In this Q&A blog post, we break down the IRS guidance on the Advanced Manufacturing Production Credit, Section 45X.
How does one earn advanced manufacturing production credit?
To earn the advanced manufacturing production credit, a business must produce eligible components and sell them to an unrelated person.
What are “eligible components” for purposes of the advanced manufacturing production credit?
For purposes of the advanced manufacturing production credit, “eligible components” include a variety of components that fall into the following categories:
- Solar energy components
- Wind energy components
- Qualifying battery components
- Critical minerals
- Inverters that are an end product which is suitable to convert direct current electricity from one or more solar modules or certified distributed wind energy systems into alternating current electricity
How does one determine the amount of the advanced manufacturing production credit?
The amount of the advanced manufacturing production credit is determined based on the type of component and the amount of the component that is produced and sold. The following is a list of different components and the amount of the credit.
- Thin film photovoltaic cell or a crystalline photovoltaic cellsome text
- 4 cents, multiplied by the capacity of such cell (expressed on a per direct current watt basis)
- Photovoltaic wafersome text
- Solar grade polysiliconsome text
- Polymeric backsheetsome text
- 40 cents per square meter
- Solar modulesome text
- 7 cents, multiplied by the capacity of such module (expressed on a per direct current watt basis)
- Wind energy component that is a related offshore wind vesselsome text
- 10 percent of the sales price of such vessel
- Wind energy component that is a not related offshore wind vessel, different components have a credit amount that is multiplied by the total rated capacity (expressed on a per watt basis) of the completed wind turbine for which such component is designed.some text
- Bladesome text
- Nacellesome text
- Towersome text
- offshore wind foundation which uses a fixed platformsome text
- offshore wind foundation which uses a floating platformsome text
- Torque tubesome text
- Structural fastenersome text
- Invertersome text
- an amount equal to the product of the capacity of the inverter (expressed on a per alternating current watt basis) multiplied by an amount that varies based on the type of inverter.some text
- central invertersome text
- utility invertersome text
- commercial invertersome text
- residential invertersome text
- microinverter or a distributed wind invertersome text
- Electrode active materialssome text
- 10 percent of the costs incurred with respect to production of the materials
- Battery cellsome text
- $35, multiplied by the capacity of such battery cell (expressed on a kilowatt-hour basis) some text
- The capacity is limited to a ratio of the cell to the maximum discharge amount of the cell to 100:1
- Battery modulesome text
- $10 (or, in the case of a battery module which does not use battery cells, $45), multiplied by the capacity of such battery module (expressed on a kilowatt-hour basis) some text
- The capacity is limited to a ratio of the module to the maximum discharge amount of the module to 100:1
- Applicable critical mineralsome text
- 10 percent of the costs incurred with respect to production of the mineral.
Are sales of components produced outside the United States eligible for the advanced manufacturing production credit?
No. To be eligible for the advanced manufacturing production credit the component must be produced in the United States or a possession of the United States.
Are advanced manufacturing production credits eligible for direct payment?
Yes. Advanced manufacturing production credits are available for direct payment.
Are advanced manufacturing production credits eligible for transferability?
Yes. Advanced manufacturing production credits are eligible to be sold to a buyer.
Since qualified advanced energy project credits are eligible for direct payment, why would a credit holder consider transferring them to someone else?
Some taxpayers generating advanced manufacturing production credits believe that the time they think it will take for the government to process their claims will diminish their value and that it would be more valuable to a buyer that can use it on their tax return and for estimated payments on a quicker time table.
