Domestic Content Bonus Tax Credit Guidance

The Domestic Content Bonus Tax Credit is a part of the Inflation Reduction Act (IRA) that encourages the use of U.S.-made clean energy products by giving extra benefits to project developers. This can add up to 10% more to their tax credits.

Clean Energy Associates (CEA) helps clients understand and meet the rules to get these benefits. CEA’s team of experts addresses challenges like the ambiguity in manufactured product components for inverters and trackers, the intricacies of direct costs, and the complexities arising from the absence of a de minimis provision.

Summary of key requirements your solar projects need to meet

1️⃣ Manufactured Product Test: Ensure at least 40% of your project's manufactured product costs come from US-made materials. This will rise to 55% by 2027!

2️⃣ US-Made Steel & Iron: All structural components in your project must be US-produced. No exceptions!

3️⃣ Direct Pay Projects: Tax-exempt entities can also benefit, but they must meet the same domestic content standards.

4️⃣ Documentation Matters: Keep an itemized breakdown of all direct costs and labor for compliance.

5️⃣ Manufacturing Labor: Imported component? You might not be able to claim the entire assembly labor.

6️⃣ No Minor Exclusions: Every component, no matter how small, counts towards the requirement.

CEA Briefing: U.S. Treasury's Guidance on Domestic Content Bonus for ITC and PTC

On Friday May 12, 2023, the U.S. Treasury Department and IRS issued a notice of intent (NOI) providing guidance on the Domestic Content Bonus for the Investment Tax Credit (ITC) and Production Tax Credit (PTC). CEA's Market Intelligence team has developed a briefing that summarizes this guidance, and the relevant issues for the PV and energy storage industries.

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