The U.S. Department of the Treasury and the Internal Revenue Service have taken an important step in providing clarity and direction for the advanced manufacturing production credit established by the Inflation Reduction Act (IRA). The new Section 45X offers a credit for the production and sale of eligible components within the United States, including solar and wind energy components, inverters, qualifying battery components, and applicable critical minerals.

The proposed regulations are designed to impact taxpayers involved in the production and sale of these eligible components and who intend to claim this credit. They include detailed guidelines for the production and sale of eligible components to unrelated persons, as well as special rules that apply to sales between related persons. Additionally, the proposed regulations outline a taxpayer’s ability to elect to treat sales to related persons as made to unrelated persons, known as the “related person election.”

Moreover, these regulations offer comprehensive definitions of eligible components, rules related to calculating the credit, and specific recordkeeping and reporting requirements. It is a critical move for U.S. manufacturers as they strive to materialize announced facilities, as expressed by JC Sandberg, the American Clean Power Association Chief Advocacy Officer. The guidance is aimed at creating and expanding supply chains for clean energy technologies domestically, thereby bolstering America’s energy security, generating well-paying jobs, and stimulating the nation’s economy.

For more detailed information on IRA guidance, please visit the Inflation Reduction Act of 2022 page on IRS.gov.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The energy market is highly volatile, and readers should conduct thorough research before making any investment decisions.