, tax-
payers follow proposed §1.48-13 in its
entirety and in a consistent manner.
Special Analyses
I. Regulatory Planning and Review—
Economic Analysis
Pursuant to the Memorandum
of Agreement, Review of Treasury
Regulations under Executive Order 12866
(June 9, 2023), tax regulatory actions issued
by the IRS are not subject to the require-
ments of section 6 of Executive Order
12866, as amended. Therefore, a regulatory
impact assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (PRA) requires
that a Federal agency obtain the approval of
Office of Management and Budget (OMB)
before collecting information from the
public, whether such collection of informa-
tion is mandatory, voluntary, or required to
obtain or retain a benefit. A Federal agency
may not conduct or sponsor, and a person
is not required to respond to, a collection of
information unless the collection of infor-
mation displays a valid control number.

December 26, 2023 1640 Bulletin No. 2023–52
The collections of information in these
proposed regulations contain reporting
and recordkeeping requirements that are
required to verify the eligibility of the
property for the credit. These collections
of information would generally be used by
the IRS for tax compliance purposes and
by taxpayers to facilitate proper reporting
and compliance.
The reporting requirement mentioned
within this proposed regulations with
respect to section 48 are in proposed
§1.48-14(f)(6), which provides the time
and manner for a taxpayer to make a sec-
tion 48(a)(5)(C) an election to have qual-
ified investment credit facility property
that was placed in service after December
31, 2008, treated as a qualified investment
credit facility for purposes of claiming the
section 48 credit. These requirements are
considered general tax records under §
1.6001-1.
A taxpayer must make a section 48(a)
(5)(C) election on a completed Form 3468
(Investment Credit) (or successor forms,
or pursuant to instructions and other guid-
ance) with the taxpayer’s timely filed
return (including extensions) for the tax-
able year in which the energy property
is placed in service. The taxpayer must
make a separate section 48(a)(5)(C) elec-
tion for each qualified facility that is to
be treated as a qualified investment credit
facility. These collections are included in
Notice 2009-52, 2009-1 C.B. 1094, which
is already approved under OMB Control
Number 1545-2145 for all filers. Also, the
election selection is included on, Form
3468, which is already approved in OMB
Control Numbers 1545-0155 for trust and
estate filers, 1545-0074 for individual
filers, and 1545-0123 for business filers.
This proposed regulation is not chang-
ing the collection requirements already
approved by OMB.
These proposed regulations would also
include reporting requirements, in addi-
tion to the general reporting requirements
set forth in in §1.45-12 of the August
Proposed Regulations, for taxpayers that
claim an increased credit amount under
section 48(a)(9)(B)(iii). These proposed
regulations would require taxpayers to
verify compliance with the Prevailing
Wage Requirements by providing infor-
mation that includes the aggregate infor-
mation detailed in §1.45-12 of the August
Proposed Regulations during the five-year
recapture period after an energy project is
placed in service. The Secretary may issue
forms and instructions in future guidance
for the purpose of meeting these reporting
requirements. As set forth in the pream-
ble to the August Proposed Regulations,
these reporting requirements will be cov-
ered under OMB control numbers 1545-
0074 for individuals/sole proprietors and
1545-0123 for business entities. The IRS
has solicited public comments on these
requirements and the associated burdens
for trusts and estates and has sought OMB
approval under a new OMB control num-
ber (1545-NEW) for trust and estate filers.
This proposed regulation is not chang-
ing or creating new collection require-
ments not already approved by, or will be
approved by, OMB for the §1.45-12.
These proposed regulations also
describe recapture procedures as detailed
in proposed § 1.6418–5. The reporting of
a section 48(a)(10)(C) recapture event
will still be required to be reported using
Form 4255, Recapture of Investment
Credit. This form is approved under OMB
control numbers 1545–0074 for individu-
als, 1545–0123 for business entities, and
1545-0166 for trust and estate filers. The
proposed regulation is not changing or
creating new collection requirements not
already approved by OMB.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes certain
requirements with respect to Federal rules
that are subject to the notice and comment
requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) and that are likely to have a
significant economic impact on a sub-
stantial number of small entities. Unless
an agency determines that a proposal is
not likely to have a significant economic
impact on a substantial number of small
entities, section 603 of the RFA requires
the agency to present an initial regulatory
flexibility analysis (IRFA) of the proposed
rule.
The Treasury Department and the IRS
have not determined whether the pro-
posed rule, when finalized, will likely
have a significant economic impact on a
substantial number of small entities. This
determination requires further study.
However, because there is a possibil-
ity of significant economic impact on a
substantial number of small entities, an
IRFA is provided in these proposed regu-
lations. The Treasury Department and the
IRS invite comments on both the num-
ber of entities affected and the economic
impact on small entities.
Pursuant to section 7805(f), this notice
of proposed rulemaking has been submit-
ted to the Chief Counsel of Advocacy of
the Small Business Administration for
comment on its impact on small business.
A. Need for and objectives of the rule
The proposed regulations will provide
greater clarity to taxpayers for purposes of
claiming the section 48 credit for energy
property. The proposed rule is expected
to encourage taxpayers to invest in devel-
oping new energy properties, including
qualified facilities otherwise eligible for
the section 45 credit for which a taxpayer
makes a section 48(a)(5)(C) election.
Thus, the Treasury Department and the
IRS intend and expect that the proposed
rule will deliver benefits across the econ-
omy that will beneficially impact various
industries.
B. Affected small entities
The Small Business Administration
estimated in its 2018 Small Business
Profile that 99.9 percent of United States
businesses meet its definition of a small
business. The applicability of these pro-
posed regulations does not depend on
the size of the business, as defined by
the Small Business Administration. As
described more fully in the preamble to
these proposed regulations and in this
IRFA, these rules may affect a variety of
different businesses across several differ-
ent industries.
The section 48 credit incentivizes the
development of energy property. Because
the potential credit claimants can vary
widely, it is difficult to estimate at this
time the impact of these proposed regula-
tions, if any, on small businesses.
The Treasury Department and the IRS
expect to receive more information on the
impact on small businesses through com-
ments on this proposed rule and again

Bulletin No. 2023–52 1641 December 26, 2023
when taxpayers start to claim the section 48
credit using the guidance and procedures
provided in these proposed regulations.
C. Impact of the rule
The proposed regulations will allow
taxpayers to plan investments and trans-
actions based on the ability to claim the
section 48 credit. The increased use of
the section 48 credit will incentivize the
development of technologies for energy
generation and storage. The use of the sec-
tion 48 credit may also lead to additional
investment in electrical grid infrastructure
to transport electricity.
Because the statutory changes that
are reflected in the proposed rules have
already been accounted for by Form 3468,
the recordkeeping and reporting require-
ments should not increase for taxpayers
that already claim the section 48 credit.
The Form 3468 already provides the pro-
cedures for taxpayers to make a section
48(a)(5)(C) election. To make the election,
a taxpayer must claim the energy credit
with respect to a qualified investment credit
facility property on a completed Form 3468
(Investment Credit) (or successor forms, or
pursuant to instructions and other guid-
ance) and file such form with the taxpayer’s
timely filed return (including extensions)
for the taxable year in which the property
is placed in service. Although the Treasury
Department and the IRS do not have suffi-
cient data to precisely determine the likely
extent of the increased costs of compliance,
the estimated burden of complying with the
recordkeeping and reporting requirements
are described in the Paperwork Reduction
Act section of the preamble.
D. Duplicative, overlapping, or
conflicting Federal rules
The proposed rule would not dupli-
cate, overlap, or conflict with any relevant
Federal rules. As discussed above, the
proposed rule would merely provide pro-
cedures and definitions to allow taxpayers
to claim the section 48 credit.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandate
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes any
Federal mandate that may result in expen-
ditures in any one year by a State, local,
or Tribal government, in the aggregate,
or by the private sector, of $100 million
(updated annually for inflation). These
proposed regulations do not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments or by the private sector in excess of
that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These proposed regulations do not
have federalism implications and do not
impose substantial, direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
VI. Executive Order 13175: Consultation
and Coordination with Indian Tribal
Governments
Executive Order 13175 (Consultation
and Coordination With Indian Tribal
Governments) prohibits an agency from
publishing any rule that has Tribal impli-
cations if the rule either imposes substan-
tial, direct compliance costs on Indian
Tribal governments, and is not required by
statute, or preempts Tribal law, unless the
agency meets the consultation and funding
requirements of section 5 of the Executive
order. This proposed rule does not have
substantial direct effects on one or more
Federally recognized Indian Tribes and
does not impose substantial direct compli-
ance costs on Indian Tribal governments
within the meaning of the Executive order.
Statement of Availability of IRS
Documents
IRS notices and other guidance cited in
this preamble are published in the Internal
Revenue Bulletin (or Cumulative Bulletin)
and are available from the Superintendent
of Documents, U.S. Government
Publishing Office, Washington, DC
20402, or by visiting the IRS website at
https://www.irs.gov.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final regu-
lations, consideration will be given to any
comments regarding the notice of pro-
posed rulemaking and partial withdrawal
of notice of proposed rulemaking that are
submitted timely to the IRS in the pream-
ble under the ADDRESSES section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. All comments submitted will
be made available at http://www.regu-
lations.gov or upon request for public
inspection and copying.
A public hearing has been scheduled
for February 20, 2024, at 10 a.m. ET, in
the Auditorium at the Internal Revenue
Building, 1111 Constitution Ave, NW,
Washington, DC. Because of access
restrictions, visitors will not be admitted
beyond the immediate entrance area more
than 30 minutes before the hearing starts.
Participants may alternatively attend the
public hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the public hearing. Persons who
wish to present oral comments at the
public hearing must submit an outline of
the topics to be discussed and the time
to be devoted to each topic by January
22, 2024. A period of 10 minutes will be
allotted to each person for making com-
ments. An agenda showing the sched-
uling of the speakers will be prepared
after the deadline for receiving outlines
has passed. Copies of the agenda will
be available free of charge at the public
hearing. If no outline of the topics to be
discussed at the public hearing is received
by January 22, 2024, the public hearing
will be cancelled. If the public hearing is
cancelled, a notice of cancellation of the
public hearing will be published in the
Federal Register.
Individuals who want to testify in per-
son at the public hearing must send an
email to publichearings@irs.gov to have
your name added to the building access

