Domestic Content Bonus Credit Solutions

• No U.S. equivalent countries are eligible. Only the 50 U.S. states, U.S. territories and Washington, D.C. are acceptable manufacturing locations. Previous U.S. equivalents, trade pact partners and other U.S. substitutions are not allowed.
• Substantial documentation is required. A standalone letter or memo stating that the product meets domestic requirement is not enough. The organization must build a strong file of workpapers and documentation to ensure the credit value can be substantiated.
• Domestic content is calculated on manufacturer’s component cost (and not the owner or engineering, procurement and construction (EPC) cost). Organizations need to work through distributors and suppliers to get to the manufacturer and determine their cost of said components.
• Direct labor costs to assemble the manufactured product may be eligible in certain instances depending on where the manufacturing activities for components were performed.
• The investment tax credit recipient must sign a declaration that the tax credit application is complete, truthful and accurate. Corporate officers may be personally liable for financially material domestic content misstatements.

Eligibility for the domestic content adder requires project owners to plan for domestic content from design and procurement through construction documentation. This ensures that their projects qualify for the bonus credit.

The percentage varies depending on the type of project and the year it begins. Baker Tilly can provide specific guidance based on your project.

There are two components that ensure qualification:

1. All of the manufacturing processes for the manufactured product take place in the U.S, which includes U.S. territories, and;
2. All of the manufactured product components of the manufactured product are of U.S. origin. The manufactured product component is considered to be of U.S. origin if it is manufactured in the U.S., regardless of the origin of its subcomponents.

Our domestic content specialists can clarify the specific requirements for your industry.

Only direct costs as defined in section 1.263A-1(e)(2)(i) that are paid or incurred within the meaning of section 461 by the U.S. manufactured product’s manufacturer to produce the U.S. manufactured product or by the non-U.S. manufactured product’s manufacturer to produce or acquire the U.S. component.

Yes, the IRA includes domestic content safe harbor provisions. Baker Tilly can help you determine if your project qualifies.

The safe harbor alternative provides a method for project owners to calculate domestic content compliance. This alternative helps ensure that projects meet the requirements for the domestic content bonus credit. Notice 2024-41 updates the current safe harbor and introduces a new optional safe harbor for calculating domestic content bonus credit amounts.

Yes, there are waiver opportunities available for direct-pay recipients. These waivers can help project owners who may face challenges in meeting the domestic content requirements to avoid reductions in tax credit value.

For any other projects, there are no waivers available currently. The bonus credit is viewed as a bonus credit, not a requirement. Not meeting the conditions is not penalized in those situations, whether due to factors inside or outside of the project’s control.

Underwriters ensuring credit monetization will have specific expectations regarding domestic content compliance. Project owners should be prepared to meet these expectations to ensure successful credit monetization.

Yes, but there could be challenges along the way to consider. First, the project would require defining the specific manufactured products and manufactured product components at a project level. The project will also require cost gathering from all manufacturers supplying product to the project. If manufacturers are not willing or able to provide cost data, the likelihood of claiming a domestic content bonus credit is low. Last, there can be challenges in the monetization phase due to limited guidance provided to date on those projects. A proactive planning approach to engage suppliers, contractors and credit buyers as early as possible can usually reduce the risk of these areas blocking the success of a project.

We assist with the necessary documentation and reporting, ensuring you meet all IRS requirements.

Non-compliance can result in reduced tax credits or penalties. Baker Tilly helps you avoid these risks.