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Department of Treasury Releases Clean Energy Tax Credit Guidance

Production Tax Credit will reward facilities that meet domestic content requirements when working on clean energy projects.

The Departments of Treasury, Energy, and Transportation and the Internal Revenue Service (IRS) have developed guidance for domestic sourcing requirements within the Inflation Reduction Act for clean energy projects and facilities. Under the terms of this new Production Tax Credit (PTC), facilities that meet domestic content requirements will receive a 10 percent bonus. Those incentives are dependent upon developers being able to source materials in the United States.

Projects in the Investment Tax Credit (ITC) program meeting these standards will receive up to a 10-percentage point bonus. Also, a required minimum percentage of the costs of the manufactured products and components of manufactured products that comprise a facility must come from products and components that were mined, produced, or manufactured in the United States. On March 13, SMACNA commented on the regulations contained in the Buy America Act. Our comments made the following suggestions: 

  1. That the proposed rule should be phased in at a measured pace;
  2. It would include price escalation clauses to further incentivize the use of American-made materials; 
  3. That the rule should clarify the waiver process for the substitution of materials due to unforeseen circumstances and emergencies;
  4. It should exempt specialty materials mandated by the owner or the general contractor; and 
  5. Federal agencies have a timely and effective waiver review process.

To obtain the full value of the credit, the project must meet the domestic sourcing requirement and either have a maximum net output of less than 1 megawatt of energy; construction of the project began before January 29, 2023, or the project satisfies the Inflation Reduction Act’s prevailing wage and apprenticeship requirements. The Treasury Department and the IRS intend to propose that the future proposed regulations will apply to taxable years ending after May 12, 2023. It is incredibly common for SMACNA contractors to be regarded as manufacturers on projects, making these tax incentives very beneficial for their businesses. 

Take a moment to review this guidance.