December 26, 2023 1642 Bulletin No. 2023–52
list. The subject line of the email must
contain the regulation number REG-
132569-17 and the language TESTIFY
In Person. For example, the subject
line may say: Request to TESTIFY In
Person at Hearing for regulation number
REG-132569-17.
Individuals who want to testify by
telephone at the public hearing must send
an email to publichearings@irs.gov to
receive the telephone number and access
code for the hearing. The subject line of
the email must contain the regulation
number REG-132569-17 and the language
TESTIFY Telephonically. For exam-
ple, the subject line may say: Request to
TESTIFY Telephonically at Hearing for
REG-132569-17.
Individuals who want to attend the
public hearing in person without testify-
ing must also send an email to publichear-
ings@irs.gov to have your name added to
the building access list. The subject line
of the email must contain the regulation
number REG-132569-17 and the language
ATTEND In Person. For example, the
subject line may say: Request to ATTEND
Hearing in Person for REG-132569-17.
Requests to attend the public hearing must
be received by 5:00 p.m. on February 15,
2024.
Hearings will be made accessible to
people with disabilities. To request spe-
cial assistance during a hearing please
contact the Publications and Regulations
Branch of the Office of Associate Chief
Counsel (Procedure and Administration)
by sending an email to publichearings@
irs.gov (preferred) or by telephone at
(202) 317-6901 (not a toll-free number)
by at least 5:00 p.m. on February 14,
2024.
Drafting Information
The principal authors of these pro-
posed rules are Martha M. Garcia and
Boris Kukso of the Office of Associate
Chief Counsel (Passthroughs & Special
Industries). However, other personnel
from the Treasury Department and the
IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Partial Withdrawal of Notice of
Proposed Rulemaking
Under the authority of 26 U.S.C. 7805,
proposed §1.48-13 contained in the notice
of proposed rulemaking (REG-100908-
23) that was published in the Federal
Register on August 30, 2023 (88 FR
60018), is withdrawn.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by:
a. Revising the entry for §1.48-9; and
b. Adding entries in numerical order
for §§ 1.48-13, 1.48-14, and 1.6418-5.
The revision and additions read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.48-9 also issued under 26
U.S.C. 48(a)(3)(D)(i) and (16). * * *
Section 1.48-13 also issued under 26
U.S.C. 48(a)(10)(C) and (16). * * *
Section 1.48-14 also issued under 26
U.S.C. 48(a)(16). * * *
* * * * *
Section 1.6418-5 also issued under 26
U.S.C. 48(a)(10)(C) and 6418(g) and (h).
* * * * *
Par. 2. Revise §1.48-9 to read as
follows:
§1.48-9 Definition of energy property.
(a) In general. For purposes of the
energy credit determined under section
48 of the Internal Revenue Code (Code),
the term energy property means property
that, taking into account the definition of
the term unit of energy property (defined
in paragraph (f)(2)(i) of this section) and
of other terms defined in paragraph (b)
and other provisions of this section, meets
the requirements of paragraph (c) of this
section and is of a type of energy property
set forth in paragraph (e) of this section.
Paragraph (d) of this section provides
rules for property excluded from energy
property. Paragraph (f) of this section pro-
vides rules for components included in
an energy property. Paragraph (g) of this
section provides the applicability date for
this section.
(b) Definitions related to requirements
for energy property. For purposes of sec-
tion 48 of the Code, this section, §§1.48-
13 and 1.48-14, and any provision of the
Code or this chapter that expressly refers
to any of the foregoing, the following defi-
nitions apply:
(1) Construction, reconstruction, or
erection of energy property. The term con-
struction, reconstruction, or erection of
energy property means work performed
to construct, reconstruct, or erect energy
property either by the taxpayer or for the
taxpayer in accordance with the taxpay-
er’s specifications.
(2) Acquisition of energy property.
The term acquisition of energy property
means a transaction by which a taxpayer
obtains rights and obligations with respect
to energy property, including—
(i) Title to the energy property under the
law of the jurisdiction in which the energy
property is placed in service, unless the
property is possessed or controlled by the
taxpayer as a lessee, and
(ii) Physical possession or control of
the energy property.
(3) Original use of energy property—
(i) In general. The term original use of
energy property means the first use to
which a unit of energy property is put,
whether or not such use is by the taxpayer.
(ii) Retrofitted units of energy prop-
erty. A retrofitted unit of energy prop-
erty acquired by the taxpayer will not be
treated as being put to original use by the
taxpayer unless the rules in §1.48-14(a)
regarding retrofitted energy property
(80/20 Rule) or paragraph (e)(10)(v) of
this section regarding modifications of
certain energy storage technology apply.
The question of whether a unit of energy
property meets the 80/20 Rule or is mod-
ified (as described in paragraph (e)(10)
(v) of this section) is a facts and circum-
stances determination.
(4) Allowable—(i) In general. For
purposes of applying paragraph (c)(1)(ii)
of this section, depreciation (or amorti-
zation in lieu of depreciation) is allow-
able with respect to energy property if
such property is of a character subject

Bulletin No. 2023–52 1643 December 26, 2023
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 deduc-
tion method of depreciation (for exam-
ple, under section 168(k) of the Code).
Further, if an Internal Revenue Service
adjustment with respect to the Federal
income tax or information return for such
taxable year requires the basis or cost
of such energy property to be recovered
using a method of depreciation, depre-
ciation is allowable to the taxpayer with
respect to energy property.
(ii) Exclusions from allowable. For pur-
poses of paragraph (b)(4)(i) of this section,
depreciation is not allowable with respect
to energy property if the basis or cost of
such property is not recovered through a
method of depreciation but, instead, such
basis or cost is recovered through a deduc-
tion of the full basis or cost of the energy
property in one taxable year (for example,
under section 179 of the Code).
(5) Placed in service—(i) In general.
Energy property 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 energy property begins; or
(B) The taxable year in which the
energy property is placed in a condition
or state of readiness and availability for
a specifically assigned function, whether
in a trade or business or in the production
of income. Energy property in a condition
or state of readiness and availability for
a specifically assigned function includes,
but is not limited to, components that are
acquired and set aside during the taxable
year for use as replacements for a particu-
lar energy property (or energy properties)
in order to avoid operational time loss and
equipment that is acquired for a specifi-
cally assigned function and is operational
but is undergoing testing to eliminate any
defects. However, components acquired
to be used in the construction of an energy
property will not be considered in a con-
dition or state of readiness and availability
for a specifically assigned function.
(ii) Energy property subject to §1.48-4
election to treat lessee as purchaser.
Notwithstanding paragraph (b)(5)(i) of
this section, energy property with respect
to which an election is made under §1.48-4
to treat the lessee as having purchased
such energy property is considered placed
in service by the lessor in the taxable year
in which possession is transferred to such
lessee.
(6) Unit of energy property. The term
unit of energy property is defined in
paragraph (f)(2)(i) of this section. No
provision of this section or §1.48-13 or
§1.48-14 uses the term unit in respect of
energy property with any meaning other
than that provided in paragraph (f)(2)(i) of
this section.
(7) Claim. With respect to a section
48 credit determined with respect to
energy property of a taxpayer, the term
claim means filing a completing Form
3468, Investment Credit, or any successor
form(s), with the taxpayer’s timely filed
(including extensions) Federal income tax
return for the taxable year in which the
energy property is placed in service, and
includes the making of an election under
section 6417 or 6418 of the Code and
corresponding regulations with respect
to such section 48 credit and made on the
taxpayer’s Federal income tax return or
annual information return.
(c) Requirements for energy prop-
erty—(1) In general. Energy property
must satisfy each of the requirements of
paragraphs (c)(1)(i) through (v) of this
section:
(i) The taxpayer constructs, recon-
structs, or erects the property, or, if the
original use of the property commences
with the taxpayer, acquires the property;
(ii) Depreciation (or amortization in
lieu of depreciation) is allowable with
respect to the property;
(iii) The property meets the perfor-
mance and quality standards as provided
in paragraph (c)(2) of this section;
(iv) The construction of the property
begins before the date provided in section
48 of the Code (if any such date is pro-
vided); and
(v) The property is placed in service by
the taxpayer by the date provided in sec-
tion 48 (if any such date is provided).
(2) Performance and quality stan-
dards—(i) In general. Energy prop-
erty must meet performance and quality
standards, if any, which have been pre-
scribed by the Secretary of the Treasury
or her delegate (after consultation with
the Secretary of Energy) and are in effect
at the time of acquisition of the energy
property.
(ii) Special rules for performance and
quality standards—(A) Small wind energy
property. Small wind energy property
must meet the performance and quality
standards in effect at the time of acquisi-
tion of the small wind turbine set forth in
the American Wind Energy Association
Small Wind Turbine Performance and
Safety Standard 9.1-2009, or subse-
quent revisions (AWEA); International
Electrotechnical Commission 61400-1,
61400-2, 61400-11, 61400-12, or subse-
quent revisions (IEC); or the ANSI/ACP
101-1-2021, the Small Wind Turbine
Standard, or subsequent revisions (ACP).
The certification requirements applicable
to such performance and quality standards
are provided in guidance published in the
Internal Revenue Bulletin. See §601.601
of this chapter.
(B) Electrochromic glass property.
To be eligible for the section 48 credit,
electrochromic windows must be rated in
accordance with the National Fenestration
Rating Council (NFRC) and secondary
glazing systems must be rated in accor-
dance with the Attachments Energy Rating
Council (AERC) Rating and Certification
Process, or subsequent revisions. See para-
graph (e)(2)(ii) of this section for the defi-
nition of electrochromic glass property.
(iii) Time of acquisition. For purposes
of applying performance and quality stan-
dards, the time of acquisition is the date
the taxpayer enters into a binding contract
(as defined in paragraph (c)(2)(iv) of this
section) to acquire the property, or, in
the case of property constructed, recon-
structed, or erected by the taxpayer, the
earlier of the date that—
(A) The taxpayer begins construction,
reconstruction, or erection of the property,
or
(B) The taxpayer and another person
enter into a binding contract (as defined
in paragraph (c)(2)(iv) of this section)
requiring the other person to construct,
reconstruct, or erect property and to place
the property in service for an agreed upon
use.
(iv) Binding contract. For purposes of
this paragraph (c)(2), a contract is bind-
ing only if it is enforceable under State

December 26, 2023 1644 Bulletin No. 2023–52
law against the taxpayer or a predecessor
and does not limit damages to a specified
amount (for example, by use of a liqui-
dated damages provision). For this pur-
pose, a contractual provision that limits
damages to an amount equal to at least
five percent of the total contract price will
not be treated as limiting damages to a
specified amount. For additional guidance
regarding the definition of a binding con-
tract, see §1.168(k)-2(b)(5)(iii)(A).
(d) Property that is not energy prop-
erty—(1) Interaction with section 45.
Energy property does not include any
property that is part of a qualified facility
the production from which is allowed as a
credit determined under section 45 of the
Code (section 45 credit) for the taxable
year or any prior taxable year. However,
see paragraph (f)(3) of this section for
rules regarding property that is an integral
part of an energy property that is also used
by a qualified facility. See §1.48-14(f)(1)
for rules regarding making an election
under section 48(a)(5) of the Code to treat
a qualified facility as an energy property.
(2) Other property. Energy property
also does not include power purchase
agreements, goodwill, going concern
value, or renewable energy certificates.
(e) Types of energy property. The types
of energy property eligible for a section 48
credit are:
(1) Solar energy property—(i) In gen-
eral. Solar energy property is equipment
that uses solar energy to generate electric-
ity, to heat or cool (or provide hot water
for use in) a structure, or to provide solar
process heat, excepting property used to
generate energy for the purposes of heat-
ing a swimming pool. Solar energy prop-
erty includes solar electric generation
equipment (as defined in paragraph (e)
(1)(ii) of this section), solar process heat
equipment (as defined in paragraph (e)(1)
(iii) of this section), and equipment that
uses solar energy to heat or cool a struc-
ture or provide hot water for use in a struc-
ture, and parts related to the functioning of
all such equipment.
(ii) Solar electric generation equip-
ment. Solar electric generation equipment
is equipment that converts sunlight into
electricity through the use of devices such
as solar cells or other collectors.
(iii) Solar process heat equipment.
Solar process heat equipment is equipment
that uses solar energy to generate steam at
high temperatures for use in industrial or
commercial processes.
(2) Fiber-optic solar energy property
and electrochromic glass property—
(i) Fiber-optic solar energy property.
Fiber-optic solar energy property is equip-
ment that uses solar energy to illuminate
the inside of a structure using fiber-optic
distributed sunlight.
(ii) Electrochromic glass property.
Electrochromic glass energy property
uses electricity to change its light trans-
mittance properties (both visible and
near infrared light) in order to heat or
cool a structure. For purposes of section
48, windows, including secondary win-
dows (also referred to as secondary glaz-
ings), that incorporate electrochromic
glass are treated as electrochromic glass
property.
(3) Geothermal energy property—(i)
In general. Geothermal energy property
is equipment used to produce, distribute,
or use energy derived from a geothermal
deposit (within the meaning of section
613(e)(2) of the Code), but only, in the
case of electricity generated by geother-
mal power, up to (but not including) the
electrical transmission stage. Geothermal
equipment includes production equipment
(as defined in paragraph (e)(3)(ii) of this
section) and distribution equipment (as
defined in paragraph (e)(3)(iii) of this
section).
(ii) Production equipment. For pur-
poses of paragraph (e)(3)(i) of this section,
production equipment is equipment nec-
essary to bring geothermal energy from
the subterranean deposit to the surface,
including well-head and downhole equip-
ment (such as screening or slotting liners,
tubing, downhole pumps, and associated
equipment). Production, injection, and
monitoring wells required for production
of the geothermal deposit qualify as pro-
duction equipment. If geothermal energy
is used to generate electricity, production
equipment also includes the property nec-
essary to produce electricity. Production
equipment does not include equipment
used for exploration and development of
geothermal deposits.
(iii) Distribution equipment. For pur-
poses of paragraph (e)(3)(i) of this sec-
tion, distribution equipment is equipment
that transports geothermal energy from a
geothermal deposit to the site of ultimate
use. If geothermal energy is used to gen-
erate electricity, distribution equipment
includes equipment that transports geo-
thermal fluids between the geothermal
deposit and the power plant. Distribution
equipment also includes components of a
building’s heating and/or cooling system,
such as pipes and ductwork that distribute
within a building the energy derived from
the geothermal deposit.
(4) Qualified fuel cell property.
Qualified fuel cell property is a fuel cell
power plant that has a nameplate capacity
of at least 0.5 kilowatts (kW) (1 kW in the
case of a fuel cell power plant with a linear
generator assembly) of electricity using an
electrochemical or electromechanical pro-
cess, and an electricity-only generation
efficiency greater than 30 percent. For
this purpose, electricity-only generation
efficiency may be calculated by dividing
the heat rate of the fuel cell (for example,
kilowatt-hours (kWh) electricity produced
per kilogram (kg) of fuel consumed) by
the higher heating value of the fuel (for
example, kWh per kg). A fuel cell power
plant is an integrated system comprised of
a fuel cell stack assembly, or linear gener-
ator assembly, and associated balance of
plant components that converts a fuel into
electricity using electrochemical or elec-
tromechanical means. A linear generator
assembly does not include any assembly
that contains rotating parts.
(5) Qualified microturbine property.
Qualified microturbine property is a sta-
tionary microturbine power plant that has
a nameplate capacity of less than 2,000
kW and an electricity-only generation
efficiency of not less than 26 percent at
International Standard Organization con-
ditions. A stationary microturbine power
plant is an integrated system comprised
of a gas turbine engine, a combustor, a
recuperator or regenerator, a generator or
alternator, and associated balance of plant
components that converts a fuel into elec-
tricity and thermal energy. A stationary
microturbine power plant also includes all
secondary components located between
the existing infrastructure for fuel deliv-
ery and the existing infrastructure for
power distribution, including equipment
and controls for meeting relevant power
standards, such as voltage, frequency, and
power factors.

