Advanced Manufacturing Tax Credit and Renewable Energy: IRS Final Rule, Components, Critical Minerals, Section 45X

Description

The Inflation Reduction Act of 2022 incentivized investment in qualified clean energy and energy-efficient property through various measures and tax credits, including the Section 45X advanced manufacturing production credit. Section 45X aims to boost domestic manufacturing of eligible components such as solar energy components, wind energy components, inverters, battery components, and certain critical minerals.

On Oct. 28, 2024, the U.S. Department of the Treasury and the IRS released final regulations pertaining to the Section 45X credit. Compared to the proposed regulations issued in 2023, these regulations make several changes favorable to taxpayers and expand the scope of the credit. The rules provide detailed guidance on the eligibility criteria, calculation methods, and compliance requirements for the Section 45X credit and clarify the inclusion of extraction and production costs for applicable critical minerals and electrode active materials.

The Section 45X tax credit provides significant tax opportunities and benefits for qualifying businesses, but it raises significant issues and questions as well. For example, understanding the credits can be complex, as there are questions about overlap and mutual exclusivity of the Section 45X and Section 48C credits as well as the interaction of the Section 45X credit with other credits and incentives.

Listen as our panel explores eligibility criteria for the credit, calculation methods, compliance and reporting requirements, practical guidance for navigating the audit process, and compliance strategies.