89220 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–117631–23] 

RIN 1545–BQ97 

Section 45V Credit for Production of 

Clean Hydrogen; Section 48(a)(15) 

Election To Treat Clean Hydrogen 

Production Facilities as Energy 

Property 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations relating to the 

credit for production of clean hydrogen 

(clean hydrogen production credit) and 

the energy credit, as established and 

amended by the Inflation Reduction Act 

of 2022, respectively. The proposed 

regulations would provide rules for: 

determining lifecycle greenhouse gas 

emissions rates resulting from hydrogen 

production processes; petitioning for 

provisional emissions rates; verifying 

production and sale or use of clean 

hydrogen; modifying or retrofitting 

existing qualified clean hydrogen 

production facilities; using electricity 

from certain renewable or zeroemissions sources to produce qualified 

clean hydrogen; and electing to treat 

part of a specified clean hydrogen 

production facility instead as property 

eligible for the energy credit. The 

proposed regulations would affect all 

taxpayers who produce qualified clean 

hydrogen and claim the clean hydrogen 

production credit, elect to treat part of 

a specified clean hydrogen production 

facility as property eligible for the 

energy credit, or produce electricity 

from certain renewable or zeroemissions sources used by taxpayers or 

related persons to produce qualified 

clean hydrogen. This document also 

provides notice of a public hearing on 

the proposed regulations. 

DATES: Written or electronic comments 

must be received by February 26, 2024. 

The public hearing on these proposed 

regulations is scheduled to be held on 

March 25, 2024, at 10 a.m. (ET). 

Requests to speak and outlines of topics 

to be discussed at the public hearing 

must be received by March 4, 2024. If 

no outlines are received by March 4, 

2024, the public hearing will be 

cancelled. Requests to attend the public 

hearing must be received by March 18, 

2024. The public hearing will be made 

accessible to people with disabilities. 

Requests for special assistance during 

the hearing must be received by March 

18, 2024. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically via the Federal 

eRulemaking Portal at https://

www.regulations.gov (indicate IRS and 

REG–117631–23) by following the 

online instructions for submitting 

comments. Requests for a public hearing 

must be submitted as prescribed in the 

‘‘Comments and Requests for a Public 

Hearing’’ section. Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The 

Department of the Treasury (Treasury 

Department) and the IRS will publish 

for public availability any comments 

submitted to the IRS’s public docket. 

Send paper submissions to: 

CC:PA:LPD:PR (REG–117631–23), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning these proposed regulations, 

the Office of Chief Counsel 

(Passthroughs and Special Industries) at 

(202) 317–6853 (not a toll-free number); 

concerning submissions of comments or 

the public hearing, Vivian Hayes at 

(202) 317–6901 (not a toll-free number) 

or by email to publichearings@irs.gov 

(preferred). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

regulations to amend the Income Tax 

Regulations (26 CFR part 1) under 

sections 45V and 48(a)(15) of the 

Internal Revenue Code (Code), as added 

to the Code by section 13204 of Public 

Law 117–169, 136 Stat. 1818 (August 

16, 2022), commonly known as the 

Inflation Reduction Act of 2022 (IRA). 

The IRA added several provisions to 

the Code related to the production of, 

and investment in, clean hydrogen, 

which, along with the provisions of 

sections 45V and 48(a)(15), are 

described in part I of this Background 

section. Part II of this Background 

section describes a previous request for 

public comment on these provisions. 

I. IRA Provisions for Clean Hydrogen 

Production and Investment 

This part I describes the credit for 

production of clean hydrogen as 

determined under section 45V (section 

45V credit) and the irrevocable election 

to claim an energy credit under section 

48 (section 48 credit) in lieu of the 

section 45V credit. Also described are 

statutory exceptions to the requirement 

that electricity be sold to an unrelated 

person to be eligible for the renewable 

electricity production credit determined 

under section 45 (section 45 credit) or 

the zero-emission nuclear power 

production credit determined under 

section 45U (section 45U credit). Under 

these exceptions, electricity produced 

by a taxpayer from a qualified facility 

under section 45(d) or a qualified 

nuclear power facility under section 

45U(b)(1) may be treated as sold by the 

taxpayer to an unrelated person during 

the taxable year if the electricity is used 

by the taxpayer or a related person at a 

qualified clean hydrogen production 

facility to produce qualified clean 

hydrogen. 

A. Section 45V 

1. Amount of Credit 

Section 45V provides a tax credit for 

the production of qualified clean 

hydrogen. For purposes of section 38 of 

the Code, section 45V(a) provides that 

the clean hydrogen production credit for 

any taxable year is an amount equal to 

the product of (i) the kilograms of 

qualified clean hydrogen produced by 

the taxpayer during such taxable year at 

a qualified clean hydrogen production 

facility during the 10-year period 

beginning on the date such facility was 

originally placed in service, and (ii) the 

applicable amount as determined under 

section 45V(b) with respect to such 

hydrogen. 

Section 45V(b)(1) provides that, for 

purposes of section 45V(a)(2), the 

applicable amount is an amount equal 

to the applicable percentage of $0.60. If 

the amount so determined is not a 

multiple of 0.1 cent, then such amount 

is rounded to the nearest multiple of 0.1 

cent. 

Section 45V(b)(2) provides that, for 

purposes of section 45V(b)(1), the 

applicable percentage is determined 

based on the lifecycle greenhouse gas 

emissions (lifecycle GHG emissions) 

rate of the process to produce any 

qualified clean hydrogen as follows: (i) 

if the lifecycle GHG emissions rate is 

not greater than 4 kilograms of carbon 

dioxide equivalent (CO2e) per kilogram 

of hydrogen, and not less than 2.5 

kilograms of CO2e per kilogram of 

hydrogen, then the applicable 

percentage is 20 percent; (ii) if the 

lifecycle GHG emissions rate is less than 

2.5 kilograms of CO2e per kilogram of 

hydrogen, and not less than 1.5 

kilograms of CO2e per kilogram of 

hydrogen, then the applicable 

percentage is 25 percent; (iii) if the 

lifecycle GHG emissions rate is less than 

1.5 kilograms of CO2e per kilogram of 

hydrogen, and not less than 0.45 

kilograms of CO2e per kilogram of 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89221 

1The IRS will publish the inflation-adjusted 

section 45V applicable amount annually. For the 

calendar year 2023, the section 45V(b)(3) inflation 

adjustment factor is equal to one, so the inflationadjusted applicable amount remains $0.60 for the 

calendar year 2023. 

2Section 45V(e)(3)(A)(ii) requires the payment of 

wages at prevailing rates ‘‘with respect to any 

taxable year, for any portion of such taxable year 

which is within the period described in subsection 

(a)(2)’’, with respect to the alteration or repair of the 

facility. There is no ‘‘period described in subsection 

(a)(2).’’ The Treasury Department and the IRS 

interpret the reference to ‘‘subsection (a)(2)’’ as a 

reference to section 45V(a)(1) where the 10-year 

credit period is identified. 

3See proposed §§ 1.45–7, 1.45–8, 1.45–12, and 

1.45V–3 as proposed in the notice of proposed 

rulemaking (REG–100908–23) published in the 

Federal Register (88 FR 60018) on August 30, 2023, 

and corrected at 88 FR 73807 on October 27, 2023. 

4Under proposed § 1.45V–3, the PWA 

requirements for purposes of section 45V(e)(2) 

would be satisfied if a facility meets the prevailing 

wage requirements of section 45(b)(7) and proposed 

§ 1.45–7, the apprenticeship requirements of section 

45(b)(8) and proposed § 1.45–8, and the 

recordkeeping and reporting requirements of 

proposed § 1.45–12. Those proposed regulations are 

outside the scope of this notice of proposed 

rulemaking and proposed § 1.45V–3 is addressed 

only to the extent necessary for purposes of 

formatting the proposed regulations that are the 

subject of this notice of proposed rulemaking in 

accordance with CFR standards. 

5Section 45V does not specify an earliest date on 

which a qualified clean hydrogen production 

facility must begin construction or be placed in 

service to be eligible to claim the section 45V credit. 

However, the section 45V credit is available for 

qualified clean hydrogen produced after December 

31, 2022. Section 13204(a)(5)(A) of the IRA. Thus, 

the owner of a qualified clean hydrogen production 

facility originally placed in service after December 

31, 2012, could claim the section 45V credit for 

qualified clean hydrogen produced during at least 

some portion of the 10-year period described in 

section 45V(a)(1), provided all other requirements 

are met. 

hydrogen, then the applicable 

percentage is 33.4 percent; and (iv) if 

the lifecycle GHG emissions rate is less 

than 0.45 kilograms of CO2e per 

kilogram of hydrogen, then the 

applicable percentage is 100 percent. 

Section 45V(b)(3) provides that the 

$0.60 amount in section 45V(a)(1) is 

adjusted by multiplying such amount by 

the inflation adjustment factor (as 

determined under section 45(e)(2), 

determined by substituting ‘‘2022’’ for 

‘‘1992’’ in section 45(e)(2)(B)) for the 

calendar year in which the qualified 

clean hydrogen is produced. If any 

amount as increased under section 

45V(b)(3) is not a multiple of 0.1 cent, 

such amount is rounded to the nearest 

multiple of 0.1 cent.1

Section 45V(e)(1) provides that, in the 

case of any qualified clean hydrogen 

production facility that satisfies the 

requirements of section 45V(e)(2), the 

amount of the section 45V credit with 

respect to qualified clean hydrogen 

described in section 45V(b)(2) is equal 

to the amount determined under section 

45V(a) (determined without regard to 

section 45V(e)(1)) multiplied by five. 

A qualified clean hydrogen 

production facility meets the 

requirements of section 45V(e)(2) if: (i) 

the facility began construction before 

January 29, 2023, and with respect to 

any taxable year, for any period of such 

taxable year that is within the 10-year 

period beginning on the date the facility 

is originally placed in service, the 

prevailing wage requirements of section 

45V(e)(3)(A) are met for any alteration 

or repair of the facility that occurs after 

January 29, 2023 (to the extent 

applicable); 2 or (ii) the facility satisfies 

the prevailing wage and apprenticeship 

(PWA) requirements of sections 

45V(e)(3)(A) and (4).3

Generally, the prevailing wage 

requirements under section 45V(e)(3)(A) 

with respect to any qualified clean 

hydrogen production facility require the 

taxpayer to ensure that any laborers and 

mechanics employed by the taxpayer or 

by any contractor or subcontractor in (i) 

the construction of such facility, and (ii) 

with respect to any taxable year, for any 

portion of such taxable year that is 

within the 10-year period beginning on 

the date such facility was originally 

placed in service, the alteration or repair 

of such facility, are paid wages at rates 

not less than the prevailing rates for 

construction, alteration, or repair of a 

similar character in the locality in 

which such facility is located as most 

recently determined by the Secretary of 

Labor, in accordance with subchapter IV 

of chapter 31 of title 40 of the United 

States Code, commonly known as the 

Davis-Bacon Act. Correction and 

penalty rules similar to the rules of 

section 45(b)(7)(B) also apply. 

Section 45V(e)(4) provides that rules 

similar to the apprenticeship 

requirements of section 45(b)(8) apply 

for purposes of section 45V(e)(2).4

For purposes of section 45V(a), in the 

case of a qualified clean hydrogen 

production facility that does not satisfy 

the requirements of section 45(e)(2), the 

amount of the clean hydrogen 

production credit for any taxable year is 

$0.12, $0.15, $0.20, or $0.60 per 

kilogram of qualified clean hydrogen 

produced (before taking into account 

any inflation adjustment under section 

45V(b)(3)), depending on the lifecycle 

GHG emissions rate associated with the 

facility’s hydrogen production process. 

For facilities meeting the requirements 

of section 45V(e)(2), the credit amount 

determined under section 45V(a) (as 

adjusted for inflation subject to section 

45V(b)(3)) is multiplied by five. 

2. Definitions 

a. Lifecycle Greenhouse Gas Emissions 

Section 45V(c)(1)(A) provides that, 

subject to section 45V(c)(1)(B), the term 

‘‘lifecycle greenhouse gas emissions’’ 

has the same meaning given such term 

under section 211(o)(1)(H) of the Clean 

Air Act (42 U.S.C. 7545(o)(1)(H)), as in 

effect on August 16, 2022. Under section 

45V(c)(1)(B), the term ‘‘lifecycle 

greenhouse gas emissions’’ includes 

emissions only through the point of 

production (well-to-gate), as determined 

under the most recent Greenhouse 

gases, Regulated Emissions, and Energy 

use in Transportation model, referred to 

as the ‘‘GREET model’’ commonly and 

in this document, developed by 

Argonne National Laboratory, or a 

successor model as determined by the 

Secretary of the Treasury or her delegate 

(Secretary). 

b. Qualified Clean Hydrogen 

Section 45V(c)(2)(A) provides that the 

term ‘‘qualified clean hydrogen’’ means 

hydrogen that is produced through a 

process that results in a lifecycle GHG 

emissions rate of not greater than 4 

kilograms of CO2e per kilogram of 

hydrogen. Section 45V(c)(2)(B) further 

provides that the term ‘‘qualified clean 

hydrogen’’ does not include any 

hydrogen unless (i) such hydrogen is 

produced (A) in the United States (as 

defined in section 638(1) of the Code) or 

a United States territory (having the 

meaning of the term ‘‘possession’’ as 

defined in section 638(2)), (B) in the 

ordinary course of a trade or business of 

the taxpayer, and (C) for sale or use; and 

(ii) the production and sale or use of 

such hydrogen is verified by an 

unrelated party. 

c. Provisional Emissions Rate 

Section 45V(c)(2)(C) provides that, in 

the case of any hydrogen for which a 

lifecycle GHG emissions rate has not 

been determined for purposes of section 

45V, a taxpayer producing such 

hydrogen may file a petition with the 

Secretary for a determination of the 

lifecycle GHG emissions rate with 

respect to such hydrogen, which is 

referred to as a ‘‘provisional emissions 

rate’’ or PER in the proposed 

regulations. 

d. Qualified Clean Hydrogen Production 

Facility 

Section 45V(c)(3) provides that the 

term ‘‘qualified clean hydrogen 

production facility’’ means a facility (i) 

owned by the taxpayer, (ii) that 

produces qualified clean hydrogen, and 

(iii) the construction of which begins 

before January 1, 2033.5


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89222 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

3. Special Rules 

a. Treatment of Facilities Owned by 

More Than One Taxpayer 

Section 45V(d)(1) provides that rules 

similar to the rules of section 45(e)(3) 

apply for purposes of section 45V. 

Section 45(e)(3) provides that, in the 

case of a facility in which more than one 

person has an ownership interest, 

except to the extent provided in 

regulations prescribed by the Secretary, 

production from the facility is allocated 

among such persons in proportion to 

their respective ownership interests in 

the gross sales from such facility. 

b. Coordination With Section 45Q 

Section 45V(d)(2) provides that no 

section 45V credit is allowed with 

respect to any qualified clean hydrogen 

produced at a facility that includes 

carbon capture equipment for which a 

credit is allowed to any taxpayer as 

determined under section 45Q (section 

45Q credit) for the taxable year or any 

prior taxable year. 

c. Credit Reduced for Tax-Exempt 

Bonds 

Section 45V(d)(3) provides that rules 

similar to the rules under section 

45(b)(3) (credit reduced for tax-exempt 

bonds) apply for purposes of section 

45V. Section 45V(d)(3) is effective for 

facilities that begin construction after 

August 16, 2022. Section 13204(a)(5)(B) 

of the IRA. Section 45(b)(3) provides 

that the amount of the credit determined 

under section 45(a) with respect to any 

facility for any taxable year (determined 

after the application of section 45(b)(1) 

and (2) regarding phaseout and inflation 

adjustment rules) is reduced by the 

amount that is the product of the 

amount so determined for such year and 

the lesser of 15 percent or a fraction (A) 

the numerator of which is the sum, for 

the taxable year and all prior taxable 

years, of proceeds of an issue of any 

obligations the interest on which is 

exempt from tax under section 103 and 

that is used to provide financing for the 

qualified facility, and (B) the 

denominator of which is the aggregate 

amount of additions to the capital 

account for the qualified facility for the 

taxable year and all prior taxable years. 

Section 45(b)(3) further provides that 

the amounts determined under section 

45(b)(3) for any taxable year are 

determined as of the close of the taxable 

year. 

d. Modification of Existing Facilities 

Section 45V(d)(4) provides that for 

purposes of section 45V(a)(1), in the 

case of any facility that (A) was 

originally placed in service before 

January 1, 2023, and, prior to the 

modification described in section 

45V(d)(4)(B), did not produce qualified 

clean hydrogen, and (B) after the date 

such facility was originally placed in 

service (i) is modified to produce 

qualified clean hydrogen, and (ii) 

amounts paid or incurred with respect 

to such modification are properly 

chargeable to the capital account of the 

taxpayer, such facility is deemed to 

have been originally placed in service as 

of the date the property required to 

complete the modification described in 

section 45V(d)(4)(B) is placed in service. 

Section 45V(d)(4) is effective for 

modifications made after December 31, 

2022. See section 13204(a)(5)(C) of the 

IRA. 

B. Electricity Used at a Qualified Clean 

Hydrogen Production Facility 

Section 45(e)(13) provides that 

electricity produced by the taxpayer is 

treated as sold by such taxpayer to an 

unrelated person during the taxable year 

if (i) such electricity is used during such 

taxable year by the taxpayer or a person 

related to the taxpayer at a qualified 

clean hydrogen production facility (as 

defined in section 45V(c)(3)) to produce 

qualified clean hydrogen (as defined in 

section 45V(c)(2)); and (ii) such use and 

production is verified (in such form or 

manner as the Secretary may prescribe) 

by an unrelated party. Section 45(e)(13) 

is effective for electricity produced after 

December 31, 2022. See section 

13204(b)(3) of the IRA. 

Section 45U(c)(2) provides that rules 

similar to the rules of section 45(e)(13) 

apply for purposes of section 45U. 

Generally, section 45U is effective for 

electricity produced at a qualified 

nuclear power facility and sold after 

December 31, 2023, in taxable years 

beginning after that date. 

C. Election To Treat Clean Hydrogen 

Production Facilities as Energy Property 

Section 48(a)(15)(A)(i) provides that, 

in the case of any qualified property (as 

defined in section 48(a)(5)(D)) that is 

part of a specified clean hydrogen 

production facility, such property is 

treated as energy property. Section 

48(a)(15)(A)(ii) provides that the energy 

percentage of the basis of any qualified 

property that is treated as energy 

property is, for a facility that is designed 

and reasonably expected to produce 

qualified clean hydrogen with a 

lifecycle GHG emissions rate that is: (i) 

not greater than 4 kilograms of CO2e per 

kilogram of hydrogen, and not less than 

2.5 kilograms of CO2e per kilogram of 

hydrogen, 1.2 percent; (ii) less than 2.5 

kilograms of CO2e per kilogram of 

hydrogen, and not less than 1.5 

kilograms of CO2e per kilogram of 

hydrogen, 1.5 percent; (iii) less than 1.5 

kilograms of CO2e per kilogram of 

hydrogen, and not less than 0.45 

kilograms of CO2e per kilogram of 

hydrogen, 2 percent; and (iv) less than 

0.45 kilograms of CO2e per kilogram of 

hydrogen, 6 percent. Under section 

48(a)(9), the amount of the section 48 

credit determined for a specified clean 

hydrogen production facility under 

section 48(a)(15) is multiplied by five if 

the facility meets the requirements of 

section 48(a)(9)(B) (regarding 

application of certain maximum net 

output levels of electrical or thermal 

energy or prevailing wage and 

apprenticeship requirements). However, 

the domestic content and energy 

communities bonuses under section 

48(a)(12) and (a)(14) do not apply to a 

specified clean hydrogen production 

facility. 

Section 48(a)(15) is effective for 

property placed in service after 

December 31, 2022, and for any 

property the construction of which 

began before January 1, 2023, only to the 

extent of the basis thereof attributable to 

construction, reconstruction, or erection 

after December 31, 2022. See section 

13204(c)(3) of the IRA. 

1. Denial of Production Credit 

Section 48(a)(15)(B) provides that no 

section 45V credit or section 45Q credit 

is allowed for any taxable year with 

respect to any specified clean hydrogen 

production facility or any carbon 

capture equipment included at such 

facility. 

2. Specified Clean Hydrogen Production 

Facility 

Section 48(a)(15)(C) provides that the 

term ‘‘specified clean hydrogen 

production facility’’ means any 

qualified clean hydrogen production 

facility (as defined in section 45V(c)(3)) 

(i) that is placed in service after 

December 31, 2022, (ii) with respect to 

which (I) no section 45V credit or 

section 45Q credit has been allowed, 

and (II) the taxpayer makes an 

irrevocable election to have section 

48(a)(15) apply, and (iii) for which an 

unrelated third party has verified (in 

such form or manner as the Secretary 

may prescribe) that such facility 

produces hydrogen through a process 

that results in lifecycle GHG emissions 

that are consistent with the hydrogen 

that such facility was designed and 

expected to produce under section 

48(a)(15)(A)(ii). 

3. Qualified Clean Hydrogen 

Section 48(a)(15)(D) provides that, for 

purposes of section 48(a)(15), the term 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89223 

6 45VH2–GREET is a user interface designed to 

accept input related to a hydrogen production 

facility, execute GREET calculations in the 

background, and display the well-to-gate carbon 

intensity of produced hydrogen in kg of CO2e/kg of 

H2. 45VH2–GREET is currently available at 

www.energy.gov/45vresources. Successor locations 

for 45V–H2GREET will be provided in IRS forms 

and instructions. 

‘‘qualified clean hydrogen’’ has the 

meaning given such term by section 

45V(c)(2). 

4. Regulations 

Section 48(a)(15)(E) provides the 

Secretary authority to issue regulations 

or other guidance as she determines 

necessary to carry out the purposes of 

section 48, including regulations or 

other guidance that recaptures so much 

of any section 48 credit allowed as 

exceeds the amount of the credit that 

would have been allowed if the 

expected production were consistent 

with the actual verified production (or 

all of the credit so allowed in the 

absence of verification). 

II. Previous Request for Comments 

On November 3, 2022, the Treasury 

Department and the IRS published 

Notice 2022–58, 2022–47 I.R.B. 483. The 

notice requested general comments on 

issues arising under section 45V and the 

associated clean hydrogen production 

and investment incentives in sections 

45 and 48. The notice also requested 

specific comments concerning (i) 

definitions; (ii) boundaries of the wellto-gate analysis for determining the 

lifecycle GHG emissions rate; (iii) the 

PER process; (iv) recordkeeping and 

reporting; (v) verification by unrelated 

parties; and (vi) coordination with 

sections 45, 48, and 45Q. The Treasury 

Department and the IRS received over 

200 comments from industry 

participants, environmental groups, 

individuals, and other stakeholders. The 

Treasury Department and the IRS 

appreciate the commenters’ interest and 

engagement on these issues. These 

comments have been carefully 

considered in the development of these 

proposed regulations. 

Explanation of Provisions 

I. Overview 

Proposed § 1.45V–1 would provide 

guidance, including definitions of key 

terms used in proposed §§ 1.45V–1 

through 1.45V–6 and 1.48–15, to 

determine the eligibility for, and the 

amount of, the section 45V credit for the 

production of qualified clean hydrogen. 

The term ‘‘section 45V credit’’ would be 

provided at § 1.45V–1(a)(12) and mean 

the credit for production of clean 

hydrogen determined under section 

45V, so much of sections 6417 and 6418 

that relate to section 45V, and the 

section 45V regulations. The term 

‘‘section 45V regulations’’ would be 

provided at proposed § 1.45V–1(a)(13) 

to mean the provisions of §§ 1.45V–1 

through 1.45V–6 and so much of the 

regulations under sections 6417 and 

6418 that relate to the section 45V 

credit. 

Proposed § 1.45V–2 would provide 

special rules for purposes of the section 

45V credit. Proposed § 1.45V–4 would 

provide procedures for determining 

lifecycle GHG emissions rates for 

qualified clean hydrogen. Proposed 

§ 1.45V–5 would provide procedures for 

verification of qualified clean hydrogen 

production and sale or use. Proposed 

§ 1.45V–6 would provide rules for 

determining the placed in service date 

for an existing facility that is modified 

or retrofitted to produce qualified clean 

hydrogen. Additionally, proposed 

§ 1.48–15 would provide procedures for 

a taxpayer to elect to treat any qualified 

property that is part of a specified clean 

hydrogen production facility as energy 

property for purposes of the section 48 

credit. 

II. Definitions 

Proposed § 1.45V–1(a)(2) through (13) 

would provide generally applicable 

definitions of terms for purposes of 

section 45V, so much of sections 6417 

and 6418 of the Code that relate to the 

section 45V credit, and the section 45V 

regulations. The definitions for 

applicable amount, applicable 

percentage, and qualified clean 

hydrogen production facility would 

generally reflect the statutory 

definitions without additional 

elaboration on the terms. See proposed 

§ 1.45V–1(a)(2), (3), and (10). This part 

II discusses those definitions in the 

proposed regulations that provide 

additional clarity beyond the statutory 

language. 

A. Facility 

Proposed § 1.45V–1(a)(7)(i) would 

provide that, for purposes of the 

definition of a qualified clean hydrogen 

production facility provided at section 

45V(c)(3), the term ‘‘facility’’ means a 

single production line that is used to 

produce qualified clean hydrogen. A 

‘‘single production line’’ would include 

all components of property that function 

interdependently to produce qualified 

clean hydrogen. 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 to produce qualified 

clean hydrogen. Proposed § 1.45V– 

1(a)(7)(ii) would provide that a facility 

does not include equipment used to 

condition or transport hydrogen beyond 

the point of production. A facility 

would also not include electricity 

production equipment used to power 

the hydrogen production process, 

including any carbon capture 

equipment associated with the 

electricity production process. Proposed 

§ 1.45V–1(a)(7)(iii) would provide that 

components that have a purpose in 

addition to the production of qualified 

hydrogen may be part of a facility if 

such components function 

interdependently with other 

components to produce qualified clean 

hydrogen. Proposed § 1.45V–1(a)(7)(iv) 

would provide an example to illustrate 

the definition of facility for purposes of 

section 45V. 

B. Lifecycle Greenhouse Gas Emissions 

Proposed § 1.45V–1(a)(8)(i) would 

incorporate the statutory definition of 

the term ‘‘lifecycle greenhouse gas 

emissions’’ under section 45V(c)(1)(A) 

and (B), specifically providing that the 

term has the same meaning as that in 42 

U.S.C. 7545(o)(1)(H) as in effect on 

August 16, 2022, and includes 

emissions only through the point of 

production (well-to-gate) as determined 

under the most recent GREET model. 

C. Most Recent GREET Model 

Proposed § 1.45V–1(a)(8)(ii) would 

provide that the term ‘‘most recent 

GREET model’’ means the latest version 

of 45VH2–GREET developed by 

Argonne National Laboratory (ANL) that 

is publicly available on the first day of 

the taxpayer’s taxable year in which the 

qualified clean hydrogen for which the 

taxpayer is claiming the section 45V 

credit was produced.6 After 

consultation with the Department of 

Energy (DOE), the Treasury Department 

and the IRS believe that the use of the 

latest version of 45VH2–GREET would 

be appropriate because it is tailored to 

the administration of the section 45V 

tax credit and includes features that 

make it easy to use for taxpayers. Use 

of the latest version of 45VH2–GREET 

would also ensure that the pathways 

and approaches provided for 

determining well-to-gate emissions for 

various hydrogen production processes 

are of sufficient methodological 

certainty to be appropriate for 

determining eligibility of tax credits. 

The latest version of 45VH2–GREET is 

the only variant of GREET that is 

suitable for use and may be used to 

determine emissions rates for purposes 

of the section 45V credit. 

Further, proposed § 1.45V–1(a)(8)(ii) 

would provide that, if a version of 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89224 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

45VH2–GREET becomes publicly 

available after the first day of the taxable 

year of production (but still within such 

taxable year), then the taxpayer may, in 

its discretion, treat such version of 

45VH2–GREET as the most recent 

GREET model. 

Instead of defining ‘‘most recent 

GREET model’’ to be the latest version 

of 45VH2–GREET that is publicly 

available on the first day of the 

taxpayer’s taxable year, an alternative 

approach would be for the Secretary to 

determine that the latest version of 

45VH2–GREET is an appropriate 

‘‘successor model,’’ as provided by 

section 45V(c)(1)(B), for the purpose of 

administering the section 45V tax credit. 

The Treasury Department and the IRS 

request comment on these approaches. 

D. Emissions Through the Point of 

Production (Well-to-Gate) 

Proposed § 1.45V–1(a)(8)(iii) would 

provide that, for purposes of section 

45V(c)(1)(B) and proposed § 1.45V– 

1(a)(8)(i), the term ‘‘emissions through 

the point of production (well-to-gate)’’ 

means the aggregate lifecycle GHG 

emissions related to hydrogen produced 

at a hydrogen production facility during 

the taxable year through the point of 

production. It includes emissions 

associated with feedstock growth, 

gathering, extraction, processing, and 

delivery to a hydrogen production 

facility. It also includes the emissions 

associated with the hydrogen 

production process, inclusive of the 

electricity used by the hydrogen 

production facility and any capture and 

sequestration of carbon dioxide 

generated by the hydrogen production 

facility. 