Bulletin No. 2023–52 1645 December 26, 2023
(6) Combined heat and power system
(CHP) property—(i) In general. CHP
property is property comprising a system
that uses the same energy source for the
simultaneous or sequential generation of
electrical power, mechanical shaft power,
or both, in combination with the genera-
tion of steam or other forms of useful ther-
mal energy (including heating and cooling
applications). CHP property must produce
at least 20 percent of its total useful energy
in the form of thermal energy that is not
used to produce electrical or mechanical
power (or combination thereof), and at
least 20 percent of its total useful energy in
the form of electrical or mechanical power
(or combination thereof). The energy effi-
ciency percentage of CHP property must
exceed 60 percent (except in the case of
CHP systems that use biomass within the
meaning of section 45 of the Code). CHP
property does not include any property
comprising a system if such system has a
capacity in excess of 50 MW or a mechan-
ical energy capacity in excess of 67,000
horsepower or an equivalent combina-
tion of electrical and mechanical energy
capacities.
(ii) Components excluded. CHP prop-
erty does not include property used to
transport the energy source to the gener-
ating facility or to distribute energy pro-
duced by the facility.
(7) Qualified small wind energy prop-
erty. Qualified small wind energy prop-
erty is property that uses a qualifying
small wind turbine to generate electricity.
A qualifying small wind turbine means a
wind turbine that has a nameplate capacity
of not more than 100 kW.
(8) Geothermal heat pump equipment.
Geothermal heat pump equipment is
equipment that uses the ground, ground
water, or other underground fluids as a
thermal energy source to heat a struc-
ture or as a thermal energy sink to cool a
structure.
(9) Waste energy recovery property
(WERP)—(i) In general. WERP is prop-
erty that generates electricity solely from
heat from buildings or equipment if the
primary purpose of such building or equip-
ment is not the generation of electricity.
Examples of buildings or equipment the
primary purpose of which is not the gen-
eration of electricity include, but are not
limited to, manufacturing plants, medical
care facilities, facilities on college cam-
puses, pipeline compressor stations, and
associated equipment. WERP does not
include any property that has a capacity in
excess of 50 MW.
(ii) Coordination with CHP property.
Any WERP that is part of a system that is
a CHP property is not treated as WERP for
purposes of section 48 of the Code unless
the taxpayer elects to not treat such system
as a CHP property for purposes of section
48.
(10) Energy storage technology—(i)
In general. Energy storage technology
includes electrical energy storage prop-
erty described in paragraph (e)(10)(ii) of
this section, thermal energy storage prop-
erty described in paragraph (e)(10)(iii) of
this section, and hydrogen energy storage
property described in paragraph (e)(10)
(iv) of this section.
(ii) Electrical energy storage property.
Electrical energy storage property is prop-
erty (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 transpor-
tation of goods or individuals, electrical
energy storage property includes but is
not limited to rechargeable electrochemi-
cal batteries of all types (such as lithium
ion, vanadium flow, sodium sulfur, and
lead-acid); ultracapacitors; physical stor-
age such as pumped storage hydropower,
compressed air storage, flywheels; and
reversible fuel cells.
(iii) Thermal energy storage property.
Thermal energy storage property is prop-
erty 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 prop-
erty 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 residen-
tial or commercial building. It does not
include a swimming pool, CHP property,
or a building or its structural components.
For example, thermal energy storage
includes, but is not limited to, 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
the building, heat pump systems that store
thermal energy in an underground tank or
borehole field to be extracted for later use
for heating and/or cooling, and electric
furnaces that use electricity to heat bricks
to high temperatures and later use this
stored energy to heat a building through
the HVAC system.
(iv) Hydrogen energy storage property.
Hydrogen energy storage property is prop-
erty (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 must store hydro-
gen that is solely used as energy and not
for other purposes such as for the pro-
duction of end products such as fertilizer.
For example, hydrogen energy storage
property includes, but is not limited to, a
hydrogen compressor and associated stor-
age tank and an underground storage facil-
ity and associated compressors.
(v) Modifications of energy storage
energy property. With respect to electri-
cal energy storage property and hydrogen
energy storage property placed in service
after December 31, 2022, energy storage
technology that is modified as set forth in
this paragraph (e)(10)(v) is treated as elec-
trical energy storage property described
in paragraph (e)(10)(ii) of this section
or hydrogen energy storage property
described in paragraph (e)(10)(iv) of this
section, except that the basis of any exist-
ing property prior to such modification is
not taken into account for purposes of this
section and section 48. This paragraph (e)
(10)(v) applies to any electrical energy
storage property and hydrogen energy
storage property that either:
(A) Was placed in service before
August 16, 2022, and would be described
in section 48(c)(6)(A)(i) of the Code,
except that such property had a capacity
of less than 5 kWh and is modified in a
manner that such property (after such

December 26, 2023 1646 Bulletin No. 2023–52
modification) has a nameplate capacity
(after such modification) of not less than
5 kWh; or
(B) Is described in section 48(c)(6)(A)
(i) of the Code and is modified in a manner
that such property (after such modifica-
tion) has an increase in nameplate capac-
ity of not less than 5 kWh.
(11) Qualified biogas property—(i)
In general. Qualified biogas property
is property comprising a system that
converts biomass (as defined in section
45K(c)(3) of the Code, as in effect on
August 16, 2022) into a gas that consists
of not less than 52 percent methane by
volume (tested at the point described in
paragraph (e)(11)(ii) of this section), or
is concentrated by such system into a gas
that consists of not less than 52 percent
methane (tested at the point described in
paragraph (e)(11)(ii) of this section), and
captures such gas for sale or productive
use and not for disposal via combustion.
Qualified biogas property also includes
any property that is part of such sys-
tem that cleans or conditions such gas.
For example, qualified biogas property
includes, but is not limited to, a waste
feedstock collection system, a landfill
gas collection system, mixing or pump-
ing equipment, and an anaerobic digester.
However, gas upgrading equipment nec-
essary to concentrate the gas into the
appropriate mixture for injection into a
pipeline through removal of other gases
such as carbon dioxide, nitrogen, or oxy-
gen is not included in qualified biogas
property.
(ii) Methane content requirement. The
methane content requirement described
in section 48(c)(7)(A)(i) of the Code and
paragraph (e)(11)(i) of this section is mea-
sured at the point at which gas exits the
biogas production system, which may
include an anerobic digester, landfill gas
collection system, or thermal gasification
equipment. This is the point at which a tax-
payer generally must determine whether it
will convert the biogas to fuel for sale or
use it directly to generate heat or to fuel an
electricity generation unit.
(12) Microgrid controllers—(i) In
general. A microgrid controller is equip-
ment that is part of a qualified microgrid
and is designed and used to monitor and
control the energy resources and loads on
such microgrid. A qualified microgrid is
an electrical system that includes equip-
ment that is capable of generating not
less than 4 kW and not greater than 20
MW of electricity; is capable of oper-
ating in connection with the electrical
grid and as a single controllable entity
with respect to such electrical grid, and
independently (and disconnected) from
such electrical grid; and is not part of a
bulk-power system (as defined in section
215 of the Federal Power Act (16 U.S.C.
824o)).
(ii) Capable of operating in connec-
tion with the electrical grid. For purposes
of this paragraph, a qualified microg-
rid includes an electrical system that is
capable of operating in connection with
the larger electrical grid, regardless of
whether a connection to the larger electri-
cal grid exists.
(13) Other property included in sec-
tion 48. Any other property specified by
section 48 as energy property is energy
property for purposes of this section and
§§1.48-13 and §1.48-14.
(f) Property included in energy prop-
erty—(1) In general. An energy prop-
erty includes a unit of energy property
(as defined in paragraph (f)(2)(i) of this
section) that meets the requirements of
paragraph (c) of this section, that is not
excluded from energy property as pro-
vided in paragraph (d) of this section, and
is of a type of energy property included
in paragraph (e) of this section. Property
owned by the taxpayer that is an integral
part of an energy property (as defined in
paragraph (f)(3) of this section) is treated
as energy property. Energy property does
not include any electrical transmission
equipment, such as transmission lines and
towers, or any equipment beyond the elec
-
trical transmission stage. Energy property
also generally does not include equipment
that is an addition or modification to an
existing energy property. However, see
§1.48-14(a) for rules regarding retrofitted
energy property (80/20 Rule) and para-
graph (e)(10)(v) of this section for rules
regarding modifications of certain types of
energy storage technology.
(2) Unit of energy property—(i)
Definition. The term unit of energy prop-
erty means all functionally interdependent
components of property (as defined in
paragraph (f)(2)(ii) of this section) owned
by the taxpayer that are operated together
and that can operate apart from other
energy properties within a larger energy
project (as defined in §1.48-13(d)). For
rooftop solar energy property, all com-
ponents of property that are installed on
a single rooftop are considered a single
unit of energy property. See §1.48-13(d)
for rules regarding when multiple energy
properties will be treated as an energy
project for certain purposes.
(ii) Functionally interdependent—(A)
In general. Except as provided in para-
graph (f)(2)(ii)(B) of this section, with
respect to components of a unit of energy
property, the term functionally interde-
pendent means that the placing in service
of each component is dependent upon the
placing in service of each of the other
components in order to generate or store
electricity, thermal energy, or hydrogen
as provided by section 48(c) of the Code
and as described in paragraph (e) of this
section.
(B) Components of certain energy
property. In the case of solar process heat
equipment, fiber-optic solar energy prop-
erty, electrochromic glass property, geo-
thermal heat pump equipment, qualified
biogas property, and microgrid controllers,
with respect to components of such prop-
erty, the term functionally interdependent
means that the placing in service of each
component is dependent upon the placing
in service of each of the other components
in order to perform the intended function
of the energy property as provided by sec-
tion 48(c) of the Code and as described in
paragraph (e) of this section.
(3) Integral part—(i) In general. For
purposes of the section 48 credit, prop-
erty owned by a taxpayer is an integral
part of an energy property owned by the
same taxpayer if it is used directly in the
intended function of the energy property
as provided by section 48(c) of the Code
and as described in paragraph (e) of this
section and is essential to the complete-
ness of the intended function. Property
that is an integral part of an energy prop-
erty is energy property. A taxpayer may
not claim the section 48 credit for any
property that is an integral part of the tax-
payer’s energy property that is not owned
by the taxpayer. Multiple energy prop-
erties (whether owned by one or more
taxpayers) may include shared property
that may be considered an integral part of

