The Inflation Reduction Act of 2022 introduced the Section 48E Clean Electricity Investment Credit (the “48E Credit”), a technology-neutral investment tax credit that largely replaced the legacy Section 48 energy credit for qualified facilities and energy storage technology (EST) placed in service after December 31, 2024. While many taxpayers and advisors are familiar with the broad “energy project” aggregation rules under finalized Treas. Reg. §1.48-13 (which apply the well-known four-out-of-seven factor test to multiple properties owned by common or related taxpayers), those rules do not apply to Section 48E projects.
This white paper explains the significantly narrower aggregation principles that actually govern Section 48E. It focuses on the limited “integrated operations” rule that applies only for specific purposes: the One Megawatt Exception to the prevailing wage and apprenticeship (PWA) requirements, the less-than-5 MW test for the Low-Income Communities Bonus Credit, and the low-output solar beginning-of-construction rules in IRS Notice 2025-42. We also highlight the practical implications for sponsors, developers, and investors who own portfolios of solar, wind, or other clean electricity facilities.
1. Key Distinction: No “Energy Project” Aggregation for Section 48E
Unlike Section 48, the final Treasury regulations under Sections 45Y and 48E (T.D. 10024, published January 15, 2025) did not adopt the Section 48 seven-factor ‘energy project’ aggregation concept as a general rule for determining Section 48E credit eligibility or bonus-credit qualification.
- The PWA proposed regulations had included a cross-reference to proposed §1.48-13, but Treasury and the IRS did not finalize proposed §1.48E-3 in the June 2024 PWA final regulations (T.D. 9998) and instead addressed Section 48E in the later tech-neutral final regulations.
- The final §1.48E-3 does not incorporate the seven-factor ‘energy project’ definition or any equivalent as a general Section 48E aggregation rule, although it does cross-reference portions of §1.48-13 for prevailing-wage administration and recapture.
- Preamble commentary confirms there is no basis for providing the same broad aggregation rule for the 48E credit as exists under Section 48.
Result: Credit eligibility, the base 48E credit amount, and eligibility for the domestic content bonus and energy community bonus are generally determined on a facility-by-facility (or EST-by-EST) basis. For PWA purposes, however, the narrow integrated-operations rule can require aggregation for applying the One Megawatt Exception. Multiple qualified facilities owned by the same taxpayer are not automatically aggregated into a single ‘project’ merely because they share common ownership, financing, off-take agreements, or other §1.48-13 factors.
A ‘qualified facility’ under §1.48E-2(d) includes both the taxpayer’s unit of qualified facility – meaning the functionally interdependent components of property owned by the taxpayer that are operated together to produce electricity – and integral property that is part of that facility (or, for EST, the property used to store and deliver energy).
2. The Narrow “Integrated Operations” Rule — The Only Aggregation Mechanism
The principal aggregation rule under Section 48E is the ‘integrated operations’ test, which applies for three narrow purposes:
- Determining whether a facility qualifies for the One Megawatt Exception to the PWA requirements (Treas. Reg. §1.48E-3(b) and (c)).
- Determining eligibility under the Low-Income Communities Bonus Credit Program (<5 MW nameplate capacity test) (Treas. Reg. §1.48E-1(b)(3)(iv)).
- Measuring maximum net output for low-output solar facilities under the beginning-of-construction rules in IRS Notice 2025-42 (effective for applicable wind and solar facilities whose construction does not begin before September 2, 2025).
Definition of “Integrated Operations” (Treas. Reg. §1.48E-3(c)(4); mirrored in Notice 2025-42 §6.03(3)):
A qualified facility (or EST) is treated as having integrated operations with one or more other qualified facilities (or ESTs) of the same technology type if all three of the following are satisfied:
- The facilities are owned by the same or related taxpayers (related taxpayers = group of trades or businesses under common control under Treas. Reg. §1.52-1(b)).
- The facilities are placed in service in the same taxable year.
- The facilities transmit electricity generated by the facilities through the same point of interconnection (POI) or, if the facilities are not grid-connected or deliver electricity directly to an end user behind a utility meter, are able to support the same end user.
