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US Announces $6 Billion Tax Credits for Advanced Energy Projects


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					</table><p>The U.S. Department of the Treasury (<a href="https://home.treasury.gov/" target="_blank" rel="noopener">Treasury</a>) and the Internal Revenue Service (<a href="https://www.irs.gov/" target="_blank" rel="noopener">IRS</a>) have allocated $6 billion in tax credits for the second round of the Inflation Reduction Act’s (IRA) 48C Qualifying Advanced Energy Project Tax Credit program. These allocations will support over 140 projects across more than 30 states, focusing on clean energy manufacturing, critical materials processing, and industrial decarbonization.</p>
<p>The second round allocated $6 billion in tax credits to clean energy manufacturing, materials recycling, and industrial decarbonization projects. Highlights of this round include:</p>
<ul>
<li><strong>Clean Energy Manufacturing and Recycling:</strong> $3.8 billion (63% of Round 2 allocations) will fund projects manufacturing energy-intensive materials at reduced carbon intensities. This includes facilities for hydrogen technologies, grid components, electric vehicle parts, batteries, solar, wind energy, and more.</li>
<li><strong>Critical Materials Recycling and Processing:</strong> $1.5 billion (25%) will be invested in facilities to process and recycle essential materials such as lithium, copper, rare earth elements, and lithium-ion batteries.</li>
<li><strong>Industrial Decarbonization:</strong> $700 million (12%) will support technologies like heat pumps, electric boilers, and thermal storage in sectors such as chemicals, food and beverage, aluminum, ceramics, and building materials. These projects are projected to eliminate 2.8 million tons of CO₂ emissions annually.</li>
</ul>
<p>The 48C program, initially established in 2009 under the American Recovery and Reinvestment Act, was expanded under the IRA with a $10 billion investment. The program aims to expand U.S. clean energy manufacturing and recycling capabilities, boost domestic critical materials processing and refining, enhance industrial efficiency, and reduce greenhouse gas emissions.</p>
<p>Of the $10 billion allocated under the IRA, 40% is earmarked for projects located in designated  48C energy communities—regions economically impacted by the closure of coal mines or plants. The competitive program awards investment tax credits to infrastructure projects demonstrating exceptional potential to advance these goals.</p>
<p><strong>Demand and Impact</strong></p>
<p>The demand for 48C tax credits in Round 2 significantly exceeded availability, with over 800 concept papers submitted, representing $40 billion in tax credit requests. The Department of Energy (DOE) received over 350 applications by October 2024 for a cumulative $16 billion.</p>
<p>Rounds 1 and 2 have allocated $10 billion in tax credits to approximately 250 projects across more than 40 states, leveraging over $44 billion in infrastructure investments. The second round alone is expected to generate 30,000 construction jobs over four years, with 10,000 of these in energy communities.</p>
<p>To claim the 48C tax credit, selected projects must meet certification and operational milestones. Projects must notify DOE within two years of receiving their Allocation Letter that certification requirements have been met. DOE will then notify the IRS, which will issue a Certification Letter. Projects must be operational within two years of certification.</p>
<p>The 48C program will publicly share details about certified projects once they meet statutory requirements. Recipients can voluntarily announce their allocations earlier in collaboration with DOE.</p>
<p>The Treasury department and IRS recently <a href="https://www.mercomindia.com/final-rules-for-tax-credits-to-spur-clean-energy-investments-in-us/" target="_blank" rel="noopener">released </a>final rules for the clean electricity investment and production tax credits (technology-neutral credits). These rules are detailed in the tax code’s sections 45Y, which establishes a ‘clean electricity production tax credit,’ and 48E, which incentivize investments in facilities that generate clean electricity.</p>
<p>Treasury and IRS also released final rules and procedural guidance for the Section 48E(h) Clean Electricity Low-Income Communities Bonus Credit Amount Program. This program expands the first-of-its-kind 48(e) bonus credit, designed to lower home energy costs, spur clean energy investments in low-income communities, and benefit low-income households.</p>



