Tax credits for microgrid property

(a)

In general

Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 48C the following new section:

48D.

Microgrid property

(a)

In general

For purposes of section 46, the microgrid property credit for any taxable year is an amount equal to the applicable percentage of the basis of the qualified microgrid property placed in service by the taxpayer during such taxable year. (b)

Applicable percentage

For purposes of this section— (1)

In general

The term applicable percentage means, with respect to qualified microgrid property which is part of any qualified microgrid, the percentage determined in accordance with the following table determined with respect to the calendar year in which construction of such qualified microgrid begins: In the case of calendar year:The applicable percentage is:2025 or any prior calendar year30 percent202626 percent202722 percent202810 percent.

(2)

Treatment of conversions

In the case of any system which is converted into a qualified microgrid, the construction of such microgrid shall be treated for purposes of this subsection as beginning on the date on which such conversion begins. (c)

Qualified microgrid property

For purposes of this section— (1)

In general

The term qualified microgrid property means any qualified property— (A)which is part of a qualified microgrid, (B)either— (i)the construction, reconstruction, or erection of which is completed by the taxpayer, or (ii)which is acquired by the taxpayer if the original use of such property commences with the taxpayer, (C)which is not part of a bulk-power system (as defined in section 215 of the Federal Power Act (16 U.S.C. 824o)), and (D)with respect to which depreciation (or amortization in lieu of depreciation) is allowable. (2)

Qualified microgrid

The term qualified microgrid means an electrical system which— (A)incorporates a microgrid controller, (B)includes equipment which is capable of generating not less than 4 kilowatts and not greater than 50 megawatts of electricity, (C)is capable of operating in connection with the electrical grid and as a single controllable entity with respect to such grid, and (D)is capable of operating independently (and disconnected) from such grid. (3)

Qualified property

(A)

In general

The term qualified property means— (i)microgrid controllers, and (ii)electric distribution and switchgear property. (B)

Additional considerations

Upon consultation with the Secretary of Energy, the Secretary may determine that a qualified property under this section includes property connected to the bulk power system (as defined in section 215 of the Federal Power Act (16 U.S.C. 824o)). (4)

Microgrid controller

The term microgrid controller means, with respect to operation and islanding of a qualified microgrid, the equipment which is necessary to monitor and control the energy resources and loads on such microgrid to maintain acceptable frequency, voltage, or economic dispatch. Such term includes any software and networking hardware necessary to the operation of such equipment. (5)

Electric distribution and switchgear property

The term electric distribution and switchgear property means, with respect to operation and islanding of a qualified microgrid, the equipment which is necessary to deliver electric power from energy resources on such microgrid to loads on the same such microgrid. Such term includes breakers, fuses, wires, switchgear cabinets and bussing, paralleling switchgear, transformers, power quality correction equipment, transfer switches, disconnects, protective relays, metering equipment, and wired and wireless communications equipment necessary to the operation of such microgrid. (6)

Treatment of spare parts

Any qualified property which is held by the taxpayer as a spare part for possible replacement of qualified property which is part of a qualified microgrid shall not fail to be treated as part of such microgrid for purposes of this section. (d)

Special rules

(1)

Certain progress expenditure rules made applicable

Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section. (2)

Denial of double benefit

No credit shall be determined under this section with respect to the basis of any property if a credit is determined under any other section of this title with respect to such basis. (e)

Allowance of personal credit for residential microgrids

In the case of a qualified microgrid placed in service by any individual in the residence of such individual— (1)this section shall be applied without regard to subparagraph (C) of subsection (c)(1), and (2)the microgrid property credit determined under this section for any taxable year with respect to qualified microgrid property (determined after application of paragraph (1)) which is part of such qualified microgrid shall be taken into account as an increase in the amount of the credit otherwise allowable to the taxpayer under section 25D for such taxable year. (f)

Termination

No credit shall be determined under this section with respect to any property placed in service after December 31, 2028.

(b)

Elective payment of credit

Subchapter B of chapter 65 of such Code is amended by adding at the end the following new section:

6431.

Elective payment of microgrid property credit

(a)

Energy property

In the case of an eligible person making an election (at such time and in such manner as the Secretary may provide) under this section with respect to any portion of the credit determined under section 48D (determined without regard to subsection (d) of this section) or any portion of the credit allowed under section 25D by reason of section 48D(e) (as so determined), such eligible person shall be treated as making a payment against the tax imposed by subtitle A for the taxable year equal to the portion to which such election applies. (b)

Definitions and special rules

For purposes of this section— (1)

Eligible person

The term eligible person means— (A)any organization exempt from tax under section 501(a), (B)any State or local government, or a political subdivision thereof, or any agency, authority, or instrumentality of any one or more of the foregoing, or any corporation which is wholly owned, directly or indirectly, by any one or more of the foregoing, (C)any Indian tribal government, (D)any organization described in section 1381(a)(2), and (E)any not-for-profit electric utility which had or has received a loan or loan guarantee under the Rural Electrification Act of 1936. (2)

Indian tribal government

The term Indian tribal government shall have the meaning given such term by section 139E. (3)

Determination of credits

The amount of any credit described in subsection (a) which is treated as allowed to any eligible person shall be determined for purposes of such subsection in the same manner as though such eligible person were subject to the tax imposed under chapter 1. (4)

Timing

The payment described in subsection (a) shall be treated as made on— (A)in the case of any government, or political subdivision, to which paragraph (1) applies and for which no return is required under section 6011 or 6033(a), the later of the date that a return would be due under section 6033(a) if such government or subdivision were described in that section or the date on which such government or subdivision submits a claim for credit or refund (at such time and in such manner as the Secretary shall provide), and (B)in any other case, the later of the due date of the return of tax for the taxable year or the date on which such return is filed. (5)

Waiver of special rules

In the case of an election under this section, the determination of any applicable credit shall be without regard to paragraphs (3) and (4)(A)(i) of section 50(b). (6)

Governmental entities treated as taxpayers

In the case of an election under this section— (A)any State or local government, or a political subdivision thereof, or (B)any Indian tribal government,

shall, to the extent not a taxpayer as defined under section 7701(a)(14), be treated as a taxpayer for purposes of this section and determining any applicable credit.

(c)

Exclusion from gross income

Gross income of the taxpayer shall be determined without regard to this section. (d)

Denial of double benefit

The credit otherwise determined under section 45D (and the credit otherwise allowed under section 25D by reason of section 48D(e)), determined without regard to this subsection, shall be reduced by the amount of the portion of such credits with respect to which the taxpayer makes the election under subsection (a).

(c)

Conforming amendments

(1)Section 46 of such Code is amended by striking and at the end of paragraph (5), by striking the period at the end of paragraph (6) and inserting , and, and by adding at the end the following new paragraph:

(7)the microgrid property credit.

(2)Section 49(a)(1)(C) of such Code is amended by striking and at the end of clause (iv), by striking the period at the end of clause (v) and inserting a comma, and by adding at the end the following new clause:

(vi)the basis of any qualified microgrid property under section 48D.

(3)Section 50(a)(2)(E) of such Code is amended by striking or 48C(b)(2) and inserting 48C(b)(2), or 48D(d)(1). (4)The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48C the following new item:

Sec. 48D. Microgrid property.

(5)The table of sections for subchapter B of chapter 65 of such Code is amended by adding at the end the following new item:

Sec. 6431. Elective payment of microgrid property credit.

(d)

Effective date

The amendments made by this section shall apply to periods after December 31, 2020, under rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).