Section 48 (Energy Credit / “ITC”): Section 48 is a federal investment tax credit (ITC) that generally rewards investment in certain “energy property” by applying a credit percentage to the eligible basis of qualifying property placed in service during the tax year. In plain English: it’s typically based on what you built and placed in service (investment), not what you produced (production). This page explains §48 at a practical level, how it’s claimed, how the “base vs increased” rate concept works (including prevailing wage and apprenticeship as a key driver), how bonuses can apply (high level), and how §48 connects to transferability under IRC §6418.

In short (60 seconds)

  • What it is: An investment tax credit (ITC) generally equal to a credit percentage times the eligible basis of qualifying “energy property” placed in service.
  • Rate concept: Modern IRA-era rules commonly use a base credit rate (often 6%) and an increased rate (often 30%) when prevailing wage & apprenticeship (PWA) requirements are satisfied or an exception applies (high level).
  • What it covers: “Energy property” includes multiple categories (solar, geothermal, fuel cells, energy storage, CHP, biogas, microgrid controllers, etc.) subject to definitions and timing rules.
  • How it’s claimed: Typically computed on Form 3468 (Part VI for the §48 Energy Credit) and then aggregated/limited under the general business credit framework (Form 3800), depending on taxpayer type.
  • Recapture risk: ITCs can be subject to recapture concepts; recapture is a major diligence topic for §48 transfers (high level).
  • Transferability: IRS guidance lists §48 as transferable under §6418, and Form 3468 instructions emphasize pre-filing registration for transfer elections.
  • Transition note: For certain post-2024 clean electricity facilities, the newer tech-neutral investment credit (§48E) may apply instead (high level).

Related pages

  • Eligible Credits — directory of credits eligible for §6418 transferability (includes §48).
  • How It Works — transfer workflow, cash rule, timing (high level).
  • Registration Filing — pre-filing registration and registration numbers (high level).
  • Risk Compliance — diligence, excessive transfer concept, and ITC recapture basics.
  • Section 48E — clean electricity investment credit (tech-neutral, post-2024 framework).
  • Glossary — key terms and definitions.

1) What is the Section 48 Energy Credit (ITC)?

The §48 Energy Credit is generally an investment-based credit. The statute describes the energy credit as the energy percentage of the basis of each qualifying energy property placed in service during the tax year (high level). In practice, project teams focus on three questions: (1) Is the property “energy property” under the statute and guidance? (2) What is the eligible basis? (3) What credit rate applies (base vs increased, plus any adders)?

ITC vs PTC (simple distinction)

  • ITC (Section 48): Generally based on investment (eligible basis) and “placed in service.”
  • PTC (e.g., Section 45 / 45Y): Generally based on production (kWh) and sale of output.

If you’re deciding between production vs investment credit frameworks, compare /p/section-45.htmlSection 45, /p/section-45y.htmlSection 45Y, and /p/section-48e.htmlSection 48E.

2) What counts as “energy property”? (high level)

The statute defines “energy property” through multiple categories and timing rules. At a high level, the list commonly includes solar energy property, geothermal energy property, certain fuel cells, microturbines, combined heat and power (CHP), small wind, energy storage technology, qualified biogas property, and microgrid controllers, among others (definitions can be detailed and time-sensitive).

Common §48 categories people recognize (not exhaustive)

  • Solar: Equipment using solar energy to generate electricity or provide solar process heat (subject to statutory boundaries).
  • Geothermal: Equipment producing/distributing/using energy from geothermal deposits (with technical limitations).
  • Energy storage technology (as defined in statute/guidance).
  • Fuel cells and microturbines (as defined in statute/guidance).
  • CHP property (as defined in statute/guidance).
  • Qualified biogas property (as defined in statute/guidance).
  • Microgrid controllers (as defined in statute/guidance).

Always confirm your property category and eligibility using official sources (see “Official sources” at the bottom).

Placed in service matters

ITC eligibility is tied to property being placed in service during the tax year (high level). “Placed in service” and “beginning of construction” concepts appear throughout IRS instructions and guidance.

3) Credit rate concept: base vs increased (PWA) + potential adders (high level)

Modern IRA-era energy credits often use a base credit rate and an increased credit rate when prevailing wage and apprenticeship (PWA) requirements are met, or when a permitted exception applies (high level). IRS materials for businesses summarize this “6% base / 30% increased” concept for §48 energy property, and Form 3468 instructions include extensive PWA-related reporting concepts.

Common “adder” concepts (high level)

  • Domestic content: Some projects may qualify for a domestic content bonus credit amount (documentation-heavy).
  • Energy community: Some projects may qualify for an energy community bonus credit rate (location/definition-driven).
  • Low-income bonus: Certain small solar/wind facilities may access a low-income communities bonus framework (application/allocation-driven).

