IRA Final Rulemaking on Clean Energy Production and Investment Tax Credits is Published

The Inflation Reduction Act (IRA) final rulemaking on the clean energy production and investment tax credits has been published, including fusion energy and other technologies. This changes the pre-existing renewable energy tax credits into a technology-neutral tax credit that supports any facility that does not produce greenhouse gases.

As we noted in May when the proposed rulemaking was announced, the explicit inclusion of fusion energy in the IRA tax credits is important in providing certainty to developers and their shareholders about the future development of fusion as a commercial energy source. Furthermore, it is important that fusion energy is recognized as a qualifying technology on its own and not as part of any “Advanced Nuclear” designation. Fusion energy is substantially different from nuclear fission; fusion has different benefits, costs, and risks, thus should receive separate treatment.

Throughout, the FIA has submitted letters in support of the rulemaking process, supporting the separation of fusion from nuclear fission, and ultimately urging the change of “nuclear fusion” to “fusion energy.” We’re happy to see all of these changes included and thank the Department of the Treasury for their openness and collaboration throughout this process. We look forward to seeing the technology-neutral credits enacted.

“Some commenters who supported this inclusion asked that the final regulations amend the reference to “nuclear fusion” in proposed §1.45Y-5(c)(2)(vii) to reduce confusion with nuclear fission. These commenters noted that Congress recently enacted the ADVANCE Act of 2024, Public Law 118-67, which included a definition of “fusion energy machine” within the Atomic Energy Act and asked that the final regulations amend proposed §1.45Y-5(c)(2)(vii) to align with that terminology. The Treasury Department and the IRS agree that the term “nuclear fusion” in proposed §1.45Y-5(c)(2)(vii) should be amended and adopt one commenter’s suggestion that the new term be “fusion energy.” The final regulations under §1.45Y-5(c)(2)(vii) reflect this change.”

Department of the Treasury Internal Revenue Services (IRS), 26 CFR Part 1