IRS Releases Final Guidance for 45X Advanced Manufacturing Production Tax Credit: Key Updates for Manufacturers

What Changed in the Final 45X Guidance?

1. Material Costs for Critical Minerals

• The IRS now allows extraction costs for critical minerals to be included as eligible material costs for 45X credits.

• Measures were introduced to prevent the double counting of material costs, ensuring compliance while recognizing their role in value-added production.

2. Inclusion of Recycled Materials

• Taxpayers may now use recycled materials, also known as “secondary production,” in the manufacturing of eligible components.

3. Assembly Definitions Updated

• The definition of eligible manufacturing now excludes “minor assembly” instead of “mere assembly.”

• Assembly processes, such as those used for solar modules and battery packs, are recognized as eligible under the credit.

4. Battery Module Clarifications

• A “battery module” includes battery packs commonly used in EV manufacturing.

• The IRS clarified that the “end-use configuration” requirement applies to individual cells within a module, not the entire module.

5. Flexibility for Tandem Solar Technologies

• Adjustments were made to the rules for calculating tandem solar cell capacity, addressing industry concerns about technology-specific treatment.

What Didn’t Change?

1. Eligible Component Categories

• Requests to expand eligible components (e.g., structural fasteners for solar trackers) were denied due to statutory limitations.

2. Safe Harbor for Contract Manufacturing

• Safe harbor provisions for pre-existing contract manufacturing agreements were not implemented, though taxpayers can apply special rules for such arrangements.

3. Standards for Battery Cell Capacity Measurement

• Suggestions to include more national or international standards were acknowledged but not incorporated.

How American Tax Exchange Can Help

At American Tax Exchange, we specialize in helping manufacturers, renewable energy developers, and other stakeholders navigate tax credit programs like the 45X Advanced Manufacturing PTC. Here’s how we can assist:

• Maximize Credit Value: We ensure your manufacturing processes and material costs align with 45X eligibility requirements to secure the highest possible credits.

• Monetization Solutions: If you can’t fully utilize your credits, we help you sell them to investors or corporations, unlocking immediate capital to reinvest in operations or new projects.

• Compliance Support: Our CPA-backed team provides detailed substantiation to meet IRS requirements, avoiding potential pitfalls like double counting or ineligible costs.

• Strategic Guidance: We evaluate bonus opportunities, such as increased credits for manufacturing in energy communities or with domestic content, to maximize your benefits.

Looking Ahead

The IRS continues to refine its guidance on clean energy tax credits, including ongoing work on the 45Z Clean Fuel Production Credit, 48E Clean Electricity Investment Tax Credit, and 45Y Clean Electricity Production Tax Credit. Businesses must stay informed as these updates could impact future renewable energy investments.

If your business is involved in solar, battery manufacturing, or other advanced manufacturing processes, now is the time to act. Let American Tax Exchange guide you through these new opportunities and ensure you’re capturing the full value of the available tax credits.