On December 22, 2023, the U.S. Department of the Treasury (DOT) released a Notice of Proposed Rulemaking (NPRM) meant to address several issues associated with the Clean Hydrogen Production Tax Credit (PTC) established via Section 45V of the Inflation Reduction Act of 2022 (IRA). This article provides a brief overview of the proposed rules.
The Inflation Reduction Act (the “IRA”) provides funding for several tax credit incentives related to significant investments in energy projects. One of these credits is the section 48C investment tax credit (“48C Credit”), which was originally offered through the American Recovery and Reinvestment Act of 2009. The IRA includes a $10 billion allocation to the 48C Credit and also broadens the scope of eligible property a company can invest in to be eligible for the credit. If selected, the 48C Credit provides a credit equal to 30% of the project’s capital investment that is deemed to be “eligible energy property.”
On May 12, 2023, in Notice 2023-38 (the “Notice”), the IRS published rules intended for inclusion in forthcoming regulations regarding domestic content bonus credit amounts.
The Inflation Reduction Act of 2022 amended §§ 45 and 48 of the Internal Revenue Code (the “Code”) to provide a domestic content bonus credit amount for certain qualified facilities or energy projects placed in service after December 31, 2022, and added new Code §§ 45Y and 48E, which include a domestic content bonus credit amount for certain investments in qualified facilities or energy storage technologies placed in service after December 31, 2023.
To claim a domestic content bonus credit amount, a taxpayer must establish that the “Domestic Content Requirement” is satisfied with respect to an “Applicable Project” by certifying to the Secretary of the Treasury that any steel, iron, or manufactured product which is a component of the Applicable Project (upon completion of construction) was produced in the United States. The Notice provides guidance on what is required to meet the Domestic Content Requirement and the procedures for reporting and claiming domestic content bonus credit amounts.