E. Qualified Clean Hydrogen 

Proposed § 1.45V–1(a)(9)(i) would 

incorporate the statutory definition of 

the term ‘‘qualified clean hydrogen’’ 

provided at section 45V(c)(2)(A) and (B), 

including the requirement that the 

hydrogen be produced (i) in the United 

States or a U.S. territory (meaning 

possession as provided in section 

638(2)); (ii) in the ordinary course of a 

trade or business of the taxpayer; and 

(iii) for sale or use. Proposed § 1.45V– 

1(a)(9)(i)(B) would provide that, to 

qualify as qualified clean hydrogen, the 

production and sale or use of such 

hydrogen must be verified by an 

unrelated party (as required by section 

45V(c)(2)(B)(ii)). See also proposed 

§ 1.45V–5. 

Proposed § 1.45V–1(a)(9)(ii) would 

provide that for purposes of section 

45V(c)(2)(B)(i)(III) and proposed 

§ 1.45V–1(a)(9)(i)(C) the term ‘‘for sale 

or use’’ means for the primary purpose 

of making such hydrogen ready and 

available for sale or use. Storage of 

hydrogen before its sale or use would 

not disqualify such hydrogen from being 

considered produced for sale or use. 

III. Rules of General Applicability 

Proposed § 1.45V–1(b)(1) would 

provide the general rules for calculating 

the amount of the section 45V credit. 

Proposed § 1.45V–1(b)(2) would 

provide that, for purposes of section 

45V(a)(1) and proposed § 1.45V–1(b)(1), 

the term ‘‘taxpayer’’ means the taxpayer 

that owns the qualified clean hydrogen 

production facility at the time of the 

facility’s production of qualified clean 

hydrogen with respect to which the 

section 45V credit is claimed, regardless 

of whether such taxpayer is treated as a 

producer under section 263A of the 

Code or under any other provision of 

law with respect to such qualified clean 

hydrogen. This rule is intended to avoid 

unintended consequences that could 

arise with respect to contract 

manufacturing and tolling arrangements 

under § 1.263A–2(a)(1)(ii)(A) and 

(a)(1)(ii)(B)(1) in the context of the 

section 45V credit, as well as to simplify 

the administration of the section 45V 

credit and provide clarity for taxpayers. 

Proposed § 1.45V–1(c) would provide 

that, subject to any applicable Code 

sections that may limit the section 45V 

credit amount, the section 45V credit for 

any taxable year is determined with 

respect to the qualified clean hydrogen 

produced by the taxpayer during that 

taxable year although the verification of 

the production and sale or use of such 

hydrogen may occur in a later taxable 

year. However, the taxpayer would not 

be eligible to claim the section 45V 

credit until all relevant verification 

requirements, and the verification itself, 

have been completed. Therefore, despite 

such verification occurring in a later 

taxable year, the section 45V credit 

would be properly claimed with respect 

to the taxable year of hydrogen 

production and subject to the general 

period of limitations for filing a claim 

for credit or refund. Thus, if verification 

occurred after the extended return filing 

deadline for the taxable year in which 

the hydrogen was produced, the 

taxpayer would need to file an amended 

return or administrative adjustment 

request (AAR) to claim the section 45V 

credit for such hydrogen. The Treasury 

Department and the IRS request 

comments on this proposed rule, 

specifically whether taxpayers 

anticipate they will be able to complete 

all the requirements for claiming the 

section 45V credit, including the 

proposed requirements for verification 

specified below, by the extended return 

filing deadline for the taxable year of 

hydrogen production. If taxpayers 

anticipate that they will not be able to 

complete all the requirements by such 

filing deadline, comments are also 

requested on what specific alternatives 

to the proposed rule, if any, should be 

considered and their rationale. 

IV. Special Rules 

Proposed § 1.45V–2(a) would address 

the coordination between the section 

45V credit and the section 45Q credit. 

Proposed § 1.45V–2(b)(1) would 

provide an anti-abuse rule that would 

make the section 45V credit unavailable 

in extraordinary circumstances in 

which, based on a consideration of all 

the relevant facts and circumstances, the 

primary purpose of the production and 

sale or use of qualified clean hydrogen 

is to obtain the benefit of the section 

45V credit in a manner that is wasteful, 

such as the production of qualified 

clean hydrogen that the taxpayer knows 

or has reason to know will be vented, 

flared, or used to produce hydrogen. 

If the cost of producing qualified 

clean hydrogen were to be less than the 

amount of the section 45V credit that 

would be available with respect to such 

hydrogen, the Treasury Department and 

the IRS are concerned that taxpayers 

may have an incentive to produce 

qualified clean hydrogen solely for the 

purpose of exploiting the section 45V 

credit in a manner that is inconsistent 

with a purpose of section 45V, which is 

to provide an incentive to produce 

qualified clean hydrogen for a 

productive use. Producing and selling or 

using qualified clean hydrogen with the 

primary purpose of obtaining the benefit 

of the section 45V credit in a wasteful 

manner would not, in certain 

circumstances, satisfy the requirement 

in section 45V(c)(2)(B)(i)(II) for 

hydrogen to be produced in the ordinary 

course of a trade or business of the 

taxpayer. Proposed § 1.45V–2(b)(2) 

would provide an example illustrating 

this anti-abuse rule. 

V. Procedures for Determining Lifecycle 

Greenhouse Gas Emissions Rates for 

Qualified Clean Hydrogen. 

Proposed § 1.45V–4(a) would provide 

that the amount of the section 45V 

credit is determined under section 

45V(a) and proposed § 1.45V–1(b) based 

upon the lifecycle GHG emissions rate 

(as defined in proposed § 1.45V– 

1(a)(8)(i)) of all hydrogen produced at a 

qualified clean hydrogen production 

facility (as defined in proposed § 1.45V– 

1(a)(10)) during the taxable year. This 

determination is made following the 

close of each such taxable year and must 

include all hydrogen production from 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89225 

7National Energy Technology Laboratory, DOE, 

‘‘Comparison of Commercial, State-of-the-Art, 

Fossil-Based Hydrogen Production Technologies,’’ 

April 12, 2022, available at https://www.netl.doe.

gov/energy-analysis/details?id=ed4825aa-8f04- 

4df7-abef-60e564f636c9. 

the year. Further, proposed § 1.45V–4(a) 

would provide that the lifecycle GHG 

emissions rate for purposes of section 

45V is determined under the most 

recent GREET model (as defined in 

proposed § 1.45V–1(a)(8)(ii)). 

Additionally, proposed § 1.45V–4(a) 

would provide that in the case of any 

hydrogen for which a lifecycle GHG 

emissions rate has not been determined 

under the most recent GREET model for 

purposes of section 45V, a taxpayer 

producing such hydrogen may file a 

petition with the Secretary for a 

determination of the lifecycle GHG 

emissions rate with respect to such 

hydrogen (a provisional emissions rate 

(PER)). 

A. GREET Model 

Proposed § 1.45V–4(b) would provide 

procedures to calculate the lifecycle 

GHG emissions rate of hydrogen 

produced at a hydrogen production 

facility using the most recent GREET 

model as defined in proposed § 1.45V– 

1(a)(8)(ii) (referring to 45VH2–GREET). 

Proposed § 1.45V–4(b) would provide 

that for each taxable year during the 

period described in section 45V(a)(1), a 

taxpayer claiming the section 45V credit 

determines the lifecycle GHG emissions 

rate of hydrogen produced at a hydrogen 

production facility using the most 

recent GREET model. Such a 

determination is made separately for 

each hydrogen production facility the 

taxpayer owns and as of the close of 

each respective taxable year in which 

such production occurs (that is, such a 

determination is made for that taxable 

year’s total hydrogen production at a 

hydrogen production facility). Proposed 

§ 1.45V–4(b) would provide that in 

calculating the lifecycle GHG emissions 

rate for purposes of determining the 

amount of the section 45V credit, the 

taxpayer must accurately enter all 

information about its qualified clean 

hydrogen production facility requested 

within the interface of 45VH2–GREET 

in compliance with the most recent 

version of the Guidelines to Determine 

Well-to-Gate Greenhouse Gas (GHG) 

Emissions of Hydrogen Production 

Pathways using 45VH2–GREET (GREET 

User Manual), which currently can be 

found at: www.energy.gov/45vresources. 

Current 45VH2–GREET, previous 

versions of 45VH2–GREET, and 

subsequent updates to 45VH2–GREET 

can be found at www.energy.gov/ 

45vresources. Proposed § 1.45V–4(b) 

would provide that information for the 

location of 45VH2–GREET and 

accompanying documentation will be 

included in the instructions to the Form 

7210, Clean Hydrogen Production 

Credit. 

45VH2–GREET includes various 

hydrogen production pathways. As of 

the publication date of these proposed 

regulations, 45VH2–GREET includes the 

following hydrogen production 

pathways— 

(1) Steam methane reforming (SMR) of 

natural gas, with potential carbon 

capture and sequestration (CCS); 

(2) Autothermal reforming (ATR) of 

natural gas, with potential CCS; 

(3) SMR of landfill gas with potential 

CCS; 

(4) ATR of landfill gas with potential 

CCS; 

(5) Coal gasification with potential 

CCS; 

(6) Biomass gasification with corn 

stover and logging residue with no 

significant market value with potential 

CCS; 

(7) Low-temperature water 

electrolysis using electricity; and 

(8) High-temperature water 

electrolysis using electricity and 

potential heat from nuclear power 

plants. 

As described in Guidelines to 

Determine Well-to-Gate Greenhouse Gas 

(GHG) Emissions of Hydrogen 

Production Pathways using 45VH2– 

GREET (GREET User Manual), certain 

parameters in 45VH2–GREET are fixed 

assumptions, referred to as ‘‘background 

data’’ in this document. Users of 

45VH2–GREET may not change 

background data. Examples of 

background data include upstream 

methane loss rates, emissions associated 

with power generation from specific 

generator types, and emissions 

associated with regional electricity 

grids. Background data are parameters 

for which bespoke inputs from 

hydrogen producers are unlikely to be 

independently verifiable with high 

fidelity, given the current status of 

verification mechanisms. The Treasury 

Department and the IRS seek comment 

on the readiness of verification 

mechanisms that could be utilized for 

certain background data in 45VH2– 

GREET if it were reverted to foreground 

data in future releases. For example, the 

upstream methane loss rate is 

background data in 45VH2–GREET, and 

the Treasury Department and the IRS 

seek comment on conditions, if any, 

under which the methane loss rate may 

in future releases become foreground 

data (such as certificates that verifiably 

demonstrate different methane loss rates 

for natural gas feedstocks, sometimes 

described as responsibly sourced 

natural gas). 

45VH2–GREET allows users to input 

the quantity of valorized co-products 

(that is, co-products from the hydrogen 

production process that are 

productively utilized or sold) and 

allocates emissions to those co-products 

(rather than to the hydrogen production) 

as described in Guidelines to Determine 

Well-to-Gate Greenhouse Gas (GHG) 

Emissions of Hydrogen Production 

Pathways using 45VH2–GREET 2023. As 

described in that document, 45VH2– 

GREET utilizes the ‘‘system expansion’’ 

approach for all co-products if possible, 

but restricts the amount of steam coproduct that reformers can claim based 

on the quantity of steam that an 

optimally designed reformer is expected 

to be capable of producing based on 

modeling from the National Energy 

Technology Laboratory.7 This restriction 

is included within the model to avoid 

incentivizing generation or overproduction of hydrogen co-products like 

steam to enable access to a higher tax 

credit value by artificially reducing the 

calculated carbon intensity of the 

hydrogen (for example, by combustion 

of fuel onsite that is unnecessary for 

hydrogen production). The Treasury 

Department and the IRS seek comments 

on this approach, including whether 

alternative co-product accounting 

methods, such as physical allocation 

(for example, energy allocation or mass 

allocation) or allocation based on other 

characteristics, would better ensure 

well-to-gate carbon intensity of 

hydrogen production is accurately 

represented. 

B. Provisional Emissions Rate 

Proposed § 1.45V–4(c)(1) would 

provide that, for purposes of section 

45V(c)(2)(C) and proposed § 1.45V–4(a), 

the term ‘‘provisional emissions rate’’ or 

‘‘PER’’ means the lifecycle GHG 

emissions rate of the process by which 

qualified clean hydrogen is produced by 

the taxpayer at a qualified clean 

hydrogen production facility as 

determined by the Secretary under 

proposed § 1.45V–4(c). 

Proposed § 1.45V–4(c)(2)(i) would 

provide that a taxpayer may not file a 

petition with the Secretary for a PER 

unless a lifecycle GHG emissions rate 

has not been determined under the most 

recent GREET model (as defined in 

proposed § 1.45V–1(a)(8)(ii) as 45VH2– 

GREET) for hydrogen produced by the 

taxpayer at a hydrogen production 

facility. Proposed § 1.45V–4(c)(2)(i) 

would further provide that a lifecycle 

GHG emissions rate has not been 

determined under the most recent 

GREET model with respect to hydrogen 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89226 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

produced by the taxpayer at a hydrogen 

production facility if it uses a hydrogen 

production pathway that is not included 

in the most recent GREET model—that 

is, if either the feedstock used by such 

facility or the facility’s hydrogen 

production technology is not included 

in the most recent GREET model. 

For example, the initial version of 

45VH2–GREET does not model every 

possible biomass fuel as a feedstock nor 

does it represent all hydrogen 

production technologies that are 

currently of commercial interest or that 

may be commercially viable in the 

future, including geologic hydrogen, 

trigeneration, or other technologies if 

sufficient technical analysis had not 

been completed at the time the model 

was published. A taxpayer with one of 

these types of hydrogen production 

pathways may use the PER process to 

obtain carbon intensities because such 

hydrogen production technologies or 

feedstocks are not currently in 45VH2– 

GREET. To use the PER process, the 

hydrogen production pathway that the 

taxpayer is utilizing must either be 

consuming a feedstock that is not 

represented in 45VH2–GREET (for 

example, a type of biomass that is not 

represented in the model) or using a 

hydrogen production technology that is 

not represented in 45VH2–GREET (for 

example, technologies used to drill for 

geologic hydrogen or trigeneration that 

can use a fuel cell to co-produce 

hydrogen, heat, and power). A taxpayer 

may not use the PER process if its 

feedstock and hydrogen production 

technology are represented in 45VH2– 

GREET, even if the taxpayer disagrees 

with the underlying assumptions (that 

is, background data) or calculation 

approach used by the most recent 

45VH2–GREET. Future versions of 

45VH2–GREET may include additional 

hydrogen production pathways, such as 

geologic hydrogen, as sufficient 

technical information becomes available 

to provide consistent treatment in 

45VH2–GREET. 

Proposed § 1.45V–4(c)(2)(i) would 

also provide that, if a taxpayer’s request 

for an emissions value from the DOE 

under proposed § 1.45V–4(c)(5) with 

respect to the hydrogen produced by the 

taxpayer at a hydrogen production 

facility is pending at the time such 

hydrogen production facility’s pathway 

is included in an updated version of 

45VH2–GREET, the taxpayer’s request 

for an emissions value will be 

automatically denied. 

Proposed § 1.45V–4(c)(2)(ii) would 

specify that, notwithstanding proposed 

§ 1.45V–1(a)(8)(ii), for the taxable year 

in which the hydrogen production 

pathway the taxpayer uses to produce 

hydrogen at a qualified clean hydrogen 

production facility is first included in 

an updated version of 45VH2–GREET, 

the updated version of 45VH2–GREET 

will be considered the most recent 

GREET model with respect to the 

hydrogen produced by the taxpayer at 

the hydrogen production facility. 

1. Process for Filing a Provisional 

Emissions Rate Petition 

Proposed § 1.45V–4(c)(3) would 

provide that a taxpayer petitions the 

Secretary for a PER by attaching a PER 

petition to its Federal income tax return 

or information return for the first 

taxable year of hydrogen production 

ending within the 10-year period 

described in section 45V(a)(1) for which 

the taxpayer claims the section 45V 

credit for hydrogen to which the PER 

petition relates and for which a lifecycle 

GHG emissions rate has not been 

determined, as defined under proposed 

§ 1.45V–4(c)(2)(i). Proposed § 1.45V– 

4(c)(3) would provide that a PER 

petition must contain (i) an emissions 

value obtained from the DOE setting 

forth the DOE’s analytical assessment of 

the lifecycle GHG emissions rate 

associated with the facility’s hydrogen 

production pathway, and (ii) a copy of 

the taxpayer’s request to the DOE for an 

emissions value, including any 

information that the taxpayer provided 

to the DOE pursuant to the emissions 

value request process specified in 

proposed § 1.45V–4(c)(5). Proposed 

§ 1.45V–4(c)(3) would further provide 

that, if the taxpayer obtained more than 

one emissions value from the DOE, then 

the PER petition must contain the 

emissions value setting forth the 

lifecycle GHG emissions rate of the 

hydrogen for which the section 45V 

credit is claimed on the Form 7210, 

Clean Hydrogen Production Credit, to 

which the PER petition is attached. 

2. Provisional Emissions Rate 

Determination 

Proposed § 1.45V–4(c)(4) would 

provide that upon the IRS’s acceptance 

of the taxpayer’s Federal income tax 

return or information return containing 

a PER petition, the emissions value 

specified on such PER petition will be 

deemed accepted. Proposed § 1.45V– 

4(c)(4) would provide that a taxpayer 

would be able to rely upon an emissions 

value provided by the DOE for purposes 

of calculating and claiming a section 

45V credit, provided that any 

information, representations, or other 

data provided to the DOE in support of 

the request for an emissions value are 

accurate. Proposed § 1.45V–4(c)(4) 

would also state that the IRS’s deemed 

acceptance of such emissions value is 

the Secretary’s determination of the 

PER. Proposed § 1.45V–4(c)(4) would 

state, however, that the production and 

sale or use of such hydrogen must be 

verified by an unrelated party under 

section 45V(c)(2)(B)(ii) and in 

compliance with the procedures 

provided in proposed § 1.45V–5. 

Proposed § 1.45V–4(c)(4) would state 

that such verification and any 

information, representations, or other 

data provided to the DOE in support of 

the request for an emissions value are 

subject to later examination by the IRS. 

3. Department of Energy Emissions 

Value Request Process 

Proposed § 1.45V–4(c)(5) would 

provide that, in order to obtain an 

emissions value, an applicant must 

submit a request for an emissions value 

following procedures that will be 

specified by the DOE. The emissions 

value request process will open on April 

1, 2024. 

Proposed § 1.45V–5 would also 

provide that emissions values will be 

evaluated using the same well-to-gate 

system boundary that is employed in 

45VH2–GREET, as proposed in § 1.45V– 

1(a)(8)(iii). Additionally, proposed 

§ 1.45V–5 would also provide that if 

applicable, background data parameters 

in 45VH2–GREET would also be treated 

as background data (with fixed values 

that an applicant cannot change) in the 

emissions value request process. The 

emissions value request process would 

be subject to any guidance issued under 

section 45V, including any guidance 

related to the use of EACs. 

Proposed § 1.45V–4(c)(5) would also 

provide that an applicant may request 

an emissions value from the DOE only 

after a front-end engineering and design 

(FEED) study or similar indication of 

project maturity, such as project 

specification and cost estimation 

sufficient to inform a final investment 

decision, has been completed for the 

hydrogen production facility. 

Forthcoming guidance from the DOE, 

which will be published prior to the 

April 1, 2024, opening of the emissions 

value request process, will specify 

criteria the DOE intends to consider in 

evaluating whether a FEED study has 

been completed or that a similar 

indicator of project readiness has been 

achieved. The Treasury Department and 

the IRS seek comments on appropriate 

indicators of project readiness that 

should be in place before an applicant 

requests an emissions value to ensure 

that requests correspond to hydrogen 

production facilities with significant 

commercial interest, and standards 

against which these indicators could be 

measured. 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89227 

8 DOE will provide guidance and procedures at 

www.energy.gov/45vresources. 

9EPA Letter, available at https://home.

treasury.gov/system/files/136/45V-NPRM-EPAletter.pdf; DOE. 2023. ‘‘Assessing Lifecycle 

Greenhouse Gas Emissions Associated with 

Electricity Use for the Section 45V Clean Hydrogen 

Production Tax Credit.’’ Washington, DC: U.S. 

Department of Energy available at www.energy.gov/ 

45vresources. 

10EPA, ‘‘Double Counting,’’ last updated Feb. 5, 

2023, available at https://www.epa.gov/greenpower-markets/double-counting. 

Additionally, proposed § 1.45V– 

4(c)(5) would provide that the DOE may 

decline to review applications that are 

not responsive, including those 

applications that use a hydrogen 

production technology and feedstock 

already in GREET or applications that 

are incomplete. Guidance and 

procedures for applicants to request and 

obtain an emissions value from the DOE 

will be published by the DOE,8

including a process for, under limited 

circumstances, a revision to the DOE’s 

initial analytical assessment of an 

emissions value, such as to address 

revised technical information or facility 

design and operation. 

4. Effect of Provisional Emissions Rate 

Proposed § 1.45V–4(c)(6) would 

provide that a taxpayer may use a PER 

determined by the Secretary to calculate 

the amount of the clean hydrogen 

production credit under section 45V(a) 

and proposed § 1.45V–1(b) with respect 

to qualified clean hydrogen produced by 

the taxpayer at a qualified clean 

hydrogen production facility beginning 

with the first taxable year in which a 

PER determined by the Secretary has 

been obtained and for any subsequent 

taxable year during the 10-year period 

beginning on the date such facility was 

originally placed in service, provided all 

other requirements of section 45V are 

met, and until the lifecycle GHG 

emissions rate of such hydrogen has 

been determined (for purposes of 

section 45V(c)(2)(C)) under the most 

recent GREET model (as defined in 

proposed § 1.45V–1(a)(8)(ii)). 

Proposed § 1.45V–4(c)(6) would 

provide that the Secretary’s PER 

determination is not an examination or 

an inspection of books of account for 

purposes of section 7605(b) of the Code, 

and would not preclude or impede the 

IRS (under section 7605(b) or any 

administrative provisions adopted by 

the IRS) from later examining a return 

or inspecting books or records with 

respect to any taxable year for which the 

section 45V credit is claimed. Proposed 

§ 1.45V–4(c)(6) would provide that a 

verification report submitted under 

section 45V(c)(2)(B)(ii) and § 1.45V–5 

and any information, representations, or 

other data provided to the DOE in 

support of an emissions value request 

would still be subject to IRS 

examination. Further, proposed 

§ 1.45V–4(c)(6) would state that a PER 

determination would not mean that the 

IRS has determined that all the 

requirements of section 45V have been 

satisfied for any taxable year, nor would 

it create an inference that such a 

presumption exists. 

C. Use of Energy Attribute Certificates 

The Treasury Department and the IRS, 

in consultation with the United States 

Environmental Protection Agency (EPA) 

and the DOE, have preliminarily 

determined that energy attribute 

certificates (EACs) may be considered 

under certain conditions in 

documenting purchased electricity 

inputs and assessing emissions impacts 

of electricity used in the production of 

hydrogen for purposes of the section 

45V credit.9 For purposes of these 

proposed regulations, the term ‘‘EACs’’ 

refers solely to EACs that represent 

attributes of electricity generated by a 

specific facility or source. The EPA has 

advised that EACs are an established 

mechanism for substantiating the 

purchase of electricity from zero GHGemitting sources and that the use of 

EACs with attributes that meet certain 

criteria is an appropriate way for the 

Treasury Department and the IRS to 

document electricity inputs to 

electrolytic hydrogen production. Such 

EACs can also serve as a reasonable 

methodological proxy for quantifying 

certain indirect emissions associated 

with electricity for purposes of the 

section 45V credit. Similarly, the EPA 

and the DOE have advised that it would 

be appropriate for EACs with attributes 

that meet certain criteria to be included 

as part of the basis for assessing 

emissions for purposes of the section 

45V credit. The Treasury Department 

and the IRS have preliminarily 

determined that the use of certain EACs, 

which satisfy the qualifying EAC 

requirements (as specified in proposed 

§ 1.45V–4(d)(3)), is consistent with the 

references to subparagraph (H) of 

section 211(o)(1) of the Clean Air Act 

(42 U.S.C. 7545(o)(1)(H)) and the most 

recent GREET Model, as specified in 

section 45V(c)(1). 

Proposed § 1.45V–4(d)(1) would 

provide that for purposes of section 

45V, if a taxpayer determines a lifecycle 

GHG emissions rate for hydrogen 

produced at a hydrogen production 

facility using the most recent GREET 

model (as defined in proposed § 1.45V– 

1(a)(8)(ii)) or a PER (as defined in 

proposed § 1.45V–4(c)(1)), then the 

taxpayer may reflect in GREET or 

include in a PER such hydrogen 

production facility’s use of electricity as 

being from a specific electricity 

generating facility rather than the being 

from the regional electricity grid (as 

represented in 45VH2–GREET) only if 

the taxpayer acquires and retires a 

qualifying EAC (as defined in proposed 

§ 1.45V–4(d)(2)(iv)) for each unit of 

electricity that the taxpayer claims from 

such source. For example, one 

megawatt-hour of electricity used to 

produce hydrogen would need to be 

matched with one megawatt-hour of 

qualifying EACs. The Treasury 

Department and the IRS seek comments 

on whether a different treatment would 

be more appropriate to account for 

transmission and distribution line 

losses. 

Further, proposed § 1.45V–4(d)(1) 

would provide that to satisfy this 

requirement, a taxpayer’s acquisition 

and retirement of qualifying EACs must 

also be recorded in a qualified EAC 

registry or accounting system (as 

defined in proposed § 1.45V–4(d)(2)(v)) 

so that the acquisition and retirement of 

such EACs may be verified by a 

qualified verifier (as defined in 

proposed § 1.45V–5(h)). 

The double counting of EACs and 

their underlying attributes would 

undermine the integrity of lifecycle 

GHG emissions rate determinations that 

incorporate EACs. A double counting 

occurs if two different parties claim the 

same environmental benefits from the 

same generated energy.10 Uniformly 

requiring claims of using electricity 

generated from specific sources to be 

evidenced by EACs that meet the 

requirements of proposed § 1.45V– 

4(d)(1) would mitigate the risk of double 

counting. Thus, proposed § 1.45V– 

4(d)(1) would provide that certain 

requirements must be met regardless of 

whether the electricity generating 

facility giving rise to the qualifying EAC 

is grid connected, directly connected, or 

co-located with the hydrogen 

production facility (that is, regardless of 

whether the underlying source of the 

qualifying EAC physically supplies 

electricity through a direct connection 

to the hydrogen production facility). 

1. Definitions Related To Use of Energy 

Attribute Certificates 

Proposed § 1.45V–4(d)(2)(i) would 

define the term ‘‘commercial operations 

date’’ or ‘‘COD’’ as the date on which a 

facility that generates electricity begins 

commercial operations. The COD, as 

defined here, is the first date of the 

operation of the relevant electricity 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89228 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

11 DOE, National Transmission Needs Study, Oct. 

2023, available at https://www.energy.gov/sites/ 

default/files/2023-10/National_Transmission_

Needs_Study_2023.pdf. 

12EPA Letter, available at https://

home.treasury.gov/system/files/136/45V-NPRMEPA-letter.pdf; DOE. 2023. ‘‘Assessing Lifecycle 

Greenhouse Gas Emissions Associated with 

Electricity Use for the Section 45V Clean Hydrogen 

Production Tax Credit.’’ Washington, DC: U.S. 

Department of Energy, available at www.energy.gov/ 

45vresources. 

generating facility. The general rules for 

determining an electricity generating 

facility’s placed in service date for 

Federal income tax purposes would not 

apply in determining its COD. 

Proposed § 1.45V–4(d)(2)(ii) would 

define the term ‘‘energy attribute 

certificate’’ or ‘‘EAC’’ to mean a 

tradeable contractual instrument, issued 

through a qualified EAC registry or 

accounting system (as defined in 

proposed § 1.45V–4(d)(2)(v)), that 

represents the energy attributes of a 

specific unit of energy produced. An 

EAC may be acquired with or separately 

from the underlying energy it 

represents. An EAC can be retired by or 

on behalf of its owner, which is the 

party that has the right to claim the 

underlying attributes represented by an 

EAC. Renewable energy certificates 

(RECs) and other similar energy 

certificates issued through a registry or 

accounting system are forms of EACs. 

Proposed § 1.45V–4(d)(2)(iii) would 

define the term ‘‘eligible EAC’’ to mean 

an EAC that, with respect to the 

electricity to which the EAC relates, 

provides, at minimum, the following 

information: (i) a description of the 

electricity generating facility, including 

the technology and feedstock used to 

generate the electricity; (ii) the amount 

and units of electricity; (iii) the date on 

which the facility that generated the 

electricity first began commercial 

operations (referred to as the 

commercial operations date (COD)) (as 

defined in proposed § 1.45V–4(d)(2)(i)); 

(iv) for electricity that is generated 

before January 1, 2028, the calendar year 

in which such electricity was generated; 

(v) for electricity that is generated after 

December 31, 2027, the date and hour 

in which such electricity was generated; 

and (vi) a unique project identification 

number or assigned identifier for each 

EAC that can be used to cross reference 

any additional electricity generating 

facility information that may be needed, 

such as location. 

Proposed § 1.45V–4(d)(2)(iv) would 

define the term ‘‘qualifying EAC’’ to 

mean an eligible EAC (as defined in 

proposed § 1.45V–4(d)(2)(iii)) that meets 

the requirements of proposed § 1.45V– 

4(d)(3) and for which the satisfaction of 

those requirements has been verified by 

a qualified verifier (as defined in 

proposed § 1.45V–5(h)). 

