IRS Announces Inflation-Adjusted Tax Credit Amounts for Clean Energy Production in 2025
Key Ideas
- IRS released Notice 2025-37 with updated credit amounts for clean energy production under Code Sections 45U, 45V, and 45Z.
- Section 45V provides tax credit for clean hydrogen production, with credit amounts based on lifecycle emissions.
- Inflation-adjusted credit rate updates for 2025 include adjustments for nuclear power production and clean transportation fuel.
- The Notice provides specific credit amounts for different criteria, encouraging the production of clean energy and fuel.
The IRS recently announced Notice 2025-37, detailing the inflation-adjusted credit amounts for clean energy production applicable in the year 2025 under specific sections of the Internal Revenue Code. These sections, namely 45U, 45V, and 45Z, offer tax credits for various types of clean energy production. Section 45U focuses on providing a credit for electricity production at qualified nuclear power plants. Section 45V is particularly relevant to hydrogen production, offering tax credits based on the lifecycle emissions of the produced hydrogen. The credit amounts for clean hydrogen under Section 45V vary depending on the amount of carbon dioxide equivalent emissions per kilogram of hydrogen produced. The lower the emissions, the higher the tax credit amount, incentivizing cleaner production methods. Additionally, Section 45Z offers tax credits for the production of clean transportation fuel. The Notice outlines the inflation-adjusted credit rate updates for 2025, taking into account factors like the GDP implicit price deflator. Specifically, the Notice provides detailed credit amount calculations for each of the mentioned sections, encouraging the shift towards cleaner energy and fuel production in the coming year. This update aims to promote sustainability and reduce carbon emissions by rewarding companies that engage in environmentally friendly practices.