Article
How IRC sections 45X and 48C incentivize green product manufacturing
May 24, 2023 · Authored by Irina Antonache, Josh Harbin, Peter Henderson
Passage of the Inflation Reduction Act of 2022 established Internal Revenue Code (IRC) Section 45X, the advanced manufacturing production credit, and also further funded IRC Section 48C, which is the qualifying advanced energy project credit.
Below is an exploration of the two credits and some frequently asked questions.
IRC section 45X
IRC Section 45X provides an income tax credit for domestic manufacturing of certain components for solar and wind energy, inverters, batteries, and critical minerals produced and sold starting Jan. 1, 2023.
What is the IRC section 45X advanced manufacturing production credit?
IRC Section 45X provides a general business credit based on the type of eligible components produced by a taxpayer within the United States or possession thereof and sold to an unrelated person during such taxable year.
An election, the form and manner of which has yet to be determined by the secretary of the treasury, will allow taxpayers to elect to sell to related persons where the sales are deemed as having been made to unrelated persons. Additionally, the eligible components produced and sold will need to be within the taxpayer’s trade or business to be eligible for the credit.
How can the IRC section 45X credit be used?
As a general business credit, the IRC Section 45X credit may be used against a taxpayer’s regular income tax. For corporate taxpayers, the credit is limited to 75% of the tax liability.
The Inflation Reduction Act provides direct pay and transferability opportunities to monetize the IRC Section 45X credit.
Related sections
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