Proposed § 1.45V–4(d)(2)(v) would 

define the term ‘‘qualified EAC registry 

or accounting system’’ to mean a 

tracking system that (i) assigns a unique 

identification number to each EAC 

tracked by such system, (ii) enables 

verification that only one EAC is 

associated with each unit of electricity, 

(iii) verifies that the underlying 

attributes of each EAC is claimed and 

retired only once, (iv) identifies the 

owner of each EAC, and (v) provides a 

publicly accessible view (for example, 

through an application programming 

interface) of all currently registered 

electricity generators in the tracking 

system to prevent the duplicative 

registration of such generators. 

Qualified EAC registries currently 

include, but are not limited to, the 

following: Electric Reliability Council of 

Texas (ERCOT); Michigan Renewable 

Energy Certification System (MIRECS); 

Midwest Renewable Energy Tracking 

System, Inc. (M–RETS); North American 

Registry (NAR); New England Power 

Pool Generation Information System 

(NEPOOL–GIS); New York Generation 

Attribute Tracking System (NYGATS); 

North Carolina Renewable Energy 

Tracking System (NC–RETS); PJM 

Generation Attribute Tracking System 

(PJM–GATS); and Western Electric 

Coordinating Council (WREGIS). 

Proposed § 1.45V–4(d)(2)(vi) would 

define the term ‘‘region’’ to mean a 

United States region derived from the 

National Transmission Needs Study 

(DOE Needs Study) that was released by 

the DOE on October 30, 2023.11 The 

DOE has mapped the DOE Needs Study 

regions to actual balancing authorities. 

The data file and map of the resulting 

United States regions can be found in 

Guidelines to Determine Well-to-Gate 

Greenhouse Gas (GHG) Emissions of 

Hydrogen Production Pathways using 

45VH2–GREET (GREET User Manual) as 

of December 26, 2023. The location of 

an electricity generation source and the 

location of a hydrogen production 

facility will be based on the balancing 

authority to which it is electrically 

interconnected (not its geographic 

location), with each balancing authority 

linked to a single region. The MISO 

balancing authority is an exception 

because it is split into two U.S. regions 

as shown in the map located at GREET 

User Manual as of December 26, 2023. 

Alaska, Hawaii, and each U.S. territory 

will be treated as separate regions. 

2. Eligible Energy Attribute Certificate 

Requirements 

Proposed § 1.45V–4(d)(3) would 

provide that an EAC meets the 

requirements to be a qualifying EAC if 

it meets the requirements for 

incrementality, temporal matching, and 

deliverability. The incrementality 

requirement in proposed § 1.45V– 

4(d)(3)(i) would require qualifying EACs 

to represent incremental source 

electricity, such as electricity from an 

electricity generating facility that has a 

recent COD. As discussed in more detail 

later in this section, the Treasury 

Department and the IRS are requesting 

comments on whether and under what 

circumstances electricity generated by 

an existing electricity generating facility 

(that is, with a less recent COD) that is 

dedicated to hydrogen production may 

be treated as satisfying the 

incrementality requirement. The 

temporal matching requirement in 

proposed § 1.45V–4(d)(3)(ii) would 

require that qualifying EACs are retired 

that represent electricity produced in 

the same time period in which the 

hydrogen production facility consumes 

electricity in the production of 

hydrogen. The deliverability 

requirement in proposed § 1.45V– 

4(d)(3)(iii) would require qualifying 

EACs to represent electricity that was 

produced by an electricity generating 

facility that is in the same region as the 

relevant hydrogen production facility. 

The Treasury Department and the IRS, 

in consultation with the EPA and the 

DOE, have preliminarily determined 

that these qualifying EAC requirements 

are consistent with the requirements of 

section 45V(c)(1)(A) and (B) of the 

Code.12 The EPA has advised that, based 

on its prior implementation of section 

211(o)(1)(H) of the Clean Air Act in 

other contexts, it would be reasonable 

and consistent with the EPA’s precedent 

for the Treasury Department and the IRS 

to determine that induced grid 

emissions are an anticipated real-world 

result of electrolytic hydrogen 

production that must be considered in 

lifecycle GHG analyses for purposes of 

the section 45V credit. Such 

interpretation would be consistent with 

the EPA’s long-standing interpretation 

and application of section 211(o)(1)(H) 

of the Clean Air Act in the context of the 

Renewable Fuel Standard (RFS) 

program. The EPA has also noted that 

EACs are an established means for 

documentation and verification of the 

electricity generation and purchase of 

zero-GHG electricity. Moreover, the EPA 

has advised that it believes it would be 

reasonable for the Treasury Department 

and the IRS to use EACs that possess 

specific attributes that meet certain 

criteria as a means of reducing the risk 

of induced grid emissions resulting from 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89229 

new load from electrolytic hydrogen 

production being added to an existing 

grid. Such requirements would mitigate 

the risk of inappropriately crediting 

hydrogen production that does not meet 

the lifecycle GHG levels required by 

section 45V. 

DOE has published a technical paper, 

Assessing Lifecycle Greenhouse Gas 

Emissions Associated with Electricity 

Use for the Section 45V Clean Hydrogen 

Production Tax Credit, which the 

Treasury Department and the IRS have 

reviewed, and which has informed the 

development of the proposed 

regulations. As discussed therein, 

incrementality, temporal matching, and 

deliverability requirements are 

important guardrails to ensure that 

hydrogen producers’ electricity use can 

be reasonably deemed to reflect the 

emissions associated with the specific 

generators from which the EACs were 

purchased and retired. If hydrogen 

producers rely on EACs without 

attributes that meet these three criteria 

there is a significant risk that hydrogen 

production would significantly increase 

induced grid GHG emissions beyond the 

allowable levels required to qualify for 

the section 45V credit. 

Electricity from a specific generator 

will have a GHG emissions profile that 

results from both its direct and indirect 

emissions. EACs with attributes that 

meet the three criteria are intended to 

address indirect GHG emissions 

resulting from the dynamics of the 

electricity market and the electric grid. 

If a hydrogen producer purchases zero 

GHG-emitting electricity that is 

represented by such EACs it is relatively 

straightforward to verify both the direct 

and indirect emissions resulting from 

such purchase and use. However, for 

minimal-emitting sources of electricity, 

additional considerations may be 

necessary to verify the full range of 

direct and indirect emissions. The 

Treasury Department and the IRS 

request comment on what information is 

needed to document and verify GHG 

emissions related to minimal-emitting 

electricity generation that is purchased 

and used for hydrogen production for 

purposes of claiming the section 45V 

credit. 

While the Treasury Department and 

the IRS are soliciting comment on the 

type of information that hydrogen 

producers must provide in order to 

document and verify the direct and 

indirect GHG emissions associated with 

purchased electricity generally, we are 

also seeking input on two specific types 

of electricity generation for which GHG 

emissions can be highly variable or 

uncertain: fossil fuel-powered electricity 

generation with CCS and biomasspowered electricity generation. With 

regard to non-minimally emitting 

electricity generation, and fossil fuelpowered generation and biomass 

powered generation with or without 

CCS in particular, the Treasury 

Department and the IRS request 

comment on mechanisms to verify 

accurately real-world emissions related 

to hydrogen production. This includes 

mechanisms for, among other things, 

verification of the origin of the 

feedstock, rate of carbon capture, and 

other parameters that are relevant to 

accurate lifecycle analysis, as well as 

the ability of EAC instruments to 

represent accurately such attributes. The 

Treasury Department and the IRS also 

request comment on specific lifecycle 

GHG emissions considerations, 

including the use of counterfactual 

scenarios, that should be considered in 

evaluating direct and indirect emissions 

associated with specific types of 

biomass and its consumption. The 

Treasury Department and the IRS also 

request comment on the extent and 

manner in which incrementality, 

temporal matching, and deliverability 

should be applied in accounting for 

existing or new electricity generation 

from biomass or fossil feedstock. These 

comments may inform future versions of 

45VH2–GREET. 

a. Incrementality 

Proposed § 1.45V–4(d)(3)(i)(A) would 

provide that an EAC meets the 

incrementality requirement if the 

electricity generating facility that 

produced the unit of electricity to which 

the EAC relates has a COD (as defined 

in proposed § 1.45V–4(d)(2)(i)) that is no 

more than 36 months before the 

hydrogen production facility for which 

the EAC is retired was placed in service. 

The Treasury Department and the IRS 

understand that EAC tracking systems 

capture the COD of each electricity 

generating facility during the 

registration process (often using data 

also reported to the Energy Information 

Administration), inclusive of month and 

year, which can be cross-referenced 

based on project identification codes 

included on those EACs. That COD 

should represent the initial date of 

operation for the relevant electricity 

generating facility. Third-party verifiers 

should use this data to confirm the 

eligibility of purchased and retired 

EACs. 

The Treasury Department and the IRS 

note that there are circumstances in 

which an existing higher-emitting 

electricity generating facility may make 

upgrades to subsequently deliver 

minimal-emitting electricity. For 

example, an existing fossil-fuel 

electricity generating facility may add 

CCS capability, thereby reducing its 

lifecycle emissions rate as determined 

in 45VH2–GREET. The Treasury 

Department and the IRS request 

comments on whether the electricity 

generated by such a facility should be 

considered incremental under 

circumstances such as if an existing 

fossil fuel electricity-generating facility 

after the addition of CCS (after upgrade), 

had a COD that is no more than 36 

months before the relevant hydrogen 

production facility was placed in 

service. Comment is also requested on 

the related question of whether, 

depending on its carbon dioxide capture 

rate, it would be appropriate to treat 

such a facility as a new source of 

minimal-emitting generation on the grid 

that would not be associated with 

induced grid emissions. Relevant to 

these questions, the Treasury 

Department and the IRS additionally 

request comment on what information 

would be needed to allow for qualifying 

EACs representing existing fossil fuelpowered electricity from facilities that 

have added CCS. In particular, comment 

is requested on whether there are 

safeguards that can ensure that a 

hydrogen producer’s purchase and use 

of electricity from an existing fossil fuelfired electricity generating facility that 

installs CCS does not result in indirect 

GHG emissions due to the dynamics of 

the electricity market and electric grid. 

The Treasury Department and the IRS 

request comment on the direct and 

induced emissions impacts of making 

such a facility eligible, and whether and 

under what circumstances it would be 

appropriate to do so. 

Proposed § 1.45V–4(d)(3)(i)(B) would 

provide an alternative test for 

establishing incrementality for 

electricity generating facilities that 

undergo an uprate. Proposed § 1.45V– 

4(d)(3)(i)(B) would provide that an EAC 

satisfies this alternative test if the 

electricity represented by the EAC is 

produced by an electricity generating 

facility that had an uprate no more than 

36 months before the hydrogen 

production facility with respect to 

which the EAC is retired was placed in 

service and such electricity is part of 

such electricity generating facility’s 

uprated production. 

Proposed § 1.45V–4(d)(3)(i)(B) would 

provide rules for determining uprated 

production. Specifically, proposed 

§ 1.45V–4(d)(3)(i)(B) would provide that 

an uprated electricity generating 

facility’s production must be prorated to 

each hour or year, consistent with the 

requirements in proposed § 1.45V– 

4(d)(3)(ii), of such facility’s generation 

by multiplying each hour’s production 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89230 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

13 DOE. 2023. ‘‘Assessing Lifecycle Greenhouse 

Gas Emissions Associated with Electricity Use for 

the Section 45V Clean Hydrogen Production Tax 

Credit.’’ Washington, DC: U.S. Department of 

Energy, available at www.energy.gov/45vresources. 

14Monthly Generator Report Based on Form 860 

available at https://www.eia.gov/electricity/data/ 

eia860m/. 

15See John Bistline et al, ‘‘Emissions and energy 

impacts of the Inflation Reduction Act’’, 

380Science, 1324–27, June 29, 2023, available at 

https://www.science.org/doi/10.1126/ 

science.adg3781; U.S. Energy Information 

Administration, Annual Energy Outlook 2023, 

March 16, 2023, available at https://www.eia.gov/ 

outlooks/aeo/tables_ref.php. 

16U.S. Energy Information Administration, 

Annual Energy Outlook 2023, March 16, 2023, 

available at https://www.eia.gov/outlooks/aeo/ 

tables_ref.php. 

by the uprated production rate to 

determine the electricity to which the 

uprate relates. Proposed § 1.45V– 

4(d)(3)(i)(B) would define key terms, 

including: (i) ‘‘uprate,’’ which means an 

increase in an electricity generating 

facility’s rated nameplate capacity (in 

nameplate megawatts); (ii) ‘‘pre-uprate 

capacity,’’ which means the nameplate 

capacity of an electricity generating 

facility immediately before an uprate; 

(iii) ‘‘post-uprate capacity,’’ which 

means the nameplate capacity of an 

electricity generating facility 

immediately after an uprate; (iv) 

‘‘incremental generation capacity,’’ 

which means the increase in an 

electricity generating facility’s rated 

nameplate capacity from the pre-uprate 

capacity to the post-uprate capacity; (v) 

‘‘uprated production rate,’’ which 

means the incremental generation 

capacity (in nameplate megawatts) 

divided by the post-uprate capacity (in 

nameplate megawatts); and (vi) 

‘‘uprated production,’’ which means the 

uprated production rate of an electricity 

generating facility multiplied by its total 

generation output in a given hour (in 

megawatt hours). Proposed § 1.45V– 

4(d)(3)(i)(C) would provide an example 

to illustrate the application of the 

alternative test for establishing 

incrementality due to uprates. 

The DOE has advised that there are 

circumstances during which diversion 

of existing minimal (that is, zero or 

near-zero) emissions power generation 

to hydrogen production is unlikely to 

result in significant induced GHG 

emissions.13 Such circumstances may 

include generation from minimalemitting power plants (i) that would 

retire absent the ability to sell electricity 

for qualified clean hydrogen production, 

(ii) during periods in which minimalemitting generation would have 

otherwise been curtailed, if marginal 

emissions rates are minimal, or (iii) in 

locations where grid-electricity is 100 

percent generated by minimal-emitting 

generators or where increases in load do 

not increase grid emissions, for 

example, due to State policy capping 

total GHG emissions such that new load 

must be met with minimal-emitting 

generators. The Treasury Department 

and the IRS seek comments on whether 

and how to provide alternative 

approaches to identifying circumstances 

in which there is minimal risk of 

significant induced grid emissions for 

certain existing electricity generating 

facilities. 

The Treasury Department and the IRS 

are considering providing, in the final 

regulations, alternative circumstances 

under which an EAC may be deemed to 

satisfy the incrementality requirement. 

The Treasury Department and the IRS 

request comments on these specific 

circumstances as described in part 

V.C.2.a.i through iii of this Explanation 

of Provisions. 

i. Avoided Retirements Approach 

The Treasury Department and the IRS 

seek comments on whether to recognize 

an avoided retirements approach that 

would treat EACs from an existing 

electricity generating facility as 

satisfying the incrementality 

requirement if the facility is likely to 

avoid retirement because of its 

relationship with a hydrogen 

production facility. With respect to this 

potential approach, the Treasury 

Department and the IRS request 

comments on the following: (i) the 

appropriate criteria that should be 

considered to assess retirement risk; (ii) 

the extent to which demonstration of 

financial loss, projected or actual local 

electricity market conditions, presence 

of out-of-market financial support 

(which could potentially include 

financial support driven by Federal or 

State policy, bilateral contracts for EACs 

or above-market electricity sales, or 

revenue provided by cost-of-service 

regulation), or upcoming relicensing 

decisions, in combination, are 

appropriate criteria to assess risk; (iii) 

industry best practices for estimating 

financial loss and the documentation 

necessary to support those estimates; 

(iv) the appropriate criteria that should 

be taken into account to assess the 

likelihood that an electricity generator’s 

relationship with a hydrogen 

production facility avoids retirement of 

the generator (for example, size of 

electrolyzer, co-location, contract 

length, or otherwise); (v) the appropriate 

criteria that should be taken into 

account to ensure that only electricity 

generation supplying the minimum 

hydrogen production necessary to avoid 

retirement is counted as incremental, 

and, in particular, whether there should 

be a cap on the amount of generation 

from a given facility that qualifies as 

incremental and how such a cap should 

be determined; (vi) the period during 

which any determination of 

incrementality of existing electricity 

generators would be maintained before 

a new showing would be required; (vii) 

the process by which eligibility for this 

approach should be determined and any 

related administrability considerations; 

and (viii) what role, if any, EAC tracking 

systems should play in the verification 

or tracking of eligible EACs from such 

electricity generators. 

With respect to processes that may be 

used to implement this approach, the 

Treasury Department and the IRS 

request comments on whether such 

approach should allow existing 

minimal-emitting generators that wish 

to provide EACs to hydrogen producers 

to demonstrate incrementality through 

submission to the IRS or another 

Federal agency, such as the DOE, 

specific information that supports a 

conclusion that the electricity generator 

is at risk of retirement that may be 

mitigated by sales to hydrogen 

producers, and, if so, what information 

and information submission process 

should be required. 

The available data on retirement risk 

indicates this approach may be 

warranted. Some clean power plants, 

primarily nuclear plants, have retired in 

recent years. Based on data from the 

Energy Information Administration 

(EIA), from 2013 through 2022, 10,800 

megawatts (MW) of nuclear, 1,700 MW 

of wind, 950 MW of hydropower, and 

360 MW of solar have retired.14 Studies 

have shown that there is risk of 

continued retirement in the years 

ahead.15 The EIA, for example, 

estimates that an additional 4,600 MW 

of existing nuclear plants may retire 

through 2032, equivalent to five percent 

of the existing nuclear fleet (1,900 

gigawatts (GW) of renewable power 

plants may retire as well).16 Some of 

these plant owners (primarily owners of 

nuclear plants) may decide whether to 

retire the plants based on the finances 

of continuing to operate the plants. It is 

likely that for some plants, additional 

revenue from selling EACs and 

electricity to hydrogen producers may 

improve the financial outlook of the 

plant and help avert retirement, thereby 

keeping the minimal-emitting power 

plant in operation and not resulting in 

induced grid emissions compared to a 

scenario in which the plant retires. 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89231 

17 DOE 2023. ‘‘Assessing Lifecycle Greenhouse 

Gas Emissions Associated with Electricity Use for 

the Section 45V Clean Hydrogen Production Tax 

Credit.’’ Washington, DC: U.S. Department of 

Energy, available at www.energy.gov/45vresources. 

ii. Zero or Minimal Induced Grid 

Emissions Through Modeling or Other 

Evidence 

The Treasury Department and the IRS 

seek comments on whether to provide 

an opportunity to demonstrate zero or 

minimal induced grid emissions 

through modeling or other evidence 

under specific circumstances. A 

demonstrated or modeled minimalemission approach could treat 

electricity produced by certain existing 

electricity generating facilities under 

certain circumstances as satisfying the 

incrementality requirement if it is 

demonstrated that such sources and 

circumstances would not give rise to 

significant induced grid emissions. 

Such a showing could be based on 

modeling or potentially be deemed to be 

made in certain circumstances based on 

regional grid characteristics, state 

policy, or facility history. 

The Treasury Department and the IRS 

request comments on this demonstrated 

or modeled minimal-emission approach, 

including: (i) the circumstances in 

which it should be available and the 

criteria that are appropriate to evaluate 

and determine whether those 

circumstances occur; (ii) who should 

apply under this approach, the 

electricity generation facility, the 

hydrogen producer, or both; (iii) what 

data or modeling should be submitted; 

(iv) best practices for making such 

demonstrations, including for ensuring 

the impartiality and replicability of 

calculation approaches; (v) how an 

administrator of such a program would 

validate the accuracy of applicant 

submissions; (vi) under what 

circumstances, if any, it would be 

appropriate to deem generation to 

satisfy the incrementality requirement 

without modeling, and what 

documentation should be provided in 

these cases; (vii) the process by which 

eligibility for this approach should be 

determined and any related 

administrability considerations; (viii) 

the period during which any 

determination of incrementality would 

be maintained before a new showing 

would be required; and (ix) the 

circumstances and capability of EACs 

and tracking systems to track and verify 

energy attributes from such sources. 

There are several circumstances that 

may be covered under this pathway. 

Periods of curtailment or zero or 

negative pricing is one such 

circumstance. Hydropower plants 

sometimes ‘‘spill’’ water, a form of 

curtailment. Curtailment of minimalemitting electricity generation tends to 

occur during times when wholesale 

electricity prices are zero or negative on 

a system-wide basis. Purchasing EACs 

from existing minimal-emitting 

electricity generators under these 

conditions would have limited or no 

induced grid emissions as these are 

times during which increased load 

would tend to be met by the otherwise 

curtailed minimal-emitting electricity 

generators rather than inducing 

increased generation from emitting 

electricity generators, and so is unlikely 

to significantly increase induced grid 

emissions. 

Similarly, if in a particular region, all 

generation—including imported 

generation—comes from minimalemitting electricity generators, then 

increased load is unlikely to 

significantly increase induced grid 

emissions. The same may be true if a 

region is subject to a state or local policy 

that ensures that new load is met with 

minimal-emitting electricity generation. 

There may be limited risk of 

significant induced GHG emissions for 

islanded generation systems. Diversion 

of generation from a minimal-emitting 

electricity generator that has never been 

connected to the grid generally may not 

have the same induced GHG emissions 

effects as diversion from an electricity 

generator that is connected to the grid. 

Induced GHG emissions could occur, 

however, if the energy demand that the 

existing minimal-emitting electricity 

generator previously met is instead met 

by a different, emitting, energy source. 

For example, an onsite minimalemitting electricity generator that 

powers an industrial facility could be 

diverted for hydrogen production, in 

which case the induced GHG emissions 

would depend on what happens at the 

site to meet the power needs of the 

industrial facility (unless the industrial 

facility ceases operation). 

iii. Formulaic Approaches To 

Addressing Incrementality From 

Existing Clean Generators 

The Treasury Department and the IRS 

recognize the difficulty in reliably 

identifying the specific electricity 

generators and specific times and places 

in which the circumstances described in 

part V.C.2.a.i and ii of this Explanation 

of Provisions might occur. Therefore, 

the Treasury Department and the IRS 

are also considering alternative 

approaches that would serve as proxy 

for all the pathways described in part 

V.C.2.a.i and part V.C.2.a.ii of this 

Explanation of Provisions. EACs that 

satisfy the incrementality requirement 

through this pathway would still be 

required to meet temporal matching and 

deliverability requirements. 

One such approach would deem five 

percent of the hourly generation from 

minimal-emitting electricity generators 

(for example, wind, solar, nuclear, and 

hydropower facilities) placed in service 

before January 1, 2023, as satisfying the 

incrementality requirement. This 

pathway may be appropriate because 

some circumstances (including periods 

of curtailment or times when generation 

from minimal-emitting electricity 

generation is on the margin) may make 

the resulting incremental generation 

difficult to anticipate or identify, or 

because the process for identifying the 

circumstances (such as avoided 

retirement risk or modeling of minimalemissions) may be overly burdensome 

to evaluate for specific electricity 

generators or require data that is not 

available. In some instances, for 

example, in determining whether EACs 

come from electricity generation that 

would otherwise have been curtailed, 

these circumstances require 

understanding of counterfactual ‘‘what 

if’’ scenarios that depend on numerous 

assumptions. In other circumstances, for 

example, in determining whether EACs 

come from minimal-emitting electricity 

generators that otherwise would have 

retired or if policy regimes restrict 

increases in grid emissions in the face 

of growing electricity demand, they may 

require detailed assessment and prequalification based on applicantsubmitted information and forecasts 

with related concerns about information 

accuracy. In still other cases, they may 

require complex geographically and 

temporally granular modeling and data 

(such as for marginal emission rates that 

consider operational and structural 

effects 17) in concert with hourly EAC 

tracking infrastructure that is not yet 

widely available. 

The Treasury Department and the IRS 

are mindful of the risk that an allowance 

without further temporal, spatial, and 

circumstantial precision results in 

hydrogen production facilities receiving 

credits for which they should not be 

eligible given their induced emissions 

rates. Given the risks of induced GHG 

emissions, the Treasury Department and 

the IRS believe that a broadly available 

allowance that is not tailored to specific 

geographic or other conditions should 

not be greater than the national average 

rate of the occurrence of the above 

circumstances and instead should be a 

conservative lower bound of the 

national average. The DOE reports that 

wind curtailment in 2022 averaged 5.3 

percent of total wind generation 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89232 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

18Office of Energy Efficiency & Renewable 

Energy, DOE, ‘‘Land-Based Wind Market Report: 

2023 Edition,’’ Aug. 24, 2023, available at https:// 

www.energy.gov/eere/wind/articles/land-basedwind-market-report-2023-edition. 

19Berkeley Lab, Electricity Markets & Policy, The 

Renewables and Wholesale Electricity Prices 

(ReWEP) Tool, available at https://emp.lbl.gov/ 

renewables-and-wholesale-electricity-prices-rewep. 

20For example, see New York State Energy 

Research and Development Authority (NYSERDA). 

2022 ‘‘Projected Emission Factors for New York 

State Grid Electricity,’’ NYSERDA Report Number 

22–18, available at https://www.nyserda.ny.gov/-/ 

media/Project/Nyserda/Files/Publications/EnergyAnalysis/22-18-Projected-Emission-Factors-forNew-York-Grid-Electricity.pdf. 

21See National Renewable Energy Laboratory, 

Energy Analysis, Cambium, available at https://

www.nrel.gov/analysis/cambium.html. Long-run 

marginal emissions rates at or near zero defined as 

under 25 kg CO2e/MWh. 

nationwide (data are only available for 

Independent System Operator (ISO) 

regions),18 and Lawrence Berkeley 

National Laboratory reports curtailment 

rates for solar photovoltaics at over 10 

percent of solar generation in ERCOT 

and over 3 percent in California 

Independent System Operator (CAISO). 

Purchasing EACs from existing 

minimal-emission electricity generators, 

whether or not from the electricity 

generators that would otherwise curtail 

their output, under these conditions 

would have limited risk of induced grid 

emissions. As noted earlier, curtailment 

is most likely to occur in the face of 

negative wholesale electricity prices if 

the marginal grid emissions rate is 

minimal or zero. Based on a data tool 

developed by Lawrence Berkeley 

National Laboratory that considers over 

50,000 wholesale pricing nodes across 

the nation, negative wholesale prices 

occurred during roughly five percent of 

hours over the last several years (6.3 

percent of hours in 2022, 5.8 percent in 

2021, 4.8 percent in 2020, 3.3 percent in 

2019, and 2.3% in 2018).19 These are 

times during which increased load is 

unlikely to increase significantly 

induced grid emissions.20 Modeled data 

from the National Renewable Energy 

Laboratory (NREL) is broadly consistent 

with these trends. Specifically, NREL’s 

Cambium data set for 2024 shows that 

long-run marginal emissions rates on a 

national basis are projected to be at or 

near zero for about five percent of hours, 

times during which minimal-emitting 

electricity generators are on the margin 

and often curtailed.21

In addition, some minimal-emitting 

electricity generators are at risk of 

retirement, including about five percent 

of the nuclear fleet according to EIA 

estimates. A percentage allowance can 

also serve as proxy for avoided 

retirements. 

The Treasury Department and the IRS 

seek comments on this five percentallowance approach, including the 

merits of this approach compared to the 

targeted pathways described, 

particularly with respect to balancing 

administrative feasibility and burden 

with accuracy of identifying 

circumstances with a low risk of 

induced grid emissions. The Treasury 

Department and the IRS also seek 

comments on whether 5 percent is the 

appropriate magnitude for an allowance. 

In particular, as noted earlier, data show 

that curtailment rates have increased in 

recent years, and NREL’s Cambium 

model predicts additional increases 

going forward. In light of these data and 

projections, the Treasury Department 

and the IRS seek comments on whether 

a higher amount, such as up to 10 

percent, would be appropriate, either in 

general or in certain cases or 

circumstances. The Treasury 

Department and the IRS also seek 

comments on: (i) how a five-percent 

allowance should be tracked, allocated, 

and administered and how feasible it is 

for EAC tracking systems to incorporate 

data on such an allowance; (ii) whether 

the five percent should apply to all 

existing minimal-emitting electricity 

generators in all locations or a subset 

and for what reasons; (iii) whether such 

an allowance should be assessed at the 

individual plant level or across an 

operator’s fleet within the same 

deliverability region; and (iv) any other 

administrability considerations. The 

Treasury Department and the IRS seek 

comments specifically on whether and 

how the ‘‘averaging’’ approach of a 

proxy appropriately captures the 

circumstances in which generation is 

incremental or does not generate 

induced grid emissions. The Treasury 

Department and the IRS also seek 

comments on how and whether the 

targeted alternative approaches or the 

other proxy approaches described 

subsequently in this part V.C.2.a.iii of 

this Explanation of Provisions might 

replace the five-percent allowance or 

might be coordinated with the 

allowance. 

The Treasury Department and the IRS 

invite comments on alternative 

formulaic, proxy approaches that might 

better capture conditions under which 

using existing minimal-emitting 

electricity generation to produce 

hydrogen does not significantly impact 

induced grid emissions. The Treasury 

Department and the IRS request 

comments on whether there would be 

an appropriate, more formulaic 

approach to capturing retirement risk, 

instead of the application-based process 

or the five-percent allowance. 

Comments are specifically requested on 

whether such an alternative approach 

should be limited to facilities with 

specific technical, market, or geographic 

characteristics corresponding with a 

greater risk of retirement (for example, 

participation in a wholesale market, 

lack of state support for a facility, 

nuclear plants with a single reactor) and 

higher likelihood that using a subset of 

electricity generation and related EACs 

for hydrogen production would 

minimize the risk. 

