Policy & Regulation

Treasury, IRS issue additional guidance on domestic content bonus

Treasury, IRS issue additional guidance on domestic content bonus
A factory worker on the Nextracker-dedicated line at JM Steel’s Leetsdale steel facility. (Photo: Nextracker)

The U.S. Department of the Treasury and Internal Revenue Service (IRS) released additional guidance on the Inflation Reduction Act’s (IRA) domestic content bonus.

The domestic content bonus applies to facilities and projects built using the required amounts of domestically produced steel, iron, and manufactured products. To receive the bonus, all manufacturing processes for steel and iron components must occur in the United States. A statutorily required minimum percentage of the costs of the manufactured products and components of manufactured products that comprise a facility must be mined, produced, or manufactured in the United States.

“American workers and businesses are committed to making sure the United States economy benefits from the global transition to clean energy. That is why these incentives to bring clean energy manufacturing to America are jumpstarting investments across the country. Today’s guidance provides important clarity to companies and simplifies the process,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “This should help companies make more clean power investments using U.S.-made equipment, generating new business for manufacturers and creating more good-paying jobs.”

Join us at GridTECH Connect California, June 24-26, 2024, in Newport Beach, CA! With some of the most ambitious sustainability and clean energy goals in the country, California is at the cutting edge of the energy transition while confronting its most cumbersome roadblocks. From electric vehicles to battery storage, microgrids, community solar, and everything in between, attendees will collaborate to advance interconnection procedures and policies in California.

“The Inflation Reduction Act’s domestic content bonus is a crucial tool for investing in American workers and American businesses,” adds John Podesta, Senior Advisor to the President for International Climate Policy. “Today’s new safe harbor approach will make it simpler for more companies to take advantage of this powerful incentive and support good-paying American jobs.”

Under the Production Tax Credit for clean energy (PTC), facilities that meet domestic content requirements receive a 10% bonus. Under the Investment Tax Credit for clean energy (ITC), projects that meet the domestic content requirement receive up to a 10-percentage point bonus. Projects are eligible for the full value of the bonus only if they meet the domestic content requirement and one of the following requirements: 1) the project has a maximum net output of less than 1 MW of energy; 2) construction of the project began before January 29, 2023; or 3) the project satisfies the Inflation Reduction Act’s prevailing wage and apprenticeship requirements.  

The notice creates a new elective safe harbor that gives clean energy developers the option of relying on DOE-provided default cost percentages for a set of manufactured products and their components. This safe harbor is in lieu of obtaining direct cost information from suppliers. The guidance also amends last May’s Notice to add more safe harbor classifications, including the addition of hydropower technologies, as well as to provide clarity for rooftop solar.

Treasury and IRS plan to issue further domestic content guidance to address issues not in the scope of this guidance, including adding further sectors, including offshore wind, to the new elective safe harbor table and issuing proposed rules for projects using elective pay (sometimes referred to as direct pay). In particular, Treasury and IRS, with DOE and other agencies, continue to evaluate potential options to further the IRA’s goal of incentivizing U.S. solar manufacturing, including solar wafer production. 

Tags