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					</table><p>The U.S. Department of the Treasury (<a href="https://home.treasury.gov/" target="_blank" rel="noopener">Treasury</a>) and Internal Revenue Service (<a href="https://www.irs.gov/" target="_blank" rel="noopener">IRS</a>) have released additional guidance on the Inflation Reduction Act’s (IRA) domestic content bonus for clean electricity production and investment tax credits.</p>
<p>The updated safe harbor applies to solar projects, domestic solar wafers, land-based wind projects, and battery energy storage systems.</p>
<p>The IRA amended tax code Sections 45 and 48 to provide a domestic content bonus credit amount for certain qualified facilities or energy projects beginning service after December 31, 2022.</p>
<p>It included Sections 45Y and 48E, which provided a domestic content bonus credit amount for specific investments in qualified facilities or energy storage technologies beginning service after December 31, 2024.</p>
<p>The Treasury Department’s guidance updated the domestic content safe harbor, which allows clean energy developers to rely on default cost percentages provided by the Department of Energy (DoE) to determine eligibility for the domestic content bonus.</p>
<p>The updated guidance provides new tables for solar and domestic solar wafers.<a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-75437 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1.png" alt="" width="890" height="674" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1.png 890w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1-300x227.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1-768x582.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1-650x492.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1-624x473.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-1-600x454.png 600w" sizes="(max-width: 890px) 100vw, 890px" /></a></p>
<p><a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-75441 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4.png" alt="" width="1100" height="875" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4.png 1100w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4-300x239.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4-768x611.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4-650x517.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4-624x496.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-4-600x477.png 600w" sizes="(max-width: 1100px) 100vw, 1100px" /></a></p>
<p><a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-3.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-75435 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-3.png" alt="" width="620" height="555" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-3.png 620w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-3-300x269.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/01/US-clean-credits-3-600x537.png 600w" sizes="(max-width: 620px) 100vw, 620px" /></a></p>
<p>Applicants can utilize the safe harbor tables in the guidance for projects beginning construction for up to 90 days after publication in the Federal Register of proposed regulations on the domestic content bonus credit requirements.</p>
<p>The guidance provides optional alternative cost percentages for solar project developers that use solar cells with domestically produced wafers to help enhance incentives for onshoring wafer manufacturing.</p>
<p>On May 24, 2024, the Treasury Department and the IRS modified the existing domestic content safe harbor by expanding the nonexclusive list of applicable projects to include hydropower and pumped hydropower storage facilities. The update replaced utility-scale photovoltaic (PV) systems with ground-mounted and rooftop systems and included specific manufactured product components for previously listed applicable projects.</p>
<p>The domestic content bonus aims to support American manufacturing of iron, steel, and manufactured products used in clean energy projects like solar and wind farms.</p>
<p>The DoE derived cost data from multiple sources to calculate the updated assigned cost percentages for solar projects using its new ground-mounted and rooftop solar component costs.</p>
<p>The data was sourced from system characteristics, price indices, U.S. survey data from the government and private sector, public filings from corporations, and comprehensive interviews of manufacturers, installers, developers, and owners of the representative technologies. The DoE also used data from three national laboratories.</p>
<p>Companies have announced investments of over $196 billion in clean energy and $92 billion in clean energy manufacturing.</p>
<p>According to an analysis by ROTH Capital Partners, the inverter and tracker contributions decreased from 5.5% to 4.1% and 28.7% to 22.5%.</p>
<p>There are now two distinct tables for ground-mount PV systems (tracking and fixed) and rooftop PV systems (Module Level Power Electronics (MLPE)and string). Two new columns were added to each type of ground-mount and rooftop, providing a path for cells and wafers.</p>
<p>The module contribution to the domestic content threshold remains the same for a utility-scale project using trackers at 66%. The new category incentivizes domestic wafer production through an approximately 52% cell credit for crystalline silicon modules; however, there is still minimal crystalline silicon wafer capacity that could realistically materialize in the near term.</p>
<p>The different Manufactured Product Components (MPCs) credits have shifted around. The tracker overall has increased by approximately four percentage points for projects without domestic crystalline silicon wafers.</p>
<p>The contribution for the module-level power electronics inverters category as a whole decreased from 35.6% to 24.8%. The production credit declined from 16.4% previously to 0.9% in the new guidance update.</p>
<p>The investment tax credit remains at 40%.</p>
<p>The financing companies could have some flexibility in sourcing domestic components to meet the minimum threshold. With a smaller inverter contribution, the new tables will be incrementally negative, as they are slightly more restrictive and may require US-assembled modules.</p>
<p>With the previous guidance, the threshold could be met without a domestic cell/module. However, the update renders blending domestic module MPCs with the minimum threshold impossible. MLPE combined with racking can still qualify at 44.4%. Under the old table, inverter plus racking combined added up to 61% for MLPE and 44.6% for string inverters; it now represents 44.4% for MLPE and 30.8% for string inverters.</p>
<p>The maximum battery energy storage system domestic content level achievable without a U.S. cell under the safe harbor method is reduced to 40.0% from 40.9%. A project can reach a maximum of 40.0% domestic content by sourcing all MPCs in the U.S.</p>
<p>At a level of 45% or above, a domestically produced U.S. cell is required to qualify under predefined domestic content values.</p>
<p>The Treasury and the IRS recently <a href="https://www.mercomindia.com/final-rules-for-tax-credits-to-spur-clean-energy-investments-in-us" target="_blank" rel="noopener">released</a> final rules for the clean electricity investment and production tax credits (technology-neutral credits).</p>
<p>In October 2024, the Treasury and the IRS <a href="https://www.mercomindia.com/us-manufacturing-credits-clean-energy-components" target="_blank" rel="noopener">released</a> the final Advanced Manufacturing Production Credit regulations to boost the growth of domestic clean energy manufacturing under the IRA.</p>


