Commercial Installations (Section 48)
The U.S. Internal Revenue Service (IRS) and Treasury Department have released final rules regarding for wind turbine eligibility under the Investment Tax Credits set forth in the Inflation Reduction Act of 2022. The rules for commercial wind turbine installations under Section 48 of the Internal Revenue Code were published in the U.S. Federal Register, Vol 89, No. 239 on 12/12/2024, that establish certain qualification requirements for small wind turbines (89 FR 100598).
The rules address requirements for all technologies covered under the IRA for commercial installations. The qualification rules for small wind turbines can be found in 26 CFR, Part 1 §48–9(c)(2) which is on p.49 of the Federal Register document and excerpted below:
(ii) Special rules for performance and quality standards
(A) Small wind energy property
(1) Small wind energy property must meet one of the following performance and quality standards in effect at the time of acquisition of the small wind turbine:
(i) American Wind Energy Association Small Wind Turbine Performance and Safety Standard 9.1 (AWEA standards);
(ii) International Electrotechnical Commission standards 61400–1, 61400– 2, 61400–11, 61400–12 (IEC standards); or
(iii) ANSI/ACP Small Wind Turbine Standard 101–1 (ACP standards).
See the full rule and other referenced and related documents for all applicable requirements and guidance. The U.S. Treasury Department provides additional information through resources such as the IRA-Related Tax Guidance and Taxpayer IRA Resource Hub web pages. And consider consulting a qualified tax professional for more information.
Residential Installations (Section 25D)
For residential wind turbine installations under Section 25D of the Internal Revenue Code, see IRS Form 5695 and the Instructions for IRS Form 5695. Also see the FAQ on Residential Clean Energy Property Credits released by the IRS in April, 2024 (FS-2024-15). The IRA-Related Tax Guidance and Taxpayer IRA Resource Hub web pages provide further information.
The legacy information provided below describes the rules established for the implementation of the Investment Tax Credit (ITC). The ITC was superseded by the Inflation Reduction Act of 2022 (IRA). However, since the final rules for qualification of distributed wind turbines in residential applicationsunder the IRA have not yet been finalized, the ITC information is provided below for reference.
The U.S. Internal Revenue Service (IRS) Notice 2015-4 requires that small and medium distributed wind turbines, with a nameplate capacity of 100 kW and less, be certified in order to qualify for the ITC, set at 30% at the time of writing. The guidance requires that qualifying wind turbine manufacturers maintain certification to either:
(1) American Wind Energy Association (AWEA) Small Wind Turbine Performance and Safety Standard 9.1-2009; or
(2) International Electrotechnical Commission (IEC) 61400-1, 61400-12, and 61400-11.
According to the current IRS Notice, the certification must be issued by an eligible certifier – defined as a third party that is accredited by the American Association for Laboratory Accreditation or other similar accreditation body. Documentation establishing that the turbine meets the new requirements must be provided to taxpayers in order to claim the credit. ICC-SWCC certifications help manufacturers meet these requirements.
An April 2014 memorandum from the Director of the U.S. Department of Energy’s Wind and Water Power Technologies Office, also encourages that the use of public funds be provided only for wind turbines that have been tested and certified for safety, function, performance, and durability.
Notice 2015-4 is posted at: http://www.irs.gov/pub/irs-drop/n-15-04.pdf. The notice reminds manufacturers that an erroneous certification may result in penalties: (a) Under section 7206 for fraud and making false statements; and (b) Under section 6701 for aiding and abetting an understatement of tax liability ($1,000 per return on which a credit is claimed in reliance on the certification).
Disclaimer: All opinions and other postings, are offered for informational purposes only and should not be construed as legal or tax advice. You should consult directly with an attorney or accountant for individual advice regarding your particular situation.