Article
IRS provides guidance on domestic content requirements for applicable entities
Jan. 22, 2024 · Authored by Craig Lammlin
The IRS issued Notice 2024-9 on Dec. 28, 2023, providing guidance for applicable entities to satisfy the domestic content requirements enacted under the Inflation Reduction Act. Notice 2024-9 also requests additional comments for proposed upcoming regulations related to the domestic content requirements, due by Feb. 26, 2024.
Background
Under the Inflation Reduction Act, the new Internal Revenue Code (IRC) Section 6417 established a mechanism for applicable entities to make an elective payment election to have certain tax credits be refundable.
The Inflation Reduction Act also created a credit enhancement or bonus for certain clean energy projects that meet domestic content requirements.
Alternatively, for projects beginning construction on or after Jan. 1, 2024, applicable entities claiming credits under the following may have the tax credit reduced if domestic content requirements aren’t met:
- IRC Section 45, Renewable Electricity Production Tax Credit
- IRC Section 45Y, Clean Energy Production Tax Credit
- IRC Section 48, Energy Investment Tax Credit
- IRC Section 48E, Clean Energy Investment Tax Credit
The IRS refers to this as the statutory elective payment or refundability phaseout.
Applicable entities subject to the statutory elective payment phaseout generally include:
- Tax-exempt organizations
- U.S. state, District of Columbia, U.S. territory, or political subdivision thereof
- Tennessee Valley Authority
- Indian Tribal governments
- Alaska Native corporations
- Rural electrical cooperatives
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.