The Inflation Reduction Act (IRA) introduced tax code section 45X, also referred to as the Advanced Manufacturing Production Credit. This credit is meant to incentivize US production of the critical components needed for clean energy technology. Qualified manufacturers can receive a credit for the components they produce and sell in a given year.
As leaders in green energy incentives and tax credits, KBKG educates manufacturers on all the incentives available from the IRA, helping maximize and monetize 45X credits.
Eligible Components
Solar Energy
Solar panel components including:
Modules, Photovoltaic Cells and Wafers, Solar-Grade Polysilicon, Torque Tubes, Structural Fasteners, and Polymeric Back Sheets
Wind Energy
Wind Energy Components Including:
Turbine Towers, Nacelles, Blades, Offshore Wind Foundations, & Distributed Wind Inverters
Battery
Battery Components Including:
Electrode Active Materials, Cells, & Modules
Critical Minerals
Applicable Critical Minerals Including:
Lithium, Cobalt, Nickel, Manganese, Zinc, Chromium, Graphite, Platinum and more
*Eligible components must be both: a.) Produced in the US or its territories and b.) Sold by taxpayer to an unrelated party
Ways to Utilize Your 45X Tax Credits
Direct Pay
Eligible entities can elect to treat credits as a tax payment, and receive the overpayment as a refund
Transfer for Cash
Elect to sell all or part of your credit to an unrelated party for cash
General Business Credit
Directly lower your tax liability
How Does KBKG Help?
1. Determine Eligibility
2. Credit Calculation
3. Proper Documentation for the IRS
4. Facilitating Credit Transfers
What is the Value of 45X Credits?
The value of the 45X tax credit depends on the type of eligible component made and sold, as well as the volume of sales.
The credit varies depending on the fact pattern of an individual clean energy manufacturer. For example, a company that manufactures solar panels necessary to produce 1GW of energy could yield $40 to $83 million in 45X tax credits.
There are Three Primary Methods for Calculating the Credit:
- Value per component size or weight:
For solar subcomponents, the credit is calculated based on a dollar value multiplied by the component’s size in square meters or weight in kilograms. - Value per electric capacity:
For other components, the credit is calculated based on their total electric capacity in watts. - Percentage of production costs:
For critical minerals and some other components, the credit amounts to about 10% of production costs.
Additionally, clean energy manufacturers are eligible for various other tax credits and incentives that KBKG can help identify.
It’s important to note that the specific value of the credit can vary depending on the component and the method used for calculation. For an accurate assessment of 45X tax credits, consult with a KBKG expert.