US Releases Additional Guidance Under IRA’s Domestic Content Bonus


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					</table><p>Solar ingot and wafer manufacturing facilities and equipment in the U.S. will qualify for a 25% investment tax credit (ITC) under the final regulations for the Advanced Manufacturing Investment Credit, part of the CHIPS Act 2022 announced by the <a href="https://home.treasury.gov/services/taxes" target="_blank" rel="noopener">Department of Treasury</a> and Internal Revenue Service (<a href="https://www.irs.gov/" target="_blank" rel="noopener">IRS</a>).</p>
<p>Section 48D of the Internal Revenue Code provides a 25% tax credit on qualified investments in advanced manufacturing facilities. This credit is designed to encourage the domestic production of semiconductors, including the slicing, etching, and bonding of the semiconductor-grade polysilicon used in photovoltaic modules.</p>
<p>The credit applies to tangible depreciable property integral to an advanced manufacturing facility&#8217;s operation, placed in service after December 31, 2022, but excludes property whose construction begins after December 31, 2026. Taxpayers must not be foreign entities of concern and should avoid significant transactions that expand semiconductor manufacturing capacity in foreign countries of concern.</p>
<p>These regulations became effective retroactively from December 23, 2024.</p>
<p>Including solar ingots and wafers under this tax credit is expected to accelerate investments in domestic production capabilities for these components, addressing a significant gap in the U.S. domestic solar supply chain.</p>
<p>No ingot and wafer facilities are operational in the U.S., making this incentive crucial for fostering new developments.</p>
<p>A unique feature of these regulations is a 10-year recapture rule. If a taxpayer significantly expands semiconductor manufacturing capacity in a foreign country of concern within ten years of placing qualified property in service, they must pay back the credit.</p>
<p>This rule aims to prevent outsourcing critical manufacturing capabilities. The final regulations provide detailed definitions for key terms:</p>
<ul>
<li>Semiconductor: Defined as an integrated electronic device or system manufactured using silicon or silicon carbide materials.</li>
<li>Semiconductor Manufacturing: Includes processes like wafer production, fabrication, and packaging but excludes precursor material production like polysilicon.</li>
</ul>
<p>In June, the U.S. <a href="https://www.mercomindia.com/us-proposes-expanding-new-clean-electricity-production-tax-credits" target="_blank" rel="noopener">proposed</a> new incentives under the Inflation Reduction Act by offering tax credits for electricity produced with low or zero greenhouse gas emissions, aligning financial assistance with environmental objectives. The Treasury and IRS detailed the regulations in sections 45Y and 48E of the Internal Revenue Code.</p>
<p>Last December, the Treasury and IRS introduced a new Section 45X that <a href="https://www.mercomindia.com/us-guidance-45x-tax-credit" target="_blank" rel="noopener">provides</a> 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>


Solar Ingot and Wafer Manufacturing in US Eligible for 25% Investment Tax Credit


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					</table><p>The U.S. has proposed new incentives under the Inflation Reduction Act (IRA) by offering tax credits for electricity produced with low or zero greenhouse gas emissions, aligning financial assistance with environmental objectives.</p>
<p>The U.S. <a href="https://home.treasury.gov/" target="_blank" rel="noopener">Department of the Treasury</a> and Internal Revenue Service (<a href="https://www.irs.gov/" target="_blank" rel="noopener">IRS</a>) detailed the regulations in sections 45Y and 48E of the Internal Revenue Code.</p>
<p>The current Production Tax Credit and Investment Tax Credit for projects starting before 2025 will be phased out and replaced by the Clean Electricity Production Credit and Clean Electricity Investment Credit for projects operational after December 31, 2024.</p>
<p>&#8220;The Clean Electricity Tax Credits provide certainty to the market and are poised to drive substantial further growth and lower utility bills over the long run,&#8221; said Treasury Secretary Janet Yellen.</p>
<p>Government estimates show the credits could reduce power sector emissions by up to 73% below 2022 levels by 2035 and save consumers on electricity costs.</p>
<p>The proposed rules identify technologies qualifying for the credits, including wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal, energy storage, and certain waste energy recovery projects.</p>
<p>Meanwhile, technologies that rely on combustion or gasification must undergo a lifecycle analysis to demonstrate net-zero emissions.</p>
<p>The regulations outline how to calculate credits, define qualified facilities, and specify increased credit amounts for facilities meeting prevailing wage and apprenticeship requirements. They specify that taxpayers must maintain thorough records, including third-party reports, verifying emissions.</p>
<p>The Treasury sought public comments on the proposal over 60 days before issuing final rules.</p>
<p>China recently took the U.S. to the World Trade Organization for <a href="https://www.mercomindia.com/china-us-wto-ira-subsidies" target="_blank" rel="noopener">consultations</a> regarding certain tax credits under IRA to promote the production of electric vehicles and renewable energy projects.</p>
<p>Last December, the Treasury and IRS introduced a new Section 45X that <a href="https://www.mercomindia.com/us-guidance-45x-tax-credit" target="_blank" rel="noopener">provides</a> 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>


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