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					</table><p>U.S.-based solar technology company <a href="https://www.firstsolar.com/en-IN/" target="_blank" rel="noopener">First Solar</a> has entered into two separate tax credit transfer agreements to sell $500 million and up to $200 million of Inflation Reduction Act (IRA) advanced manufacturing production tax credits to <a href="https://www.fiserv.com/en.html" target="_blank" rel="noopener">Fiserv</a>, a financial technology services provider.</p>
<p>According to the terms of these agreements, Fiserv will acquire the tax credits at a rate of $0.96 per $1 during the first half of 2024. This price includes fees and commissions paid by First Solar to the placement agent.</p>
<p>The tax credits are the outcome of the sale of solar modules produced in 2023 by First Solar’s operational manufacturing facilities in the U.S., including its recently commissioned third Ohio factory.</p>
<p>First Solar operates fully integrated solar manufacturing facilities where thin film wafers, cells, and modules are produced through an integrated process. In this process, a sheet of glass undergoes transformation into a fully functional solar panel in approximately four hours.</p>
<p>Due to its vertical integration, First Solar qualifies for advanced manufacturing production tax credits, which are permissible for the production of solar wafers, cells, and modules under Section 45X of the IRA.</p>
<p>The production tax credit is a per-kilowatt-hour tax credit applicable to electricity generated by solar and qualifying technologies during the first decade of a system’s operation. It serves to reduce federal income tax liability and is subject to annual inflation adjustments.</p>
<p>Solar systems placed in service in 2022 or later, commencing construction before 2033, are eligible for a 2.75 ¢/kWh production tax credit if they meet labor requirements outlined by the Treasury Department or are under 1 MW in size.</p>
<p>According to the Internal Revenue Service and the Treasury Department <a href="https://www.energy.gov/eere/solar/federal-tax-credits-solar-manufacturers" target="_blank" rel="noopener">guidelines</a>, “Manufacturers may also elect to transfer all, or a portion, of the tax credits for a given year to an unrelated eligible taxpayer. Credits from a single property can be sold to multiple buyers in the same tax year.”</p>
<p>First Solar anticipates that the liquidity generated from this transaction will expedite the enhancement of its cash position in the U.S. through the monetization of Section 45X credits. This move is expected to fortify the company’s balance sheet and support continued investments in crucial growth areas, such as research and development.</p>
<p>Citigroup Global Markets is the placement agent for First Solar on the transaction. The agreements follow the <a href="https://www.mercomindia.com/us-guidance-45x-tax-credit" target="_blank" rel="noopener">proposed</a> rulemaking by the U.S. Department of Treasury and Internal Revenue Service to implement the Section 45X credits.</p>
<p>In August last year, President Joe Biden <a href="https://www.mercomindia.com/inflation-reduction-act-faster-transition-clean-energy-u-s/" target="_blank" rel="noopener">signed</a> the Inflation Reduction Act, which proposes $369.75 billion in energy security and climate change programs over ten years.</p>