Bulletin No. 2023–52 1647 December 26, 2023
each energy property so long as the cost
basis for the shared property is properly
allocated to each energy property. The
total cost basis of such shared property
divided among the energy properties may
not exceed 100 percent of the cost of such
shared property. In addition, property that
is shared by a qualified facility (as defined
in section 45(d) of the Code) and an
energy property that is an integral part of
the energy property will not be considered
property that is not energy property under
paragraph (d) of this section.
(ii) Power conditioning and transfer
equipment. Property that is an integral
part of energy property includes power
conditioning equipment and transfer
equipment used to perform the intended
function of the energy property as pro-
vided by section 48(c) and as described
in paragraph (e) of this section. Power
conditioning equipment includes, but is
not limited to, transformers, inverters, and
converters, which modify the characteris-
tics of electricity or thermal energy into
a form suitable for use or transmission
or distribution. Parts related to the func-
tioning or protection of power condition-
ing equipment are also treated as power
conditioning equipment and include, but
are not limited to, switches, circuit break-
ers, arrestors, and hardware and software
used to monitor, operate, and protect
power conditioning equipment. Transfer
equipment includes equipment that per-
mits the aggregation of energy generated
by components of energy properties and
equipment that alters voltage in order to
permit transfer to a transmission or distri-
bution 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 pro-
tection of transfer equipment are also
treated as transfer equipment and may
include items such as current transform-
ers used for metering, electrical interrupt-
ers (such as circuit breakers, fuses, and
other switches), and hardware and soft-
ware used to monitor, operate, and protect
transfer equipment. Power conditioning
equipment and transfer equipment that
are integral to an energy property may
be integral to another energy property or
used by a qualified facility (as defined in
section 45(d) of the Code), so long as the
total cost basis of the integral property is
properly allocated across the energy prop-
erty and qualified facility that share such
property.
(iii) Roads. Roads that are an integral
part of an energy property are integral
to the activity performed by the energy
property such as onsite roads that are used
for equipment to operate and maintain
the energy property. Roads primarily for
access to the site, or roads used primarily
for employee or visitor vehicles, are not
integral to the activity performed by an
energy property.
(iv) Fences. Fencing is not an integral
part of an energy property because it is not
integral to the activity performed by the
energy property.
(v) Buildings. Generally, buildings
are not integral parts of an energy prop-
erty because they are not integral to the
activity of the energy property. However,
the following structures are not treated as
buildings for this purpose:
(A) A structure that is essentially an
item of machinery or equipment; and
(B) A structure that houses property
that is integral to the activity of an energy
property if the use of the structure is so
closely related to the use of the housed
energy property that the structure clearly
can be expected to be replaced when
the energy property it initially houses is
replaced.
(4) Location of energy property. Any
property that meets the requirements of
paragraphs (f)(2) and (3) of this section
is part of an energy property regardless of
where such property is located.
(5) Examples. This paragraph provides
examples illustrating property included in
energy property.
(i) Example 1. Solar energy property. X con-
structs a solar energy property (Property) comprised
of 500 separate solar panels. The solar panels are
connected by wires, cables, and combiner boxes.
Generated electricity is conditioned for subsequent
use through an inverter and eventually carried to a
substation that houses a transformer where the elec-
tricity is stepped up to electrical grid voltage before
being transmitted to the electrical grid through an
intertie. All components of the Property, up to and
including the transformer are either functionally
interdependent components of the Property or are
integral parts of the Property. Therefore, the Property
is an energy property for purposes of the section 48
credit. When X places the Property in service, the
cost of the components up to and including the
transformer is included in the basis of the Property
for purposes of computing the section 48 credit.
(ii) Example 2. Co-located energy properties.
Assume the same facts as in Example 1, except that
Y constructs a wind energy property (Wind Property)
near X’s solar energy property (Solar Property). X’s
Solar Property and Y’s Wind Property each connect
to a substation that houses a transformer where the
electricity is stepped up to electrical grid voltage
before being transmitted to the electrical grid through
the intertie. X and Y each pay 50% of the cost of the
transformer and related power conditioning equip-
ment housed therein. X’s Solar Property and Y’s
Wind Property are separate energy properties. When
X and Y place their respective energy properties in
service, the cost of the components up to and includ-
ing 50% of the cost of the transformer and related
power conditioning equipment is included in X’s and
Y’s basis in their respective energy properties for
purposes of computing the section 48 credit.
(iii) Example 3. Qualified offshore wind facil-
ity. Z constructs a qualified offshore wind facility
(Offshore Wind Facility) comprised of 150 turbines
for which Z makes a valid election under section
48(a)(5) of the Code to claim the section 48 credit in
lieu of the section 45 credit. The alternating current
electricity generated by the individual wind turbines
will be carried by inter-array cables to an offshore
substation where a transformer will step up the volt-
age of the electricity and a converter will convert it
to direct current so it may be transported by subsea
export cables to an onshore substation adjacent to
the point of interconnection with the electrical grid.
When the electricity reaches the onshore substation,
it will flow into another converter where it will be
converted back to alternating current, and then
through a transformer and associated switchgear
where it will be converted to electrical grid voltage
and where the Offshore Wind Facility can be elec-
trically isolated from the grid. The electricity will
then pass through an intertie that will take the elec-
tricity from the substation to the point of intercon-
nection with the electrical grid. All components of
the Offshore Wind Facility, up to and including the
transformer and switchgear housed in the onshore
substation, are either functionally interdependent
components of an energy property or integral parts
of an energy property. Therefore, the Offshore Wind
Facility is an energy property, and when Z places
the Offshore Wind Facility in service, the cost of
the components up to and including the transformer
and switchgear housed in the onshore substation are
included in the basis of the Offshore Wind Facility
for purposes of computing the section 48 credit.
(iv) Example 4. Co-located energy property and
qualified facility. X constructs a wind facility (Wind
Facility) that is co-located with an energy storage
technology (Energy Storage). The Wind Facility
and Energy Storage share power conditioning and
transfer equipment. X assigns 50% of the cost of the
shared power conditioning and transfer equipment to
the Wind Facility and 50% of the cost to the Energy
Storage. The power conditioning and transfer equip-
ment are integral parts of the Energy Storage, and
are therefore, considered energy property. Therefore,
X will include 50% of the cost of the power condi-
tioning and transfer equipment when determining the
section 48 credit for the Energy Storage. Because the

December 26, 2023 1648 Bulletin No. 2023–52
shared power conditioning and transfer equipment
are not considered part of the Wind Facility, if the
Wind Facility otherwise satisfies the requirements
of the section 45 credit, X can claim the section 45
credit for the Wind Facility.
(g) Applicability date. This section
applies with respect to property placed
in service after December 31, 2022, and
during a taxable year beginning after
[DATE OF PUBLICATION OF FINAL
RULE].
Par. 3. Section 1.48-13 is added to read
as follows:
§1.48-13 Rules relating to the increased
credit amount for prevailing wage and
apprenticeship.
(a) In general. If a qualified energy
project satisfies the requirements in para-
graph (b) of this section, the amount of
the energy credit determined under sec-
tion 48(a) of the Internal Revenue Code
(Code), after the application of sections
48(a)(1) through (8), and 48(a)(15), is
equal to the credit determined under sec-
tion 48(a) (section 48 credit) multiplied by
five.
(b) Requirements. A qualified energy
project satisfies the requirements of this
paragraph (b) if it is one of the following—
(1) A project with a maximum net out-
put of less than one megawatt (MW) of
electrical (as measured in alternating cur-
rent) or thermal energy determined based
on the nameplate capacity as provided
in paragraph (e) of this section (One-
Megawatt Exception);
(2) A project the construction of which
began prior to January 29, 2023; or
(3) A project that meets the prevail-
ing wage requirements of section 48(a)
(10)(A) of the Code, §1.45-7(b)-(d), and
paragraph (c) of this section, the appren-
ticeship requirements of section 45(b)(8)
of the Code and §1.45-8, and the record-
keeping and reporting requirements of
§1.45-12.
(c) Special rule applicable to general
prevailing wage requirements—(1) In
general. In addition to satisfying the pre-
vailing wage requirements under §1.45-
7(b) through (d), a taxpayer must ensure
that any laborers and mechanics employed
(within the meaning of §1.45-7) by the
taxpayer or any contractor or subcontrac-
tor in the construction of such energy proj-
ect, and for the five-year period beginning
on the date such project is placed in ser-
vice, the alteration or repair of such proj-
ect, are paid wages at rates not less than
the prevailing rates for construction, alter-
ation, or repair of a similar character in the
locality in which such project is located as
most recently determined by the Secretary
of Labor, in accordance with 40 U.S.C.
chapter 31, subchapter IV. Subject to sec-
tion 48(a)(10)(C) of the Code and this
paragraph (c), for purposes of determining
the increased credit amount under section
48(a)(9)(B)(iii) of the Code, the taxpayer
is deemed to satisfy the prevailing wage
requirements of section 48(a)(10)(A)(ii)
of the Code at the time such project is
placed in service.
(2) Exception. For purposes of satis-
fying the prevailing wage requirements
of paragraph (b)(3) of this section, §1.45-
7(a) does not apply.
(3) Recapture—(i) In general. The
increased credit amount under paragraph
(b)(3) of this section is subject to recapture
for any project that does not satisfy the
prevailing wage requirements in §1.45-
7(b) through (d) and paragraph (c)(1) of
this section for any period with respect
to an alteration or repair of such project
during the five-year period beginning on
the date such project is originally placed
in service (five-year recapture period) (but
that does not cease to be investment credit
property within the meaning of section
50(a) of the Code).
(ii) Recapture event—(A) In general.
Any failure to satisfy the prevailing wage
requirements in §1.45-7(b) through (d)
and paragraph (c)(1) of this section for
any period with respect to the alteration
or repair of any project during the five-
year recapture period is a recapture event.
Any failure to satisfy the prevailing wage
requirements in §1.45-7(b) through (d)
and paragraph (c)(1) of this section for
any period remain subject to the correc-
tion and penalty provisions in §1.45-7(c),
including the waiver provisions in §1.45-
7(c)(6). Subject to § 1.45-7(c)(5) and (6),
if the correction and penalty payments
described in §1.45-7(c) are not made by
the taxpayer on or before the date that is
180 days after the date of a final determi-
nation by the IRS (as defined in §1.45-7(c)
(4)(ii)), the cure provision in §1.45-7(c)
does not apply and the increased credit
amount is subject to recapture.
(B) Yearly determination. A determi-
nation of whether a recapture event has
occurred under paragraph (c)(3)(ii) of this
section must be made for each taxable year
(or portion thereof) occurring within the
five-year recapture period, beginning with
the taxable year ending after the date the
energy project is placed in service. Thus,
for each taxable year beginning or end-
ing within the five-year recapture period,
the taxpayer must determine whether the
prevailing wage requirements of section
48(a)(10)(A) of the Code, §1.45-7(b)-(d),
and paragraph (c)(1) of this section are
satisfied for the recapture year(s) occur-
ring during each taxable year.
(C) Carrybacks and carryforward
adjusted. In the case of any recapture event
described in paragraph (c)(3)(ii)(A) of this
section, the carrybacks and carryforwards
under section 39 must be adjusted by rea-
son of such recapture event.
(iii) Correction and penalty pay-
ments not required if taxpayer is subject
to recapture under section 48(a)(10)(C)
of the Code. If the IRS determines that a
taxpayer that claimed the increased credit
amount under section 48(a)(9)(B)(iii) of
the Code or transferred a specified credit
portion under section 6418 of the Code
that includes the increased credit amount
under section 48(a)(9)(B)(iii) failed to
satisfy the prevailing wage requirements
in §1.45-7(b) through (d) and paragraph
(c)(1) of this section for any period with
respect to the alteration or repair of any
project during the five-year recapture
period and the taxpayer does not make the
correction and penalty payments provided
in §1.45-7(c), then no penalty is assessed
under §1.45-7, and the increased credit
amount is subject to recapture. Taxpayers
whose increased credit amount is subject
to recapture under this section may still be
entitled to the base amount of the energy
credit under section 48(a) of the Code if
such taxpayers meet the requirements to
claim the credit.
(4) Recapture amount—(i) In gen-
eral. If a recapture event has occurred as
described in paragraph (c)(3)(ii) of this
section and the taxpayer fails to make the
correction and penalty payments described
in §1.45-7(c)(1) within 180 days after the
date of a final determination by the IRS,
the tax under chapter 1 of the Code for
the taxable year in which the recapture

