45x Advanced Manufacturing Production Credit

§45X ADVANCED MANUFACTURING PRODUCTION CREDIT (PTC)

The §45X Advanced Manufacturing Production Credit was established by the Inflation Reduction Act of 2022 (IRA) to incentivize domestic manufacturing of renewable energy components and critical minerals. This tax credit aims to bolster the production of solar, wind, and battery components, as well as the refining or recycling of critical minerals, by providing financial incentives to manufacturers.

The primary goal of the §45X credit is to support the growth of the renewable energy sector in the United States. By offering a production tax credit, the government encourages manufacturers to invest in the production of essential components for renewable energy systems, thereby promoting clean energy and reducing reliance on imported materials.

ELIGIBILITY AND DURATION

Who Qualifies
The §45X credit is available to US-based manufacturers producing eligible components used for renewable energy technologies, energy storage, and specified critical minerals. To qualify, the components must be manufactured in the United States or its possessions and sold to unrelated parties. Components produced at facilities that have claimed the IRC Section 48C credit are not eligible for the §45X credit.
Effective Period
The §45X credit is effective from January 1, 2023, through December 31, 2032. Most components will see a phase-down in credit value starting in 2030, with the credit value reducing to 75% in 2030, 50% in 2031, and 25% in 2032. Critical minerals are exempt from this phase-out.

QUALIFICATION CRITERIA

Production Requirements

To qualify for the §45X credit, components must be substantially transformed into a complete and distinct eligible component. This means that the manufacturing process must involve significant changes to the constituent elements, materials, or subcomponents to create a new product.

Eligible Components

• Solar Energy Components: Solar modules, photovoltaic cells (thin film and crystalline), photovoltaic wafers, solar grade polysilicon, torque tubes (for solar tracking devices), structural fasteners (for solar tracking devices), and polymeric backsheets.
• Wind Energy Components: Blades, nacelles, towers, offshore wind foundations (fixed and floating platforms), and offshore wind vessels.
• Inverters: Central inverters, commercial inverters, distributed wind inverters, microinverters, residential inverters, and utility inverters.
• Battery Components: Electrode active materials, battery cells, and battery modules.
• Critical Minerals: From a list of 50 specified minerals.

DOCUMENTATION

Manufacturers must provide detailed documentation of the manufacturing process, goods produced, and sales records to qualify for the §45X credit. This includes records of production and sale to unrelated parties, as well as certifications from suppliers for critical minerals and electrode active materials.

CALCULATION METHODS

Credit Calculation

The §45X tax credit is calculated based on the production volume of eligible components within a tax year. There are three primary methods for calculating the credit:

• Value per Component Size or Weight: For solar subcomponents, the credit is determined by multiplying a specified dollar value by the component’s size in square meters or weight in kilograms.
• Value per Electric Capacity: For wind components, the credit is calculated based on the total electric capacity in watts.
• Percentage of Production Costs: For critical minerals and certain other components, the credit amounts to 10% of production costs.

CREDIT AMOUNTS

Solar Energy Components:

• Photovoltaic cells: $0.04 per watt direct current
• Photovoltaic wafers: $12 per square meter
• Solar grade polysilicon: $3 per kilogram
• Solar modules: $0.07 per watt direct current
• Torque tubes: $0.87 per kilogram
• Structural fasteners: $2.28 per kilogram
• Polymeric backsheets: $0.40 per square meter

Inverters:

• Central inverters: $0.025 per watt alternating current
• Utility inverter: $0.015 per watt alternating current
• Commercial inverters: $0.02 per watt alternating current
• Residential inverters: $0.065 per watt alternating current
• Microinverters: $0.11 per watt alternating current

Wind Components:

• Blades: $0.02 multiplied by total rated capacity of complete turbine
• Nacelles: $0.05 multiplied by total rated capacity of complete turbine
• Towers: $0.03 multiplied by total rated capacity of complete turbine
• Offshore wind foundations (fixed): $0.02 multiplied by total rated capacity of complete turbine
• Offshore wind foundation (floating): $0.04 multiplied by total rated capacity of the completed wind turbine
• Wind inverter: $0.11 multiplied by total rated capacity of the distributed wind inverter

Battery Components:

• Battery cells: $35 per kilowatt-hour of capacity
• Battery modules: $10 per kilowatt-hour of capacity (on top of the cell credit), $45 per kilowatt-hour for modules that do not use cells
• Electrode active materials: 10% of the costs incurred due to production of such materials

 Critical Minerals:

• 10% of the costs incurred by the taxpayer due to production

PROPOSAL REQUEST