Investment Tax Credit for Businesses: Who Can Still Claim It?

The business investment tax credit, the ITC behind commercial solar quotes, lives in two Code sections. The original energy credit in IRC 48 closed most of its categories to projects whose construction begins after 2024. Its replacement, the clean electricity investment credit in IRC 48E, covers any zero-emission generating facility and energy storage placed in service after 2024. Public Law 119-21, signed July 4, 2025, then put an end date on wind and solar, added foreign entity restrictions and zeroed out the leftover section 48 rate. Here is what a business can still claim, at what rate, and how the credit is filed, sold or paid out.

Section 48E: what qualifies and the rates

A qualified facility under 48E(b)(3) is one used to generate electricity, placed in service after December 31, 2024, whose anticipated greenhouse gas emissions rate is not greater than zero. The credit is figured on qualified property: tangible personal property, or other tangible property used as an integral part of the facility, but not a building or its structural components; it must be depreciable and new when you acquired it or built by you. Interconnection costs count for facilities of 5 megawatts (ac) or less. Energy storage technology qualifies on its own under the 48(c)(6) definition (a nameplate capacity of at least 5 kilowatt hours, or thermal energy storage).

The prevailing wage requirement, borrowed from 48(a)(10), means paying laborers and mechanics the rates the Secretary of Labor determines under the Davis-Bacon rules during construction and for alteration or repair in the 5 years after the project is placed in service; apprenticeship follows 45(b)(8). A taxpayer claiming the increased amount files Form 7220 for each facility (Form 3468 instructions). A rooftop system under 1 megawatt gets 30% without either requirement.

Which technologies still qualify, and until when

The wind and solar rule is the one most businesses will meet. Section 70513(a) of P.L. 119-21 added 48E(e)(4): no credit for qualified property placed in service after December 31, 2027 that is part of a wind or solar facility, and section 70513(g)(5) limits that termination to facilities whose construction begins after July 4, 2026. Notice 2025-42 then tightened how “begins construction” is shown for that deadline: the Physical Work Test is the sole method (physical work of a significant nature, with no fixed minimum amount), continuous construction must follow, and a facility placed in service within four calendar years after the year construction began satisfies continuity. The 5% safe harbor survives only for solar facilities of 1.5 megawatts (ac) or less. The notice applies to facilities whose construction had not begun before September 2, 2025. For every other technology the phase-out starts with construction beginning after 2033, because 45Y(d)(3) now fixes the applicable year at 2032.

What is left of section 48 is short. P.L. 119-21 section 70513(e) cut the rate for “other” energy property, the clause (ii) catch-all, from 2% to 0% for construction beginning on or after June 16, 2025, and barred any increase to it; the 2025 Form 3468 instructions show the step-down for geothermal energy property. Ground-source heat pumps are the exception, with section 48 running through construction beginning before 2035.

Prohibited foreign entity restrictions

Two new tests apply to section 48E. First, for tax years beginning after July 4, 2025, no credit is allowed to a taxpayer that is a specified foreign entity or a foreign-influenced entity as defined in section 7701(a)(51). Second, a facility or energy storage technology whose construction begins after December 31, 2025 is not qualified if it includes material assistance from a prohibited foreign entity. Notice 2026-15, announced February 12, 2026 (IR-2026-23), gives interim rules for the material assistance cost ratio and safe harbors until 60 days after Treasury publishes its tables, so check the current guidance before filing.

Claiming it: Form 3468, basis and recapture

The credit is claimed on a separate Form 3468 for each facility or property (Part V for section 48E, Part VI for section 48) and flows into the general business credit on Form 3800. Two follow-on rules change the cash math. Under IRC 50(c)(3), the depreciable basis of the property is reduced by 50% of the credit. And under 50(a), if the property is disposed of or stops being investment credit property within 5 years, the credit is recaptured at 100% in the first full year, then 80%, 60%, 40% and 20%; section 48E(g) adds recapture if the IRS determines the facility’s emissions rate exceeds 10 grams of CO2e per kilowatt hour.

Selling the credit, or getting it paid: sections 6418 and 6417

A business without enough tax to use the credit has two routes. Under IRC 6418, an eligible taxpayer can transfer all or part of a section 48 or 48E credit to an unrelated buyer. The consideration must be paid in cash, is not included in the seller’s income and is not deductible by the buyer; the election is made by the return due date including extensions, is irrevocable, and the buyer cannot transfer the credit again. A buyer who receives an excessive credit transfer owes the excess plus a 20% addition unless it shows reasonable cause. Under IRC 6417, applicable entities (tax-exempt organizations, states and political subdivisions, tribal governments, Alaska Native Corporations, rural electric cooperatives and the TVA) elect to treat the credit as a payment of tax and receive it as a refund. Both routes require the IRS pre-filing registration described on its elective pay and transferability page; the registration number must be on the return for the election to be effective. A credit that is neither transferred nor paid out follows the general business credit carryforward rules in our guide to the R&D credit carryforward.

Sources: 26 U.S.C. 48E, clean electricity investment credit (text current through P.L. 119-111); 26 U.S.C. 48, energy credit; 26 U.S.C. 45Y(d)(3), applicable year; 26 U.S.C. 50, recapture and basis adjustment for investment credit property; 26 U.S.C. 6418, transfer of certain credits; 26 U.S.C. 6417, elective payment of applicable credits; Public Law 119-21, section 70513, termination and restrictions on the clean electricity investment credit (July 4, 2025); IRS Notice 2025-42, beginning of construction for the wind and solar termination; IRS, 2025 Instructions for Form 3468, Investment Credit; IRS news release IR-2026-23 on Notice 2026-15, material assistance from prohibited foreign entities (February 12, 2026); IRS, Elective pay and transferability (reviewed June 27, 2026). Rates, dates and rules checked against these sources on September 26, 2026. This is general information, not tax advice for your situation. Tax services are provided by licensed tax professionals under a separate engagement agreement. BEG does not provide tax advice.