UPDATE: Oct. 25, 2024: The Department of the Treasury released finalized rules on Thursday for the 45X advanced manufacturing production credit.The final rules now allow companies producing critical minerals and electrode active materials to include materials and extraction costs as part of production costs that can be applied towards the tax credit.
Additionally, production now explicitly includes both primary and secondary production, allowing taxpayers to manufacture eligible components using recycled materials.
Dive Brief:
- The Treasury Department released proposed guidance Thursday for how manufacturers can qualify for the Inflation Reduction Act’s advanced manufacturing production credit.
- The goal of the 45X tax credit is to incentivize domestic clean energy production, including blades for wind turbines, wafers for solar panels, electricity inverters, batteries and critical minerals, the Treasury Department said in a Dec. 14 release.
- A public hearing on the proposed regulation is scheduled for Feb. 22, 2024, at 10 a.m. ET.
Dive Insight:
The promise of new guidance was announced by the Treasury Department in September, with the intention to “provide definitions of eligible components, rules related to calculating the credit, as well as specific recordkeeping and reporting requirements,” according to the IRS press release.
More than $140 billion has been announced for the manufacturing of clean energy technologies, electric vehicles and batteries since President Biden signed the Inflation Reduction Act into law, nearly double the total investment in those sectors in the two years before the bill was passed, the Treasury Department said in a Dec. 14 release.
The amount of credit available to manufacturers depends on the component produced. For example, manufacturers of offshore wind vessels and critical minerals used in products like EV batteries can receive a tax credit of 10% of their production costs, according to the regulations.
Industry experts had previously noted the credits were expected to be “very substantial.” On solar manufacturing, a mid-sized solar module production facility making a “fairly modest” 2 GW per year could generate an annual tax credit of $140 million, Moss Adams partner Peter Henderson said in a June interview with Utility Dive.
Companies can receive the full credit until 2030, after which the credits will begin phasing out in 2030 by 25% per year and completely after 2032. This rule does not apply to critical mineral tax credits.
The Treasury Department’s details section 45X-eligible products in the regulations for five types of components and their various forms:
- Inverters: A component that converts direct current electricity from one or more solar modules or certified distributed wind energy systems into alternating current electricity. This includes central inverters, commercial inverters, distributed wind inverters, microinverters, residential inverters and utility inverters.
- Solar energy components: Solar modules, photovoltaic cells, photovoltaic wafers, solar grade polysilicon, torque tubes, structural fasteners or polymeric backsheets.
- Wind energy components: Blades, nacelles, towers, offshore wind foundations and related offshore wind vessels.
- Qualifying battery component: Electrode active materials, battery cells and battery modules.
- Applicable critical minerals: Includes a list of 50 minerals, such as aluminum, lithium, zinc and more.
“While today’s proposal is critical to supporting investments in new and mothballed factories, U.S. solar manufacturers are still facing headwinds that may jeopardize these projects,” Mike Carr, executive director of the Solar Manufacturers Coalition, said in response to the new guidance. “With deteriorating solar market conditions due to continued market manipulation by China, the future of U.S. solar manufacturing is under attack.”
The Treasury Department’s Notice of Proposed Rulemaking will be open for public comment for 60 days after the proposed guidance has been published in the Federal Register.