Bulletin No. 2023–52 1649 December 26, 2023
event occurs is increased by the applica-
ble recapture percentage multiplied by the
increased credit amount that was claimed
by the taxpayer under paragraph (b)(3) of
this section.
(ii) Applicable recapture percentage. If
the recapture event occurs:
(A) Within one full year after the prop-
erty is placed in service, the recapture per-
centage is 100;
(B) Within one full year after the close
of the period described in paragraph (c)(4)
(ii)(A) of this section, the recapture per-
centage is 80;
(C) Within one full year after the close
of the period described in paragraph (c)(4)
(ii)(B) of this section, the recapture per-
centage is 60;
(D) Within one full year after the close
of the period described in paragraph (c)(4)
(ii)(C) of this section, the recapture per-
centage is 40;
(E) Within one full year after the close
of the period described in paragraph (c)(4)
(ii)(D) of this section, the recapture per-
centage is 20.
(5) Recapture period. The five-year
recapture period begins on the date the
project is placed in service and ends on
the date that is five full years after the
placed-in-service date. Each 365-day
period (366-day period in case of a leap
year) within the five-year recapture period
is a separate recapture year for recapture
purposes.
(6) Increase in tax for recapture. The
increase in tax under chapter 1 of the Code
for the recapture of an increased credit
amount claimed under paragraph (b)(3)
occurs in the year of the recapture event.
(7) Annual prevailing wage compliance
report. In addition to the general reporting
requirements in §1.45-12, a taxpayer that
has claimed an increased credit amount
under paragraph (b)(3) of this section or
transferred a specified credit portion under
section 6418 of the Code that includes an
increased credit amount under paragraph
(b)(3) of this section is required to provide
to the IRS, information on the payment
of prevailing wages with respect to any
alteration or repair of the project during
the recapture period at the time and in the
form and manner prescribed in IRS forms
or instructions or in publications or guid-
ance published in the Internal Revenue
Bulletin. See §601.601 of this chapter.
(8) Transferred specified credit por-
tions. In the case of a transferred spec-
ified credit portion under section 6418,
to which recapture of an increased credit
amount under this paragraph (c) applies,
the eligible taxpayer is required to notify
the transferee taxpayer of the recapture
event in accordance with the provisions
of §1.6418-5(f)(2) and the transferee
taxpayer is responsible for any amount
of increase in tax under section 48(a)
(10)(C) of the Code and this paragraph
(c) in accordance with the provisions of
§1.6418-5(f)(3).
(9) Coordination with recapture rules
under section 50(a). If any increased credit
amount was recaptured with respect to
investment credit property in a prior year
under section 48(a)(10)(C) of the Code
and this paragraph (c), then, such increased
credit amount is not included in determin-
ing the aggregate decrease in the credits
allowed under section 38 of the Code for
all prior taxable years which would have
resulted solely from reducing to zero the
credit determined under subparts D and E
of part IV of subchapter A of chapter 1 of
the Code (that is, sections 38 – 50 of the
Code) with respect to the property.
(d) Energy project defined—(1) In gen-
eral. For purposes of the increased credit
amount provided by section 48(a)(9) of
the Code and paragraphs (b) and (c) of
this section, the domestic content bonus
credit amount provided by section 48(a)
(12) of the Code, and the increase in credit
rate for energy communities provided in
section 48(a)(14) of the Code, the term
energy project means one or more energy
properties (multiple energy properties)
that are operated as part of a single energy
project. Multiple energy properties will
be treated as one energy project if, at any
point during the construction of the multi-
ple energy properties, they are owned by
a single taxpayer (subject to the related
taxpayer rule provided in paragraph (d)(2)
of this section) and any two or more of the
following factors are present:
(i) The energy properties are con-
structed on contiguous pieces of land;
(ii) The energy properties are described
in a common power purchase, thermal
energy, or other off-take agreement or
agreements;
(iii) The energy properties have a com-
mon intertie;
(iv) The energy properties share a com-
mon substation, or thermal energy off-
take point;
(v) The energy properties are described
in one or more common environmental or
other regulatory permits;
(vi) The energy properties are con-
structed pursuant to a single master con-
struction contract; or
(vii) The construction of the energy
properties are financed pursuant to the
same loan agreement.
(2) Related taxpayers—(i) Definition.
For purposes of this section, the term
related taxpayers means members of a
group of trades or businesses that are
under common control (as defined in
§1.52-1(b)).
(ii) Related taxpayer rule. For purposes
of this section, related taxpayers are treated
as one taxpayer in determining whether
multiple energy properties are treated as
an energy project with respect to which a
section 48 credit may be determined.
(3) Consistent treatment as an energy
project. If multiple energy properties
are treated as a single energy project for
beginning of construction purposes with
respect to the section 48 credit, the mul-
tiple energy properties will also be treated
as a single energy project for purposes of
the prevailing wage and apprenticeship
requirements, the domestic content bonus
credit amount, and the increase in section
48 credit rate for energy communities.
(e) Nameplate capacity for purposes
of the One-Megawatt Exception. For pur-
poses of paragraph (b)(1) of this section,
the determination of whether an energy
project has a maximum net output of less
than 1 MW of electrical (as measured in
alternating current) or thermal energy
is determined based on the nameplate
capacity. Where applicable, taxpayers
should use the International Standard
Organization (ISO) conditions to measure
the maximum electrical generating output
or usable energy capacity of an energy
project. Paragraphs (e)(1) through (5) of
this section provide rules for applying
the One-Megawatt Exception (as pro-
vided in paragraph (b)(1) of this section)
to different types of energy properties.
Because electrochromic glass property (as
defined in §1.48-9(e)(2)(ii)), fiber-optic
solar energy property (as defined in §1.48-
9(e)(2)(i)), and microgrid controllers (as

December 26, 2023 1650 Bulletin No. 2023–52
defined in §1.48-9(e)(12)) do not generate
electricity or thermal energy, these energy
properties are not eligible for the One-
Megawatt Exception.
(1) Electrical generating energy prop-
erty. In the case of an electrical generating
energy property, use the maximum electri-
cal generating output in MW that the unit
of energy property is capable of producing
on a steady state basis and during contin-
uous operation under standard conditions,
as measured by the manufacturer and con-
sistent with the definition of nameplate
capacity provided in 40 CFR 96.202.
(2) Electrical energy storage property.
In the case of electrical energy storage prop-
erty (as defined in §1.48-9(e)(10)(ii)), use
the storage device’s maximum net output.
(3) Thermal energy storage property
and other property generating thermal
energy. In the case of thermal energy
storage property (as defined in §1.48-9(e)
(10)(iii)) and other energy property that
generates thermal energy for productive
use (for example, direct geothermal use,
geothermal heat pumps, solar process
heating), a taxpayer must use the equiva-
lent of 3.4 million British Thermal Units
per hour (mmBtu/hour) for heating and
284 tons for cooling can be used to deter-
mine if the thermal storage property sat-
isfies the One-Megawatt Exception (Btu
per hour/3,412,140 = MW). For projects
delivering thermal energy to a building or
buildings, this can be assessed as either
the aggregate maximum thermal output
of all individual heating or cooling ele-
ments within the building or buildings,
or as the maximum thermal output that
the entire project is capable of delivering
to a building or buildings at any given
moment.
(4) Hydrogen energy storage property
and specified clean hydrogen produc-
tion facilities. A hydrogen energy storage
property (as defined in §1.48-9(e)(10)(iv))
or a specified clean hydrogen production
facility (as defined in section 48(a)(15)
(C) of the Code) must have a maximum
net output of less than 3.4 mmBtu/hour of
hydrogen or equivalently 10,500 standard
cubic feet (scf) per hour of hydrogen to
satisfy the One-Megawatt Exception.
(5) Qualified biogas property. In the
case of qualified biogas property, 3.4
mmBtu/hour can be used as equivalent to
the One-Megawatt Exception. Taxpayers
may convert the maximum net output of
3.4 mmBtu/hour into an equivalent maxi-
mum net volume flow in scf per hour using
the appropriate high heat value conversion
factors found in the EPA GHGRR at table
C-1 to subpart C of part 98 (40 CFR part
98). Otherwise, taxpayers may calculate
their own equivalent volumetric flow if
the heat content of the gas is known.
(f) Applicability date—(1) In general.
Except as provided in paragraph (f)(2) of
this section, this section applies to projects
placed in service in taxable years ending
on or after the date final regulations are
published in the Federal Register, and
the construction of which begins after the
date final regulations are published in the
Federal Register.
(2) Exception. Paragraph (d) of this
section applies to energy projects the con-
struction of which begins after November
22, 2023.
Par. 4. Section 1.48-14 is added to read
as follows:
§1.48-14 Rules applicable to energy
property.
(a) Retrofitted energy property—(1)
In general. For purposes of section 48(a)
(3)(B)(ii), (a)(5)(D)(iv), and (a)(8)(B)(iii)
of the Internal Revenue Code (Code), a
retrofitted energy property may be origi-
nally placed in service even though it con-
tains some used components of the unit
of energy property only if the fair mar-
ket value of the used components of the
unit of energy property is not more than
20 percent of the total value of the unit of
energy property taking into account the
cost of the new components of property
plus the value of the used components of
the unit of energy property (80/20 Rule).
Only expenditures paid or incurred that
relate to the new components of the unit
of energy property are taken into account
for purposes of computing the energy
credit determined under section 48 (sec-
tion 48 credit) with respect to the unit of
energy property. The cost of new com-
ponents of the unit of energy property
includes all costs properly included in the
depreciable basis of the new components.
If the taxpayer satisfies the 80/20 Rule
with regard to the unit of energy property
and the taxpayer pays or incurs new costs
for property that is an integral part of the
energy property (as defined in §1.48-9(f)
(3)(i)), the taxpayer may include the new
costs paid or incurred for property that is
an integral part of the energy property (as
defined in §1.48-9(f)(3)(i)) in the basis of
the energy property for purpose of the sec-
tion 48 energy credit. Further, in the case
of an energy project (as defined in §1.48-
13(d)), the 80/20 Rule is applied to each
unit of energy property comprising an
energy project.
(2) Excluded costs. Costs incurred for
new components of property added to
used components of a unit of energy prop-
erty may not be taken into account for pur-
poses of the section 48 credit unless the
taxpayer satisfies the 80/20 Rule (as pro-
vided in paragraph (a)(1) of this section)
by placing into service a unit of energy
property for which the fair market value
of the used components of property is not
more than 20 percent of the total value
of the unit of energy property taking into
account the cost of the new components of
property plus the value of the used compo-
nents of property.
(3) Examples. This paragraph (a)(3)
provides examples illustrating the provi-
sions of this paragraph (a):
(i) Example 1. Retrofitted solar energy prop-
erty that satisfies the 80/20 Rule. Z owns an exist-
ing solar energy property for which the section 48
credit has been claimed and the recapture period for
the section 48 credit has elapsed. Z replaces used
components of the solar energy property with new
components of property at a cost of $1.4 million.
The retrofitted solar energy property constitutes a
unit of energy property. The fair market value of
the remaining original components of the retro-
fitted solar energy property is $100,000, which is
not more than 20% of the retrofitted solar energy
property’s total value of $1.5 million (the cost of
the new components ($1.4 million) + the value of
the remaining original components ($100,000)).
The value of the old components of the retrofitted
solar energy property is $100,000/$1.5 million (7%
of the value of total value of the retrofitted solar
energy property), thus the retrofitted solar energy
property will be considered newly placed in service
for purposes of section 48, and Z will be able to
claim a section 48 credit based on the cost of the
new components ($1.4 million).
(ii) Example 2. Capital improvements to an exist-
ing energy property that do not satisfy the 80/20
Rule. X owns an existing unit of energy property for
which the section 48 credit has been claimed and the
recapture period for the section 48 credit has elapsed.
The fair market value of the unit of energy property
is $1 million. During the tax year, X makes capital
improvements to the unit of energy property. The
expenditures for such capital improvements total
$300,000. X may not claim a section 48 credit for
the $300,000 spent on capital improvements during

