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Posted On: 07/27/2025 2:53:33 PM
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The 45X Advanced Manufacturing Production Credit for solar components remains in effect on July 25, 2025, but with some key changes introduced by the "One Big Beautiful Bill Act" (OBBBA) signed into law earlier in the month. The OBBBA modifies the credit's rules, particularly regarding foreign entities and domestic content requirements.
Here's a breakdown of the key points:
What is the 45X credit? The 45X credit is a per-unit tax credit for manufacturers of specific clean energy components, including those used in solar energy systems.
Key Changes Introduced by the OBBBA:
Prohibited Foreign Entity (PFE) Rules:
The OBBBA introduces restrictions on claiming the 45X credit if a manufacturer receives material assistance from or has ties to certain foreign entities, particularly those from China, Russia, North Korea, or Iran, according to law firm K&L Gates.
Domestic Content Requirements:
The OBBBA emphasizes domestic manufacturing. For the credit to apply, a significant portion of the component's cost must be attributable to US-based production and manufacturing.
Credit Stacking:
The ability to "stack" credits (claiming the credit on components used to produce a final product) has been curtailed. It's now generally limited to situations where the primary component is produced in the same facility as the secondary component and where the primary component makes up at least 65% of the total direct costs of the secondary component.
IRS Guidance:
The IRS is expected to issue additional guidance on how to interpret and implement these PFE restrictions and other aspects of the credit.
Important Considerations:
Effective Control:
pv magazine USA reports manufacturers should carefully review their contracts and technology licenses to ensure they do not give PFE's effective control over their production or products.
Statute of Limitations:
Frost Brown Todd notes that the IRS has a six-year statute of limitations on assessing any deficiency related to the 45X credit calculation.
Penalties:
According to Frost Brown Todd, penalties may apply for overstating the credit or submitting false certifications.
In summary, while the 45X credit is still in place, manufacturers need to be aware of the changes introduced by the OBBBA, particularly regarding foreign entity restrictions and domestic content requirements. Guidance from the IRS is expected to clarify these requirements.
icymi
Here's a breakdown of the key points:
What is the 45X credit? The 45X credit is a per-unit tax credit for manufacturers of specific clean energy components, including those used in solar energy systems.
Key Changes Introduced by the OBBBA:
Prohibited Foreign Entity (PFE) Rules:
The OBBBA introduces restrictions on claiming the 45X credit if a manufacturer receives material assistance from or has ties to certain foreign entities, particularly those from China, Russia, North Korea, or Iran, according to law firm K&L Gates.
Domestic Content Requirements:
The OBBBA emphasizes domestic manufacturing. For the credit to apply, a significant portion of the component's cost must be attributable to US-based production and manufacturing.
Credit Stacking:
The ability to "stack" credits (claiming the credit on components used to produce a final product) has been curtailed. It's now generally limited to situations where the primary component is produced in the same facility as the secondary component and where the primary component makes up at least 65% of the total direct costs of the secondary component.
IRS Guidance:
The IRS is expected to issue additional guidance on how to interpret and implement these PFE restrictions and other aspects of the credit.
Important Considerations:
Effective Control:
pv magazine USA reports manufacturers should carefully review their contracts and technology licenses to ensure they do not give PFE's effective control over their production or products.
Statute of Limitations:
Frost Brown Todd notes that the IRS has a six-year statute of limitations on assessing any deficiency related to the 45X credit calculation.
Penalties:
According to Frost Brown Todd, penalties may apply for overstating the credit or submitting false certifications.
In summary, while the 45X credit is still in place, manufacturers need to be aware of the changes introduced by the OBBBA, particularly regarding foreign entity restrictions and domestic content requirements. Guidance from the IRS is expected to clarify these requirements.
icymi
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