Bonus will help boost American manufacturing of solar wafers and other components critical for U.S. energy security
WASHINGTON – Today, the U.S. Department of the Treasury (Treasury) and Internal Revenue Service (IRS) are releasing additional guidance on the Inflation Reduction Act’s domestic content bonus for Clean Electricity Production and Investment Tax Credits.
The domestic content bonus boosts American manufacturing of iron, steel, and manufactured products used in clean energy projects like solar and wind farms, helping to ensure that American workers and American companies continue to benefit from investments in the clean energy economy. Under the Biden-Harris Administration, companies have announced more than $196 billion in investments in clean power and $92 billion in clean energy manufacturing.
“Ensuring American workers are building the growing clean energy economy is a top priority for the Biden-Harris Administration,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “Today’s guidance will help fuel America’s clean energy investment and manufacturing boom and create good-paying jobs.”
The domestic content bonus is one of several tax incentives that are boosting U.S. manufacturing, alongside the advanced manufacturing production credit (45X), the qualifying advanced energy project credit (48C), and the CHIPS advanced manufacturing investment credit (48D), as well as incentives to produce clean energy that are increasing demand for components.
The guidance Treasury released today updates and builds upon the domestic content safe harbor that Treasury and the IRS published in May of 2024 that provides clean energy developers the option to rely on default cost percentages provided by Department of Energy (in lieu of obtaining direct cost information from suppliers) to determine eligibility for the domestic content bonus. Today’s guidance reflects improved default values that more closely align with the characteristics and costs of applicable project components and manufactured product components in the marketplace, as analyzed by the Department of Energy.
Today’s guidance establishes optional alternative cost percentages for developers of solar projects that use solar cells manufactured with domestically-produced wafers to appropriately recognize cost differentials for manufacturers who use cells made with domestic wafers, thereby enhancing incentives for onshoring wafer manufacturing.
The guidance also provides a variety of updates to clarify use of the safe harbor tables, including:
- Solar: The updated tables update cost percentages, make certain adjustments to the characterizations of applicable project components and manufactured product components, and offer clarifying definitions.
- Domestic Solar Wafers: For each solar table, there are new optional alternative cost percentages for projects using domestic solar cells manufactured with domestic wafers.
- Land-Based Wind: The updated table for Land-Based Wind includes minor adjustments to the characterizations of applicable project components and manufactured product components.
- Battery Electric Storage System (BESS): The updated table updates cost percentages, makes certain adjustments to the characterizations of applicable project components and manufactured product components, and offers clarifying definitions.
In addition, today’s guidance provides additional clarity on the use of the tables for retrofits, projects utilizing elective pay (also known as direct pay), as well as carport and floating solar projects. Taxpayers may utilize the safe harbor tables included in this guidance for projects beginning construction up to 90 days after the release of further guidance.
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