45J and 45U Tax Credits

Did you know that nuclear power provides about 10% of the world’s electricity and is one of the largest sources of zero-emission energy? Under the Inflation Reduction Act (IRA), the 45J and 45U tax credits are part of the U.S. federal government’s efforts to support the growth and development of this energy source. These credits incentivize the production of low-carbon energy through nuclear power, helping pave the way for a sustainable low-carbon future. Both of these credits are designed to encourage nuclear development, but they target slightly different aspects of the nuclear energy industry.

45J: Advanced Nuclear Production Tax Credit (PTC)

  • The 45J tax credit is specifically for advanced nuclear reactors, which are newer, innovative technologies that offer potential improvements in safety, efficiency and waste management.
  • The credit applies to new or upgraded nuclear plants using advanced
  • The 45J credit provides a slightly higher incentive, with up to $15 per MWh for advanced nuclear production.

45U: Zero-Emission Nuclear Power Production Tax Credit (PTC)

  • The 45U tax credit applies to all nuclear plants, whether they use traditional or advanced technologies, as long as they produce zero-emission electricity without emitting greenhouse gases.
  • Section 13105 of the Inflation Reduction Act of 2022 created section 45U, the zero-emission nuclear power production credit, for electricity produced at a qualified nuclear power facility and sold by the taxpayer to an unrelated person in tax years beginning after December 31, 2023, and before January 1, 2033.
  • The base amount of the Zero-Emission Nuclear Power Production Credit is 0.3 cents/kWh, inflation adjusted after 2024. Credit amount is reduced based on the amount of the qualified nuclear power facility’s gross receipts. Credit amount is increased by up to 5 times or up to 30 percent for facilities meeting prevailing wage
  • The credit applies to both existing and new nuclear plants that meet the zero-emission requirement.

What is the current guidance and the guidance forthcoming?

As of now, the Internal Revenue Service (IRS) has provided some initial guidance on the 45J and 45U under the Inflation Reduction Act (IRA), but additional guidance is expected, especially regarding the specifics of implementation, eligibility and procedural details for claiming the credits. The IRS guidance on  outline the eligibility requirements, credit amounts and procedures for claiming the credits. In 2024, taxpayers were able to claim these credits using forms such as Form 8835 (Renewable Energy Production Credit).However, additional guidance is expected, particularly in clarifying detailed procedures for claiming the credits, the definition of “advanced” nuclear technologies under 45J, the interaction with other IRA incentives, and how the credits apply to plants still under construction or in early testing stages. The IRS also noted that they are expected to release updated forms and instructions as well as details on how the credits will be phased or adjusted over time. This forthcoming guidance will ensure more clarity on the claims process, eligibility and technical criteria for both new and existing nuclear facilities.

Navigating 45J and 45U Tax Credits: Key Insights for 2025 and Beyond

The 45J and 45U tax credits are crucial elements of the U.S. government’s efforts to promote the growth of nuclear energy as part of its broader clean energy agenda. These credits are available through 2025, even with the introduction of the 45Y and 48E tech-neutral credits starting January 1, 2025. Both the 45J and 45U credits qualify for direct pay or can be sold under a Transfer Credit Purchase Agreement (TCPA). Buyers typically require either a strong Seller Guaranty or tax credit insurance, though it’s worth noting that while the 45U credit is not subject to recapture risk, it is still vulnerable to disallowance and qualification risks. The pricing of these credits can vary based on the risks associated with the seller, with investment-grade-rated sellers often commanding over $0.95 per credit for already generated 45U credits. These tax credits, by providing financial incentives for nuclear energy projects, help make them more viable and competitive while also contributing to energy security and job creation.

Why are these tax credits important, and how can Foss & Company advise in this area?

 The 45J and 45U are essential tax incentives that play a critical role in advancing the nuclear energy sector. These credits help make nuclear projects financially viable by reducing the costs of both new and existing nuclear power plants. These incentives attract investment, making nuclear energy more competitive and supporting its role in achieving net-zero emissions targets. Additionally, they contribute to energy security, create jobs and stimulate economic growth, particularly in the clean energy sector.

Since 1983, Foss & Company has been a leader in the tax equity space and can play a critical role in helping developers and investors navigate the complexities of the 45J and 45U tax credits. These credits make nuclear energy projects more financially viable, and our team is dedicated to ensuring that you fully leverage these opportunities. We provide expert guidance on structuring tax equity deals, ensuring compliance with eligibility requirements, and integrating these credits into your overall financing strategy. At Foss & Company, we are committed to providing the expertise and strategic insight needed to maximize the value of these tax credits, helping you achieve long-term success in the evolving nuclear energy sector.

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