In particular, the Treasury 

Department and the IRS seek comments 

on whether existing nuclear and 

hydroelectric facilities that need to 

undertake a relicensing process are 

generally at higher risk of retirement 

without additional financial assistance 

and, if so, what considerations should 

be integrated into a potential formulaic 

approach. Comments are further 

requested on whether there are 

particular characteristics of hydrogen 

production facilities associated with 

existing generators at risk of retirement 

that should be considered (i) to 

demonstrate that the hydrogen 

production reduces retirement risk, 

such as co-location of hydrogen 

production with an existing generator 

and (ii) to assess the minimum 

hydrogen production necessary to 

reduce retirement risk, such as 

limitations on project size, electrolyzer 

capacity, or percent of generation used 

by the hydrogen production. Comments 

are further requested on how to 

determine the portion of such electricity 

generation and related EACs, which is 

generally likely to be sufficient to 

minimize that risk. Similarly, with 

respect to the modeled or demonstrated 

approach described in part V.C.2.a.ii of 

this Explanation of Provisions, the 

Treasury Department and the IRS 

request comments on whether there are 

formulaic approaches that might be 

used instead of an application-based 

pre-qualification process and the broad 

five-percent allowance. 

For each of these possible alternative 

approaches to establish incrementality, 

the Treasury Department and the IRS 

request comments on how eligibility for 

the approach may be reliably verified by 

an unrelated party and administered by 

the IRS. 

b. Temporal Matching 

Proposed § 1.45V–4(d)(3)(ii)(A) would 

provide the general rule that an EAC 

satisfies the temporal matching 

requirement if the electricity 

represented by the EAC is generated in 

the same hour that the taxpayer’s 

hydrogen production facility uses 

electricity to produce hydrogen. 

Proposed § 1.45V–4(d)(3)(ii)(B) would 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89233 

22 DOE. 2023. ‘‘Assessing Lifecycle Greenhouse 

Gas Emissions Associated with Electricity Use for 

the Section 45V Clean Hydrogen Production Tax 

Credit,’’ Washington, DC: U.S. Department of 

Energy, available at www.energy.gov/45vresources. 23Electric Power Research Institute, ‘‘24/7 

Carbon-free Energy: Matching Carbon-free Energy 

Procurement to Hourly Electric Load,’’ Dec. 15, 

2022, available at https://www.epri.com/research/ 

products/000000003002025290. 24Center for Research Solutions, ‘‘Readiness for 

Hourly: U.S. Renewable Energy Tracking Systems,’’ 

June 15, 2023, available at https://resourcesolutions.org/wp-content/uploads/2023/06/ 

Readiness-for-Hourly-U.S.-Renewable-EnergyTracking-Systems.pdf. 

25 DOE. 2023. ‘‘Assessing Lifecycle Greenhouse 

Gas Emissions Associated with Electricity Use for 

the Section 45V Clean Hydrogen Production Tax 

Credit,’’ Washington, DC: U.S. Department of 

Energy, available at: www.energy.gov/45vresources. 

26 DOE, National Transmission Needs Study, Oct. 

2023, available at https://www.energy.gov/sites/ 

default/files/2023-10/National_Transmission_

Needs_Study_2023.pdf. 

provide a transition rule to allow an 

EAC that represents electricity 

generated before January 1, 2028 to fall 

within the general rule provided in 

proposed § 1.45V–4(d)(3)(ii)(A) if the 

electricity represented by the EAC is 

generated in the same calendar year that 

the taxpayer’s hydrogen production 

facility uses electricity to produce 

hydrogen. The DOE has advised that 

hourly matching is necessary to 

properly address significant indirect 

emissions from electricity use and that 

the tracking systems and related 

contractual structures for hourly 

matching will take some time to develop 

to an appropriate level of maturity.22

This transition rule is intended to 

provide time for the EAC market to 

develop the hourly tracking capability 

necessary to verify compliance with this 

requirement. 

Hourly tracking systems for EACs are 

not yet broadly available across the 

country and will take some time to 

develop.23 In a recent survey of nine 

existing tracking systems,24 two of the 

tracking systems indicated that they are 

already tracking on an hourly basis, 

although software functionality in these 

two systems remains limited. Fully 

developing the functionality of these 

systems will take time, as will creating 

and developing the functionality of 

hourly tracking infrastructure in other 

regions of the country. Of the other 

tracking systems, assuming that 

challenges are overcome, four gave a 

timeline of less than one year to two 

years, and one gave a timeline of three 

to five years; in the latter case, the 

respondent noted that the timeline 

could be closer to three years if there is 

full state agency buy-in, clear 

instructions are received from federal or 

state agencies, and funding for 

stakeholder participation is made 

available. Two tracking systems 

declined to give a timeline to develop 

this functionality. In the same survey, 

tracking systems identified a number of 

challenges to hourly tracking that will 

need to be overcome, including cost, 

regulatory approval, interactions with 

state policy, sufficient stakeholder 

engagement, data availability and 

management, and user confusion. 

Moreover, once the tracking software 

infrastructure is in place nationally, it 

may take additional time for 

transactional structures and efficient 

hourly EAC markets to develop. Among 

the issues that require resolution as EAC 

tracking systems move to hourly 

resolution is the treatment of electricity 

storage.25

Given the state of tracking systems, 

the expected responses to this proposed 

rule, and the impact of demand to drive 

development of the tracking systems, 

the Treasury Department and the IRS 

anticipate that the proposed duration of 

the transition rule would allow 

sufficient time for systems to develop 

hourly tracking mechanisms and for the 

associated trading markets to develop. 

The Treasury Department and the IRS 

acknowledge uncertainty in the timing 

of implementing an hourly matching 

requirement, however, and request 

comments on the appropriate duration 

of this transition rule to hourly 

matching, including specific data 

regarding current industry practices, the 

predicted timelines for development of 

hourly tracking mechanisms, and the 

predicted timeline for market 

development for hourly EACs. 

c. Deliverability 

Proposed § 1.45V–4(d)(3)(iii) would 

provide that an EAC meets the 

deliverability requirements if the 

electricity represented by the EAC is 

generated by a source that is in the same 

region (as defined in proposed § 1.45V– 

4(d)(2)(vi)) as the relevant hydrogen 

production facility. This approach 

provides reasonable assurances of 

deliverability of electricity because the 

regions, as defined earlier, were 

developed by the DOE in consideration 

of transmission constraints and 

congestion and, in many cases, match 

power-systems operation. The Treasury 

Department and the IRS recognize that 

transmission limitations also exist 

within these specified regions but are 

not aware of readily administrable 

options to reflect those grid constraints. 

The DOE has generally found that interregional transmission constraints tend 

to be greater than within-region 

constraints.26 The Treasury Department 

and the IRS request comments on 

whether there are additional ways to 

establish deliverability, such as 

circumstances indicating that electricity 

is actually deliverable from an 

electricity generating facility to a 

hydrogen production facility, even if the 

two are not located in the same region 

or if the clean electricity generator is 

located outside of the United States. 

VI. Procedures for Verification of 

Qualified Clean Hydrogen Production 

and Sale or Use 

Section 45V(c)(2)(B)(ii) provides that 

hydrogen is not qualified clean 

hydrogen unless ‘‘the production and 

sale or use of such hydrogen is verified 

by an unrelated party.’’ 

A. Requirements for Verification 

Reports 

Proposed § 1.45V–5(a) would provide 

that a verification report must be 

attached to the taxpayer’s Form 7210, 

Clean Hydrogen Production Credit, or 

any successor form(s), and included 

with the taxpayer’s Federal income tax 

return or information return for each 

qualified clean hydrogen production 

facility and for each taxable year in 

which the taxpayer claims the section 

45V credit. Proposed § 1.45V–5(b) 

would provide that the verification 

report specified in § 1.45V–5(a) must be 

prepared by a qualified verifier (as 

defined in § 1.45V–5(h)) under penalties 

of perjury. Proposed § 1.45V–5(b)(1) 

through (6) would describe the 

following information that a verification 

report must contain: (i) an attestation 

from the qualified verifier regarding the 

taxpayer’s production of qualified clean 

hydrogen for sale or use during the 

taxable year (production attestation), (ii) 

an attestation from the qualified verifier 

regarding the amount of such qualified 

clean hydrogen sold or used (sale or use 

attestation), (iii) an attestation from the 

qualified verifier regarding conflicts of 

interest (conflict attestation), (iv) certain 

information regarding the qualified 

verifier, including documentation of the 

qualified verifier’s qualifications 

(qualified verifier statement), (v) certain 

general information about the taxpayer’s 

hydrogen production facility where the 

hydrogen production undergoing 

verification occurred, and (vi) any 

documentation necessary to substantiate 

the verification process given the 

standards and best practices prescribed 

by the qualified verifier’s accrediting 

body and the circumstances of the 

taxpayer and the taxpayer’s hydrogen 

production facility. 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89234 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

B. Requirements for Production 

Attestation 

Proposed § 1.45V–5(c)(1) would 

provide that a production attestation 

must state, under penalties of perjury, 

that the qualified verifier performed a 

verification sufficient to determine that 

the operation, during the applicable 

taxable year, of the hydrogen production 

facility that produced the hydrogen for 

which the section 45V credit is claimed, 

and any EACs applied pursuant to 

proposed § 1.45V–4(d), are accurately 

reflected in: (i) the amount of qualified 

clean hydrogen produced by the 

taxpayer that is claimed on the Form 

7210, Clean Hydrogen Production 

Credit, or any successor form(s), to 

which the verification report is 

attached; and (ii) either the data the 

taxpayer entered into the most recent 

GREET model (as defined in proposed 

§ 1.45V–1(a)(8)(ii)) to determine the 

lifecycle GHG emissions rate that is 

claimed on the Form 7210, or the data 

the taxpayer submitted in the PER 

petition relating to the hydrogen for 

which the section 45V credit is claimed, 

and which was provided to the DOE in 

support of the taxpayer’s request for the 

emissions value provided in the PER 

petition. For any acquisition and 

retirement of qualifying EACs, the 

verification must include validation that 

any purchases of EACs from specified 

sources as entered into the most recent 

GREET model or used as part of a PER 

application meet all requirements for 

being qualifying EACs, and that any 

required technical parameters of the 

generating source (for example, CCS 

capture rate, or sources of biomass) as 

entered into 45VH2–GREET or as part of 

a PER application are accurate. 

Proposed § 1.45V–5(c)(2) would 

provide that, if the production 

attestation attests to the information 

specified in proposed § 1.45V– 

5(c)(1)(ii)(B), then the production 

attestation must also specify the 

emissions value received from the DOE 

that was calculated using such data, 

expressed in kilograms of CO2e per 

kilogram of hydrogen. 

Proposed § 1.45V–5(c)(3) would 

provide that the production attestation 

must specify the lifecycle GHG 

emissions rate (expressed in kilograms 

of CO2e per kilogram of hydrogen) and 

the amount of qualified clean hydrogen 

produced by the taxpayer, (expressed in 

kilograms), that are claimed on the Form 

7210, Clean Hydrogen Production 

Credit, or any successor form(s), to 

which the verification report is 

attached. 

C. Requirements for Sale or Use 

Attestation 

Proposed § 1.45V–5(d)(1) would 

provide that the sale or use attestation 

must be an attestation, made under 

penalties of perjury, that the qualified 

verifier performed a verification 

sufficient to determine that the amount 

of qualified clean hydrogen that is 

specified in the production attestation 

(described in proposed § 1.45V–5(c)), 

and that is claimed on the Form 7210, 

Clean Hydrogen Production Credit, or 

any successor form(s), to which the 

verification report is attached, has been 

sold or used. 

Proposed § 1.45V–5(d)(2) would 

provide that, for purposes of section 

45V(c)(2)(B)(ii) and § 1.45V–1(a)(9)(ii), 

the hydrogen specified in proposed 

§ 1.45V–5(d)(1) has been used if a 

person makes a verifiable use of such 

hydrogen. Section 45V does not deny a 

section 45V credit if the hydrogen is 

sold or used outside the United States 

(as defined in section 638(1) or a United 

States territory (having the meaning of 

the term ‘‘possession’’ as defined in 

section 638(2)). Thus, a verifiable use 

can occur within or outside the United 

States. A verifiable use can be made by 

the taxpayer or a person other than the 

taxpayer. For example, in a tolling 

arrangement pursuant to which a 

service recipient provides raw materials 

or inputs such as water or electricity to 

a third-party service provider that owns 

a hydrogen production facility (the 

toller), and the toller produces hydrogen 

for the service recipient using the 

service recipient’s raw materials or 

inputs in exchange for a fee, use of the 

hydrogen by the service recipient would 

be a verifiable use. However, a verifiable 

use includes neither (i) use of hydrogen 

to generate electricity that is then 

directly or indirectly used in the 

production of more hydrogen, nor (ii) 

venting or flaring hydrogen. 

Excluding those activities from 

qualifying as a verifiable use is intended 

to prevent the wasteful production of 

hydrogen and abusive section 45V 

credit generation schemes. For example, 

without this restriction, the section 45V 

credit could be exploited through the 

production of qualified clean hydrogen 

that is used to generate electricity that 

is, in turn, used to produce additional 

qualified clean hydrogen. The primary 

purpose of these arrangements would be 

the exploitation of the section 45V 

credit and possibly other Federal 

income tax credits. Such arrangements 

are inconsistent with the intent of 

section 45V and with the statutory 

‘‘use’’ requirement because they would 

incentivize the inefficient production of 

qualified clean hydrogen for 

unproductive use and would result in 

excessive claims of the section 45V 

credit. The Treasury Department and 

the IRS request comments on whether 

there are additional safeguards that the 

regulations could adopt to prevent this 

or similar types of abusive section 45V 

credit claims, including section 45V 

credit claims arising if such circular 

arrangements are coordinated among 

multiple parties. 

D. Requirements for Conflict Attestation 

Proposed § 1.45V–5(e)(1) would 

provide that the verification report must 

also include a conflict attestation, made 

under penalties of perjury, that (i) the 

qualified verifier has not received a fee 

based to any extent on the value of any 

section 45V credit that has been or is 

expected to be claimed by any taxpayer 

and no arrangement has been made for 

such fee to be paid at some time in the 

future; (ii) the qualified verifier was not 

a party to any transaction in which the 

taxpayer sold qualified clean hydrogen 

it had produced or in which the 

taxpayer purchased inputs for the 

production of such hydrogen; (iii) the 

qualified verifier is not related, within 

the meaning of section 267(b) or 

707(b)(1), to, or an employee of, the 

taxpayer; (iv) the qualified verifier is not 

married to an individual described in 

proposed § 1.45V–5(e)(1)(iii); and (v) if 

the qualified verifier is acting in his or 

her capacity as a partner in a 

partnership, an employee of any person, 

whether an individual, corporation, or 

partnership, or an independent 

contractor engaged by a person other 

than the taxpayer, the attestations under 

proposed § 1.45V–5(e)(1)(i) through (iv) 

must be made with respect to the 

partnership or the person who employs 

or engages the qualified verifier. 

Proposed § 1.45V–5(e)(2) would 

provide that, if a transfer election has 

been made under section 6418(a) of the 

Code with respect to the section 45V 

credit, then the attestation requirements 

under proposed § 1.45V–5(e)(1) would 

need to be made with respect to the 

qualified verifier’s independence from 

both the eligible taxpayer (as defined in 

section 6418(f)(2) and § 1.6418–1(b)) 

and the transferee taxpayer (as 

described in section 6418(a) and defined 

in § 1.6418–1(m)). 

E. Requirements for Qualified Verifier 

Statement 

Proposed § 1.45V–5(f) would provide 

that the qualified verifier statement 

must contain (i) the qualified verifier’s 

name, address, and taxpayer 

identification number; (ii) the qualified 

verifier’s qualifications to conduct the 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89235 

verification, including the qualified 

verifier’s education and experience and 

a photocopy of the qualified verifier’s 

certificate received from their 

accrediting body; (iii) if the qualified 

verifier is acting in his or her capacity 

as a partner in a partnership, an 

employee of any person, whether an 

individual, corporation, or partnership, 

or an independent contractor engaged 

by a person other than the taxpayer, the 

name, address, and taxpayer 

identification number of the partnership 

or the person who employs or engages 

the qualified verifier; (iv) the signature 

of the qualified verifier and the date 

signed by the qualified verifier; and (v) 

a statement that the verification was 

conducted for Federal income tax 

purposes. 

F. General Information Required To Be 

Included in Verification Report 

Proposed § 1.45V–5(g) would provide 

that the verification report must include 

(i) the location of the hydrogen 

production facility; (ii) a description of 

the hydrogen production facility, 

including its method of producing 

hydrogen; (iii) the type(s) of feedstock(s) 

used by the hydrogen production 

facility during the taxable year of 

production; (iv) the amount(s) of 

feedstock(s) used by the hydrogen 

production facility during the taxable 

year of production; and (v) a list of the 

metering devices used to record any 

data used by the qualified verifier to 

support the production attestation along 

with a statement that the qualified 

verifier is reasonably assured that the 

device(s) underwent industryappropriate quality assurance and 

quality control, and that the accuracy 

and calibration of the device has been 

tested in the last year. 

G. Definitions Related to Verifications 

Proposed § 1.45V–5(h) would define 

the term ‘‘qualified verifier’’ to mean 

any individual or organization with 

active accreditation (i) as a validation 

and verification body from the 

American National Standards Institute 

National Accreditation Board; or (ii) as 

a verifier, lead verifier, or verification 

body under the California Air Resources 

Board Low Carbon Fuel Standard 

program. The Treasury Department and 

the IRS request comment on this 

definition of ‘‘qualified verifier,’’ 

including on whether additional 

accreditations that demonstrate 

sufficient expertise for verification of 

lifecycle analysis for the section 45V 

credit should be included. 

Proposed § 1.45V–5(i) would define 

the term ‘‘unrelated party’’ (as described 

in section 45V(c)(2)(B)(ii)) to mean a 

qualified verifier who meets the conflict 

attestation requirements as provided in 

proposed § 1.45V–5(e). 

H. Requirements for Taxpayers Claiming 

Both the Section 45V Credit and the 

Section 45 Credit or the Section 45U 

Credit 

Proposed § 1.45V–5(j) would provide 

requirements that, in the case of a 

taxpayer who produces electricity for 

which either the section 45 credit or 

section 45U credit is claimed and the 

taxpayer or a related person (as defined 

in section 45(e)(4)) uses such electricity 

(and related EACs) to produce hydrogen 

for which the section 45V credit is 

claimed, the verification report must 

also contain attestations that the 

qualified verifier performed a 

verification sufficient to determine that 

(i) the electricity used to produce 

hydrogen was produced at the relevant 

facility for which either the section 45 

credit or section 45U credit was 

claimed, (ii) the given amount of such 

electricity (in kilowatt hours) used to 

produce hydrogen at the relevant 

qualified clean hydrogen production 

facility is reasonably assured of being 

accurate, and (iii) the electricity for 

which a section 45 or section 45U credit 

was claimed is represented by EACs that 

are retired in connection with the 

production of such hydrogen. 

I. Required Time for Filing a 

Verification Report 

Proposed § 1.45V–5(k) would provide 

that a verification report must be signed 

and dated by the qualified verifier no 

later than (i) the due date, including 

extensions, of the Federal income tax 

return or information return for the 

taxable year during which the hydrogen 

undergoing verification is produced; or 

(ii) in the case of a section 45V credit 

first claimed on an amended return or 

administrative adjustment request 

(AAR), the date on which the amended 

return or AAR is filed. 

VII. Placed in Service Date for Existing 

Facility That Is Modified or Retrofitted 

To Produce Qualified Clean Hydrogen 

A. Modification of an Existing Facility 

Under section 45V(d)(4), in the case of 

any facility that was originally placed in 

service before January 1, 2023, and, 

prior to the modification (described in 

section 45V(d)(4)(B)), did not produce 

qualified clean hydrogen, and after the 

date the facility was originally placed in 

service (i) is modified to produce 

qualified clean hydrogen, and (ii) 

amounts paid or incurred with respect 

to the modification are properly 

chargeable to the taxpayer’s capital 

account, the facility will be deemed to 

have been originally placed in service as 

of the date the property required to 

complete the modification is placed in 

service. The rule in section 45V(d)(4) for 

modification of existing facilities 

applies to modifications made after 

December 31, 2022. See section 

13204(a)(5)(C) of the IRA. 

Proposed § 1.45V–6(a)(1) would 

incorporate the statutory provisions of 

section 45V(d)(4). Proposed § 1.45V– 

6(a)(2) would further provide that an 

existing facility will not be deemed to 

have been originally placed in service as 

of the date the property required to 

complete the modification is placed in 

service unless the modification is made 

for the purpose of enabling the facility 

to produce qualified clean hydrogen and 

the taxpayer pays or incurs an amount 

with respect to such modification that is 

properly chargeable to the taxpayer’s 

capital account for the facility. Proposed 

§ 1.45V–6(a)(2) would also provide that 

a modification is made for the purpose 

of enabling the facility to produce 

qualified clean hydrogen if the facility 

could not produce hydrogen with a 

lifecycle GHG emissions rate that is less 

than or equal to 4 kilograms of CO2e per 

kilogram hydrogen but for the 

modification. Changing fuel inputs to 

the hydrogen production process, such 

as switching from conventional natural 

gas to renewable natural gas, would not 

qualify as a facility modification for 

purposes of proposed § 1.45V–6(a)(2). 

Examples 1, 2, and 3 of proposed 

§ 1.45V–6(c) would provide examples 

illustrating the application of the rules 

provided by section 45V(d)(4) and 

proposed § 1.45V–6(a). 

B. Retrofit of an Existing Facility (80/20 

Rule) 

Proposed § 1.45V–6(b) would provide 

that an existing facility may establish a 

new date on which it is considered 

originally placed in service for purposes 

of section 45V, even though the facility 

contains some used property, provided 

the fair market value of the used 

property is not more than 20 percent of 

the facility’s total value (the cost of the 

new property plus the value of the used 

property) (80/20 Rule). Proposed 

§ 1.45V–6(b) would further provide that 

for purposes of the 80/20 Rule, the cost 

of new property includes all properly 

capitalized costs of the new property 

included within the facility. Proposed 

§ 1.45V–6(b) would provide that, if a 

facility satisfies the requirements of the 

80/20 Rule, then the date on which such 

facility is considered originally placed 

in service for purposes of section 

45V(a)(1) is the date on which the new 

property added to the facility is placed 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89236 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

in service. Proposed § 1.45V–6(b) would 

also provide that the 80/20 Rule applies 

to any existing facility, regardless of 

whether the facility previously 

produced qualified clean hydrogen and 

regardless of when the facility was 

originally placed in service (before 

application of proposed § 1.45V–6(b)). 

Examples 4 and 5 of proposed § 1.45V– 

6(c) would provide examples 

illustrating the application of the 80/20 

Rule. 

VIII. Election To Treat a Clean 

Hydrogen Production Facility as Energy 

Property for Purposes of the Section 48 

Credit 

A. Overview 

Section 48(a)(15) allows a taxpayer 

that owns and places in service a 

specified clean hydrogen production 

facility (as defined in section 

48(a)(15)(C)) to make an irrevocable 

election to claim the section 48 credit in 

lieu of the section 45V credit for any 

qualified property (as defined in section 

48(a)(5)(D)) that is part of the facility. 

This provision is effective for property 

placed in service after December 31, 

2022. For any property that is placed in 

service after December 31, 2022, and the 

construction of which begins before 

January 1, 2023, section 13204(c)(3) of 

the IRA provides that section 48(a)(15) 

applies only to the extent of the basis of 

such property that is attributable to 

construction, reconstruction, or erection 

occurring after December 31, 2022. 

Proposed § 1.48–15(a) would provide 

that a taxpayer that owns and places in 

service a specified clean hydrogen 

production facility (as defined in 

section 48(a)(15)(C) and proposed 

§ 1.48–15(b)) can make an irrevocable 

election under section 48(a)(15)(C)(ii)(II) 

to treat any qualified property (as 

defined in section 48(a)(5)(D)) that is 

part of the facility as energy property for 

purposes of section 48. 

Proposed § 1.48–15(b) would define 

the term ‘‘specified clean hydrogen 

production facility’’ to mean any 

qualified clean hydrogen production 

facility (within the meaning of section 

45V(c)(3)) and proposed § 1.45V– 

1(a)(10)): (i) that is placed in service 

after December 31, 2022; (ii) with 

respect to which no section 45V credit 

or section 45Q credit has been allowed, 

and for which the taxpayer makes an 

irrevocable election to have section 

48(a)(15) apply; and (iii) for which an 

unrelated party has verified in the 

manner specified in proposed § 1.48– 

15(e) that such facility produces 

hydrogen through a process that results 

in lifecycle GHG emissions that are 

consistent with the hydrogen that such 

facility was designed and expected to 

produce under section 48(a)(15)(A)(ii) 

and proposed § 1.48–15(c). 

Proposed § 1.48–15(c)(1) would 

provide the energy percentage (used by 

a taxpayer to calculate a section 48 

credit) for a specified clean hydrogen 

production facility that is designed and 

reasonably expected to produce 

qualified clean hydrogen through a 

process that results in a lifecycle GHG 

emissions rate of not greater than 4 

kilograms of CO2e per kilogram of 

hydrogen. Proposed § 1.48–15(c)(2) 

would further provide that ‘‘designed 

and reasonably expected to produce’’ 

means hydrogen produced through a 

process that results in the lifecycle GHG 

emissions rate specified in the annual 

verification report for the taxable year in 

which the section 48(a)(15) election is 

made. The Treasury Department and the 

IRS request comments on this proposed 

rule and whether there are any 

challenges to using the lifecycle GHG 

emissions rate achieved in the taxable 

year in which the section 48(a)(15) 

election is made to determine the 

facility’s energy percentage for purposes 

of calculating the section 48 credit 

amount. 

B. Election Procedures 

1. Time and Manner of Making Election 

Proposed § 1.48–15(d)(1) would 

provide that, to make an election under 

section 48(a)(15)(c)(ii)(II), a taxpayer 

must claim the section 48 credit with 

respect to a specified clean hydrogen 

production facility on a Form 3468, 

Investment Credit, or any successor 

form(s), and file the form with the 

taxpayer’s Federal income tax return or 

information return for the taxable year 

in which the specified clean hydrogen 

production facility is originally placed 

in service. Proposed § 1.48–15(d)(1) 

would provide that the taxpayer must 

also attach a statement to its Form 3468, 

Investment Credit, or any successor 

form(s), filed with its Federal income 

tax return or information return that 

includes all the information required by 

the instructions to Form 3468, 

Investment Credit, or any successor 

form(s), for each specified clean 

hydrogen production facility subject to 

an election. Proposed § 1.48–15(d)(1) 

would provide that a separate election 

must be made for each specified clean 

hydrogen production facility that meets 

the requirements provided in section 

48(a)(15) to treat the qualified property 

that is part of the facility as energy 

property. 

Proposed § 1.48–15(d)(1) would 

further provide that, if any taxpayer 

owning an interest in a specified clean 

hydrogen production facility makes an 

election with respect to the facility, then 

that election would be binding on all 

taxpayers that directly or indirectly own 

an interest in the facility. Thus, 

consistent with section 48(a)(15)(B), if a 

taxpayer owning an interest in a 

specified clean hydrogen production 

facility makes an election under section 

48(a)(15)(C)(ii)(II), then no other 

taxpayer owning an interest in the same 

facility will be allowed a section 45V 

credit or section 45Q credit with respect 

to the facility. 

The Treasury Department and the IRS 

request comments on whether, in the 

context of a specified clean hydrogen 

production facility that is directly 

owned through an arrangement properly 

treated as a tenancy-in-common for 

Federal income tax purposes or through 

an organization that has made a valid 

election under section 761(a) of the 

Code, each co-owner’s or member’s 

undivided ownership share of the 

qualified property comprised in the 

facility should be treated for purposes of 

section 48(a)(15)(C)(ii)(II) as a separate 

facility owned by such co-owner or 

member, with each such co-owner or 

member eligible to make a separate 

election under section 48(a)(15)(C)(ii)(II) 

to claim the section 48 credit in lieu of 

the section 45V credit with respect to its 

undivided ownership interest in the 

facility or share of the underlying 

qualified property. 

2. Special Rule for Partnerships and S 

Corporations 

Proposed § 1.48–15(d)(2) would 

provide that, in the case of a specified 

clean hydrogen production facility 

owned by a partnership or an S 

corporation, the election under section 

48(a)(15)(C)(ii)(II) would be made by the 

partnership or S corporation and would 

be binding on all ultimate credit 

claimants (as defined in § 1.50– 

1(b)(3)(ii)). Proposed § 1.48–15(d)(2) 

would provide that the partnership or S 

corporation must file a Form 3468, 

Investment Credit, or any successor 

forms(s), with its partnership or S 

corporation return for the taxable year 

in which the specified clean hydrogen 

production facility is placed in service 

to indicate that it is making the election, 

and attach a statement that includes all 

the information required by the 

instructions to Form 3468, Investment 

Credit, or any successor form(s), for 

each specified clean hydrogen 

production facility subject to the 

election. Proposed § 1.48–15(d)(2) 

would provide that the ultimate credit 

claimant’s section 48 must be based on 

each claimant’s share of the basis (as 

defined in § 1.46–3(f)) of the specified 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89237 

clean hydrogen production facility on a 

completed Form 3468, Investment 

Credit, or any successor forms(s), and 

file such form with a Federal income tax 

return or information return for the 

taxable year that ends with or within the 

taxable year in which the partnership or 

S corporation made the election. 