If integrated operations exist, the aggregate nameplate capacity of all such facilities/ESTs is used for the relevant test (1 MW for PWA; 5 MW for low-income bonus; 1.5 MWac for low-output solar BoC safe harbor).
Nameplate capacity measurement rules (detailed in §1.48E-3(c) and Notice 2025-42 §6.03(2)) generally use the lesser of (i) the sum of DC nameplate capacities (deemed AC for solar) or (ii) the first inverter’s AC capacity, measured under ISO conditions where applicable. Integral property is not included in the capacity calculation.
3. Practical Implications for Common Owners and Portfolios
Because the integrated operations test is narrow and conjunctive (all three prongs must be met), many common portfolio structures will not trigger aggregation:
- Separate points of interconnection (e.g., multiple ground-mounted arrays or rooftop systems each with their own POI) → treated as separate facilities, even if owned by the same taxpayer and placed in service the same year.
- Different placed-in-service years → no aggregation, even if they share a POI.
- Different technology types (e.g., solar + wind, or solar + battery) → no aggregation under the integrated operations rule.
- Behind-the-meter projects serving different end users → generally not aggregated.
Common scenarios where aggregation WILL occur:
- Multiple solar arrays behind the same meter serving a single commercial host or community solar subscriber group, owned by related entities, placed in service the same year.
- Phased utility-scale solar blocks that share a single POI/substation and meet the other two prongs.
Consequences when aggregation applies:
- A portfolio that would otherwise qualify for the One Megawatt Exception (avoiding PWA) may be forced to satisfy PWA on an aggregated basis.
- Low-income bonus eligibility or the 1.5 MW low-output solar BoC safe harbor (Notice 2025-42) may be lost if aggregate capacity exceeds the threshold.
4. Examples
Example 1 – Non-Aggregated Rooftop Portfolio Taxpayer owns 20 rooftop solar systems (each <0.8 MWac) on different commercial buildings, each with its own POI and separate PPAs. All placed in service in 2026 by related entities. → No aggregation. Each facility independently qualifies for the One Megawatt Exception (no PWA required).
Example 2 – Aggregated Community Solar Three 0.6 MWac ground-mount arrays on adjacent parcels, owned by the same LLC, placed in service in the same tax year, sharing a single POI and serving the same subscriber group behind a common meter. → Integrated operations applies. Aggregate capacity = 1.8 MWac → does not qualify for the One Megawatt Exception; PWA required for full credit.
Example 3 – Low-Output Solar BoC (Notice 2025-42) A developer plans multiple small solar canopies (<1 MW each) for a single parking lot project, same owner, same year, single POI. -> Aggregated for the 1.5 MWac low-output test; if total exceeds 1.5 MWac, the project cannot rely on the low-output rule and would need to satisfy the applicable beginning-of-construction standard without that rule.
5. Planning Considerations
- Structuring tip: Deliberate use of separate POIs, different placed-in-service years, or unrelated ownership entities can preserve facility-by-facility treatment and access to the One Megawatt Exception.
- Documentation: Maintain clear records of ownership, placed-in-service dates, POI details, and end-user relationships.
- Interaction with Section 48 legacy rules: Projects that straddle the 2024/2025 transition or elect under §48 may still be subject to the broader §1.48-13 rules.
- Future guidance: Treasury and the IRS may issue additional rules or guidance under Section 48E; monitor future published guidance and IRS updates.
Bottom line: Section 48E offers greater flexibility for common owners of multiple properties than the legacy Section 48 regime. The absence of the seven-factor energy project test as a general Section 48E rule means that – outside the narrow integrated-operations rule and other specifically incorporated provisions – each qualified facility or EST is generally evaluated on its own for credit and bonus-credit purposes. Proper structuring and documentation can unlock significant tax credit value for portfolio developers.
This white paper is for informational purposes only and does not constitute tax, legal, or accounting advice. Taxpayers should consult with their own advisors regarding their specific facts and circumstances. Rules cited are current as of April 2026 based on final regulations (T.D. 10024) and IRS Notice 2025-42.