These items are highly fact-specific and depend on definitions, documentation, and (in some cases) allocations. Verify current-year rules in official sources.

4) Recapture and “ITC risk” (high level)

A major difference between many production credits and investment credits is that ITCs can involve recapture concepts. IRS Form 3468 instructions include a “Recapture of Credit” section, and the transferability regulations also reference recapture impacts for certain transferred credits (high level). Because recapture can affect buyers and deal terms, it is one of the most important diligence topics for §48 transferability.

Practical meaning (plain English)

Recapture is a rule concept where, if certain conditions change within a specified period, some portion of the originally claimed ITC may be required to be paid back through tax adjustments. The details are technical and depend on facts and the applicable rules. For deal-level risk education, see /p/risk-compliance.htmlRisk Compliance.

Why buyers care

  • Buyers typically want clarity on project eligibility, basis support, and compliance evidence.
  • Buyers often seek contractual protection because recapture/excessive transfer rules can create economic exposure.
  • Documentation quality (“audit-ready file”) becomes a major value driver in transferable credit pricing.

5) How to claim §48 (Form 3468 + Form 3800)

IRS guidance describes Form 3468 as the “Investment Credit” form used to claim investment credits, including the §48 Energy Credit. IRS Form 3468 instructions include a dedicated Part VI for the §48 Energy Credit and describe filing mechanics for various taxpayer types, including partnerships and S corporations (high level). Many taxpayers then apply general business credit limitations and ordering on Form 3800.

Common workflow (high level)

  1. Identify the correct credit category and property classification (energy property type).
  2. Determine eligible basis and placed-in-service details (documentation supported).
  3. Complete Form 3468 (Part VI for §48).
  4. Apply general business credit rules/limitations (often via Form 3800, depending on taxpayer type).

6) §48 and transferability under §6418 (high level)

IRS transferability FAQs list the §48 Energy Credit as one of the eligible credits that an eligible taxpayer can elect to transfer under §6418. IRS Form 3468 instructions also include a pre-filing registration reminder and describe registration numbers for elective payment and transfer elections (high level). Separately, eCFR rules state that a taxpayer must obtain and report a registration number for each eligible credit property prior to making a transfer election, and failure to obtain/report a registration number can make a transfer election ineligible for that property (high level).

Transferability checklist for §48 (high level)

  • Confirm eligibility: ensure the project/property is §48 energy property (not a different credit category).
  • Basis support: maintain invoices, cost segregation/support, and placed-in-service evidence.
  • Rate support: maintain documentation for any increased rate or adders (PWA, domestic content, energy community, low-income bonus, etc.).
  • Pre-filing registration: obtain a registration number for each eligible credit property before the transfer election, and include it on returns as required.
  • Recapture awareness: understand recapture exposure and how it may be allocated in agreements; see /p/risk-compliance.htmlRisk Compliance.

Read next: /p/how-it-works.htmlHow It Works and /p/registration-filing.htmlRegistration Filing.

7) Transition note: Section 48 vs Section 48E (post-2024 clean electricity)

IRS business-facing summaries describe §48 as the “Investment Tax Credit for Energy Property” in the pre-2025 framework and §48E as the newer “Clean Electricity Investment Credit” in the post-2024 tech-neutral framework (high level). If your facility is in the post-2024 clean electricity category, §48E may be the relevant credit instead of §48. This is a common confusion point, so the safest approach is to verify which credit applies based on your facility type and placed-in-service timing.

Practical takeaway

If your project is “clean electricity” and placed in service after 2024, start by checking /p/section-48e.htmlSection 48E in addition to this page.

FAQs (Section 48)

1) Is §48 an investment credit or a production credit?

§48 is an investment credit (ITC) generally tied to the basis of energy property placed in service (high level).

2) What is the usual “base vs increased” credit rate idea?

Many IRA-era credits use a base credit rate (often 6%) and a higher rate (often 30%) when prevailing wage and apprenticeship requirements are satisfied or an exception applies (high level). Confirm the exact current-year rules in official sources.

3) What form is used to claim §48?

IRS guidance describes Form 3468 as the Investment Credit form and includes Part VI for the §48 Energy Credit (high level).

4) Can §48 be transferred under §6418?

Yes. IRS transferability FAQs list the §48 Energy Credit among eligible credits that may be transferred under §6418, subject to the rules and registration requirements.

5) Why does recapture come up so often for §48?

Investment credits can involve recapture concepts. IRS Form 3468 instructions include recapture discussion, and transferability rules also address recapture impacts (high level).

6) Is this page tax or legal advice?

No. This site provides general informational and educational content only. See /p/disclaimer.htmlDisclaimer.

Official sources (clickable)

This page is educational. For official definitions, year-specific rules, and filing requirements, consult the sources below.

Last updated: February 2026

Note: Educational content only — not tax or legal advice. See /p/disclaimer.htmlDisclaimer.