Proposed § 1.48–15(d)(2) would provide 

that the partnership or S corporation 

making the election must provide the 

ultimate credit claimants with the 

necessary information to complete Form 

3468, Investment Credit, or any 

successor forms(s), to claim the section 

48 credit. 

3. Election Irrevocable 

Proposed § 1.48–15(d)(3) would 

provide that the election to treat any 

qualified property that is part of a 

specified clean hydrogen production 

facility as energy property would be 

irrevocable. 

4. Election Availability Date 

Proposed § 1.48–15(d)(4) would 

provide that the election to treat any 

qualified property that is part of a 

specified clean hydrogen production 

facility as energy property would be 

available for property placed in service 

after December 31, 2022, and, for any 

property that began construction before 

January 1, 2023, only to the extent of the 

basis thereof attributable to the 

construction, reconstruction, or erection 

after December 31, 2022. 

C. Third-Party Verification 

Proposed § 1.48–15(e)(1) would 

provide that, in the case of a taxpayer 

that makes an election under section 

48(a)(15)(c)(ii)(II) to treat any qualified 

property that is part of a specified clean 

hydrogen production facility as energy 

property for purposes of the section 48 

credit, the taxpayer must obtain an 

annual verification report for the taxable 

year in which the election is made and 

for each taxable year thereafter of the 

recapture period specified in proposed 

§ 1.48–15(f)(3). Proposed § 1.48–15(e)(1) 

would further provide that the taxpayer 

must also submit the annual verification 

report as an attachment to the Form 

3468, Investment Credit, or any 

successor form(s), for the taxable year in 

which the election is made. 

Further, proposed § 1.48–15(e)(2)(i) 

would provide that the annual 

verification report must be signed under 

penalties of perjury by a qualified 

verifier (as defined in proposed § 1.45V– 

5(h)) and contain (i) the information 

specified in §§ 1.45V–5(b) and 1.45V– 

5(d) through § 1.45V–5(h); (ii) a 

statement attesting to the lifecycle GHG 

emissions rate (determined under 

section 45V(c) and § 1.45V–4) of the 

hydrogen produced at the specified 

clean hydrogen production facility for 

the taxable year to which the annual 

verification report relates and that the 

operation, during such taxable year, of 

the specified clean hydrogen production 

facility, and any EACs applied pursuant 

to § 1.45V–4(d) for the purpose of 

accounting for such facility’s emissions, 

are accurately reflected in the data the 

taxpayer entered into the most recent 

GREET model (as defined in § 1.45V– 

1(a)(8)(ii)) (or in the data the taxpayer 

provided to the DOE in support of the 

taxpayer’s request for an emissions 

value), to determine the lifecycle GHG 

emissions rate of the hydrogen 

undergoing verification; and (iii) an 

attestation that the facility produced 

hydrogen through a process that results 

in a lifecycle GHG emissions rate that is 

consistent with, or lower than, the 

lifecycle GHG emissions rate of the 

hydrogen that such facility was 

designed and expected to produce. 

Proposed § 1.48–15(e)(2)(ii) would 

provide that if a transfer election has 

been made under section 6418(a) of the 

Code with respect to the section 48 

credit for a specified clean hydrogen 

production facility, then the conflict 

attestation containing the information 

specified in proposed § 1.45V–5(e)(1) 

must be made with respect to the 

qualified verifier’s independence from 

both the eligible taxpayer (as defined in 

section 6418(f)(2) and § 1.6418–1(b)) 

and the transferee taxpayer (as 

described in section 6418(a) and defined 

in § 1.6418–1(m)), and without regard to 

the requirements under proposed 

§ 1.45V–5(e)(2). 

Proposed § 1.48–15(e)(2)(iii) would 

provide that in the event the facility 

produces qualified clean hydrogen 

through a process that results in a 

lifecycle GHG emissions rate greater 

than the lifecycle GHG emissions rate 

such facility was designed and expected 

to produce (and thus the qualified 

verifier cannot provide the attestation 

specified in proposed § 1.48– 

15(e)(2)(i)(B)), resulting in a reduced 

energy percentage under section 

48(a)(15)(A)(ii) with respect to such 

facility, an emissions tier recapture 

event under proposed § 1.48–15(f)(2) 

will occur. Proposed § 1.48–15(e)(2)(iv) 

would provide that the hydrogen a 

facility was ‘‘designed and expected to 

produce’’ would mean hydrogen 

produced through a process that results 

in the lifecycle GHG emissions rate 

specified in proposed § 1.48–15(c)(2). 

Additionally, proposed § 1.48– 

15(e)(2)(v) would require that the 

annual verification report must be 

signed and dated by the qualified 

verifier no later than the due date, 

including extensions, of the Federal 

income tax return or information return 

for the taxable year in which the 

hydrogen undergoing verification was 

produced. Proposed § 1.48–15(e)(2)(vi) 

would provide that in addition to the 

recordkeeping requirements set forth in 

§ 1.48–15(g), the taxpayer must retain 

the annual verification report for at least 

six years after the due date, with 

extensions, for filing the Federal income 

tax return or information return for the 

taxable year in which the hydrogen 

undergoing verification was produced. 

D. Credit Recapture 

Section 48(a)(15)(E) directs the 

Secretary to issue such regulations or 

other guidance as determined necessary 

to carry out the purposes of section 48, 

including regulations or other guidance 

addressing recapture of so much of the 

credit allowed under section 48 as 

exceeds the amount of the credit that 

would have been allowed if the 

expected production were consistent 

with the actual verified production or 

all of the credit so allowed in the 

absence of such verification. 

1. Emissions Tier Recapture Events 

Under Section 48(a)(15)(E) 

Proposed § 1.48–15(f)(1), would 

provide that, for purposes of section 

48(a)(15)(E), in any taxable year of the 

recapture period specified in proposed 

§ 1.48–15(f)(3) in which an emissions 

tier recapture event (as defined in 

proposed § 1.48–15(f)(2)) occurs, the tax 

imposed on the taxpayer under chapter 

1 of the Code for the taxable year of the 

emissions tier recapture event is 

increased by the recapture amount 

specified in proposed § 1.48–15(f)(4). 

Proposed § 1.48–15(f)(2) would 

provide that an emissions tier recapture 

event under section 48(a)(15)(E) occurs 

during any taxable year of the recapture 

period specified in proposed § 1.48– 

15(f)(3) under the following 

circumstances: (i) the taxpayer fails to 

obtain an annual verification report by 

the deadline for filing its Federal 

income tax return or information return 

(including extensions) for any taxable 

year in which an annual verification 

report was required under proposed 

§ 1.48–15(e)(1); (ii) the specified clean 

hydrogen production facility actually 

produced hydrogen through a process 

that results in a lifecycle GHG emissions 

rate that can only support a lower 

energy percentage than the energy 

percentage used to calculate the amount 

of the section 48 credit for such facility 

for the year in which the facility is 

placed in service; or (iii) the specified 

clean hydrogen production facility 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89238 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

27Biogas is gas resulting from the decomposition 

of organic matter under anaerobic conditions, and 

the principal constituent is methane (50–75 

percent). 

actually produced hydrogen through a 

process that results in a lifecycle GHG 

emissions rate of greater than 4 

kilograms of CO2e per kilogram of 

hydrogen. 

2. Recapture Period Under Section 

48(a)(15)(E) 

Proposed § 1.48–15(f)(3) would 

provide that the recapture period begins 

on the first day of the first taxable year 

after the taxable year in which the 

facility was placed in service and ends 

on the last day of the fifth taxable year 

after the close of the taxable year in 

which the facility was placed in service. 

For example, if a calendar-year taxpayer 

places in service a specified clean 

hydrogen production facility on June 1, 

2023, then the last day of the fifth 

taxable year following the close of the 

taxable year in which the facility was 

placed in service is December 31, 2028. 

Therefore, the recapture period is 

January 1, 2024, through December 31, 

2028. 

3. Recapture Amount 

Proposed § 1.48–15(f)(4) would 

provide that, if an emissions tier 

recapture event has occurred under 

proposed § 1.48–15(f)(2), the recapture 

amount for the taxable year in which the 

emissions tier recapture event occurred 

is equal to 20 percent of the excess of 

(i) the section 48 credit allowed to the 

taxpayer for the specified clean 

hydrogen production facility for the 

taxable year in which the facility was 

placed in service, over (ii) the section 48 

credit that would have been allowed to 

the taxpayer for the facility if the 

taxpayer had used the energy percentage 

supported by the actual production to 

calculate the amount of the section 48 

credit. Proposed § 1.48–15(f)(4)(ii) 

would provide that, in the case of any 

emissions tier recapture event described 

in proposed § 1.48–15(f)(2), the 

carrybacks and carryovers under section 

39 must be adjusted by reason of the 

emissions tier recapture event. Proposed 

§ 1.48–15(f)(4)(iii) would further 

provide that, if the specified clean 

hydrogen production facility produced 

hydrogen through a process that results 

in a lifecycle GHG emissions rate of 

greater than 4 kilograms of CO2e per 

kilogram of hydrogen, or if the taxpayer 

fails to submit an annual verification 

report with its Federal income tax 

return or information return with 

respect to a specified clean hydrogen 

production facility for any taxable year 

of the recapture period, then the section 

48 credit that would have been allowed 

to the taxpayer for the facility would be 

zero. Thus, in that case, the recapture 

amount in the taxable year of the 

emissions tier recapture event would be 

20 percent of the section 48 credit 

allowed to the taxpayer with respect to 

such specified clean hydrogen 

production facility. Proposed § 1.48– 

15(f)(5) would provide an example 

illustrating the application of proposed 

§ 1.48–15(f)(1) through (4). 

Unless modified in future guidance, 

any reporting of emissions tier recapture 

under proposed § 1.48–15(f) is made on 

the taxpayer’s annual tax return. The 

Secretary may issue future guidance 

and/or prescribe tax forms and 

instructions to address the reporting of 

emissions tier recapture under proposed 

§ 1.48–15(f) and any additional annual 

reporting obligations. The Treasury 

Department and IRS therefore request 

comments on the reporting of recapture 

and any additional annual reporting 

obligations. 

4. Coordination With Recapture Rules 

Under Sections 50 and 48(a)(10)(C) 

Proposed § 1.48–15(f)(6) would 

provide that, during any taxable year of 

the recapture period for any credit 

allowed under section 48(a) with 

respect to qualified property that is part 

of a specified clean hydrogen 

production facility, the recapture rules 

would be applied, if applicable, in the 

following order: (i) section 50(a) 

(recapture in case of dispositions, etc.); 

(ii) section 48(a)(10)(C) (recapture 

relating to the prevailing wage 

requirements); and (iii) section 

48(a)(15)(E) (emissions tier recapture). 

E. Recordkeeping Requirements 

Proposed § 1.45V–2(c) would provide 

that a taxpayer claiming the section 45V 

credit would need to meet the general 

recordkeeping requirements under 

section 6001 necessary to substantiate 

the amount of the section 45V credit 

claimed by the taxpayer. Section 6001 

provides that every person liable for any 

tax imposed by the Code, or for the 

collection thereof, must keep such 

records as the Secretary may from time 

to time prescribe. Section 1.6001–1(a) 

provides that any person subject to 

income tax must keep such permanent 

books of account or records as are 

sufficient to establish the amount of 

gross income, deductions, credits, or 

other matters required to be shown by 

such person in any return of such tax. 

Section 1.6001–1(e) provides that the 

books and records required by § 1.6001– 

1 must be retained so long as the 

contents thereof may become material in 

the administration of any internal 

revenue law. 

Proposed § 1.45V–2(c) would also 

provide that taxpayers must retain all 

raw data used for submission of the 

request for an emissions value to the 

DOE for at least six years after the due 

date (including extensions) for filing the 

Federal income tax return or 

information return to which the PER 

petition is ultimately attached. 

Proposed § 1.48–15(g) would provide 

corresponding recordkeeping rules. 

IX. Renewable Natural Gas and Fugitive 

Sources of Methane 

The Treasury Department and the IRS 

intend to provide rules addressing 

hydrogen production pathways that use 

renewable natural gas (RNG) or other 

fugitive sources of methane (for 

example, from coal mine operations) for 

purposes of the section 45V credit. In 

the context of this guidance, the term 

RNG refers to biogas that has been 

upgraded to be equivalent in nature to 

fossil natural gas. Fugitive methane 

refers to the release of methane through, 

for example, equipment leaks, or 

venting during the extraction, 

processing, transformation, and delivery 

of fossil fuels to the point of final use, 

such as coal mine methane or coal bed 

methane. Such rules would apply to all 

RNG used for the purposes of the 

section 45V credit and would provide 

conditions that must be met before 

certificates for RNG or fugitive methane 

(representations of the environmental 

attributes of the methane) and the GHG 

emissions benefits they are meant to 

represent may be taken into account in 

determining lifecycle GHG emissions 

rates for purposes of the section 45V 

credit. Such conditions would be 

logically consistent with but not 

identical to the incrementality, temporal 

matching, and deliverability 

requirements for electricity derived 

EACs, in that they would be designed to 

reflect the ways in which additional 

RNG or demand for fugitive methane 

can impact lifecycle GHG emissions and 

also to address the differences between 

electricity and methane, including but 

not limited to the different sources of 

emissions, markets, available tracking 

and verification methods, and potential 

for perverse incentives. 

The Treasury Department and the IRS 

anticipate requiring that for purposes of 

the section 45V credit, for biogas or 

biogas-based RNG to receive an 

emissions value consistent with that gas 

(and not standard natural gas), the RNG 

used during the hydrogen production 

process must originate from the first 

productive use of the relevant methane. 

For any specific source of biogas,27


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89239 

productive use is generally defined as 

any valuable application of biogas 

(including to provide heat or cooling, 

generate electricity, or upgraded to 

RNG), and specifically excludes venting 

to the atmosphere or capture and 

flaring. The Treasury Department and 

the IRS further propose to define ‘‘first 

productive use’’ of the relevant methane 

as the time when a producer of that gas 

first begins using or selling it for 

productive use in the same taxable year 

as (or after) the relevant hydrogen 

production facility was placed in 

service. The implication of this proposal 

is that biogas from any source that had 

been productively used in a taxable year 

prior to taxable year in which the 

relevant hydrogen production facility 

was placed in service would not receive 

an emission value consistent with 

biogas-based RNG but would instead 

receive a value consistent with natural 

gas in the determination of the 

emissions value for that specific 

hydrogen production pathway. This 

proposal would limit emissions 

associated with the diversion of biogas 

or RNG from other pre-existing 

productive uses. 

For existing biogas sources that 

typically productively use or sell a 

portion of the biogas and flare or vent 

the remaining excess, the flared or 

vented portion may be eligible for first 

productive use as defined above if the 

flaring or venting volume can be 

adequately demonstrated and verified. 

In such circumstances, the flared or 

vented volume may be determined 

based on the previous taxable year’s 

flared or vented volume as 

demonstrated via reported data to 

programs such as the Greenhouse Gas 

Reporting Program. Requirements 

would be established to reduce the risk 

that entities will deliberately generate 

additional biogas for purposes of the 

section 45V credit, above historic and 

expected future levels or an equivalent 

metric, for example by generating biogas 

through the intentional generation of 

waste, and to ensure that other factors 

affecting the emissions rate of hydrogen 

produced with biogas-based RNG or 

RNG procurement via RNG certificates 

are taken into account. The Treasury 

Department and the IRS request 

comment on these and other potential 

conditions. Any fugitive sources of 

methane would be treated in the same 

fashion as described above for RNG. 

For purposes of the section 45V 

credit, hydrogen producers using RNG 

or fugitive methane would be required 

to acquire and retire corresponding 

attribute certificates through a bookand-claim system that can verify in an 

electronic tracking system that all 

applicable requirements are met. 

Hydrogen producers would also be 

required to have a pipeline 

interconnection and measurement using 

a revenue grade meter. These rules 

would apply to the use of certificates 

with both direct and non-direct claims 

of RNG or fugitive methane use. Direct 

use would involve the production of 

hydrogen with a direct exclusive 

pipeline connection to a facility that 

generates RNG or from which fugitive 

methane is being sourced, while nondirect use would involve producing 

hydrogen using RNG or fugitive 

methane sourced from a commercial or 

common-carrier natural gas pipeline. In 

all cases, attribute certificates would 

need to document the RNG or fugitive 

methane procurement for qualified 

clean hydrogen production claims and 

that the environmental attributes of the 

RNG or fugitive methane being used are 

not sold to other parties or used for 

compliance with other policies or 

programs. 

The Treasury Department and the IRS 

request comments on these and other 

rules related to RNG and fugitive 

methane. Regarding fugitive methane, 

the Treasury Department and the IRS 

request comment on the appropriate 

lifecycle analysis considerations 

associated with specific fugitive 

methane sources, such as counterfactual 

scenarios, to account for direct and 

significant indirect emissions, and also 

the manner in which to assess methane 

from these sources if the current 

practice is flaring. These comments may 

inform future versions of 45VH2– 

GREET. In particular, the Treasury 

Department and the IRS request 

comments on the following questions: 

(1) What data sources and peer 

reviewed studies provide information 

on RNG production systems (including 

biogas production and reforming 

systems), markets, monitoring, 

reporting, and verification processes, 

and GHG emissions associated with 

these production systems and markets? 

(2) What conditions for the use of 

biogas and RNG would ensure that 

emissions accounting for purposes of 

the section 45V credit reflects and 

reduces the risk of indirect emissions 

effects from hydrogen production using 

biogas and RNG? How can taxpayers 

verify that they have met these 

requirements? 

(3) How broadly available and reliable 

are existing electronic tracking systems 

for RNG certificates in book and claim 

systems? What developments may be 

required, if any, before such systems are 

appropriate for use with RNG 

certificates used to claim the section 

45V credit? 

(4) How should RNG or fugitive 

methane resulting from the first 

productive use of methane be defined, 

documented, and verified? What 

industry best practices or alternative 

methods would enable such verification 

to be reflected in an RNG or methane 

certificate or other documentation? 

What additional information should be 

included in RNG certificates to help 

certify compliance? 

(5) What are the emissions associated 

with different methods of transporting 

RNG or fugitive methane to hydrogen 

producers (for example, vehicular 

transport, pipeline)? 

(6) How can the section 45V 

regulations reflect and mitigate indirect 

emissions effects from the diversion of 

biogas or RNG or fugitive methane from 

potential future productive uses? What 

other new uses of biogas or RNG or 

fugitive methane could be affected in 

the future if more gas from new capture 

and productive use of methane from 

these sources is used in the hydrogen 

production process? 

(7) How can the potential for the 

generation of additional emissions from 

the production of additional waste, 

waste diversion from lower-emitting 

disposal methods, and changes in waste 

management practices be limited 

through emissions accounting or rules 

for biogas and RNG use established for 

purposes of the section 45V credit? 

(8) To limit the additional production 

of waste, should the final regulations 

limit eligibility to methane sources that 

existed as of a certain date or waste or 

waste streams that were produced 

before a certain date, such as the date 

that the IRA was enacted? If so, how can 

that be documented or verified? How 

should any changes in volumes of waste 

and waste capacity at existing methane 

sources be documented and treated for 

purposes of the section 45V credit? How 

should additional capture of existing 

waste or waste streams be documented 

and treated? 

(9) Are geographic or temporal 

deliverability requirements needed to 

reflect and reduce the risk of indirect 

emissions effects from biogas and RNG 

or fugitive methane use in the hydrogen 

production process? If so, what should 

these requirements be and are electronic 

tracking systems able to capture these 

details? 

(10) How should variation in methane 

leakage across the existing natural gas 

pipeline system be taken into account in 

estimating the emissions from the 

transportation of RNG or fugitive 

methane or establishing rules for RNG 

or fugitive methane use? How should 

methane leakage rates be estimated 

based on factors such as the location 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89240 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

where RNG or fugitive methane is 

injected and withdrawn, the distance 

between the locations where RNG or 

fugitive methane is injected and 

withdrawn, season of year, age of 

pipelines, or other factors? Are data or 

analysis available to support this? 

(11) What counterfactual assumptions 

and data should be used to assess the 

lifecycle GHG emissions of hydrogen 

production pathways that rely on RNG? 

Is venting an appropriate counterfactual 

assumption for some pathways? If not, 

what other factors should be 

considered? 

(12) What criteria should be used in 

assessing biogas and RNG-based PERs? 

What practices should be put in place 

to reduce the risk of unintended 

consequences (for example, gaming)? 

Should conservative default parameters 

and counterfactuals be used unless 

proven otherwise by a third party? 

The Treasury Department and the IRS 

understand that, before final regulations 

addressing the section 45V credit are 

issued, taxpayers will use 45VH2– 

GREET or the PER process to determine 

a lifecycle GHG emissions rate for 

hydrogen production facilities that rely 

on direct use of landfill gas or any 

fugitive methane feedstock, provided 

they meet the requirement that the gas 

being used results from the first 

productive use of methane from the 

landfill source or fugitive methane 

source. The term ‘‘direct use’’ means 

that there is a direct, exclusive pipeline 

connection between the hydrogen 

production facility and the source of the 

gas that is procured (for example, the 

upgrading or processing facility that 

produces RNG from landfill gas). 

Relative to a book-and-claim system, the 

direct connection between a gas 

supplier and a hydrogen production 

facility can reduce the uncertainty of 

pipeline leakage, tracking, and 

verification. The Treasury Department 

and the IRS are considering providing a 

rule that taxpayers would need to 

provide and maintain documentation to 

substantiate that (i) the RNG being used 

results from the first productive use of 

the methane at the landfill source and 

is not displacing a previous productive 

use; and (ii) the environmental 

attributes of the RNG being used, 

including those of the underlying 

biogas, are not sold to other parties or 

used for compliance with other policies 

or programs. When additional 

conditions addressing hydrogen 

production pathways that use RNG or 

fugitive methane for purposes of the 

section 45V credit are determined at a 

later date, taxpayers would also be 

required to maintain documentation 

that the RNG or fugitive methane being 

used meets those requirements and to 

acquire and retire any RNG or fugitive 

methane certificates that are established. 

The Treasury Department and IRS are 

also considering providing rules for 

using RNG certificates and 

documentation required in the event 

additional conditions for use of RNG are 

later imposed. 

Tracking and verification mechanisms 

for RNG or fugitive methane specific to 

the needs of the section 45V credit are 

not yet available, and existing systems 

have limited capabilities for tracking 

and verifying RNG pathways, especially 

in the part of the production process 

before the methane has been reformed to 

RNG. Existing tracking and verification 

systems do not clearly distinguish 

between inputs, verify or require 

verification of underlying practices 

claimed by RNG production sources, 

require proof of generator 

interconnection or revenue-quality 

metering, provide validation of 

generation methodology, include 

exclusively United States basedgeneration, verify generator registration, 

and track the vintage of generator 

interconnection. The Treasury 

Department and IRS are considering 

providing rules to address whether or 

how book-and-claim systems with 

sufficient tracking and verification 

mechanisms may be used to attribute 

the environmental benefits of RNG or 

fugitive methane to hydrogen producers 

in the final regulations. Additional 

certainty is also needed to accurately 

account for emissions from pathways 

that do not yet exist in 45VH2–GREET 

and from RNG that is injected into a 

commercial or common-carrier pipeline. 

The Treasury Department and IRS 

understand that, before final regulations 

are issued, taxpayers will determine a 

lifecycle GHG emissions rate for 

hydrogen production pathways using 

landfill gas by using 45VH2–GREET in 

cases in which the hydrogen production 

facility is receiving RNG through a 

direct dedicated pipeline connection 

and measurement using a revenue grade 

meter. The PER process will not address 

other hydrogen production pathways 

using biogas and RNG until after the 

final regulations are issued. 

Proposed Applicability Dates 

These regulations are proposed to 

apply to taxable years beginning after 

these proposed regulations are 

published in the Federal Register. 

Taxpayers may rely on these proposed 

regulations for taxable years beginning 

after December 31, 2022, and before the 

date the final regulations are published 

in the Federal Register, provided the 

taxpayers follow the proposed 

regulations in their entirety and in a 

consistent manner. 

Special Analyses 

I. Regulatory Planning and Review 

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 requirements 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) generally 

requires that a Federal agency obtain the 

approval of the Office of Management 

and Budget (OMB) before collecting 

information from the public, whether 

such collection of information 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 information displays a 

valid control number. 

The collections of information in 

these proposed regulations would 

include reporting, third-party 

disclosure, and recordkeeping 

requirements. These collections are 

necessary for taxpayers to claim the 

section 45V credit, or the section 48 

credit with respect to a specified clean 

hydrogen production facility, and for 

the IRS to validate that taxpayers have 

met the regulatory requirements and are 

entitled to claim either credit. 

The recordkeeping requirements in 

these proposed regulations would 

include the requirement that taxpayers 

claiming the section 45V credit, or the 

section 48 credit with respect to a 

specified clean hydrogen production 

facility, need to meet the general 

recordkeeping provisions under section 

6001 necessary to substantiate the 

amount of the section 45V credit or 

section 48 credit claimed by the 

taxpayer as detailed in proposed 

§§ 1.45V–2(c) and 1.48–15(g). These 

recordkeeping requirements are 

considered general tax records under 

§ 1.6001–1(e). For PRA purposes, 

general tax records are already approved 

by OMB under 1545–0074 for 

individuals/sole proprietors, 1545–0123 

for business entities, and 1545–0047 for 

tax-exempt organizations, and 1545– 

0092 for trust and estate filers. 

The proposed regulations would 

reference the DOE’s process for 

applicants to request an emissions value 

from the DOE that could then be used 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89241 

to file a petition with the Secretary for 

a PER determination as detailed in 

proposed § 1.45V–4. The petition made 

to IRS will be performed by attaching 

the emissions value obtained from the 

DOE to the filing of Form 7210. The 

burden for these requirements will be 

included within the Form and 

Instructions for 7210. Form 7210 will be 

approved by OMB, in accordance with 

5 CFR 1320.10, under the following 

OMB Control Numbers: 1545–0074 for 

individuals, 1545–0123 for businesses, 

1545–0047 for tax-exempt organizations, 

and 1545–NEW for trust and estate 

filers. 

The proposed regulations mention the 

collection of information associated 

with the process for taxpayers to request 

an emissions value from the DOE and is 

reflected in the DOE’s Paperwork 

Reduction Act Submission relating to 

such process. These proposed 

regulations are not creating or changing 

any of the collection requirements 

submitted by DOE to OMB for approval. 

Approval of the DOE’s Paperwork 

Reduction Act Submission is pending 

with OMB. These proposed regulations 

are not creating or changing any of the 

collection requirements being approved 

by OMB under the DOE OMB Control 

Number 1910–XXXX. 

The proposed regulations would 

include reporting requirements that 

taxpayers claiming the section 45V 

credit provide a verification report with 

their annual Federal income tax return 

or information return for each taxable 

year in which they claim the section 

45V credit as detailed in proposed 

§ 1.45V–5. The proposed regulation also 

includes a third-party disclosure 

requirement that a verification report 

must be certified by an unrelated third 

party. The verification report must 

contain an attestation regarding the 

taxpayer’s production of qualified clean 

hydrogen for sale or use, the amount of 

qualified clean hydrogen sold or used 

by the taxpayer, conflicts of interest, the 

verifier’s qualifications, and 

documentation necessary to substantiate 

the verification process. The taxpayer 

must submit the verification report to 

the IRS by attaching it to Form 7210, 

Clean Hydrogen Production Credit, or 

any successor form(s). The burden for 

these requirements will be included 

within the Form and Instructions for 

Form 7210. Form 7210 will be approved 

by OMB, in accordance with 5 CFR 

1320.10, under the following OMB 

Control Numbers: 1545–0074 for 

individuals, 1545–0123 for businesses, 

1545–0047 for tax-exempt organizations, 

and 1545–NEW for trust and estate 

filers. 

The proposed regulations include 

reporting, third-party disclosure, and 

recordkeeping requirements that 

taxpayers making the election under 

section 48(a)(15) to claim the energy 

credit under section 48 with respect to 

a specified clean hydrogen production 

facility. The reporting requirement is 

that taxpayers submit an annual 

verification report with their Federal 

income tax return or information return 

for the year in which they claim the 

section 48 credit. The third-party 

disclosure requirement is that an annual 

verification report must be certified by 

an unrelated third-party. The annual 

verification report must contain an 

attestation regarding the taxpayer’s 

production of qualified clean hydrogen 

for sale or use, the amount of qualified 

clean hydrogen sold or used by the 

taxpayer, conflicts of interest, the 

verifier’s qualifications, the lifecycle 

GHG emissions rate of the hydrogen that 

the specified clean hydrogen production 

facility produced, and documentation 

necessary to substantiate the verification 

process. The proposed regulations also 

include a requirement that the taxpayer 

obtain and retain an annual verification 

report for each taxable year of the 

recapture period. The taxpayer must 

obtain the annual verification report by 

the return filing deadline (with 

extensions) for the taxable year to which 

the annual verification report relates. 

The annual verification report must 

contain an attestation regarding the 

taxpayer’s production of qualified clean 

hydrogen for sale or use during the 

taxable year, the amount of qualified 

clean hydrogen sold or used by the 

taxpayer during the taxable year, the 

lifecycle GHG emissions rate of the 

hydrogen that the specified clean 

hydrogen production facility produced 

during the taxable year, conflicts of 

interest, the verifier’s qualifications, and 

documentation necessary to substantiate 

the verification process. The annual 

verification report for the taxable year in 

which the section 48(a)(15) election is 

made will be attached to Form 3468. 

