Article
Incentive opportunities and compliance solutions for manufacturers
June 12, 2024
It’s been almost two years since the Inflation Reduction Act (IRA) was signed into law and many incentives are available in the form of tax credits for the manufacturing industry. Below are some of the key IRA programs and compliance requirements that are affecting manufacturers.
Section 48C:
Section 48C offers an investment tax credit for manufacturing expansions. The initial $4 billion was allocated in March 2024 to various technologies, providing a 30% transferable tax credit. The second round, totaling $6 billion, requires a concept paper application and is due to the Department of Energy (DOE) by June 21. Applicants who were not awarded in the first round can apply for the second round. The process involves submitting a concept paper, with the DOE and Treasury reviewing submissions. Selected concept papers will be invited to submit full applications, aiming to receive allocation letters by Jan. 5, 2025.
Various investments can qualify for this tax credit. These include clean energy manufacturing, such as solar, wind, battery and other technology production. The second category covers industrial decarbonization, which refers to projects that reduce current state greenhouse gas emissions by at least 20% or more. Lastly, the third type of eligible projects are critical materials processing, refining and recycling.
Meeting the PW&A requirement is critical to these projects as failure to do so could result in a substantially lower credit or forfeit of the credit.
45X Production Tax Credit:
The Inflation Reduction Act introduced Section 45X, which offers a production tax credit for domestically manufacturing components used in solar and wind energy, inverters, battery components, and critical minerals. Manufacturers who produce and sell the qualifying product while meeting the requirements of the program can claim the credits on their tax return. The program provides full benefits through tax year 2029 and partial benefits through tax year 2032. The eligible components include a wide range of items such as: