See “A Primer on Carbon-Negative AI Data Centers” for more on this topic
For complex clean energy projects like Buena Vista Biomass Power (BVBP), retaining experienced tax credit consultants is essential to ensure full eligibility, compliance, documentation and monetization of Investment Tax Credits (ITCs). These credits, available under Section 48E of the Internal Revenue Code, represent one of the most significant value drivers in a project’s capital stack, often reducing equity needs and enhancing investor returns.
The Role of Tax Credit Consultants
Tax credit consultants guide project sponsors through every step of the ITC process, from eligibility analysis to final transfer execution. Their work often includes:
1. Eligibility and Valuation Analysis
Consultants perform technical studies such as the “80/20 Rule” analysis, which determines whether refurbished or re-powered facilities qualify for new ITCs. They also conduct cost segregation studies to separate eligible versus non-eligible property and ensure maximum credit recovery under IRS guidelines.
2. Compliance and Documentation Support
Proper documentation is key to securing enhanced credit rates. Consultants help establish compliance programs for prevailing wage and apprenticeship (PWA) requirements, which can increase the base ITC from 6% to 30%. They also verify whether projects qualify for up to two additional 10% adders: one for using sufficient Domestic Content in construction and another for locating in designated Energy Communities, which include areas with historical reliance on fossil fuels or high unemployment linked to the energy transition. These bonus credits can raise the total ITC to as much as 50% of eligible costs.
3. Regulatory Navigation and Ongoing Monitoring
The Inflation Reduction Act introduced complex rules governing when construction begins, domestic content certifications, and wage monitoring. Consultants maintain ongoing oversight to ensure projects remain compliant throughout development and construction.
4. Monetization and Transfer Execution
Once credits are earned, consultants assist in preparing documentation for registration and transfer to buyers. This includes coordinating with tax credit marketplaces and brokers, supporting due diligence, and preparing the forms required for claiming or transferring credits.
5. Broader Tax and Incentive Optimization
Many firms also identify and pursue additional opportunities such as New Market Tax Credits (NMTCs), state and local incentives, and other clean energy programs that enhance project returns and community benefits.
Example: KPMG’s Approach
For BVBP, KPMG LLC has been engaged to provide a comprehensive suite of Section 48E consulting services, leveraging a multi-disciplinary team across tax, valuation, compliance and legal specialties. Their proposed scope includes:
- 80/20 Rule Analysis and Valuation to establish fair market value of existing biomass assets
- PWA Compliance Program including contractor training, payroll verification and documentation
- ITC Cost Segregation Studies to identify and classify eligible property
- Domestic Content Analysis to verify U.S. origin of materials and components
- General Tax Credit Consulting including structuring, monetization, and a review of potential NMTC eligibility to confirm whether the project qualifies.
KPMG’s national energy credit team has supported more than 150 clean energy projects since the Inflation Reduction Act was enacted and maintains deep expertise in Section 48E and related incentive programs.
Why It Matters
For projects like BVBP, a well-structured ITC consulting engagement can mean the difference between partial and full monetization of credits. With hundreds of pages of evolving Treasury and IRS guidance, compliance missteps can lead to disallowance of credits or reduced transfer value. Engaging a qualified advisor ensures technical accuracy, regulatory compliance and optimized financial outcomes.
Disclaimer
References to KPMG and its materials are for informational purposes only; this post is not endorsed by, affiliated with, or sponsored by KPMG.
Explore Our Investment Strategies
See how we’re aligning capital with today’s most impactful opportunities!