The annual verification report for each 

taxable year of the recapture period will 

be retained by the taxpayer for at least 

six years after the due date (with 

extensions) for filing the Federal income 

tax return or information return for the 

year to which the report relates. The 

burden for these requirements will be 

included within the Form and 

Instructions for 3468. The revisions to 

Form 3468 will be approved by OMB, in 

accordance with 5 CFR 1320.10, under 

the following OMB Control Numbers: 

1545–0074 for individuals, 1545–0123 

for businesses, 1545–0047 for taxexempt organizations, and 1545–0155 

for trust and estate filers. 

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 substantial 

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 proposed 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 

possibility of significant economic 

impact on a substantial number of small 

entities, an IRFA is provided in these 

proposed regulations. The Treasury 

Department and the IRS invite 

comments on both the number of 

entities affected and the economic 

impact on small entities. 

Pursuant to section 7805(f), this 

notice of proposed rulemaking has been 

submitted to the Chief Counsel of the 

Office 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 provide 

guidance to taxpayers intending to 

claim the section 45V credit for the 

production of qualified clean hydrogen 

or make the election under section 

48(a)(15) to treat qualified property that 

is part of a specified clean hydrogen 

production facility as energy property 

and claim the section 48 credit. The 

proposed regulations would provide 

needed guidance for taxpayers on use of 

the GREET model to determine the 

lifecycle GHG emissions rate resulting 

from the hydrogen production process, 

procedures for petitioning the Secretary 

for a PER determination, requirements 

for the verification of the production 

and sale or use of the hydrogen, 

requirements for modifications to an 

existing hydrogen production facility, 

and procedures for making the election 

under section 48(a)(15). 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89242 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

B. Affected Small Entities 

The RFA directs agencies to provide 

a description of, and if feasible, an 

estimate of, the number of small entities 

that may be affected by the proposed 

rules, if adopted. The Small Business 

Administration’s Office of Advocacy 

estimates in its 2023 Frequently Asked 

Questions that 99.9 percent of American 

businesses meet the definition of a small 

business. The applicability of these 

proposed 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 this proposed regulation and in this 

IRFA, sections 45V and 48(a)(15) and 

these proposed regulations may affect a 

variety of different businesses across 

several different industries. Because the 

potential credit claimants can vary 

widely, it is difficult to estimate at this 

time the impact of these proposed 

regulations, if any, on small businesses. 

Although there is uncertainty as to the 

exact number of small businesses within 

this group, the current estimated 

number of respondents to these 

proposed rules is between 800 and 1000 

taxpayers. 

The Treasury Department and the IRS 

expect to receive more information on 

the impact on small businesses through 

comments on these proposed rules and 

again when taxpayers start using the 

guidance and procedures provided in 

these proposed regulations to claim the 

section 45V credit, or the section 48 

credit with respect to a specified clean 

hydrogen production facility. 

C. Impact of the Rules 

The proposed regulations provide 

rules for how taxpayers can claim the 

section 45V credit, or the section 48 

credit with respect to a specified clean 

hydrogen production facility. Taxpayers 

that claim the section 45V credit, or the 

section 48 credit with respect to a 

specified clean hydrogen production 

facility, will have administrative costs 

related to reading and understanding 

the rules as well as recordkeeping and 

reporting requirements because of the 

verification and Federal income tax 

return or information return 

requirements. The costs will vary across 

different-sized entities and across the 

type of project(s) in which such entities 

are engaged. 

To claim a section 45V credit, a 

taxpayer must determine the lifecycle 

GHG emissions rate for all hydrogen 

produced at a qualified clean hydrogen 

production facility during the taxable 

year. If the hydrogen production 

technology or feedstock used by the 

taxpayer to produce hydrogen is 

addressed in the most recent 45VH2– 

GREET, the taxpayer must use 45VH2– 

GREET to determine the emissions rate 

for the hydrogen produced during that 

taxable year at the qualified clean 

hydrogen production facility. If the 

hydrogen production technology or 

feedstock used by the taxpayer to 

produce hydrogen is not included in the 

most recent 45VH2–GREET, the 

taxpayer must petition the Secretary for 

a provisional emissions rate (PER). As 

part of the process for a taxpayer to 

petition for a PER, a taxpayer must 

submit an application to the DOE for an 

emissions value that it may use to claim 

the section 45V credit. 

In addition to determining the 

lifecycle GHG emissions rate for 

hydrogen produced by the taxpayer at a 

qualified clean hydrogen production 

facility during the taxable year, before 

claiming the section 45V credit, a 

taxpayer must submit a verification 

report, certified by an unrelated third 

party, attesting to the taxpayer’s 

production of qualified clean hydrogen 

for sale or use, the amount of qualified 

clean hydrogen sold or used by the 

taxpayer, conflicts of interest, the 

verifier’s qualifications, and 

documentation necessary to substantiate 

the verification process. The process for 

claiming the section 48 credit with 

respect to a specified clean hydrogen 

production facility requires a taxpayer 

to submit an annual verification report 

with its Federal income tax return or 

information return for the taxable year 

in which it claims the section 48 credit, 

as well as to obtain an annual 

verification report for the five taxable 

years following the taxable year in 

which the section 48(a)(15) election is 

made. Additionally, the taxpayer would 

need to retain records sufficient to 

establish compliance with these 

proposed regulations for as long as may 

be relevant. 

Although the Treasury Department 

and the IRS do not have sufficient data 

to determine precisely 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. Alternatives Considered 

The Treasury Department and the IRS 

considered alternatives to the proposed 

regulations. The proposed regulations 

were designed to minimize burdens for 

taxpayers while ensuring that the 

statutory requirements of sections 45V 

and 48(a)(15) are met. For example, in 

providing rules related to the 

information required to be submitted to 

claim the section 45V credit, or the 

section 48 credit with respect to a 

specified hydrogen production facility, 

the Treasury Department and the IRS 

considered whether the production and 

sale or use of the hydrogen could be 

verified by an unrelated party without 

requiring the unrelated party to possess 

certain qualifications or conflict of 

interest characteristics. Such an option 

would, however, increase the 

opportunity for fraud or excessive 

payments under section 45V or section 

48. Section 45V(f) specifically 

authorizes the IRS to promulgate 

regulations or other guidance providing 

for requirements for recordkeeping or 

information reporting for purposes of 

administering the requirements of 

section 45V. As described in the 

preamble to these proposed regulations, 

these proposed rules carry out that 

Congressional intent as the verification 

requirements allow the IRS to verify the 

taxpayer’s entitlement to the section 

45V credit. 

Additionally, the Treasury 

Department and the IRS considered 

whether to require taxpayers to submit 

an annual verification report with their 

Federal income tax returns or 

information returns claiming the section 

45V credit. Section 45V requires the 

taxpayer to obtain an annual verification 

report, and the Treasury Department 

and the IRS determined that requiring 

the taxpayer to attach such a report to 

their federal income tax return or 

information return is the most efficient 

way of ensuring the completion and 

accuracy of the report. 

Additionally, the Treasury 

Department and the IRS considered 

allowing taxpayers to treat the section 

45V credit as determined in the taxable 

year of hydrogen production or 

verification. However, such an option 

would create administrability issues and 

potentially a mismatch between the 

taxable year in which the hydrogen is 

produced and the taxable year in which 

the section 45V credit for such 

production is claimed. Thus, the 

proposed regulations would require the 

credit to be determined in the taxable 

year of production. 

Comments are requested on the 

requirements in the proposed 

regulations, including specifically 

whether there are less burdensome 

alternatives that do not increase the risk 

of duplication, fraud, or improper 

payments under section 45V. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The proposed regulations would not 

duplicate, overlap, or conflict with any 

relevant Federal rules. As discussed 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89243 

above, the proposed regulations would 

merely provide procedures and 

definitions to allow taxpayers to claim 

the section 45V credit, or the section 48 

credit with respect to a specified clean 

hydrogen production facility. The 

Treasury Department and the IRS invite 

input from interested members of the 

public on identifying and avoiding 

overlapping, duplicative, or conflicting 

requirements. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates 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 expenditures 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). This proposed rule does not 

include any Federal mandate that may 

result in expenditures by State, local, or 

Tribal governments, 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 governments, 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. This proposed rule 

does not have federalism implications 

and does not impose substantial direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

order. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to comments 

regarding the notice of proposed 

rulemaking that are submitted timely to 

the IRS as prescribed in the preamble 

under the ADDRESSES section. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. All comments 

will be made available at https://

www.regulations.gov. Once submitted to 

the Federal eRulemaking Portal, 

comments cannot be edited or 

withdrawn. 

A public hearing has been scheduled 

for March 25, 2024, beginning at 10 a.m. 

(ET), in the Auditorium at the Internal 

Revenue Building, 1111 Constitution 

Avenue NW, Washington, DC. Due to 

building security procedures, visitors 

must enter at the Constitution Avenue 

entrance. In additional, all visitors must 

present photo identification to enter the 

building. 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 hearing. Persons who wish 

to present oral comments at the hearing 

must submit an outline of the topics to 

be discussed and the time to be devoted 

to each topic by March 4, 2024. A 

period of 10 minutes will be allotted to 

each person for making comments. An 

agenda showing the scheduling 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 hearing. 

If no outline of the topics to be 

discussed at the hearing is received by 

March 4, 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 

person at the public hearing must send 

an email to publichearings@irs.gov to 

have your name added to the building 

access list. The subject line of the email 

must contain the regulation number 

REG–117631–23 and the language 

TESTIFY in Person. For example, the 

subject line may say: Request to 

TESTIFY in Person at Hearing for REG– 

117631–23. 

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 RE–117631–23 and 

the language TESTIFY Telephonically. 

For example, the subject line may say: 

Request to TESTIFY Telephonically at 

Hearing for REG–117631–23. 

Individuals who want to attend the 

public hearing in person without 

testifying must also send an email to 

publichearings@irs.gov to have your 

name added to the building access list. 

The subject line of the email must 

contain the regulation number REG– 

117631–23 and the language ATTEND 

In Person. For example, the subject line 

may say: Request to ATTEND Hearing in 

Person for REG–117631–23. Requests to 

attend the public hearing must be 

received by 5:00 p.m. EST on March 18, 

2024. 

Hearings will be made accessible to 

people with disabilities. To request 

special 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 tollfree number) by at least March 18, 2024. 

Statement of Availability of IRS 

Documents 

IRS guidance cited in this preamble is 

published in the Internal Revenue 

Bulletin and is 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. 

Drafting Information 

The principal author of these 

proposed regulations is the Office of the 

Associate Chief Counsel (Passthroughs 

and Special Industries). However other 

personnel from the Treasury 

Department, the DOE, the EPA, and the 

IRS participated in the development of 

the proposed regulations. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

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 adding entries 

in numerical order for §§ 1.45V–1 

through 1.45V–6 and 1.48–15 to read in 

part as follows: 

Authority: 26 U.S.C. 7805 * * * 

* * * * * 

Section 1.45V–1 also issued under 26 

U.S.C. 45V(f). 

Section 1.45V–2 also issued under 26 

U.S.C. 45V(f). 

Section 1.45V–3 also issued under 26 

U.S.C. 45V(e) and (f). 

Section 1.45V–4 also issued under 26 

U.S.C. 45V(f). 

Section 1.45V–5 also issued under 26 

U.S.C. 45V(f). 

Section 1.45V–6 also issued under 26 

U.S.C. 45V(c) and (d). 

* * * * * 

Section 1.48–15 also issued under 26 

U.S.C. 48(a)(15). 

* * * * * 

■ Par. 2. Sections 1.45V–0 through 

1.45V–6 are added to read as follows: 

Sec. 

* * * * * 

1.45V–0 Table of contents. 

1.45V–1 Credit for production of qualified 

clean hydrogen. 

1.45V–2 Special rules. 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89244 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

1.45V–3 [Reserved] 

1.45V–4 Procedures for determining 

lifecycle greenhouse gas emissions rates 

for qualified clean hydrogen. 

1.45V–5 Procedures for verification of 

qualified clean hydrogen production and 

sale or use. 

1.45V–6 Rules for determining the placed 

in service date for an existing facility 

that is modified to produce qualified 

clean hydrogen. 

* * * * * 

§ 1.45V–0 Table of contents. 

This section lists the captions 

contained in §§ 1.45V–1 through 1.45V– 

6. 

§ 1.45V–1 Credit for production of qualified 

clean hydrogen. 

(a) Overview. 

(1) In general. 

(2) Applicable amount. 

(i) In general. 

(ii) Inflation adjustment. 

(3) Applicable percentage. 

(4) Claim. 

(5) Code. 

(6) DOE. 

(7) Facility. 

(i) In general. 

(ii) Treatment of certain indirect 

production and post-production equipment. 

(iii) Multipurpose components. 

(iv) Example. 

(8) Lifecycle GHG emissions. 

(i) In general. 

(ii) Most recent GREET model. 

(iii) Emissions through the point of 

production (well-to-gate). 

(9) Qualified clean hydrogen. 

(i) In general. 

(ii) For sale or use. 

(10) Qualified clean hydrogen production 

facility. 

(11) Secretary. 

(12) Section 45V credit. 

(13) Section 45V regulations. 

(b) Amount of credit. 

(1) In general. 

(2) Producer of qualified clean hydrogen. 

(3) Increased credit amount for qualified 

clean hydrogen production facilities. 

(c) Determination of credit. 

(d) Applicability date. 

§ 1.45V–2 Special rules. 

(a) Coordination with credit for carbon 

oxide sequestration. 

(b) Anti-abuse rule. 

(1) In general. 

(2) Example. 

(i) Facts. 

(ii) Analysis. 

(c) Recordkeeping. 

(d) Applicability date. 

§ 1.45V–3 [Reserved] 

§ 1.45V–4 Procedures for determining 

lifecycle greenhouse gas emissions rates 

for qualified clean hydrogen. 

(a) In general. 

(b) Use of the most recent GREET model. 

(c) Provisional emissions rate (PER). 

(1) In general. 

(2) Rate not determined. 

(i) In general. 

(ii) Subsequent inclusion in 45VH2– 

GREET. 

(3) Process for filing a PER petition. 

(4) PER determination. 

(5) Department of Energy emissions value 

request process. 

(6) Effect of PER. 

(d) Use of Energy Attribute Certificates 

(EACs). 

(1) In general. 

(2) Definitions. 

(i) Commercial operations date. 

(ii) Energy attribute certificate. 

(iii) Eligible EAC. 

(iv) Qualifying EAC. 

(v) Qualified EAC registry or accounting 

system. 

(vi) Region. 

(3) Qualifying EAC requirements. 

(i) Incrementality. 

(ii) Temporal matching. 

(iii) Deliverability. 

(e) Applicability date. 

§ 1.45V–5 Procedures for verification of 

qualified clean hydrogen production and 

sale or use. 

(a) In general. 

(b) Requirements for verification reports. 

(c) Requirements for the production 

attestation. 

(d) Requirements for the sale or use 

attestation. 

(1) In general. 

(2) Verifiable use. 

(e) Requirements for the conflict 

attestation. 

(1) In general. 

(2) Special rule for transfer elections. 

(f) Requirements for the qualified verifier 

statement. 

(g) General information on the taxpayer’s 

hydrogen production facility. 

(h) Qualified verifier. 

(i) Unrelated party. 

(j) Requirements for taxpayers claiming 

both the section 45V credit and the section 

45 credit or the section 45U credit. 

(k) Timely verification report. 

(l) Applicability date. 

§ 1.45V–6 Rules for determining the placed 

in service date for an existing facility 

that is modified to produce qualified 

clean hydrogen. 

(a) Modification of an existing facility. 

(1) In general. 

(2) Modification requirements. 

(b) Retrofit of an Existing Facility (80/20 

Rule). 

(c) Examples. 

(1) Example 1: Modification of an existing 

facility. 

(i) Facts. 

(ii) Analysis. 

(2) Example 2: Modification of an existing 

facility; coordination with the section 45Q 

credit previously allowed. 

(i) Facts. 

(ii) Analysis. 

(3) Example 3: Modification of an existing 

facility and coordination with section 45Q 

credit not previously allowed. 

(i) Facts. 

(ii) Analysis. 

(4) Example 4: Retrofit of an Existing 

Facility (80/20 Rule) and coordination with 

section 45Q credit previously allowed. 

(i) Facts. 

(ii) Analysis. 

(5) Example 5: Retrofit of an Existing 

Facility (80/20 Rule) and coordination with 

section 45Q credit previously allowed. 

(i) Facts. 

(ii) Analysis. 

(d) Applicability date. 

§ 1.45V–1 Credit for production of clean 

hydrogen. 

(a) Overview—(1) In general. For 

purposes of section 38 of the Code, the 

section 45V credit is determined under 

section 45V of the Code, so much of 

sections 6417 and 6418 of the Code that 

relate to section 45V, and the section 

45V regulations (as defined in paragraph 

(a)(13) of this section). Paragraphs (a)(2) 

through (13) of this section provide 

generally applicable definitions of terms 

that, unless otherwise provided, apply 

for purposes of section 45V, the section 

45V regulations, and any provision of 

the Code or this chapter that expressly 

refers to any provision of section 45V or 

the section 45V regulations. Paragraph 

(b) of this section provides rules for 

determining the amount of the section 

45V credit for any taxable year, which 

generally depends on the kilograms of 

qualified clean hydrogen produced 

during the taxable year and the 

emissions intensity of the process used 

to produce such hydrogen, as well as 

whether certain requirements, including 

the requirements under § 1.45V–3, are 

satisfied. Paragraph (c) of this section 

provides rules regarding the taxable year 

for which a section 45V credit is 

determined. See § 1.45V–2 for special 

rules, including rules to coordinate the 

section 45V credit with the credit for 

carbon oxide sequestration determined 

under section 45Q of the Code, an antiabuse rule, and recordkeeping 

requirements. See § 1.45V–3 for rules 

relating to the increased credit amount 

for satisfying the prevailing wage and 

apprenticeship requirements. See 

§ 1.45V–4 for procedures to determine 

lifecycle greenhouse gas (GHG) 

emissions rates for qualified clean 

hydrogen and § 1.45V–5 for procedures 

for verification of qualified clean 

hydrogen production and sale or use. 

See § 1.45V–6 for rules to determine the 

placed in service date for an existing 

facility that is modified or retrofitted to 

produce qualified clean hydrogen. See 

also § 1.48–15 for procedures to elect to 

treat any qualified property that is part 

of a specified clean hydrogen 

production facility as energy property 

for purposes of section 48 of the Code. 

(2) Applicable amount—(i) In general. 

The term applicable amount means the 

amount equal to the applicable 

percentage of $0.60, provided that if any 

such amount is not a multiple of 0.1 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89245 

cent, such amount is rounded to the 

nearest multiple of 0.1 cent. 

(ii) Inflation adjustment. The $0.60 

amount specified in section 45V(b)(1) 

and paragraph (a)(2)(i) of this section is 

adjusted annually by multiplying such 

amount by the inflation adjustment 

factor (as determined under section 

45(e)(2) of the Code, determined by 

substituting ‘‘2022’’ for ‘‘1992’’ in 

section 45(e)(2)(B)) for the calendar year 

in which the qualified clean hydrogen is 

produced, provided that if any such 

amount as adjusted is not a multiple of 

0.1 cent, such amount is rounded to the 

nearest multiple of 0.1 cent. 

(3) Applicable percentage. The term 

applicable percentage means the 

percentage set forth in paragraphs 

(a)(3)(i) through (iv) of this section, 

which is determined according to the 

lifecycle GHG emissions rate of the 

process by which the qualified clean 

hydrogen is produced: 

(i) In the case of any qualified clean 

hydrogen that is produced through a 

process that results in a lifecycle GHG 

emissions rate of not greater than 4 

kilograms of carbon dioxide equivalent 

(CO2e) per kilogram of hydrogen, and 

not less than 2.5 kilograms of CO2e per 

kilogram of hydrogen, the applicable 

percentage is 20 percent. 

(ii) In the case of any qualified clean 

hydrogen that is produced through a 

process that results in a lifecycle GHG 

emissions rate of less than 2.5 kilograms 

of CO2e per kilogram of hydrogen, and 

not less than 1.5 kilograms of CO2e per 

kilogram of hydrogen, the applicable 

percentage is 25 percent. 

(iii) In the case of any qualified clean 

hydrogen that is produced through a 

process that results in a lifecycle GHG 

emissions rate of less than 1.5 kilograms 

of CO2e per kilogram of hydrogen, and 

not less than 0.45 kilograms of CO2e per 

kilogram of hydrogen, the applicable 

percentage is 33.4 percent. 

(iv) In the case of any qualified clean 

hydrogen that is produced through a 

process that results in a lifecycle GHG 

emissions rate of less than 0.45 

kilograms of CO2e per kilogram of 

hydrogen, the applicable percentage is 

100 percent. 

(4) Claim. With respect to the section 

45V credit determined for qualified 

clean hydrogen produced by the 

taxpayer at a qualified clean hydrogen 

production facility, the term claim 

means the filing of a completed Form 

7210, Clean Hydrogen Production 

Credit, or any successor form(s), with 

the taxpayer’s Federal income tax return 

or annual information return for the 

taxable year in which the credit is 

determined, and includes the making of 

an election under section 6417 or 6418 

and the regulations in this chapter 

under section 6417 or 6418, as 

applicable, with respect to such section 

45V credit on the applicable entity’s or 

eligible taxpayer’s timely filed 

(including extensions) Federal income 

tax return or annual information return. 

(5) Code. The term Code means the 

Internal Revenue Code. 

(6) DOE. The term DOE means the 

U.S. Department of Energy. 

(7) Facility—(i) In general. For 

purposes of the definition of qualified 

clean hydrogen production facility 

provided at section 45V(c)(3) and 

paragraph (a)(10) of this section, unless 

otherwise specified, the term facility 

means a single production line that is 

used to produce qualified clean 

hydrogen. A single production line 

includes all components of property 

that function interdependently to 

produce qualified clean hydrogen. 

Components of property function 

interdependently to produce qualified 

clean hydrogen if the placing in service 

of each component is dependent upon 

the placing in service of each of the 

other components to produce qualified 

clean hydrogen. 

(ii) Treatment of certain indirect 

production and post-production 

equipment. The term facility does not 

include— 

(A) Equipment that is used to 

condition or transport hydrogen beyond 

the point of production; or 

(B) Notwithstanding paragraph 

(a)(7)(iii) of this section, electricity 

production equipment used to power 

the hydrogen production process, 

including any carbon capture 

equipment associated with the 

electricity production process. 

(iii) Multipurpose components. 

Components that have a purpose in 

addition to the production of qualified 

hydrogen may be part of a facility if 

such components function 

interdependently with other 

components to produce qualified clean 

hydrogen. 

(iv) Example. The following example 

illustrates the definition of facility 

provided in this paragraph (a)(7). A 

hydrogen production facility is 

equipped with carbon capture 

equipment (as defined in § 1.45Q–2(c)), 

as distinguished from the carbon 

capture equipment described in 

paragraph (a)(7)(ii)(B) of this section. 

One purpose of this equipment is the 

capture of carbon oxides. The facility 

produces hydrogen through a process 

that results in a lifecycle GHG emissions 

rate falling within the range specified in 

section 45V(b)(2)(C). Without the carbon 

capture equipment, the facility could 

not produce hydrogen through a process 

that results in a lifecycle GHG emissions 

rate falling within the range specified in 

section 45V(b)(2)(C). Because the carbon 

capture equipment is functionally 

interdependent with other components 

of property to produce qualified clean 

hydrogen within the meaning of 

paragraph (a)(9)(i) of this section, the 

carbon capture equipment is part of the 

facility for purposes of section 45V(c)(3) 

and the regulations in this part under 

section 45V, along with all other 

components of property that function 

interdependently with the carbon 

capture equipment to produce qualified 

clean hydrogen. 

(8) Lifecycle GHG emissions—(i) In 

general. Subject to section 45V(c)(1)(B) 

and paragraphs (a)(8)(ii) and (iii) of this 

section, and unless otherwise specified 

in the section 45V regulations, the term 

lifecycle GHG emissions has the 

meaning given the term lifecycle 

greenhouse gas emissions by 42 U.S.C. 

7545(o)(1)(H), as in effect on August 16, 

2022. For purposes of section 45V, 

lifecycle GHG emissions include 

emissions only through the point of 

production (well-to-gate), as determined 

under the most recent Greenhouse 

gases, Regulated Emissions, and Energy 

use in Transportation model (GREET 

model) developed by Argonne National 

Laboratory, or a successor model. 

(ii) Most recent GREET model. Unless 

otherwise specified in the section 45V 

regulations, for purposes of the section 

45V credit, the term most recent GREET 

model means the latest version of 

45VH2–GREET developed by Argonne 

National Laboratory that is publicly 

available, as provided in the 

instructions to the latest version of Form 

7210, Clean Hydrogen Production 

Credit, or any successor form(s), on the 

first day of the taxable year during 

which the qualified clean hydrogen for 

which the taxpayer is claiming the 

section 45V credit was produced. If a 

version of 45VH2–GREET becomes 

publicly available after the first day of 

the taxable year of production (but still 

within such taxable year), then the 

taxpayer may, in its discretion, treat 

such later version of 45VH2–GREET as 

the most recent GREET model. 

(iii) Emissions through the point of 

production (well-to-gate). The term 

emissions through the point of 

production (well-to-gate) means the 

aggregate lifecycle GHG emissions 

related to hydrogen produced at a 

hydrogen production facility during the 

taxable year through the point of 

production. It includes emissions 

associated with feedstock growth, 

gathering, extraction, processing, and 

delivery to a hydrogen production 

facility. It also includes the emissions 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89246 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

associated with the hydrogen 

production process, inclusive of the 

electricity used by the hydrogen 

production facility and any capture and 

sequestration of carbon dioxide 

generated by the hydrogen production 

facility. 

(9) Qualified clean hydrogen—(i) In 

general. The term qualified clean 

hydrogen means hydrogen that is 

produced through a process that results 

in a lifecycle GHG emissions rate of not 

greater than 4 kilograms of CO2e per 

kilogram of hydrogen. Such term does 

not include any hydrogen unless the 

production and sale or use of such 

hydrogen is verified by an unrelated 

party in accordance with, and satisfying 

the requirements of, § 1.45V–5, and 

such hydrogen is produced— 

(A) In the United States (as defined in 

section 638(1) of the Code) or a United 

States territory, which, for purposes of 

section 45V and the regulations in this 

part under section 45V, has the meaning 

of the term possession provided in 

section 638(2) of the Code; 

(B) In the ordinary course of a trade 

or business of the taxpayer; and 

(C) For sale or use. 

(ii) For sale or use. The term for sale 

or use means for the primary purpose of 

making ready and available for sale or 

use. Storage of hydrogen following 

production does not disqualify such 

hydrogen from being considered 

produced for sale or use. 

(10) Qualified clean hydrogen 

production facility. The term qualified 

clean hydrogen production facility 

means a facility— 

(i) Owned by the taxpayer; 

(ii) That produces qualified clean 

hydrogen; and 

(iii) The construction of which begins 

before January 1, 2033. 

(11) Secretary. The term Secretary 

means the Secretary of the Treasury or 

her delegate. 

(12) Section 45V credit. The term 

section 45V credit means the credit for 

production of clean hydrogen 

determined under section 45V of the 

Code, so much of sections 6417 and 

6418 of the Code that relate to section 

45V, and the section 45V regulations. 

(13) Section 45V regulations. The 

term section 45V regulations means this 

section, §§ 1.45V–2 through 1.45V–6, 

and the regulations in this chapter 

under sections 6417 and 6418 of the 

Code that relate to the section 45V 

credit. 

(b) Amount of credit—(1) In general. 

The amount of the section 45V credit 

determined under section 45V(a) and 

the section 45V regulations for any 

taxable year is the product of the 

kilograms of qualified clean hydrogen 

produced by the taxpayer during such 

taxable year at a qualified clean 

hydrogen production facility during the 

10-year period beginning on the date 

such facility was originally placed in 

service, multiplied by the applicable 

amount with respect to such hydrogen. 

(2) Producer of qualified clean 

hydrogen. The term taxpayer means the 

taxpayer that owns the qualified clean 

hydrogen production facility at the time 

of the facility’s production of hydrogen 

for which the section 45V credit is 

claimed, regardless of whether such 

taxpayer is treated as a producer under 

section 263A of the Code or under any 

other provision of law with respect to 

such hydrogen. 

(3) Increased credit amount for 

qualified clean hydrogen production 

facilities. Pursuant to section 45V(e)(1), 

§ 1.45V–3 provides rules that permit the 

amount of the section 45V credit 

determined under section 45V(a) and 

paragraph (b)(1) of this section to be 

multiplied by five if certain 

requirements related to prevailing wages 

and apprenticeships are met. See 

§ 1.45V–3(a). 

(c) Determination of credit. Subject to 

any applicable sections of the Code that 

may limit the section 45V credit 

amount, the section 45V credit for any 

taxable year of a taxpayer who produces 

qualified clean hydrogen and claims 

such credit is determined with respect 

to the qualified clean hydrogen 

produced by the taxpayer during that 

taxable year, regardless of whether the 

verification of the production and sale 

or use of that hydrogen occurs in a later 

taxable year. Although the section 45V 

credit is determined with respect to the 

taxable year in which the qualified 

clean hydrogen is produced, a taxpayer 

is not eligible to claim the section 45V 

credit with respect to the production of 

that hydrogen until all relevant 

verification requirements, and the 

verification itself, have been completed 

for both the production of the hydrogen 

and the sale or use of that hydrogen. 