Bulletin No. 2023–52 1651 December 26, 2023
the tax year because the capital improvements did
not satisfy the 80/20 Rule.
(b) Dual use property—(1) Definition.
For purposes of section 48, the term dual
use property means property that uses
energy derived from both a qualifying
source (that is, from an energy property
defined in §1.48-9(a) (including a qual-
ified facility for which an election has
been made as provided by paragraph (f)
(1) of this section)) and from a non-qual-
ifying source (that is, sources other than
an energy property defined in §1.48-9(a)
(including a qualified facility for which
an election has been made as provided by
paragraph (f)(1) of this section)).
(2) Qualification as energy property—
(i) In general. If dual use property meets
each of the requirements of this paragraph
(b), it will qualify as energy property if its
use of energy from non-qualifying sources
does not exceed 50 percent of its total
energy input (as determined under the
rules of paragraph (b)(2)(ii) of this sec-
tion) during an annual measuring period
(as defined in paragraph (b)(2)(iii) of this
section). If the energy used from qualify-
ing sources is between 50 percent and 100
percent, only a proportionate amount of
the eligible basis of the energy property
will be taken into account in computing
the amount of the section 48 credit (for
example, if 80 percent of the energy used
by a dual use property is from qualifying
sources, 80 percent of the basis of the dual
use property will be taken into account in
computing the amount of the section 48
credit).
(ii) Aggregation of energy inputs. The
measurement of energy use required for
purposes of paragraph (b)(2)(i) of this
section may be made by comparing, on
the basis of British thermal units (Btus),
energy input to dual use property from
all qualifying sources with energy input
from all non-qualifying sources. The
Commissioner may also accept any other
method that accurately establishes the rel-
ative annual use of energy derived from
all qualifying sources and of energy input
from all non-qualifying sources by dual
use property.
(iii) Annual measuring period. For
purposes of paragraph (b)(2)(i) of this
section, the term annual measuring
period means with respect to an item
of dual use property the 365-day period
(366-day period in case of a leap year)
beginning with the day the dual use
property is placed in service or a 365-
day period (366-day period in case of a
leap year) beginning the day after the last
day of the immediately preceding annual
measuring period.
(iv) Recapture. If, for a taxable year
(within the recapture period specified in
section 50(a) of the Code) subsequent to
the taxable year that a dual use property
was placed in service, the equipment’s
use of energy from all qualifying sources
is reduced below 50 percent of its total
energy input (as determined under the
rules of paragraph (b)(2)(i) of this sec-
tion), then recapture of the section 48
credit is required under section 50(a).
(c) Energy property eligible for mul-
tiple Federal income tax credits—(1) In
general. For purposes of this section, the
basis of energy property may be eligible
for calculating both the section 48 credit
and another Federal income tax credit,
subject to the limitation provided in para-
graph (c)(2) of this section.
(2) Limitation. A taxpayer that owns
energy property that is eligible for both
the section 48 credit and another Federal
income tax credit is eligible for the sec-
tion 48 credit only to the extent the other
Federal income tax credit was not claimed
with respect to the taxpayer’s eligible basis
in the energy property. Except as provided
in paragraph (f)(8) of this section, in no
event may a taxpayer claim both a section
48 credit and another Federal income tax
credit with respect to the same eligible
basis in an energy property. See paragraph
(e) of this section for special rules regard-
ing ownership of energy property.
(d) Incremental cost
—(1) In general.
For purposes of this section, only the
incremental cost of energy property is
included in the eligible basis of the energy
property. The term incremental cost means
the excess of the total cost of energy prop-
erty over the amount that would have been
expended for the energy property if the
energy property were not used for a qual-
ifying purpose.
(2) Example. A installs solar energy
property above the surface of an existing
roof of a building that A owns. The solar
energy property uses bifacial panels that
convert to energy the light that strikes
both the front and back of the panels if
installed over a highly reflective surface
that is affixed to a roof (reflective roof).
The cost of the reflective roof is $15,000
whereas the cost of a standard roof for the
building would be $10,000. The reflec-
tive roof does not include the portions
of the existing roof that will be replaced,
and any features of the roof not directly
related to establishing, improving, and
maintaining the efficiency of the reflec-
tive roof. Accordingly, the reflective roof,
if installed in connection with the solar
energy property, constitutes energy prop-
erty under section 48. The incremental
cost of the reflective roof is $5,000, and
that amount is A’s eligible basis in the
solar energy property for purposes of the
section 48 credit.
(e) Special rules concerning owner-
ship—(1) Eligible basis. For purposes
of this section, a taxpayer that owns an
energy property is eligible for the section
48 credit only to the extent of the taxpay-
er’s eligible basis in the energy property.
In the case of multiple taxpayers holding
direct ownership in an energy property,
each taxpayer determines its eligible basis
based on its fractional ownership interest
in the energy property.
(2) Multiple owners. A taxpayer must
directly own at least a fractional interest
in the entire unit of energy property for
a section 48 credit to be determined with
respect to such taxpayer’s interest. No
section 48 credit may be determined with
respect to a taxpayer’s ownership of one
or more separate components of an energy
property if the components do not consti-
tute a unit of energy property. However,
the use of property owned by one taxpayer
that is an integral part of an energy prop-
erty owned by a second taxpayer will not
prevent a section 48 credit from being
determined with respect to the second tax-
payer’s energy property.
(3) Related taxpayers—(i) Definition.
For purposes of this section, the term
related taxpayers means members of a
group of trades or businesses that are
under common control (as defined in
§1.52-1(b)).
(ii) Related taxpayer rule. For purposes
of this section, related taxpayers are treated
as one taxpayer in determining whether a
taxpayer has made an investment in an
energy property with respect to which a
section 48 credit may be determined.

December 26, 2023 1652 Bulletin No. 2023–52
(4) Examples. The following examples
illustrate the rules in this paragraph (e).
In each example, X and Y are unrelated
taxpayers.
(i) Example 1. Fractional ownership required to
satisfy section 48. X and Y own fractional ownership
interests in a geothermal heat pump equipment that is
a unit of energy property. Because X and Y each own
a fractional ownership interest in a unit of energy
property, a section 48 credit may be determined with
respect to X’s and Y’s fractional ownership interests
in the unit of energy property.
(ii) Example 2. Ownership of separate compo-
nents. X and Y own separate components of a geo-
thermal heat pump equipment, which taken together
is a unit of energy property. X owns the coils in the
ground and Y owns the heat pump. No section 48
credit may be determined with respect to either X
or Y because each owns a separate component of
energy property that does not constitute a unit of
energy property as defined in §1.48-9(f)(2).
(iii) Example 3. Shared ownership of property
that is an integral part of separate energy proper-
ties. X owns a wind energy property that is a unit of
energy property and Y owns a solar energy property
that is a unit of energy property that are co-located.
Both X’s wind energy property and Y’s solar energy
property connect to a substation that houses a step-up
transformer where the electricity is stepped up to
electrical grid voltage before being transmitted to the
electrical grid through an intertie. X and Y each own
a 50% fractional ownership interest in the step-up
transformer. The step-up transformer is an integral
part of both the wind energy property and the solar
energy property (as defined in §1.48-9(f)(3)(i). As a
result, X and Y may both compute a section 48 credit
for their respective energy properties by including
50% of the costs of the step-up transformer.
(iv) Example 4. Separate ownership of property
that is an integral part of separate energy property. X
owns a wind energy property that is a unit of energy
property and property that is an integral part of the
wind energy property, specifically a transformer
where the electricity is stepped up to electrical grid
voltage before being transmitted to the electrical grid
through an intertie. Y owns a solar energy property
that is a unit of energy property that connects to X’s
transformer. Because Y does not hold an ownership
interest in the transformer, Y may compute its sec-
tion 48 credit for its solar energy property but it will
not include any costs relating to the transformer.
(f) Coordination with other Code pro-
visions. Paragraphs (f)(1) through (7) of
this section provide rules applicable to
the election under section 48(a)(5)(C) to
treat certain facilities as energy property
eligible for a section 48 credit in lieu of
a renewable electricity production credit
under section 45 of the Code (section 45
credit). Paragraph (f)(8) of this section
provides a coordination rule for property
with respect to which both a section 48
credit and a low-income housing credit
under section 42 of the Code (section 42
credit) may be determined.
(1) Election to treat qualified facilities
as energy property. If a taxpayer makes
an election under section 48(a)(5)(C) of
the Code (pursuant to the requirements
in paragraph (f)(6) of this section) to treat
qualified property (as defined in para-
graph (f)(2) of this section) that is part of
a qualified investment credit facility (as
defined in paragraph (f)(4) of this section)
as energy property with respect to which a
section 48 credit may be determined, such
property will be treated as energy property
for purposes of section 48. No section 45
credit may be determined with respect to
any such qualified investment credit facil-
ity and the requirements of section 45 are
not imposed on a qualified investment
credit facility. No credit under sections
45Q or 45V of the Code may be deter-
mined with respect to either any carbon
capture equipment included in a qualified
investment credit facility or any specified
clean hydrogen production facility.
(2) Qualified property. For purposes
of this paragraph (f), the term qualified
property means property that meets each
of the requirements of paragraphs (f)(2)(i)
through (iii) of this section:
(i) The property is tangible personal
property (as defined in paragraph (f)(3)(i)
of this section) or other tangible property
(not including a building or its structural
components) (as defined in paragraph (f)
(3)(ii) of this section), but only if such
other tangible property is used as an inte-
gral part (as defined in paragraph (f)(3)(iii)
of this section) of the qualified investment
credit facility (as defined in paragraph (f)
(4) of this section).
(ii) Depreciation (or amortization in
lieu of depreciation) is allowable (as
defined in §1.48-9(b)(4)) with respect to
the property.
(iii) The taxpayer constructs, recon-
structs, or erects the property (as defined
in §1.48-9(b)(1)) or acquires the property
(as defined in §1.48-9(b)(2)) if the original
use of the property (as defined in §1.48-
9(b)(3)) commences with the taxpayer.
(3) Definitions related to requirements
for qualified property. For purposes of
section 48 of the Code and this paragraph
(f), the definitions of this paragraph (f)(3)
apply:
(i) Tangible personal property. The
term tangible personal property means
any tangible property except land and
improvements thereto, such as buildings
or other inherently permanent structures
(including items that are structural com-
ponents of such buildings or structures).
Tangible personal property includes all
property (other than structural compo-
nents) 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 inher-
ently permanent structure) is considered
tangible personal property even though
located outside a building. Local law is
not controlling for purposes of determin-
ing 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 to be a fixture and therefore
real property.
(ii) 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 electrical
energy by a person engaged in a trade or
business of furnishing any such service.
(iii) Integral part—(A) In general.
Property owned by a taxpayer is an inte-
gral part of a qualified investment credit
facility owned by the same taxpayer if it
is used directly in the intended function
of the qualified investment credit facility
and is essential to the completeness of the
intended function of the qualified invest-
ment credit facility. A taxpayer may not
claim the section 48 credit for any prop-
erty that is an integral part of the taxpay-
er’s qualified investment credit facility
that is not owned by the taxpayer.
(B) Power conditioning and trans-
fer equipment. Property that is an inte-
gral part of a qualified investment credit
facility includes power conditioning
equipment and transfer equipment used
to perform the intended function of
the qualified investment credit facility.
Power conditioning equipment includes,
but is not limited to, transformers,
inverters, and converters, which mod-
ify the characteristics of electricity or
thermal energy into a form suitable for
use or transmission or distribution. Parts
related to the functioning or protec-
tion of power conditioning equipment

