Inflation Reduction Act Provisions for Manufacturing

MANUFACTURING
TAX PROVISIONS Advanced Energy Project Credit
DESCRIPTION Provides a tax credit for investments in advanced energy projects, as defined in 26 USC § 48C(c)(1).
ELIGIBLE RECIPIENTS A project that (1) re-equips, expands, or establishes an industrial or manufacturing facility for the production or recycling of a range of clean energy equipment and vehicles; (2) re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent; or (3) re-equips, expands, or establishes an industrial facility for the processing, refining, or recycling of critical materials.
BASE CREDIT AMOUNT 6% of taxpayer's qualifying investment
BONUS CREDIT AMOUNT Businesses can claim a 30% credit for projects meeting prevailing wage and apprenticeship requirements.
U.S. CODE 26 U.S. Code 48C
IRA SECTION 13501
FUNDING MECHANISM Allocated investment credit. 48C provides $10 billion of allocations, at least $4 billion of which must be allocated in energy communities.
NEW OR MODIFIED? Modified and extended. 48C had been enacted in 2009 but was fully allocated after the 2nd allocation round in 2013. The Inflation Reduction Act provides $10 billion of allocations, directs a minimum share to energy communities, and expands eligibility to new types of projects.
PERIOD OF AVAILABILITY The credit is available when the application and certification process begins and ends when credits are fully allocated.
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
TRANSFERABLE Yes
STACKABLE Cannot claim 45X credit for property produced at facilities that received the 48C credit.
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Initial Guidance Establishing Qualifying Advanced Energy Project Credit Allocation Program Under Section 48C(e)

 

MANUFACTURING
TAX PROVISIONS Advanced Manufacturing Production Credit
DESCRIPTION Provides a production tax credit for domestic manufacturing of components for solar and wind energy, inverters, battery components, and critical minerals.
ELIGIBLE RECIPIENTS Domestic manufacturers
BASE CREDIT AMOUNT Varies by technology
BONUS CREDIT AMOUNT None
U.S. CODE 26 U.S. Code 45X
IRA SECTION 13502
FUNDING MECHANISM Production tax credit
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY Credit for critical minerals is permanent starting in 2023. For other items, the full credit is available between 2023-2029 and phases down over 2030-2032.
DIRECT PAY Yes, for tax-exempt organizations, states, political subdivisions, the Tennessee Valley Authority, Indian Tribal governments, Alaska Native Corporations, and rural electricity co-ops (applicable entities). Entities other than applicable entities are eligible for up to 5 years of direct pay (which expires at the end of 2032) for tax years after December 31, 2022 if they make an election.
TRANSFERABLE Yes
STACKABLE Cannot claim 45X credit for property produced at facilities that received the 48C credit.
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)