Accordingly, although the sale or use of 

the hydrogen and the verification 

thereof may occur in a taxable year after 

the taxable year of production, the 

section 45V credit is properly claimed 

with respect to the taxable year of 

production and is subject to the general 

period of limitations for filing a claim 

for credit or refund under section 6511 

and other applicable provisions of the 

Code. 

(d) Applicability date. This section 

applies to taxable years beginning after 

December 26, 2023. 

§ 1.45V–2 Special rules. 

(a) Coordination with credit for 

carbon oxide sequestration. In the case 

of any qualified clean hydrogen 

produced at a qualified clean hydrogen 

production facility that includes carbon 

capture equipment for which a credit is 

allowed to any taxpayer under section 

45Q of the Code (section 45Q credit) for 

the taxable year or any prior taxable 

year, no section 45V credit is allowed 

under section 45V of the Code. 

However, if the 80/20 Rule provided in 

§ 1.45Q–2(g)(5) is satisfied with respect 

to such carbon capture equipment, and 

no new section 45Q credit has been 

allowed to any taxpayer for such carbon 

capture equipment, then the unit of 

carbon capture equipment (as defined in 

§ 1.45Q–2(c)(3)) for which the 80/20 

rule is satisfied will not be treated as 

carbon capture equipment for which a 

section 45Q credit was allowed to any 

taxpayer for any prior taxable year for 

purposes of section 45V(d)(2) and this 

paragraph (a). 

(b) Anti-abuse rule—(1) In general. 

The rules of section 45V of the Code 

(and so much of sections 6417 and 6418 

of the Code related to the section 45V 

credit) and the section 45V regulations 

(as defined in § 1.45V–1(a)(13)) must be 

applied in a manner consistent with the 

purposes of section 45V and the section 

45V regulations. A purpose of section 

45V and the regulations in this part 

under section 45V (and so much of 

sections 6417 and 6418 and the 

regulations in this chapter under 

sections 6417 and 6418 related to the 

section 45V credit) is to provide 

taxpayers an incentive to produce 

qualified clean hydrogen for a 

productive use. Accordingly, the section 

45V credit is not allowable if the 

primary purpose of the production and 

sale or use of qualified clean hydrogen 

is to obtain the benefit of the section 

45V credit in a manner that is wasteful, 

such as the production of qualified 

clean hydrogen that the taxpayer knows 

or has reason to know will be vented, 

flared, or used to produce hydrogen. A 

determination of whether the 

production and sale or use of qualified 

clean hydrogen is inconsistent with the 

purposes of section 45V and the 

regulations in this part under section 

45V of the Code is based on all facts and 

circumstances. 

(2) Example—(i) Facts. Taxpayer is a 

C corporation that has a calendar year 

taxable year. In 2031, Taxpayer places 

Facility in service in the United States. 

Facility produces qualified clean 

hydrogen that qualifies for the highest 

applicable amount of the section 45V 

credit at a production cost of $2 per 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89247 

kilogram of hydrogen (assuming 

Taxpayer also claims the increased 

credit under section 45V(e), without 

taking into account any future inflation 

adjustment, the amount of the section 

45V credit would be $3 per kilogram of 

qualified clean hydrogen). The cost of 

producing each kilogram of qualified 

clean hydrogen is less than the amount 

of the section 45V credit that would be 

available if Taxpayer qualified for the 

section 45V credit. In 2031, Taxpayer 

sells all the qualified clean hydrogen 

produced at Facility that year to 

Customer at a price that is well below 

the current market price. Taxpayer 

knows or reasonably expects that 

Customer will vent or flare a portion of 

the qualified clean hydrogen it 

purchased from Taxpayer. In addition, 

Taxpayer intends to obtain the benefit 

from the section 45V credit by claiming 

such credit itself or monetizing such 

credits through an election under 

section 6417 or 6418 of the Code. 

(ii) Analysis. Based on all the facts 

and circumstances, the primary purpose 

of Taxpayer’s production and sale of 

qualified clean hydrogen is to obtain the 

benefit of the section 45V credit in a 

manner that is wasteful. Taxpayer is not 

eligible for the section 45V credit with 

respect to the qualified clean hydrogen 

that Taxpayer produced and sold in 

2031 to Customer that is subsequently 

vented or flared by Customer. 

(c) Recordkeeping. Consistent with 

section 6001 of the Code, a taxpayer 

claiming the section 45V credit for 

qualified clean hydrogen produced at a 

qualified clean hydrogen production 

facility must maintain and preserve 

records sufficient to establish the 

amount of the section 45V credit 

claimed by the taxpayer. At a minimum, 

those records must include records to 

substantiate the information required to 

be included in the verification report 

under § 1.45V–5, records establishing 

that the facility meets the definition of 

a qualified clean hydrogen production 

facility under section 45V(c)(3) and 

§ 1.45V–1(a)(10), records of past credit 

claims under section 45Q by any 

taxpayer with respect to carbon capture 

equipment included at the facility, and 

records establishing the date the 

qualified clean hydrogen production 

facility was placed in service. If the 

requirements under section 45V(e) and 

§ 1.45V–3(b) for the increased credit 

amount were satisfied, then the taxpayer 

must also maintain records in 

accordance with § 1.45–12. Taxpayers 

must also retain all raw data used for 

submission of a request for an emissions 

value to the DOE for at least six years 

after the due date (including extensions) 

for filing the Federal income tax return 

or information return to which the 

provisional emissions rate (PER) (as 

defined in § 1.45V–4(c)(1)) petition is 

ultimately attached. 

(d) Applicability date. This section 

applies to taxable years beginning after 

December 26, 2023. 

§ 1.45V–3 [Reserved] 

§ 1.45V–4 Procedures for determining 

lifecycle greenhouse gas emissions rates 

for qualified clean hydrogen. 

(a) In general. The amount of the 

section 45V credit is determined under 

section 45V(a) of the Code and § 1.45V– 

1(b) according to the lifecycle GHG 

emissions rate of all hydrogen produced 

at a hydrogen production facility during 

the taxable year. The lifecycle GHG 

emissions rate of such hydrogen is 

determined under the most recent 

GREET model. In the case of any 

hydrogen for which a lifecycle GHG 

emissions rate has not been determined 

under the most recent GREET model for 

purposes of section 45V, a taxpayer 

producing such hydrogen may file a 

petition for a provisional emissions rate 

(PER) with the IRS for the Secretary’s 

determination of the lifecycle GHG 

emissions rate with respect to such 

hydrogen. 

(b) Use of the most recent GREET 

model. For each taxable year during the 

period described in section 45V(a)(1), a 

taxpayer claiming the section 45V credit 

determines the lifecycle GHG emissions 

rate of hydrogen produced at a hydrogen 

production facility under the most 

recent GREET model separately for each 

hydrogen production facility the 

taxpayer owns. This determination is 

made following the close of each such 

taxable year and must include all 

hydrogen production during the taxable 

year. In using the most recent GREET 

model to calculate the lifecycle GHG 

emissions rate for purposes of 

determining the amount of the section 

45V credit under section 45V(a) and 

§ 1.45V–1(b), the taxpayer must 

accurately enter all information about 

its facility requested within the interface 

of 45VH2–GREET (as described in 

§ 1.45V–1(a)(8)(ii)). Information 

regarding where taxpayers may access 

45VH2–GREET and accompanying 

documentation will be included in the 

instructions to the Form 7210, Clean 

Hydrogen Production Credit, or any 

successor form(s). 

(c) Provisional emissions rate (PER)— 

(1) In general. For purposes of section 

45V(c)(2)(C) and paragraph (a) of this 

section, the term provisional emissions 

rate or PER means the lifecycle GHG 

emissions rate of the process by which 

qualified clean hydrogen is produced by 

the taxpayer at a hydrogen production 

facility as determined by the Secretary 

under this paragraph (c). 

(2) Rate not determined—(i) In 

general. For purposes of section 

45V(c)(2)(C), a taxpayer may not file a 

petition for a PER unless a lifecycle 

GHG emissions rate has not been 

determined under the most recent 

GREET model with respect to hydrogen 

produced by the taxpayer at a hydrogen 

production facility. A lifecycle GHG 

emissions rate has not been determined 

under the most recent GREET model 

with respect to hydrogen produced by 

the taxpayer at a hydrogen production 

facility if either the feedstock used by 

such facility or the facility’s hydrogen 

production technology is not included 

in the most recent GREET model. A 

facility’s hydrogen production pathway 

is not included in the most recent 

GREET model if the feedstock used by 

such facility or the facility’s hydrogen 

production technology is not included 

in the most recent GREET model. If a 

taxpayer’s request for an emissions 

value pursuant to paragraph (c)(5) of 

this section with respect to the 

hydrogen produced by the taxpayer at a 

hydrogen production facility is pending 

at the time such facility’s hydrogen 

production pathway becomes included 

in an updated version of 45VH2– 

GREET, the taxpayer’s request for an 

emissions value will be automatically 

denied. In such case, the taxpayer must 

determine the lifecycle GHG emissions 

rate with respect to such hydrogen 

under paragraph (c)(2)(ii) of this section. 

(ii) Subsequent inclusion in 45VH2– 

GREET. Notwithstanding the definition 

of the most recent GREET model 

provided at § 1.45V–1(a)(8)(ii), for the 

taxable year in which the hydrogen 

production facility’s hydrogen 

production pathway is first included in 

an updated version of 45VH2–GREET, 

the updated version of 45VH2–GREET 

will be considered the most recent 

GREET model with respect to the 

hydrogen produced by the taxpayer at 

the hydrogen production facility during 

such taxable year, and for purposes of 

section 45V(c)(2)(C), a lifecycle GHG 

emissions rate for such hydrogen will be 

considered to have been determined. 

(3) Process for filing a PER petition. 

To file a PER petition with the 

Secretary, a taxpayer must submit a PER 

petition attached to the taxpayer’s 

Federal income tax return for the first 

taxable year of hydrogen production 

ending within the 10-year period 

described in section 45V(a)(1) for which 

the taxpayer claims the section 45V 

credit for hydrogen to which the PER 

petition relates and for which a lifecycle 

GHG emissions rate has not been 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89248 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

determined, as defined under paragraph 

(c)(2)(i) of this section. A PER petition 

must contain an emissions value 

obtained from the DOE setting forth 

DOE’s analytical assessment of the 

lifecycle GHG emissions associated with 

the facility’s hydrogen production 

pathway, which must be consistent with 

the lifecycle GHG emissions framework 

provided in the section 45V regulations, 

and a copy of the taxpayer’s request to 

the DOE for an emissions value, 

including any information provided by 

the taxpayer to the DOE pursuant to the 

emissions value request process 

provided in paragraph (c)(5) of this 

section. If the taxpayer obtained more 

than one emissions value from the DOE, 

the PER petition must contain the 

emissions value setting forth the 

lifecycle GHG emissions rate of the 

hydrogen for which the section 45V 

credit is claimed on the Form 7210, 

Clean Hydrogen Production Credit, to 

which the PER petition is attached. 

(4) PER determination. Upon the IRS’s 

acceptance of the taxpayer’s Federal 

income tax return containing a PER 

petition, the emissions value of the 

hydrogen specified on such petition will 

be deemed accepted. A taxpayer would 

be able to rely upon an emissions value 

provided by the DOE for purposes of 

calculating and claiming a section 45V 

credit, provided that any information, 

representations, or other data provided 

to the DOE in support of the request for 

an emissions value are accurate. The 

IRS’s deemed acceptance of such 

emissions value is the Secretary’s 

determination of the PER. However, the 

production and sale or use of such 

hydrogen must be verified by an 

unrelated party under section 

45V(c)(2)(B)(ii) and § 1.45V–5. Such 

verification and any information, 

representations, or other data provided 

to the DOE in support of the request for 

an emissions value are subject to later 

examination by the IRS. 

(5) Department of Energy (DOE) 

emissions value request process. An 

applicant that submits a request for an 

emissions value must follow the 

procedures specified by the DOE to 

request and obtain such emissions 

value. Emissions values will be 

evaluated using the same well-to-gate 

system boundary that is employed in 

45VH2–GREET. Additionally, if 

applicable, background data parameters 

in 45VH2–GREET will also be treated as 

background data (with fixed values that 

an applicant cannot change) in the 

emissions value request process. 

Treatment of EACs and other proposals 

outlined in the regulations in this part 

under section 45V will be consistently 

applied in the emissions value request 

process. An applicant may request an 

emissions value from the DOE only after 

a front-end engineering and design 

(FEED) study or similar indication of 

project maturity, as determined by the 

DOE, such as project specification and 

cost estimation sufficient to inform a 

final investment decision has been 

completed for the hydrogen production 

facility. The DOE may decline to review 

applications that are not responsive, 

including those applications that use a 

hydrogen production technology and 

feedstock already in 45VH2–GREET or 

applications that are incomplete. 

Guidance and procedures for applicants 

to request and obtain an emissions value 

from the DOE will be published by the 

DOE, including a process for, under 

limited circumstances, a revision to the 

DOE’s initial analytical assessment of an 

emissions value on the basis of revised 

technical information or facility design 

and operation. 

(6) Effect of PER. A taxpayer may use 

a PER determined by the Secretary to 

calculate the amount of the section 45V 

credit under section 45V(a) and 

§ 1.45V–1(b) with respect to qualified 

clean hydrogen produced at a qualified 

clean hydrogen production facility, 

provided all other requirements of 

section 45V are met, until the lifecycle 

GHG emissions rate of such hydrogen 

has been determined (for purposes of 

section 45V(c)(2)(C)) under the most 

recent GREET model. The Secretary’s 

PER determination is not an 

examination or inspection of books of 

account for purposes of section 7605(b) 

of the Code and does not preclude or 

impede the IRS (under section 7605(b) 

or any administrative provisions 

adopted by the IRS) from later 

examining a return or inspecting books 

or records with respect to any taxable 

year for which the section 45V credit is 

claimed. For example, the verification 

report submitted under section 

45V(c)(2)(B)(ii) and § 1.45V–5 and any 

information, representations, or other 

data provided to the DOE in support of 

the request for an emissions value are 

still subject to examination. Further, a 

PER determination does not signify that 

the IRS has determined that the 

requirements of section 45V have been 

satisfied for any taxable year. 

(d) Use of Energy Attribute 

Certificates (EACs)—(1) In general. For 

purposes of the section 45V credit, if a 

taxpayer determines a lifecycle GHG 

emissions rate for hydrogen produced at 

a hydrogen production facility using the 

most recent GREET model or the 

Secretary determines a provisional 

emissions rate for hydrogen produced at 

a hydrogen production facility subject to 

a PER petition, then the taxpayer may 

treat such hydrogen production 

facility’s use of electricity as being from 

a specific electricity generating facility 

rather than being from the regional 

electricity grid (as represented in 

45VH2–GREET) only if the taxpayer 

acquires and retires qualifying EACs (as 

defined in paragraph (d)(2)(iv) of this 

section) for each unit of electricity that 

the taxpayer claims from such source. 

For example, one megawatt-hour of 

electricity use to produce hydrogen 

would need to be matched with one 

megawatt-hour of qualifying EACs. 

Further, to satisfy this requirement, a 

taxpayer’s acquisition and retirement of 

qualifying EACs must also be recorded 

in a qualified EAC registry or 

accounting system (as defined in 

paragraph (d)(2)(v) of this section) so 

that the acquisition and retirement of 

such EACs may be verified by a 

qualified verifier (as defined in § 1.45V– 

5(h)). The requirements of this 

paragraph (d)(1) apply regardless of 

whether the electricity generating 

facility is grid connected, directly 

connected, or co-located with the 

hydrogen production facility. 

(2) Definitions. For purposes of this 

section— 

(i) Commercial operations date. The 

term commercial operations date or 

COD means the date on which a facility 

that generates electricity begins 

commercial operations. 

(ii) Energy attribute certificate. The 

term energy attribute certificate (EAC) 

means a tradeable contractual 

instrument, issued through a qualified 

EAC registry or accounting system (as 

defined in paragraph (d)(2)(v) of this 

section), that represents the energy 

attributes of a specific unit of energy 

produced. An EAC may be traded with 

or separately from the underlying 

energy it represents. An EAC can be 

retired by or on behalf of its owner, 

which is the party that has the right to 

claim the underlying attributes 

represented by an EAC. Renewable 

energy certificates (RECs) and other 

similar energy certificates issued 

through a registry or accounting system 

are forms of EACs. 

(iii) Eligible EAC. The term eligible 

EAC means an EAC that, with respect to 

the electricity to which the EAC relates, 

provides, at a minimum, the 

information described in paragraphs 

(d)(2)(iii)(A) through (F) of this 

section— 

(A) A description of the facility, 

including the technology and feedstock 

used to generate the electricity; 

(B) The amount and units of 

electricity; 

(C) The COD of the facility that 

generated the electricity; 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89249 

(D) For electricity that is generated 

before January 1, 2028, the calendar year 

in which such electricity was generated; 

(E) For electricity that is generated 

after December 31, 2027, the date and 

hour in which such electricity was 

generated; and 

(F) The project identification number 

or assigned identifier. 

(iv) Qualifying EAC. The term 

qualifying EAC means an eligible EAC 

that meets the requirements of 

paragraph (d)(3) of this section and for 

which the satisfaction of those 

requirements has been verified by a 

qualified verifier (as defined in § 1.45V– 

5(h)). 

(v) Qualified EAC registry or 

accounting system. The term qualified 

EAC registry or accounting system 

means a tracking system that— 

(A) Assigns a unique identification 

number to each EAC tracked by such 

system; 

(B) Enables verification that only one 

EAC is associated with each unit of 

electricity; 

(C) Verifies that each EAC is claimed 

and retired only once; 

(D) Identifies the owner of each EAC; 

and 

(E) Provides a publicly accessible 

view (for example, through an 

application programming interface) of 

all currently registered generators in the 

tracking system to prevent the 

duplicative registration of generators. 

(vi) Region. The term region means a 

region derived from the National 

Transmission Needs Study that was 

released by the DOE on October 30, 

2023. Alaska, Hawaii, and each U.S. 

territory will be treated as separate 

regions. 

(3) Qualifying EAC requirements. An 

eligible EAC meets the requirements of 

this paragraph (d)(3) if it meets the 

requirements of paragraphs (d)(3)(i) 

through (iii) of this section. 

(i) Incrementality. An EAC meets the 

requirements of this paragraph (d)(3)(i) 

if it meets the requirements of paragraph 

(d)(3)(i)(A) or (B) of this section. 

Paragraph (d)(3)(i)(C) of this section 

provides an example that illustrates the 

application of paragraph (d)(3)(i)(B) of 

this section. 

(A) An EAC meets the requirements of 

this paragraph (d)(3)(i)(A) if the 

electricity generation facility that 

produced the unit of electricity to which 

the EAC relates has a COD that is no 

more than 36 months before the 

hydrogen production facility for which 

the EAC is retired was placed in service. 

(B) Uprates. An EAC meets the 

requirements of this paragraph 

(d)(3)(i)(B) if the electricity represented 

by the EAC is produced by an electricity 

generating facility that had an uprate no 

more than 36 months before the 

hydrogen production facility with 

respect to which the EAC is retired was 

placed in service and such electricity is 

part of such electricity generating 

facility’s uprated production. The term 

uprate means an increase in an 

electricity generating facility’s rated 

nameplate capacity (in nameplate 

megawatts). The term pre-uprate 

capacity means the nameplate capacity 

of an electricity generating facility 

immediately before an uprate. The term 

post-uprate capacity means the 

nameplate capacity of an electricity 

generating facility immediately after an 

uprate. The term incremental generation 

capacity means the increase in an 

electricity generating facility’s rated 

nameplate capacity from the pre-uprate 

capacity to the post-uprate capacity. The 

term uprated production rate means the 

incremental generation capacity (in 

nameplate megawatts) divided by the 

post-uprate capacity (in nameplate 

megawatts). The term uprated 

production means the uprated 

production rate of an electricity 

generating facility multiplied by its total 

generation output (in megawatt hours). 

An uprated electricity generating 

facility’s production must be prorated to 

each hour of such facility’s generation 

by multiplying the production for each 

hour or each year, consistent with the 

requirements in paragraph (d)(3)(ii) of 

this section, by the uprated production 

rate to determine the electricity to 

which the uprate relates. 

(C) Example. Power Plant undergoes 

an uprate that expands its rated 

nameplate capacity from a pre-uprate 

capacity of 10 megawatts (MW) to a 

post-uprate capacity of 12 MW. After 

the uprate, its generation output 

increases to a total of 40,000 MW hours 

for the year. Power Plant’s incremental 

generation capacity is 2 MW, its uprated 

production rate is 0.167 (2 MW divided 

by 12 MW), and its total uprated 

production for the year is 6,667 

megawatt hours (MWh) (2 megawatts 

divided by 12 MW multiplied by 40,000 

MWh). Two-twelfths (0.167) of each 

hour of the Power Plant’s production 

may be considered uprated production. 

(ii) Temporal matching—(A) In 

general. An EAC meets the requirements 

of this paragraph (d)(3)(ii) if the 

electricity represented by the EAC is 

generated in the same hour that the 

taxpayer’s hydrogen production facility 

uses electricity to produce hydrogen. 

(B) Transition rule. For EACs that 

represent electricity generated before 

January 1, 2028, the EAC will be 

considered generated in the same hour 

that the taxpayer’s hydrogen production 

facility uses electricity to produce 

hydrogen as required in paragraph 

(d)(3)(ii)(A) of this section if the 

electricity represented by the EAC is 

generated in the same calendar year that 

the taxpayer’s hydrogen production 

facility uses electricity to produce 

hydrogen. 

(iii) Deliverability. An EAC meets the 

requirements of this paragraph (d)(3)(iii) 

if the electricity represented by the EAC 

is generated by a facility that is in the 

same region (as defined in paragraph 

(d)(2)(vi) of this section) as the hydrogen 

production facility. 

(e) Applicability date. This section 

applies to taxable years beginning after 

December 26, 2023. 

§ 1.45V–5 Procedures for verification of 

qualified clean hydrogen production and 

sale or use. 

(a) In general. For each qualified clean 

hydrogen production facility for which 

a taxpayer claims a section 45V credit, 

a verification report must be attached to 

the taxpayer’s Form 7210, Clean 

Hydrogen Production Credit, or any 

successor form(s), for each qualified 

clean hydrogen production facility and 

for each taxable year in which the 

taxpayer claims the section 45V credit. 

(b) Requirements for verification 

reports. A verification report specified 

in paragraph (a) of this section must be 

prepared by a qualified verifier under 

penalties of perjury and must contain— 

(1) An attestation from the qualified 

verifier regarding the taxpayer’s 

production of qualified clean hydrogen 

for sale or use (production attestation); 

(2) An attestation from the qualified 

verifier regarding the amount of 

qualified clean hydrogen sold or used 

(sale or use attestation); 

(3) An attestation from the qualified 

verifier regarding conflicts of interest 

(conflict attestation); 

(4) Certain information regarding the 

qualified verifier, including 

documentation of the qualified verifier’s 

qualifications (qualified verifier 

statement); 

(5) Certain general information about 

the taxpayer’s hydrogen production 

facility where the hydrogen production 

undergoing verification occurred; and 

(6) Any documentation necessary to 

substantiate the verification process 

given the standards and best practices 

prescribed by the qualified verifier’s 

accrediting body and the circumstances 

of the taxpayer and the taxpayer’s 

hydrogen production facility. 

(c) Requirements for the production 

attestation. The following requirements 

apply to the production attestation. 

(1) The production attestation must be 

an attestation, made under penalties of 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89250 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

perjury, that the qualified verifier 

performed a verification sufficient to 

determine that the operation, during the 

applicable taxable year, of the hydrogen 

production facility that produced the 

hydrogen for which the section 45V 

credit is claimed, and any energy 

attribute certificates (EACs) applied 

pursuant to § 1.45V–4(d) for the purpose 

of accounting for such facility’s 

emissions, are accurately reflected in— 

(i) The amount of qualified clean 

hydrogen produced by the taxpayer that 

is claimed on the Form 7210, Clean 

Hydrogen Production Credit, or any 

successor form(s), to which the 

verification report is attached; and 

(ii) Either— 

(A) The data the taxpayer entered into 

the most recent GREET model to 

determine the lifecycle GHG emissions 

rate that is claimed on the Form 7210, 

Clean Hydrogen Production Credit, or 

any successor form(s), to which the 

verification report is attached; or 

(B) The data the taxpayer submitted in 

the PER petition relating to the 

hydrogen for which the section 45V 

credit is claimed, and which was 

provided to the DOE in support of the 

taxpayer’s request for the emissions 

value provided in the PER petition. 

(2) If the production attestation attests 

to the information specified in 

paragraph (c)(1)(ii)(B) of this section, 

then the production attestation must 

also specify the emissions value 

received from the DOE that was 

calculated using such data, expressed in 

kilograms of CO2e per kilogram of 

hydrogen. 

(3) The production attestation must 

specify the lifecycle GHG emissions rate 

(expressed in kilograms of CO2e per 

kilogram of hydrogen) and the amount 

of qualified clean hydrogen produced by 

the taxpayer (expressed in kilograms), 

that are claimed on the Form 7210, 

Clean Hydrogen Production Credit, or 

any successor form(s), to which the 

verification report is attached. 

(d) Requirements for the sale or use 

attestation—(1) In general. The sale or 

use attestation must be an attestation, 

made under penalties of perjury, that 

the qualified verifier performed a 

verification sufficient to determine that 

the amount of qualified clean hydrogen 

that is specified in the production 

attestation pursuant to paragraph 

(c)(1)(i) of this section, and that is 

claimed on the Form 7210, Clean 

Hydrogen Production Credit, or any 

successor form(s), to which the 

verification report is attached, has been 

sold or used by a person who makes a 

verifiable use of such hydrogen. 

(2) Verifiable use. For purposes of 

section 45V(c)(2)(B)(ii) of the Code and 

the section 45V regulations (as defined 

in § 1.45V–1(a)(13)), a person’s 

verifiable use of the hydrogen specified 

in paragraph (d)(1) of this section can 

occur within or outside the United 

States. A verifiable use can be made by 

the taxpayer or a person other than the 

taxpayer. For example, a verifiable use 

includes a tolling arrangement pursuant 

to which a service recipient provides 

raw materials or inputs, such as water 

or electricity, to a toller (that is, a thirdparty service provider that owns a 

hydrogen production facility), and the 

toller produces hydrogen for the service 

recipient using the service recipient’s 

raw materials or inputs in exchange for 

a fee, use of the hydrogen by the service 

recipient would be a verifiable use. 

However, a verifiable use does not 

include— 

(i) Use of hydrogen to generate 

electricity that is then directly or 

indirectly used in the production of 

more hydrogen; or 

(ii) Venting or flaring of hydrogen. 

(e) Requirements for the conflict 

attestation—(1) In general. The conflict 

attestation must include attestations, 

made under penalties of perjury, that— 

(i) The qualified verifier has not 

received a fee based to any extent on the 

value of any section 45V credit that has 

been or is expected to be claimed by any 

taxpayer and no arrangement has been 

made for such fee to be paid at some 

time in the future; 

(ii) The qualified verifier was not a 

party to any transaction in which the 

taxpayer sold qualified clean hydrogen 

it had produced or in which the 

taxpayer purchased inputs for the 

production of such hydrogen; 

(iii) The qualified verifier is not 

related, within the meaning of section 

267(b) or 707(b)(1) of the Code, to, or an 

employee of, the taxpayer; 

(iv) The qualified verifier is not 

married to an individual described in 

paragraph (e)(1)(iii) of this section; and 

(v) If the qualified verifier is acting in 

his or her capacity as a partner in a 

partnership, an employee of any person, 

whether an individual, corporation, or 

partnership, or an independent 

contractor engaged by a person other 

than the taxpayer, the attestations under 

paragraphs (e)(1)(i) through (iv) of this 

section must also be made with respect 

to the partnership or the person who 

employs or engages the qualified 

verifier. 

(2) Special rule for transfer elections. 

If an election has been made under 

section 6418(a) of the Code with respect 

to the section 45V credit, then the 

attestations under paragraph (e)(1) of 

this section must be made with respect 

to the qualified verifier’s independence 

from both the eligible taxpayer and the 

transferee taxpayer (as those terms are 

defined in section 6418 and the 

regulations in this chapter thereunder). 

(f) Requirements for the qualified 

verifier statement. The qualified verifier 

statement must include the following— 

(1) The qualified verifier’s name, 

address, and taxpayer identification 

number; 

(2) The qualified verifier’s 

qualifications to conduct the 

verification, including a description of 

the qualified verifier’s education and 

experience and a photocopy of the 

qualified verifier’s certificate received 

from their accrediting body; 

(3) If the qualified verifier is acting in 

his or her capacity as a partner in a 

partnership, an employee of any person, 

whether an individual, corporation, or 

partnership, or an independent 

contractor engaged by a person other 

than the taxpayer, the name, address, 

and taxpayer identification number of 

the partnership or the person who 

employs or engages the qualified 

verifier; 

(4) The signature of the qualified 

verifier and the date signed by the 

qualified verifier; and 

(5) A statement that the verification 

was conducted for Federal income tax 

purposes. 

