FIA Submits Letters to the Treasury, Urging Fusion Tax Equality with Clean Energy

The Fusion Industry Association wrote letters (embedded below) in response to the Treasury Department's Internal Revenue Service’s (IRS) requests for comment on implementing the "Energy Security Tax Credits for Manufacturing" (Notice 2022-47) and on "Certain Energy Generation Incentives" (Notice 2022-49) as enacted in the Inflation Reduction Act of 2022. In these letters, the FIA and its members urge the Secretary of the Treasury ensures that fusion receives equal tax treatment to other clean energy sources.

Often referred to as “the holy grail of clean energy”, fusion could provide a virtually limitless clean (emitting no greenhouse gas emissions), safe, and affordable source of firm power to meet the global demand. After decades of scientific research, we are now approaching the dawn of commercial fusion. Private fusion firms are rapidly scaling up, achieving scientific and investment breakthroughs, and gaining confidence in their projected timescales. 93% of the private fusion industry anticipates fusion power on the grid in the 2030s or before, up from the 83% of the industry that thought this last year. Hosting a White House Summit in March 2022 on "Developing a Bold Decadal Vision for Fusion", the US government aligns. Recent scientific, investment, and policy breakthroughs for fusion are significant for achieving fusion commercialization on a timeline relevant to mitigating the climate crisis. Including fusion as a clean energy source in the Inflation Reduction Act will help pave the way for its acceleration.

Energy Security Tax Credits for Manufacturing (Notice 2022-47)

This letter comments specifically on the implementation of the qualifying advanced energy project credit under § 48C of the Internal Revenue Code. The FIA and its members request “commercial fusion energy systems or components” be included as an “advanced energy property” so that the expansion, re-equipment, or construction of new industrial or manufacturing facilities for fusion energy systems are eligible for the tax credit. Commercial fusion energy is on the horizon, and this tax credit can catalyze substantial near-term growth in US manufacturing of high-value fusion device components–which today are currently manufactured abroad, particularly in China.

For the U.S. to remain competitive in this emerging technology sector, it’s vital that federal policy align to encourage its development here rather than in foreign markets. We need not repeat the past mistakes by ceding the manufacture of strategic technologies, such as semiconductors, solar power or batteries, to foreign suppliers. Expanding the definition of “advanced energy property” under the § 48C credit to accommodate fusion energy could help avoid that, and spur job creation in the manufacturing of commercial fusion components in the U.S.

Tax Credits for Energy Generation Incentives (Notice 2022-49)

Tax credits for energy generation are a longstanding, important incentive for energy. The consensus view of the FIA Membership is that the new §45Y and §48E production and investment tax credits could provide important incentives as fusion energy moves to commercialization. Knowing that fusion power plants will be eligible for production or investment tax credits will provide critical certainty to investors, allowing more investment today, even as the tax credits wouldn’t be utilized for several more years.

Under the statutory requirements for § 45Y and § 48E credits, credit will go to those “qualified facilities” where “the greenhouse gas emissions rate… is not greater than zero.” Emitting no greenhouse gasses, fusion energy aligns with the requirements.

Fusion must be Separated from Fission

Furthermore, both letters urge that fusion energy should be recognized as a qualifying technology on its own, and not as part of any “Advanced Nuclear” decision. Fusion energy is substantially different from nuclear fission; fusion has different benefits, costs, and risks, thus necessitating separate treatment. Moreover, several states and countries have bans on fission energy. Including fusion energy as an “advanced nuclear” technology for purposes of implementation of of § 48C and §§ 13701 and 13702 of the Inflation Reduction Act could, unintentionally, create confusion and uncertainty for fusion energy in these potential markets and inhibit deployment.

The FIA strongly supports the desire of Congress and the Administration for a technology- neutral approach towards clean energy and energy security policy. Recent progress by FIA member companies, built on decades of research and knowledge gained about fusion energy, now provide a realistic chance of putting this zero-emission, clean energy power source on the grid in the next decade, As such, it’s vital that the Administration establish tax credit equity for fusion energy, compared to other clean energy technologies, that will directly incentivize private sector investment into clean, safe, sustainable fusion energy.