February 16, 2024. The U.S. Treasury Department and Internal Revenue Service (IRS) today issued a technical correction to the Notice of Proposed Rulemaking (NPRM) issued in November in regard to proposed changes to the Sec. 48 investment tax credit (ITC).
The correction is intended to make clear that the cleaning and conditioning equipment critical to processing biogas into renewable natural gas (RNG) is eligible for the ITC.
“The technical correction issued today signals a better understanding of how the ITC can facilitate RNG deployment to maximize the benefits of methane capture and recycling,” said RNG Coalition Director of Federal Government Affairs Geoffrey Dietz. “This change comes on the heels of diligent engagement from RNG Coalition membership which will continue in the coming weeks and months as we move toward a final rule.”
Cleaning and conditioning equipment integral to processing biogas into RNG was recognized under the Sec. 48 ITC changes put forth in the Inflation Reduction Act in 2022. However, a proposed rule issued in November 2023 considered excluding such equipment from ITC eligibility, contrary to Congressional intent. In response, RNG Coalition, its 400-plus membership and leaders in Washington mobilized in recent weeks to ensure ITC implementation reflects statute.
While today’s result is encouraging, there remain critical issues to resolve to ensure that ITC implementation is consistent with the intent of the IRA to maximize clean energy deployment. The ITC must, however, better recognize the diversity of biogas project ownership structures, and revisions are needed to ensure that application of the tax code does not unintentionally limit investment in RNG facilities.