The IRS on May 23, 2025,released 2025 production tax credit (PTC) amounts under Section 45 of the Internal Revenue Code. The guidance provides that:
- For facilities placed in service before Jan. 1, 2022, the credit for renewable electricity production for calendar year (CY) 2025 is 3 cents per kilowatt hour (kWh) on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass and geothermal energy. The credit is 1.5 cents per kWh on the sale of electricity produced from the qualified energy resources of open-loop biomass, landfill gas, trash and qualified hydropower, as well as marine and hydrokinetic renewable energy.
- For facilities placed in service after Dec. 31, 2021, the credit for renewable electricity production for CY 2025 is 0.6 cents per kWh on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass, geothermal energy and solar energy. The credit is 0.3 cents per kWh on the sale of electricity produced from open-loop biomass, landfill gas and trash. These amounts increase from 0.6 cents and 0.3 cents to 3 cents and 1.5 cents per kWh, respectively, if prevailing wage and apprenticeship requirements are satisfied.
- For qualified hydropower, marine and hydrokinetic renewable energy facilities placed in service after Dec. 31, 2022, the credit for renewable electricity production for CY 2025 is 0.6 cents per kWh, or 3 cents if prevailing wage and apprenticeship requirements are satisfied.
Background
Section 45 allows a renewable energy PTC for generating electricity from certain energy resources and those tax credit amounts are annually adjusted for inflation and published via IRS notice.
The difference in credit amounts for facilities placed into service after 2021 results from Section 45 changes made by the Inflation Reduction Act of 2022 (IRA). The IRA:
- changed the manner by which Section 45 credits amounts are calculated for any facility placed into service after Dec. 31, 2021, by providing a different rounding rule, compared to the rule for facilities placed into service before that date
- removed the reduction by half for the credit amount for qualified hydropower facilities and hydrokinetic renewable energy facilities placed into service after Dec. 31, 2022
- requires that certain prevailing wage and apprenticeship requirements be satisfied for the full (5x multiplier) amount of the credit
Also note, the IRA allows bonus credit amounts – not reflected in the previously mentioned credit amounts – for the use of domestic content or if the project is located in an energy community.
The Holland & Knight Energy Tax Team is available for questions regarding these credits. To receive additional analysis from the team, please subscribe to our alerts. Please also check out our Inflation Reduction Act Tax Resource Library.
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