The domestic content bonus credit explained: What manufacturers need to know

The Inflation Reduction Act (IRA) has fundamentally influenced investment priorities in energy generating properties across the U.S. market. Notably, domestic content bonus credit available for investment and production tax credits has catalyzed significant investments into the American supply chain. While these credits are typically claimed by project owners — often utilities companies — the success of such project’s hinges on a diverse ecosystem of manufacturing and installation companies. Therefore, manufacturers must proactively consider the impact of their decisions throughout the value chain and strategically identify avenues to outpace competition.

Manufacturers have distinct opportunities to claim credits for qualifying energy properties through the section 48C and 45X programs. It’s crucial to not only capitalize on these incentives but also remain cognizant of domestic content requirements, as illustrated above.

By strategically navigating these programs and aligning with domestic content regulations, manufacturers can optimize IRA benefits while simultaneously meeting the needs and expectations of customers.

Illustrative example

For a project owner seeking a credit, the domestic content bonus credit represents a potential increase of 10% in their investment in qualifying energy property under the section 48 tax credit. Let's illustrate this with an example: Imagine a $100 million project that is in the process of filing its tax credit application at the time of being put into service.