Bulletin No. 2023–52 1653 December 26, 2023
are also treated as power conditioning
equipment and include, but are not lim-
ited to, switches, circuit breakers, arres-
tors, and hardware and software used
to monitor, operate, and protect power
conditioning equipment. Transfer equip-
ment includes equipment that permits
the aggregation of energy generated by
components of energy properties and
equipment that alters voltage in order to
permit transfer to a transmission or dis-
tribution 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 function-
ing or protection of transfer equipment
are also treated as transfer equipment
and may include items such as current
transformers used for metering, electri-
cal interrupters (such as circuit breakers,
fuses, and other switches), and hardware
and software used to monitor, operate,
and protect transfer equipment.
(C) Roads. Roads that are an integral
part of a qualified investment credit facil-
ity are integral to the activity performed
by the qualified investment credit facility;
these include onsite roads that are used
for equipment to operate and maintain the
qualified investment credit facility. Roads
primarily for access to the site, or roads
used primarily for employee or visitor
vehicles, are not integral to the activity
performed by a qualified investment credit
facility.
(D) Fences. Fencing is not an integral
part of an energy property because it is not
integral to the activity performed by the
energy property.
(E) Buildings. Generally, buildings are
not integral parts of a qualified investment
credit facility because they are not integral
to the activity of the qualified investment
credit facility. However, the following
structures are not treated as buildings for
this purpose:
(1) A structure that is essentially an
item of machinery or equipment.
(2) A structure that houses property
that is integral to the activity of a quali-
fied investment credit facility if the use
of the structure is so closely related to the
use of the housed qualified investment
credit facility that the structure clearly
can be expected to be replaced when the
qualified investment credit facility it ini-
tially houses is replaced.
(4) Qualified investment credit facility.
The term qualified investment credit facil-
ity means any facility—
(i) That is a qualified facility (within
the meaning of section 45) described in
section 45(d)(1) through (4), (6), (7), (9)
or (11) of the Code;
(ii) That meets the placed in service and
beginning of construction requirements (if
any) provided in section 48 of the Code;
(iii) With respect to which no credit
has been allowed under section 45 of the
Code; and
(iv) For which the taxpayer makes an
irrevocable election under section 48(a)
(5) of the Code and paragraph (f)(1) of
this section.
(5) Intangibles excluded. Intangible
property is not qualified property for pur-
poses of section 48(a)(5)(D) of the Code
and paragraph (f) of this section.
(6) Time and manner of making elec-
tion—(i) In general. To make an election
under section 48(a)(5) of the Code and
paragraph (f)(1) of this section to treat a
qualified facility as a qualified investment
credit facility, a taxpayer must claim the
section 48 credit with respect to such qual-
ified investment credit facility on a com-
pleted Form 3468, Investment Credit, or
any successor form(s), and file such form
with the taxpayer’s timely filed (includ-
ing extensions) Federal income tax return
for the taxable year in which the quali-
fied investment credit facility is placed
in service. The taxpayer must also attach
a statement to its Form 3468, or any suc-
cessor form(s), filed with its timely filed
Federal income tax return (including
extensions) that includes all of the infor-
mation required by the instructions to
Form 3468, or any successor form(s) for
each qualified investment credit facility
subject to an election under section 48(a)
(5) and paragraph (f)(1) of this section. A
separate election must be made for each
qualified facility that meets the require-
ments provided in paragraph (f)(4) of this
section to be treated as a qualified invest-
ment credit facility. If any taxpayer own-
ing an interest in a qualified facility makes
an election with respect to such qualified
facility, that election is binding on all tax-
payers that directly or indirectly own an
interest in the qualified facility.
(ii) Special rule for partnerships and
S corporations. In the case of a qualified
facility owned by a partnership or an S
corporation, the election under para-
graph (f)(1) of this section is made by
the partnership or S corporation and is
binding on all ultimate section 48 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 timely filed partnership
or S corporation return (including exten-
sions) with respect to Federal income tax
for the taxable year in which the quali-
fied investment credit facility is placed
in service to indicate that it is making
the election and attach a statement that
includes all of the information required
by the instructions to Form 3468, or
any successor form(s) for each quali-
fied facility subject to the election. The
ultimate credit claimants must claim the
section 48 credit on a completed Form
3468, or any successor form(s), and file
such form with a timely filed (including
extensions) Federal income tax return for
the taxable year that ends with or within
the taxable year in which the partnership
or S corporation made the election. 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 energy credit.
(7) Election irrevocable. The election
under section 48(a)(5) of the Code and
paragraph (f)(1) of this section to treat a
qualified facility as an energy property is
irrevocable.
(8) Coordination rule for sections 42
and 48 credits. As provided under section
50(c)(3)(C) of the Code, in the case of a
taxpayer determining eligible basis for
purposes of calculating a section 42 credit,
a taxpayer is not required to reduce its
basis in an energy property by the amount
of the section 48 credit determined with
respect to the property. The basis of an
energy property may be used to deter-
mine a section 48 credit and may also be
included in eligible basis when determin-
ing a section 42 credit. See paragraph (e)
of this section for special rules regarding
ownership of energy property.
(g) Rules for certain lower-output
energy properties to include qualified
interconnection costs in the basis of

December 26, 2023 1654 Bulletin No. 2023–52
associated energy property—(1) In gen-
eral. For purposes of determining the sec-
tion 48 credit, energy property includes
amounts paid or incurred by the taxpayer
for qualified interconnection property (as
defined in paragraph (g)(2) of this sec-
tion), in connection with the installation
of energy property (as defined in §1.48-
9(a)) that has a maximum net output of
not greater than 5 MW (as measured in
alternating current) (as described in para-
graph (g)(3) of this section). The qualified
interconnection property must provide
for the transmission or distribution of the
electricity produced or stored by such
energy property and must be properly
chargeable to the capital account of the
taxpayer as reduced by paragraph (g)(6)
of this section.
(2) Qualified interconnection prop-
erty. The term qualified interconnection
property means, with respect to an energy
project that is not a microgrid controller,
any tangible property that is part of an
addition, modification, or upgrade to a
transmission or distribution system that is
required at or beyond the point at which
the energy project interconnects to such
transmission or distribution system in
order to accommodate such interconnec-
tion; is either constructed, reconstructed,
or erected by the taxpayer, (as defined in
§1.48-9(b)(1)), or for which the cost with
respect to the construction, reconstruc-
tion, or erection of such property is paid
or incurred by such taxpayer; and the
original use (as defined in §1.48-9(b)(3)),
of which, pursuant to an interconnection
agreement (as defined in paragraph (g)
(4) of this section), commences with a
utility (as defined in paragraph (g)(5) of
this section). Qualified interconnection
property is not part of an energy prop-
erty. As a result, qualified interconnec-
tion property is not taken into account in
determining whether an energy property
satisfies the requirements for the domes-
tic content bonus credit amount refer-
enced in section 48(a)(12) of the Code
and the increase in credit rate for energy
communities provided in section 48(a)
(14) of the Code.
(3) Five-Megawatt Limitation—(i) In
general. The Five-Megawatt Limitation is
measured at the level of the energy prop-
erty in accordance with section 48(a)(8)
(A) of the Code. The maximum net output
of an energy property is measured only by
nameplate generating capacity of the unit
of energy property at the time the energy
property is placed in service.
(ii) Nameplate capacity for purposes of
the Five-Megawatt Limitation. The deter-
mination of whether an energy property
has a maximum net output of not greater
than 5 MW (as measured in alternating
current) is based on the nameplate capac-
ity for purposes of paragraph (g)(1) of
this section. Where applicable, taxpay-
ers should use the International Standard
Organization (ISO) conditions to measure
the maximum electrical generating output
or usable energy capacity of an energy
property. Paragraphs (g)(3)(ii)(A) and (B)
of this section, provide rules for applying
the Five-Megawatt Limitation (as pro-
vided in paragraph (g)(1) of this section)
to electrical generating energy property
and electrical energy storage property,
respectively.
(A) Electrical generating energy prop-
erty. In the case of an electrical generating
energy property, use the maximum electri-
cal generating output in MW that the unit
of energy property is capable of producing
on a steady state basis and during contin-
uous operation under standard conditions,
as measured by the manufacturer and con-
sistent with the definition of nameplate
capacity provided in 40 CFR 96.202.
(B) Electrical energy storage property.
In the case of electrical energy storage
property (as defined in §1.48-9(e)(10)(ii)),
the storage device’s maximum net output
is its nameplate capacity.
(4) Interconnection agreement
. The
term interconnection agreement means an
agreement with a utility for the purposes
of interconnecting the energy property
owned by such taxpayer to the transmis-
sion or distribution system of the utility.
(5) Utility. For purposes of section
48(a)(8) of the Code and this paragraph
(g), the term utility means the owner or
operator of an electrical transmission or
distribution system that is subject to the
regulatory authority of a State or polit-
ical subdivision thereof, any agency or
instrumentality of the United States, a
public service or public utility commis-
sion or other similar body of any State or
political subdivision thereof, or the gov-
erning or ratemaking body of an electric
cooperative.
(6) Reduction to amounts chargeable
to capital account. In the case of expenses
paid or incurred for qualified intercon-
nection property as defined in paragraph
(g)(2) of this section, amounts otherwise
chargeable to capital account with respect
to such expenses must be reduced under
rules similar to the rules of section 50(c)
of the Code. In addition, the taxpayer must
pay or incur the interconnection prop-
erty costs; therefore, any reimbursement,
including by a utility, must be accounted
for by reducing taxpayers’ expenditure
when determining eligible costs.
(7) Examples. This subparagraph pro-
vides examples illustrating the application
of the Five-Megawatt Limitation provided
in this paragraph (g).
(i) Example 1. Application of Five-Megawatt
Limitation to an interconnection agreement for
energy properties owned by separate taxpayers.
X places in service a solar energy property (Solar
Property) with a maximum net output of 5 MW (as
measured in alternating current). Y places in service
a qualified wind facility (Wind Facility), for which
Y has made a valid election under section 48(a)(5)
of the Code to elect the section 48 credit in lieu of
the section 45 credit, with a maximum net output
of 5 MW (as measured in alternating current). The
Solar Property and the Wind Facility are separate
units of energy property installed on contiguous
pieces of land and connect to the grid through a
common intertie. As part of the development of
the Solar Property and Wind Facility, interconnec-
tion costs are required by the utility to modify and
upgrade the transmission system at or beyond the
common intertie to the utility’s transmission sys-
tem to accommodate such interconnection. X and
Y are party to the same interconnection agreement
with the utility that allows for a maximum output
of 10 MW (as measured in alternating current). The
interconnection agreement provides the total cost
of the qualified interconnection property. X and Y
may include the costs paid or incurred by X and Y,
respectively, for qualified interconnection property
subject to the terms of the interconnection agree-
ment, when calculating their respective section 48
credits for the Solar Property and the Wind Facility
because each has a maximum net output of not
greater than 5 MW.
(ii) Example 2. Application of Five-Megawatt
Limitation to an interconnection agreement for
a single energy property. X develops three solar
energy properties located in close proximity. The
three solar energy properties are not considered
an energy project pursuant to the definition in §
1.48-13(d). Each of the solar energy properties is
a unit of energy property and has a maximum net
output of 4 MW (as measured in alternating cur-
rent). Electricity that is suitable for use or transmis-
sion (and is not further conditioned) from the three
solar energy properties feeds into a single gen-tie
line and a common intertie. X is party to a separate
interconnection agreement with the utility for each
solar energy property and each interconnection

