45X

Advanced Manufacturing Production Credit Published on November 5, 2024 – On October 24, 2024 the U.S. Treasury Department and Internal Revenue Service released final regulations (T.D. 10010) regarding the advanced manufacturing production credit under section 45X established by Pub. L. No. 117-169 (commonly called the “Inflation Reduction Act of 2022” (IRA)) to incentivize the production of eligible components within the United States. As explained in the related IRS release—IR-2024-281 (October 24, 2024)—section 45X provides a tax credit for the production and sale to unrelated persons after December 31, 2022, of “eligible components,” which include solar and wind energy components, inverters, qualifying battery components, and 50 applicable critical minerals.  Only eligible components that are produced and sold in a trade or business of the taxpayer are taken into account for purposes of the section 45X credit. The final regulations define qualifying production activities, provide rules for the sale of eligible components to unrelated persons as well as special rules that apply to sales between related persons, and provide rules to address contract manufacturing scenarios. The final regulations also provide definitions of eligible components, rules related to calculating the credit, including eligible production costs and specific recordkeeping and reporting requirements. What is the new 45X tax credit program and when was it introduced?   The Inflation Reduction Act of 2022 introduced the Section 45X Manufacturing Production Tax Credit (PTC) to strengthen the domestic supply chain for critical components in advanced energy production. This program allows manufacturers to claim tax credits for a variety of qualifying products, and those with vertical integration can potentially claim credits for multiple products within their operations. What are some of the implications of the 45X tax credit program? Economic Growth: The credit is expected to stimulate growth in the renewable energy manufacturing sector, leading to job creation…