First Solar Plans to Offload IRA Tax Credits Worth $700 Million


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					</table><p>The <a href="https://home.treasury.gov/" target="_blank" rel="noopener">U.S. Department of Treasury</a> and the Internal Revenue Service (<a href="https://www.irs.gov/" target="_blank" rel="noopener">IRS</a>) have proposed regulations and provided guidance to the advanced manufacturing production credit established by the Inflation Reduction Act (IRA).</p>
<p>The new Section 45X provides a credit for the production (within the U.S.) and sale of certain eligible components, including solar and wind energy components, inverters, qualifying battery components, and applicable critical minerals.</p>
<p>Eligible solar components include solar modules, photovoltaic cells and wafers, solar-grade polysilicon, torque tube, structural fastener, or polymeric backsheet. Wind components include blade, nacelle, tower, offshore wind foundation, or related offshore wind vessel.</p>
<p>Battery components include electrode active materials, battery cells, or battery modules. Inverters include central inverters, commercial inverters, distributed wind inverters, microinverters, and residential inverters.</p>
<p>The proposed regulations would affect taxpayers who produce and sell eligible components and intend to claim the benefit of an advanced manufacturing production credit by making elective payments or credit transfer elections.</p>
<p>Stakeholders can submit their comments by February 13, 2024.</p>
<p>Tax credits can also be claimed for 10% of the cost of processing 50 critical minerals.</p>
<p><a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-61441 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1.png" alt="Eligible Components for Advanced Manufacturing Production Tax Credit" width="890" height="663" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1.png 890w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1-300x223.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1-768x572.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1-650x484.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1-624x465.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/12/Eligible-Components-for-Advanced-Manufacturing-Production-Tax-Credit-1-600x447.png 600w" sizes="(max-width: 890px) 100vw, 890px" /></a></p>
<p>To qualify for section 45X tax credits, a company must manufacture and sell eligible components domestically. The IRS emphasizes that merely assembling, making superficial changes, or partially transforming materials into products is insufficient. There must be a significant transformation of raw materials into a distinct product. Alternatively, the manufacturer can use components made by others to create a different product, such as using solar cells to produce solar modules.</p>
<p>However, a special rule applies to solar-grade polysilicon, electrode active materials, and applicable critical minerals. For these components, the term refers to activities like processing, converting, refining, or purifying source materials, such as brines, ores, or waste streams, to create a unique eligible component.</p>
<p>The IRS said two types of arrangements are not contract manufacturing. One is a routine purchase order for off-the-shelf components that require no more than minimal tailoring. The other is where the factory knows when the contract is signed that it can satisfy the order out of existing stocks or normal production of finished goods.</p>
<p>Components must be manufactured in 2023 or later. Production may have commenced before 2023, like the construction of a wind tower, as long as it is finished in 2023. If an item is produced in one year and sold in the following year, the tax credit is applied in the year of sale.</p>
<p>Global law firm, <a href="https://www.nortonrosefulbright.com/en-in" target="_blank" rel="noopener">Norton Rose Fulbright</a> explains that for instance, if company X produces photovoltaic wafers and sells them to affiliate Y in 2023, and Y sells the cells to a third party Z in 2024, both X and Y can claim tax credits for the components they produced, but not until 2024. However, if a related person election is made where wafers are integrated into cells in 2023, and the cells are sold in 2024, X can claim its tax credit in 2023. Integration, where the component disappears in another, larger eligible component, triggers the tax credit when combined with a related person election.</p>
<p>The eligible components must be produced in the U.S., Puerto Rico, the U.S. Virgin Islands, Guam, or the Northern Mariana Islands.</p>
<p>The origin of the inputs used to make them does not matter.</p>
<p>The eligible components must be sold or incorporated by the manufacturer into other eligible components to trigger tax credits. The IRS said to use general tax principles to determine when a sale occurs.</p>
<p>For eligible components sold in 2030, 2031, and 2032, the reduction in credit percentages is 75%, 50%, and 25%, respectively. The phase-out percentage is zero percent for an eligible component sold after December 31, 2032. Thus, current law provides no section 45X credit after 2032 for eligible components other than for applicable critical minerals.</p>
<p>The proposed regulations have reservations about the potential manipulation of Section 45X tax benefits. In extreme cases where the primary reason for producing and selling eligible components is solely to obtain tax benefits, the rules aim to prevent such misuse. Specifically, if the tax benefits gained from selling an eligible component exceed the production cost of that component, the credit will not be available.</p>
<p>In August, the Treasury Department and IRS <a href="https://www.mercomindia.com/us-releases-new-guidelines-under-inflation-reduction-act/" target="_blank" rel="noopener">proposed</a> rules and guidelines under the Inflation Reduction Act to harmonize sustainable energy and employment opportunities and solidify commitment to the “Investing in America” agenda.</p>
<p>In August last year, President Joe Biden <a href="https://www.mercomindia.com/inflation-reduction-act-faster-transition-clean-energy-u-s/" target="_blank" rel="noopener">signed</a> the ‘Inflation Reduction Act,’ which the U.S. House of Representatives and the Senate had passed. The Act addresses issues of climate change, taxes, healthcare, and inflation. The Act proposes $369.75 billion in energy security and climate change programs over the next ten years.</p>


US Treasury Announces Guidance on 45X Advanced Solar Manufacturing Tax Credit

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