Bulletin No. 2023–52 1655 December 26, 2023
agreement allows for a maximum output of 4 MW
(as measured in alternating current). X may include
the costs it paid or incurred for qualified intercon-
nection property for each solar energy property
when calculating its section 48 credit for each of the
three solar energy properties, subject to the terms
of each interconnection agreement, because each
of the solar energy properties has a maximum net
output of not greater than 5 MW.
(iii) Example 3. Application of Five-Megawatt
Limitation to a single interconnection agreement for
multiple energy properties. The facts are the same
as Example 2, except that X is party to one inter-
connection agreement with the utility with respect
to the three solar energy properties and the intercon-
nection agreement allows for a maximum output of
12 MW (as measured in alternating current). With
respect to each of the three solar energy properties,
X may include the costs it paid or incurred for qual-
ified interconnection property for each solar energy
property when calculating its section 48 credit for
each of the three solar energy properties, subject to
the terms of the interconnection agreement, because
each of the solar energy properties has a maximum
net output of not greater than 5 MW.
(iv) Example 4. Application of Five-Megawatt
Limitation to an Energy Project. The facts are the
same as Example 3, except that the three solar energy
properties are also subject to a common power pur-
chase agreement and as a result, are considered an
energy project (as defined in § 1.48-13(d)). With
respect to each of the three solar energy properties,
X may include the costs it paid or incurred for qual-
ified interconnection property when calculating its
section 48 credit for each of the three solar energy
properties, subject to the terms of the interconnection
agreement, because each of the solar energy prop-
erties has a maximum net output of no greater than
5 MW.
(h) Cross references. (1) For rules
regarding the coordination of the section
42 credit and section 48 credit, see section
50(c)(3) of the Code.
(2) For rules regarding the denial of
double benefit for qualified biogas prop-
erty, see section 45(e) of the Code.
(3) To determine applicable recapture
rules, see section 50(a) of the Code.
(4) For rules regarding the credit eligi-
bility of property used outside the United
States, see section 50(b)(1) of the Code.
(5) For rules regarding the credit
eligibility of property used by certain
tax-exempt organizations, see sec-
tion 50(b)(3) of the Code. See section
6417(d)(2) of the Code for an exception
to this rule in the case of an applica-
ble entity making an elective payment
election.
(6) For application of the normalization
rules to the section 48 credit when taken
by certain regulated companies, including
rules regarding the election not to apply
the normalization rules to energy storage
technology (as defined in section 48(c)(6)
of the Code), see section 50(d)(2) of the
Code.
(i) Applicability date. This section
applies with respect to property placed
in service after December 31, 2022, and
during a taxable year beginning after
[DATE OF PUBLICATION OF FINAL
RULE].
Par. 5. Section 1.6418-5, as proposed
to be added at 88 FR 40496, June 21,
2023, is amended by:
1. Redesignating paragraphs (f)
through (h) as paragraphs (g) through (i).
2. Adding new paragraph (f).
The addition reads as follows:
§1.6418-5 Special rules.
* * * * *
(f) Notification and impact of recap-
ture under section 48(a)(10)(C) of the
Code—(1) In general. In the case of any
election under §1.6418-2 or §1.6418-3
with respect to any specified credit
portion described in §1.6418-1(c)(2)
(iii), if, during any taxable year, there
is recapture under section 48(a)(10)(C)
of the Code and §1.48-13(c)(3) of any
increased credit amount under section
48(a)(9)(B)(iii) before the close of the
recapture period (as described in §1.48-
13(c)(5)), such eligible taxpayer and the
transferee taxpayer must follow the noti-
fication process in paragraph (f)(2) of
this section with recapture impacting the
transferee taxpayer as described in para-
graph (f)(3) of this section.
(2)
Notification requirements. The
notification requirements for the eligi-
ble taxpayer are the same as for an eligi-
ble taxpayer that must report a recapture
event as described in paragraph (d)(2)(i)
of this section, except that the recapture
amount that must be computed is defined
in §1.48-13(c)(4).
(3) Impact of recapture. The transferee
taxpayer is responsible for any amount
of tax increase under section 48(a)(10)
(C) of the Code and §1.48-13(c)(3) upon
the occurrence of a recapture event under
§1.48-13(c)(3)(ii).
(4) Applicability date. This section
applies to taxable years ending on or after
[DATE OF PUBLICATION OF FINAL
RULE].
* * * * *
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register
November 17, 2023, 8:45 a.m., and published in the
issue of the Federal Register for November 22, 2023,
88 FR 82188)

Bulletin No. 2023–52 i December 26, 2023
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

December 26, 2023 ii Bulletin No. 2023–52
Numerical Finding List
1
Bulletin 2023–52
Announcements:
2023-18, 2023-30 I.R.B. 366
2023-19, 2023-30 I.R.B. 367
2023-20, 2023-30 I.R.B. 368
2023-17, 2023-31 I.R.B. 412
2023-21, 2023-31 I.R.B. 413
2023-22, 2023-32 I.R.B. 429
2023-23, 2023-34 I.R.B. 569
2023-24, 2023-35 I.R.B. 661
2023-25, 2023-37 I.R.B. 821
2023-26, 2023-37 I.R.B. 822
2023-28, 2023-37 I.R.B. 823
2023-29, 2023-41 I.R.B. 1064
2023-30, 2023-45 I.R.B. 1236
2023-31, 2023-46 I.R.B. 1251
2023-32, 2023-47 I.R.B. 1258
2023-33, 2023-47 I.R.B. 1261
2023-24, 2023-49 I.R.B. 1385
2023-35, 2023-52 I.R.B. 1615
Notices:
2023-29, 2023-29 I.R.B. 1
2023-45, 2023-29 I.R.B. 317
2023-47, 2023-29 I.R.B. 318
2023-37, 2023-30 I.R.B. 359
2023-50, 2023-30 I.R.B. 361
2023-51, 2023-30 I.R.B. 362
2023-54, 2023-31 I.R.B. 382
2023-53, 2023-32 I.R.B. 424
2023-55, 2023-32 I.R.B. 427
2023-57, 2023-34 I.R.B. 560
2023-58, 2023-34 I.R.B. 563
2023-59, 2023-34 I.R.B. 564
2023-52, 2023-35 I.R.B. 650
2023-61, 2023-35 I.R.B. 651
2023-62, 2023-37 I.R.B. 817
2023-56, 2023-38 I.R.B. 824
2023-63, 2023-39 I.R.B. 919
2023-64, 2023-40 I.R.B. 974
2023-66, 2023-40 I.R.B. 992
2023-68, 2023-41 I.R.B. 1060
2023-65, 2023-42 I.R.B. 1067
2023-67, 2023-42 I.R.B. 1074
2023-69, 2023-42 I.R.B. 1079
2023-71, 2023-44 I.R.B. 1191
2023-70, 2023-45 I.R.B. 1228
2023-72, 2023-45 I.R.B. 1228
2023-73, 2023-45 I.R.B. 1232
2023-75, 2023-47 I.R.B. 1256
2023-76, 2023-49 I.R.B. 1320
2023-74, 2023-51 I.R.B. 1484
2023-79, 2023-52 I.R.B. 1581
2023-80, 2023-52 I.R.B. 1583
Proposed Regulations:
REG-124123-22, 2023-30 I.R.B. 369
REG-124930-21, 2023-31 I.R.B. 431
REG-120730-21, 2023-33 I.R.B. 491
REG-134420-10, 2023-34 I.R.B. 571
REG-109348-22, 2023-35 I.R.B. 662
REG-120727-21, 2023-36 I.R.B. 670
REG-122793-19, 2023-38 I.R.B. 829
REG-100908-23, 2023-39 I.R.B. 931
REG-115559-23, 2023-42 I.R.B. 1082
REG-106203-23, 2023-43 I.R.B. 1143
REG-113064-23, 2023-43 I.R.B. 1144
REG-117614-14, 2023-44 I.R.B. 1193
REG-127391-16, 2023-44 I.R.B.
1214
REG-103525-23, 2023-46 I.R.B. 1252
REG-115762-23, 2023-47 I.R.B. 1262
REG-120727-21, 2023-47 I.R.B. 1285
REG-112916-23, 2023-49 I.R.B. 1323
REG-128276-12, 2023-49 I.R.B. 1362
REG-142338-07, 2023-49 I.R.B. 1363
REG-131756-11, 2023-50 I.R.B. 1386
REG-132422-17, 2023-50 I.R.B. 1390
REG-104194-23, 2023-51 I.R.B. 1558
REG-132569-17, 2023-52 I.R.B. 1616
Revenue Procedures:
2023-31, 2023-25 I.R.B. 386
2023-26, 2023-33 I.R.B. 486
2023-27, 2023-35 I.R.B. 655
2023-17, 2023-37 I.R.B. 819
2023-30, 2023-40 I.R.B. 995
2023-31, 2023-40 I.R.B. 1057
2023-32, 2023-41 I.R.B. 1064
2023-35, 2023-42 I.R.B. 1079
2023-28, 2023-43 I.R.B. 1092
2023-33, 2023-43 I.R.B. 1135
2023-34, 2023-48 I.R.B. 1287
2023-36, 2023-51 I.R.B. 1485
2023-37, 2023-51 I.R.B. 1491
2023-38, 2023-51 I.R.B. 1544
2023-40, 2023-51 I.R.B. 1553
2023-39, 2023-52 I.R.B. 1590
2023-41, 2023-52 I.R.B. 1607
Revenue Rulings:
2023-13, 2023-32 I.R.B. 413
2023-14, 2023-33 I.R.B. 484
2023-15, 2023-34 I.R.B. 559
2023-15, 2023-34 I.R.B. 559
2023-16, 2023-37 I.R.B. 796
2023-17, 2023-37 I.R.B. 798
2023-18, 2023-40 I.R.B. 972
2023-19, 2023-41 I.R.B. 1059
2023-20, 2023-45 I.R.B. 1221
2023-21, 2023-49 I.R.B. 1299
2023-22, 2023-49 I.R.B. 1301
2023-23, 2023-51 I.R.B. 1472
Treasury Decisions:
9976, 2023-30 I.R.B. 354
9977, 2023-31 I.R.B. 375
9978, 2023-32 I.R.B. 415
9979, 2023-35 I.R.B. 602
9980, 2023-43 I.R.B. 1087
9981, 2023-44 I.R.B. 1174
9982, 2023-45 I.R.B. 1223
9983, 2023-46 I.R.B. 1237
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 27, 2023.

Bulletin No. 2023–52 iii December 26, 2023
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2023–52
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 27, 2023.

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Washington, DC 20224
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