(g) General information on the 

taxpayer’s hydrogen production facility. 

The verification report must include the 

following information for the taxpayer’s 

hydrogen production facility where the 

hydrogen production undergoing 

verification occurred: 

(1) The location of the hydrogen 

production facility; 

(2) A description of the hydrogen 

production facility, including its 

method of producing hydrogen; 

(3) The type(s) of feedstock(s) used by 

the hydrogen production facility during 

the taxable year of production; 

(4) The amount(s) of feedstock(s) used 

by the hydrogen production facility 

during the taxable year of production; 

and 

(5) A list of the metering devices used 

to record any data used by the qualified 

verifier to support the production 

attestation under paragraph (c) of this 

section along with a statement that the 

qualified verifier is reasonably assured 

that the device(s) underwent industryappropriate quality assurance and 

quality control, and the accuracy and 

calibration of the device has been tested 

in the last year. 

(h) Qualified verifier. The term 

qualified verifier means any individual 

or organization with active 

accreditation— 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89251 

(1) As a validation and verification 

body from the American National 

Standards Institute National 

Accreditation Board; or 

(2) As a verifier, lead verifier, or 

verification body under the California 

Air Resources Board Low Carbon Fuel 

Standard program. 

(i) Unrelated party. For purposes of 

section 45V(c)(2)(B)(ii), the term 

unrelated party means a qualified 

verifier who meets the requirements of 

paragraph (e) of this section. 

(j) Requirements for taxpayers 

claiming both the section 45V credit and 

the section 45 credit or the section 45U 

credit. In the case of a taxpayer who 

produces electricity for which either the 

section 45 or section 45U credit is 

claimed and the taxpayer or a related 

person uses such electricity to produce 

hydrogen for which the section 45V 

credit is claimed, the verification report 

must also contain attestations that the 

qualified verifier performed a 

verification sufficient to determine 

that— 

(1) The electricity used to produce 

such hydrogen was produced at the 

relevant facility for which a section 45 

or section 45U credit is claimed; 

(2) The given amount of electricity (in 

kilowatt hours) used to produce such 

hydrogen at the relevant hydrogen 

production facility is reasonably assured 

of being accurate; and 

(3) The electricity for which a section 

45 or 45U credit was claimed is 

represented by EACs that are retired in 

connection with the production of such 

hydrogen. 

(k) Timely verification report. A 

verification report must be signed and 

dated by the qualified verifier no later 

than— 

(1) The due date, including 

extensions, of the Federal income tax 

return or information return for the 

taxable year during which the hydrogen 

undergoing verification is produced; or 

(2) In the case of a credit first claimed 

on an amended return or administrative 

adjustment request, the date on which 

the amended return or administrative 

adjustment request is filed. 

(l) Applicability date. This section 

applies to taxable years beginning after 

December 26, 2023. 

§ 1.45V–6 Rules for determining the placed 

in service date for an existing facility that 

is modified or retrofitted to produce 

qualified clean hydrogen. 

(a) Modification of an existing 

facility—(1) In general. Under section 

45V(d)(4) of the Code, in the case of an 

existing facility that— 

(i) Was originally placed in service 

before January 1, 2023, and, prior to the 

modification described in this 

paragraph (a), did not produce qualified 

clean hydrogen, and after the date such 

facility was originally placed in 

service— 

(A) Is modified to produce qualified 

clean hydrogen; and 

(B) Amounts paid or incurred with 

respect to such modification are 

properly chargeable to the taxpayer’s 

capital account for the facility. 

(ii) Such facility will be deemed to 

have been originally placed in service as 

of the date the property required to 

complete the modification described in 

this paragraph (a) is placed in service. 

(2) Modification requirements. For 

purposes of section 45V(d)(4) and 

paragraph (a)(1) of this section, an 

existing facility will not be deemed to 

have been originally placed in service as 

of the date the property required to 

complete the modification is placed in 

service unless the modification is made 

for the purpose of enabling the facility 

to produce qualified clean hydrogen and 

the taxpayer pays or incurs an amount 

that is properly chargeable to the 

taxpayer’s capital account with respect 

to the facility. A modification is made 

for the purpose of enabling the facility 

to produce qualified clean hydrogen if 

the facility could not produce hydrogen 

with a lifecycle greenhouse gas (GHG) 

emissions rate that is less than or equal 

to 4 kilograms of CO2e per kilogram of 

hydrogen but for the modification. For 

example, if a taxpayer solely pays or 

incurs capital expenses to modify 

existing components of a hydrogen 

production facility that are not 

necessary for the production of 

hydrogen with a lifecycle GHG 

emissions rate that is less than or equal 

to 4 kilograms of CO2e per kilogram of 

hydrogen, such modification does not 

entitle the facility to a new placed in 

service date. 

(b) Retrofit of an Existing Facility (80/ 

20 Rule). For purposes of section 

45V(a)(1), a facility may establish a new 

date on which it is considered originally 

placed in service, even though the 

facility contains some used property, 

provided the fair market value of the 

used property is not more than 20 

percent of the facility’s total value, 

calculated by adding the cost of the new 

property to the value of the used 

property (80/20 Rule). For purposes of 

the 80/20 Rule, the cost of new property 

includes all properly capitalized costs of 

the new property included within the 

facility. The 80/20 Rule applies to any 

existing facility, regardless of whether 

the facility previously produced 

qualified clean hydrogen and regardless 

of when the facility was originally 

placed in service (before application of 

this paragraph (b)). If a facility satisfies 

the requirements of the 80/20 Rule, then 

the date on which such facility is 

considered originally placed in service 

for purposes of section 45V(a)(1) is the 

date on which the new property added 

to the facility is placed in service. 

(c) Examples. The following examples 

illustrate the application of paragraphs 

(a) and (b) of this section: 

(1) Example 1: Modification of an 

existing facility—(i) Facts. Facility X, a 

hydrogen production facility that was 

originally placed in service on January 

1, 2018, could not produce qualified 

clean hydrogen as described in section 

45V(c)(2). After January 1, 2023, Facility 

X was modified to produce qualified 

clean hydrogen, and all amounts paid or 

incurred with respect to such 

modifications were properly chargeable 

to the taxpayer’s capital account for 

Facility X. The property required to 

complete the modification was placed 

in service on June 1, 2023. 

(ii) Analysis. Under section 45V(d)(4) 

and paragraph (a) of this section, 

because Facility X was originally placed 

in service before January 1, 2023, and 

before the modification could not 

produce qualified clean hydrogen, it is 

deemed to be originally placed in 

service as of the date the property 

required to complete the modification is 

placed in service. Accordingly, for 

purposes of section 45V(a)(1) and (d)(4), 

Facility X is deemed to have been 

originally placed in service on June 1, 

2023. 

(2) Example 2: Modification of an 

existing facility; coordination with the 

section 45Q credit previously allowed— 

(i) Facts. The facts are the same as in 

paragraph (c)(1) of this section (Example 

1), except that taxpayer was allowed a 

section 45Q credit with respect to 

carbon capture equipment (CCE) 

included at Facility X before June 1, 

2023. 

(ii) Analysis. Under paragraph (a) of 

this section and § 1.45V–2(a), although 

Facility X is deemed to have been 

originally placed in service on June 1, 

2023, because taxpayer had previously 

been allowed a section 45Q credit with 

respect to the CCE included at Facility 

X, no section 45V credit is allowable for 

qualified clean hydrogen produced at 

Facility X, despite the modification. 

(3) Example 3: Modification of an 

existing facility and coordination with 

section 45Q credit not previously 

allowed—(i) Facts. Facility Y, a 

hydrogen production facility that was 

originally placed in service on February 

1, 2020, could not previously produce 

qualified clean hydrogen as described in 

section 45V(c)(2). On February 1, 2026, 

Facility Y was modified to produce 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89252 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

qualified clean hydrogen by adding new 

CCE to allow Facility Y to capture, 

process, and prepare carbon dioxide for 

transport for disposal, injection, or 

utilization. All amounts paid or 

incurred with respect to such 

modifications were properly chargeable 

to the taxpayer’s capital account for 

Facility Y. The property required to 

complete the modification of Facility Y 

was placed in service on February 1, 

2026, and as a result, Facility Y, 

including the new CCE, is deemed to be 

originally placed in service on February 

1, 2026, for purposes of sections 45V 

and 45Q. No section 45Q credit has 

been allowed to any taxpayer with 

respect to the new carbon capture 

equipment located at Facility Y. 

(ii) Analysis. Under paragraph (a) of 

this section and § 1.45V–2(a), because 

no section 45Q credit has been allowed 

to any taxpayer with respect to the new 

CCE located at Facility Y, a section 45V 

credit is allowable for the qualified 

clean hydrogen produced at Facility Y, 

assuming all other requirements of 

section 45V are met. 

(4) Example 4: Retrofit of an Existing 

Facility (80/20 Rule)—(i) Facts. Facility 

Z, a hydrogen production facility that 

was originally placed in service on 

February 1, 2023, does not produce 

qualified clean hydrogen as described in 

section 45V(c)(2). On January 1, 2026, 

Facility Z was retrofitted to produce 

qualified clean hydrogen. After the 

retrofit, the cost of the new property 

included in Facility Z is greater than 80 

percent of Facility Z’s total value. 

(ii) Analysis. Even though Facility Z 

does not satisfy the requirements of 

section 45V(d)(4) because Facility Z was 

not originally placed in service before 

January 1, 2023, under paragraph (b) of 

this section, Facility Z is deemed to be 

originally placed in service on January 

1, 2026, because Facility Z meets the 80/ 

20 Rule. Thus, a section 45V credit is 

allowable for qualified clean hydrogen 

produced at Facility Z during the 10- 

year period beginning on January 1, 

2026, assuming all other requirements 

of section 45V are met. 

(5) Example 5: Retrofit of an Existing 

Facility (80/20 Rule) and coordination 

with section 45Q credit previously 

allowed—(i) Facts. The facts are the 

same as in paragraph (c)(4) of this 

section (Example 4), except that before 

the retrofit, Facility Z included CCE for 

which a section 45Q credit was allowed 

to a taxpayer. 

(ii) Analysis. Under paragraph (b) of 

this section and § 1.45V–2(a), Facility Z 

is deemed to be originally placed in 

service on January 1, 2026, because 

Facility Z meets the 80/20 Rule. 

However, a section 45V credit is not 

allowable for qualified clean hydrogen 

produced at Facility Z during the 10- 

year period beginning on January 1, 

2026, because a section 45Q credit has 

been allowed to a taxpayer with regard 

to the CCE included in Facility Z. 

(d) Applicability date. This section 

applies to taxable years beginning after 

December 26, 2023. 

■ Par. 3. Section 1.48–15 is added to 

read as follows: 

§ 1.48–15 Election to treat clean hydrogen 

production facility as energy property. 

(a) In general. Under section 48(a)(15) 

of the Internal Revenue Code (Code), a 

taxpayer that owns and places in service 

a specified clean hydrogen production 

facility (as defined in section 

48(a)(15)(C) and paragraph (b) of this 

section) can make an irrevocable 

election under section 48(a)(15)(C)(ii)(II) 

to treat any qualified property (as 

defined in section 48(a)(5)(D)) that is 

part of the facility as energy property for 

purposes of section 48. 

(b) Specified clean hydrogen 

production facility. The term specified 

clean hydrogen production facility 

means any qualified clean hydrogen 

production facility— 

(1) That is placed in service after 

December 31, 2022; 

(2) With respect to which no credit 

has been allowed under section 45V or 

45Q of the Code, and for which the 

taxpayer makes an irrevocable election 

to have section 48(a)(15) apply; and 

(3) For which an unrelated party has 

verified in the manner specified in 

paragraph (e) of this section that such 

facility produces hydrogen through a 

process that results in lifecycle 

greenhouse gas (GHG) emissions that are 

consistent with the hydrogen that such 

facility was designed and expected to 

produce under section 48(a)(15)(A)(ii) 

and paragraph (c) of this section. 

(c) Energy percentage—(1) In general. 

In the case of a specified clean hydrogen 

production facility that is designed and 

reasonably expected to produce 

qualified clean hydrogen through a 

process that results in a lifecycle GHG 

emissions rate of: 

(i) Not greater than 4 kilograms of 

carbon dioxide equivalent (CO2e) per 

kilogram of hydrogen, and not less than 

2.5 kilograms of CO2e per kilogram of 

hydrogen, the energy percentage is 1.2 

percent; 

(ii) Less than 2.5 kilograms of CO2e 

per kilogram of hydrogen, and not less 

than 1.5 kilograms of CO2e per kilogram 

of hydrogen, the energy percentage is 

1.5 percent; 

(iii) Less than 1.5 kilograms of CO2e 

per kilogram of hydrogen, and not less 

than 0.45 kilograms of CO2e per 

kilogram of hydrogen, the energy 

percentage is 2 percent; and 

(iv) Less than 0.45 kilograms of CO2e 

per kilogram of hydrogen, the energy 

percentage is 6 percent. 

(2) Designed and reasonably expected 

to produce. Hydrogen that a facility is 

designed and reasonably expected to 

produce means hydrogen produced 

through a process that results in the 

lifecycle GHG emissions rate specified 

in the annual verification report 

described in paragraph (e)(2) of this 

section for the taxable year in which the 

election is made. 

(d) Time and manner of making the 

election—(1) In general. To make an 

election under section 

48(a)(15)(C)(ii)(II), a taxpayer must 

claim the section 48 credit with respect 

to a specified clean hydrogen 

production facility on a completed Form 

3468, Investment Credit, or any 

successor form(s), and file the form with 

the taxpayer’s Federal income tax return 

or information return for the taxable 

year in which the specified clean 

hydrogen production facility is placed 

in service. The taxpayer must also 

attach a statement to its Form 3468, 

Investment Credit, or any successor 

form(s), filed with its Federal income 

tax return or information return that 

includes the information required by the 

instructions to Form 3468, Investment 

Credit, or any successor form(s), for 

each specified clean hydrogen 

production facility subject to an 

election. A separate election must be 

made for each specified clean hydrogen 

production facility that meets the 

requirements provided in section 

48(a)(15) to treat the qualified property 

that is part of the facility as energy 

property. If any taxpayer owning an 

interest in a specified clean hydrogen 

production facility makes an election 

under section 48(a)(15)(C)(ii)(II) with 

respect to the specified clean hydrogen 

production facility, then that election is 

binding on all taxpayers that directly or 

indirectly own an interest in the 

specified clean hydrogen production 

facility. 

(2) Special rule for partnerships and 

S corporations. In the case of a specified 

clean hydrogen production facility 

owned by a partnership or an S 

corporation, the election under section 

48(a)(15)(C)(ii)(II) is made by the 

partnership or S corporation and is 

binding on all ultimate credit claimants 

(as defined in § 1.50–1(b)(3)(ii)). The 

partnership or S corporation must file a 

Form 3468, Investment Credit, or any 

successor forms(s), with its partnership 

or S corporation return for the taxable 

year in which the specified clean 

hydrogen production facility is placed 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89253 

in service to indicate that it is making 

the election, and attach a statement that 

includes all the information required by 

the instructions to Form 3468, 

Investment Credit, or any successor 

form(s), for each specified clean 

hydrogen production facility subject to 

the election. The ultimate credit 

claimant’s section 48 credit must be 

based on each claimant’s share of the 

basis (as defined in § 1.46–3(f)) of the 

specified clean hydrogen production 

facility on a completed Form 3468, 

Investment Credit, or any successor 

form(s), and file such form with a 

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, 

Investment Credit, or any successor 

form(s), to claim the section 48 credit. 

(3) Election irrevocable. The election 

to treat qualified property that is part of 

a specified clean hydrogen production 

facility as energy property is 

irrevocable. 

(4) Election availability date. The 

election to treat qualified property that 

is part of a specified clean hydrogen 

production facility as energy property is 

available for property placed in service 

after December 31, 2022. In the case of 

any property placed in service after 

December 31, 2022, for which 

construction began before January 1, 

2023, the election under section 

48(a)(15)(C)(ii)(II) applies only to the 

extent of the basis of such property that 

is attributable to construction, 

reconstruction, or erection occurring 

after December 31, 2022. 

(e) Third party verification—(1) In 

general. In the case of a taxpayer that 

makes an election under section 

48(a)(15)(C)(ii)(II) to treat any qualified 

property that is part of a specified clean 

hydrogen production facility as energy 

property for purposes of the section 48 

credit, the taxpayer must obtain an 

annual verification report for the taxable 

year in which the election under section 

48(a)(15)(C)(ii)(II) is made for the facility 

and for each taxable year thereafter 

during the recapture period specified in 

paragraph (f)(3) of this section. The 

taxpayer must also submit the annual 

verification report as an attachment to 

the Form 3468, Investment Credit, or 

any successor form(s), for the taxable 

year in which the election under section 

48(a)(15)(C)(ii)(II) is made for the 

facility. 

(2) Annual verification report—(i) In 

general. For purposes of paragraph (e)(1) 

of this section, the annual verification 

report must be signed under penalties of 

perjury by a qualified verifier (as 

defined in § 1.45V–5(h)) and contain an 

attestation providing all of the 

following— 

(A) The information specified in 

§ 1.45V–5(b) and (d) through (h); 

(B) A statement attesting to the 

lifecycle GHG emissions rate 

(determined under section 45V(c) and 

§ 1.45V–4) of the hydrogen produced at 

the specified clean hydrogen production 

facility for the taxable year to which the 

annual verification report relates and 

that the operation, during such taxable 

year, of the specified clean hydrogen 

production facility, and any energy 

attribute certificates (EACs) applied 

pursuant to § 1.45V–4(d) for the purpose 

of accounting for such facility’s 

emissions, are accurately reflected in 

the data that the taxpayer entered into 

the most recent GREET model (as 

defined in § 1.45V–1(a)(8)(ii)) (or that 

the taxpayer provided to the Department 

of Energy (DOE) in support of the 

taxpayer’s request for an emissions 

value), to determine the lifecycle GHG 

emissions rate of the hydrogen 

undergoing verification; and 

(C) A statement attesting that the 

facility produced hydrogen through a 

process that results in a lifecycle GHG 

emissions rate that is consistent with, or 

lower than, the lifecycle GHG emissions 

rate of the hydrogen that such facility 

was designed and expected to produce. 

(ii) Conflict attestation in the case of 

a transfer election. If a transfer election 

has been made under section 6418(a) of 

the Code with respect to the section 48 

credit for a specified clean hydrogen 

production facility, then a conflict 

attestation containing the information 

specified in § 1.45V–5(e)(1), must be 

made with respect to the qualified 

verifier’s independence from both the 

eligible taxpayer (as defined in section 

6418(f)(2) and § 1.6418–1(b)) and the 

transferee taxpayer (as described in 

section 6418(a) and defined in § 1.6418– 

1(m)), and without regard to the 

requirements under § 1.45V–5(e)(2). 

(iii) Inconsistent lifecycle GHG 

emissions. In the event the facility 

produces hydrogen through a process 

that results in a lifecycle GHG emissions 

rate that is greater than the lifecycle 

GHG emissions rate that such facility 

was designed and expected to produce 

(and thus the qualified verifier cannot 

provide the attestation specified in 

paragraph (e)(2)(i)(C) of this section), 

resulting in a reduced energy percentage 

under section 48(a)(15)(A)(ii) with 

respect to such facility, an emissions 

tier recapture event under paragraph 

(f)(2) of this section will occur. 

(iv) Designed and expected to 

produce. Hydrogen that the facility was 

designed and expected to produce 

means hydrogen specified in paragraph 

(c)(2) of this section. 

(v) Timely annual verification report. 

The annual verification report must be 

signed and dated by the qualified 

verifier no later than the due date, 

including extensions, of the Federal 

income tax return for the taxable year in 

which the hydrogen undergoing 

verification was produced. 

(vi) Records retention. In addition to 

the recordkeeping requirements set forth 

in paragraph (g) of this section, the 

taxpayer must retain the annual 

verification report for at least six years 

after the due date, with extensions, for 

filing the Federal income tax return for 

the taxable year in which the hydrogen 

undergoing verification was produced. 

(f) Recapture—(1) In general. For 

purposes of section 48(a)(15)(E), in any 

taxable year of the recapture period 

specified in paragraph (f)(3) of this 

section in which an emissions tier 

recapture event (as defined in paragraph 

(f)(2) of this section) occurs, the tax 

imposed on the taxpayer under chapter 

1 of the Code for the taxable year of the 

emissions tier recapture event is 

increased by the recapture amount 

specified in paragraph (f)(4) of this 

section. 

(2) Emissions tier recapture event. For 

purposes of paragraph (f)(1) of this 

section, an emissions tier recapture 

event occurs in any taxable year of the 

recapture period specified in paragraph 

(f)(3) of this section under the following 

circumstances— 

(i) The taxpayer fails to obtain an 

annual verification report by the 

deadline for filing its Federal income 

tax return (including extensions) for any 

taxable year in which an annual 

verification report is required under 

paragraph (e)(1) of this section; 

(ii) The specified clean hydrogen 

production facility actually produced 

hydrogen through a process that results 

in a lifecycle GHG emissions rate that 

can only support a lower energy 

percentage than the energy percentage 

used to calculate the amount of the 

section 48 credit for the facility for the 

taxable year in which the facility is 

placed in service; or 

(iii) The specified clean hydrogen 

production facility actually produced 

hydrogen through a process that results 

in a lifecycle GHG emissions rate of 

greater than 4 kilograms of CO2e per 

kilogram of hydrogen. 

(3) Recapture period. For purposes of 

paragraph (f) of this section, the 

recapture period begins on the first day 

of the taxable year after the taxable year 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
89254 Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 

in which the facility was placed in 

service and ends on the close of the fifth 

taxable year following the close of the 

taxable year in which the facility was 

placed in service. 

(4) Recapture amount—(i) In general. 

In the case of an emissions tier 

recapture event under paragraph (f)(2) of 

this section, the recapture amount for 

the taxable year in which the emissions 

tier recapture event occurred is equal to 

20 percent of the excess of the section 

48 credit allowed to the taxpayer for the 

specified clean hydrogen production 

facility for the taxable year in which the 

facility was placed in service, over the 

section 48 credit that would have been 

allowed to the taxpayer for the facility 

if the taxpayer had used the energy 

percentage supported by the actual 

production to calculate the amount of 

the section 48 credit. Such increase in 

tax is the recapture amount. 

(ii) Carrybacks and carryovers. In the 

case of any emissions tier recapture 

event described in paragraph (f)(2) of 

this section, the carrybacks and 

carryovers under section 39 must be 

adjusted by reason of the emissions tier 

recapture event. 

(iii) Recapture amount in case of 

recapture events under paragraph 

(f)(2)(i) or (iii) of this section. For 

purposes of paragraph (f)(4)(i) of this 

section, in the case of an emissions tier 

recapture event under paragraph (f)(2)(i) 

or (iii), the amount of the section 48 

credit that would have been allowed to 

the taxpayer for the specified clean 

hydrogen production facility if the 

taxpayer had used the energy percentage 

supported by the actual production is 

zero. Accordingly, the recapture amount 

in the taxable year of an emissions tier 

recapture event under paragraph (f)(2)(i) 

or (iii) is 20 percent of the section 48 

credit allowed to the taxpayer for such 

specified clean hydrogen production 

facility. 

(5) Example. The following example 

illustrates the application of paragraphs 

(f)(1) through (4) of this section. 

(i) Facts. On June 1, 2023, Taxpayer, 

a calendar-year taxpayer, originally 

places in service Facility X, a specified 

clean hydrogen production facility. At 

such time, Taxpayer’s basis in qualified 

property that is part of Facility X is 

$100,000,000. In the taxable year in 

which Facility X was originally placed 

in service (taxable year 2023), Facility X 

produces qualified clean hydrogen 

through a process that results in a 

lifecycle GHG emissions rate of 0.44kg/ 

CO2e per kilogram of hydrogen. 

Taxpayer submits with its 2023 Federal 

income tax return an annual verification 

report attesting that, for the taxable year 

2023, Facility X produced hydrogen 

through a process that resulted in a 

lifecycle GHG emissions rate of 0.44kg/ 

CO2e, which is consistent with the 

lifecycle GHG emissions rate of the 

hydrogen that the facility was designed 

and expected to produce. Taxpayer 

makes a valid election under section 

48(a)(15)(C)(ii)(II) with respect to 

Facility X on its Federal income tax 

return for the taxable year 2023. In the 

first year of the recapture period 

(taxable year 2024), Taxpayer fails to 

obtain an annual verification report by 

the deadline (including extensions) for 

filing its 2024 Federal income tax 

return. In the second year of the 

recapture period (taxable year 2025), 

Facility X produces qualified clean 

hydrogen through a process that results 

in a lifecycle GHG emissions rate of 

1.4kg/CO2e per kilogram of hydrogen 

and obtains an annual verification 

report attesting to such lifecycle GHG 

emissions rate. In the third, fourth, and 

fifth years of the recapture period 

(taxable years 2026, 2027, and 2028), 

Facility X produces qualified clean 

hydrogen through a process that results 

in a lifecycle GHG emissions rate of 

0.44kg/CO2e per kilogram of hydrogen 

and obtains an annual verification 

report attesting to such lifecycle GHG 

emissions rate, and attesting that such 

lifecycle GHG emissions rate is 

consistent with the lifecycle GHG 

emissions rate of the hydrogen that the 

facility was designed and expected to 

produce, by the deadline (including 

extensions) for filing its 2026, 2027, and 

2028 Federal income tax returns, 

respectively. 

(ii) Analysis. Facility X is designed 

and reasonably expected to produce 

hydrogen through a process that results 

in a lifecycle GHG emissions rate of 

0.44kg/CO2e, which is the rate specified 

in Taxpayer’s annual verification report 

submitted with Taxpayer’s Federal 

income tax return for the taxable year in 

which the election under section 

48(a)(15)(C)(ii)(II) with respect to 

Facility X was made. Under paragraph 

(c)(1)(iv) of this section, Facility X’s 

energy percentage is therefore 6 percent. 

For the taxable year 2023, the year in 

which Taxpayer places in service 

Facility X, Taxpayer claims a section 48 

credit for its basis in qualified property 

that is part of Facility X in the amount 

of $6,000,000 (6 percent of 

$100,000,000). In taxable year 2024, 

there is an emissions tier recapture 

event under paragraph (f)(2)(i) of this 

section because Taxpayer failed to 

obtain an annual verification report. 

Under paragraph (f)(4)(i) of this section, 

the amount of the section 48 credit 

recaptured in 2024 is $1,200,000. This 

reflects 20 percent of the section 48 

credit allowed ($6,000,000) for Facility 

X. In taxable year 2025, there is an 

emissions tier recapture event under 

paragraph (f)(2)(ii) of this section 

because Facility X produced hydrogen 

through a process that resulted in a 

lifecycle GHG emissions rate that could 

only support an energy percentage of 2 

percent, which is lower than the energy 

percentage used to calculate the amount 

of the section 48 credit for Facility X. 

Under paragraph (f)(4)(i) of this section, 

the amount of the section 48 credit 

recaptured in 2025 is $800,000. This 

reflects 20 percent of the difference 

between the amount of the section 48 

credit allowed ($6,000,000) and the 

amount of the section 48 credit that 

would have been allowed for Facility X 

if Taxpayer had used the energy 

percentage supported by the actual 

production ($2,000,000). There is no 

emissions tier recapture event in taxable 

years 2026, 2027, or 2028 because, in 

those years, Facility X produced 

hydrogen through a process that 

resulted in a lifecycle GHG emissions 

rate that was consistent with the 

lifecycle GHG emissions rate of the 

hydrogen that Facility X was designed 

and expected to produce, and Taxpayer 

obtained an annual verification report 

attesting to such by the deadline (with 

extensions) for filing its Federal income 

tax return for each of those taxable 

years. 

(6) Coordination with sections 50(a) 

and 48(a)(10)(C) of the Code. In each 

taxable year of the recapture period 

specified in paragraph (f)(3) of this 

section for any credit allowed under 

section 48 with respect to a specified 

clean hydrogen production facility, the 

recapture rules, if applicable, apply in 

the following order: 

(i) Section 50(a); 

(ii) Section 48(a)(10)(C); and 

(iii) Section 48(a)(15)(E). 

(g) Recordkeeping. Consistent with 

section 6001 of the Code, a taxpayer 

making the election under section 

48(a)(15)(C)(ii)(II) with respect to a 

specified clean hydrogen production 

facility must maintain and preserve 

records sufficient to establish the 

amount of the section 48 credit claimed 

by the taxpayer. At a minimum, those 

records include records to substantiate 

the information required to be included 

in the annual verification report under 

paragraph (e)(2) of this section, records 

establishing that the facility meets the 

definition of a specified qualified clean 

hydrogen production facility under 

section 48(a)(15)(C) and paragraph (b) of 

this section, and records establishing 

the date the specified clean hydrogen 

production facility was placed in 


khammond on DSKJM1Z7X2PROD with PROPOSALS3
Federal Register / Vol. 88, No. 246 / Tuesday, December 26, 2023 / Proposed Rules 89255 

service. If the increased section 48 

credit amount was allowed under 

section 48(a)(9), then the taxpayer must 

also maintain records in accordance 

with § 1.45–12. 

(h) Applicability date. This section 

applies to taxable years beginning after 

December 26, 2023. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2023–28359 Filed 12–22–23; 8:45 am] 

BILLING CODE 4830–01–P 


khammond on DSKJM1Z7X2PROD with PROPOSALS3