Treasury Department Issues Guidance to Stimulate American Clean Energy Manufacturing
WASHINGTON, D.C. – The U.S. Department of the Treasury and Internal Revenue Service (IRS) have released comprehensive guidance aimed at accelerating American clean energy manufacturing. The guidance provides detailed information regarding the domestic content bonus under the Inflation Reduction Act, which incentivizes clean energy projects and facilities that meet American manufacturing and sourcing requirements.
In collaboration with the Department of Energy and Department of Transportation, this guidance is a key component of the Biden-Harris Administration’s Investing in America strategy. Its purpose is to support the domestic manufacturing sector, particularly in areas such as iron and steel, by offering tax credits that encourage investment and contribute to the growth of the clean energy economy.
Treasury Secretary Janet L. Yellen expressed her confidence that these tax credits will play a pivotal role in driving investment and ensuring widespread benefits from President Biden’s Investing in America agenda. She highlighted the surge in clean energy development and manufacturing in the United States, resulting in the creation of well-paying jobs, strengthened national security, and progress toward climate goals.
Energy Secretary Jennifer M. Granholm commended the Biden-Harris Administration’s commitment to bolstering American manufacturing and enhancing national security through initiatives like the domestic content bonus credit. Granholm emphasized the significant increase in clean energy manufacturing facilities across the country, showcasing the administration’s efforts to cultivate a vibrant clean energy economy.
Transportation Secretary Pete Buttigieg highlighted the Department of Transportation’s role in advising the Treasury on implementing the domestic content bonus credit. By incentivizing renewable energy projects, this credit serves as another catalyst for the administration’s goal of achieving a robust clean energy sector.
Under the Production Tax Credit (PTC), facilities meeting domestic content requirements receive a 10 percent bonus, while projects adhering to the Investment Tax Credit (ITC) can receive up to a 10-percentage point bonus. To qualify for the full value of the bonus, projects must meet the domestic content requirement and satisfy specific conditions related to project size, construction commencement, or prevailing wage and apprenticeship standards outlined in the Inflation Reduction Act.
The domestic content bonus applies to facilities constructed using domestically produced steel, iron, and manufactured products. Additionally, a certain percentage of the costs of manufactured products and components must originate from sources within the United States. The guidance clarifies the treatment of labor costs, ensuring the focus remains on domestic manufacturing.
To assist taxpayers in determining applicable standards, the Treasury Department and IRS have established a safe harbor for certain types of clean energy projects, incorporating recommended classifications from the Federal Transit Administration and the Department of Energy. Furthermore, the Treasury Department is open to alternative approaches for classifying manufactured product components.
This guidance represents the initial phase of the Treasury Department’s implementation of the clean energy provisions under the Inflation Reduction Act. Additional guidance will be issued gradually in the coming months, providing further clarity and certainty for companies and entities planning investments and projects aligned with the act.
Since the Inflation Reduction Act’s passage in August 2022, the Treasury has actively engaged with stakeholders, sought public input, and published initial guidance on various provisions to facilitate the realization of the act’s objectives. This comprehensive approach demonstrates the administration’s commitment to leveraging clean energy manufacturing as a catalyst for economic growth, climate action, and national security.
For more information on the Treasury Department’s implementation work related to the Inflation Reduction Act, refer to the provided resources.