§45X — Advanced manufacturing production credit
Statute Text — 26 U.S.C. §45X
For purposes of section 38, the advanced manufacturing production credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each eligible component which is—
produced by the taxpayer, and
during the taxable year, sold by such taxpayer to an unrelated person.
Any eligible component produced and sold by the taxpayer shall be taken into account only if the production and sale described in paragraph (1) is in a trade or business of the taxpayer.
For purposes of this subsection, a taxpayer shall be treated as selling components to an unrelated person if such component is sold to such person by a person related to the taxpayer.
At the election of the taxpayer (in such form and manner as the Secretary may prescribe), a sale of components by such taxpayer to a related person shall be deemed to have been made to an unrelated person.
As a condition of, and prior to, any election described in clause (i), the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper or excessive amount determined under paragraph (1).
Subject to paragraph (3), the amount determined under this subsection with respect to any eligible component, including any eligible component it incorporates, shall be equal to—
in the case of a thin film photovoltaic cell or a crystalline photovoltaic cell, an amount equal to the product of—
4 cents, multiplied by
the capacity of such cell (expressed on a per direct current watt basis),
in the case of a photovoltaic wafer, $12 per square meter,
in the case of solar grade polysilicon, $3 per kilogram,
in the case of a polymeric backsheet, 40 cents per square meter,
in the case of a solar module, an amount equal to the product of—
7 cents, multiplied by
the capacity of such module (expressed on a per direct current watt basis),
in the case of a wind energy component—
if such component is a related offshore wind vessel, an amount equal to 10 percent of the sales price of such vessel, and
if such component is not described in clause (i), an amount equal to the product of—
the applicable amount with respect to such component (as determined under paragraph (2)(A)), multiplied by
the total rated capacity (expressed on a per watt basis) of the completed wind turbine for which such component is designed,
in the case of a torque tube, 87 cents per kilogram,
in the case of a structural fastener, $2.28 per kilogram,
in the case of an inverter, an amount equal to the product of—
the applicable amount with respect to such inverter (as determined under paragraph (2)(B)), multiplied by
the capacity of such inverter (expressed on a per alternating current watt basis),
in the case of electrode active materials, an amount equal to 10 percent of the costs incurred by the taxpayer with respect to production of such materials,
in the case of a battery cell, an amount equal to the product of—
$35, multiplied by
subject to paragraph (4), the capacity of such battery cell (expressed on a kilowatt-hour basis),
in the case of a battery module, an amount equal to the product of—
$10 (or, in the case of a battery module which does not use battery cells, $45), multiplied by
subject to paragraph (4), the capacity of such battery module (expressed on a kilowatt-hour basis), and
in the case of any applicable critical mineral, an amount equal to 10 percent (2.5 percent in the case of metallurgical coal) of the costs incurred by the taxpayer with respect to production of such mineral.
For purposes of paragraph (1)(F)(ii), the applicable amount with respect to any wind energy component shall be—
in the case of a blade, 2 cents,
in the case of a nacelle, 5 cents,
in the case of a tower, 3 cents, and
in the case of an offshore wind foundation—
which uses a fixed platform, 2 cents, or
which uses a floating platform, 4 cents.
For purposes of paragraph (1)(I), the applicable amount with respect to any inverter shall be—
in the case of a central inverter, 0.25 cents,
in the case of a utility inverter, 1.5 cents,
in the case of a commercial inverter, 2 cents,
in the case of a residential inverter, 6.5 cents, and
in the case of a microinverter or a distributed wind inverter, 11 cents.
Subject to subparagraphs (C) and (D), in the case of any eligible component sold after
December 31, 2029
, the amount determined under this subsection with respect to such component shall be equal to the product of—
the amount determined under paragraph (1) with respect to such component, as determined without regard to this paragraph, multiplied by
the phase out percentage under subparagraph (B).
The phase out percentage under this subparagraph is equal to—
in the case of an eligible component sold during calendar year 2030, 75 percent,
in the case of an eligible component sold during calendar year 2031, 50 percent,
in the case of an eligible component sold during calendar year 2032, 25 percent,
in the case of an eligible component sold after
December 31, 2032
, 0 percent.
In the case of any applicable critical mineral (other than metallurgical coal) produced after
December 31, 2030
, the amount determined under this subsection with respect to such mineral shall be equal to the product of—
the amount determined under paragraph (1) with respect to such mineral, as determined without regard to this subparagraph, multiplied by
the phase out percentage under clause (ii).
The phase out percentage under this clause is equal to—
in the case of any applicable critical mineral produced during calendar year 2031, 75 percent,
in the case of any applicable critical mineral produced during calendar year 2032, 50 percent,
in the case of any applicable critical mineral produced during calendar year 2033, 25 percent, and
in the case of any applicable critical mineral produced after
December 31, 2033
, 0 percent.
This section shall not apply to any wind energy component produced and sold after December 31, 2027.
This section shall not apply to any metallurgical coal produced after December 31, 2029.
For purposes of subparagraph (K)(ii) or (L)(ii) of paragraph (1), the capacity determined under either subparagraph with respect to a battery cell or battery module shall not exceed a capacity-to-power ratio of 100:1.
For purposes of this paragraph, the term “capacity-to-power ratio” means, with respect to a battery cell or battery module, the ratio of the capacity of such cell or module to the maximum discharge amount of such cell or module.
For purposes of this section—
The term “eligible component” means—
any solar energy component,
any wind energy component,
any inverter described in subparagraphs (B) through (G) of paragraph (2),
any qualifying battery component, and
any applicable critical mineral.
The term “eligible component” shall not include any property which is produced at a facility if the basis of any property which is part of such facility is taken into account for purposes of the credit allowed under section 48C after the date of the enactment of this section.
In the case of taxable years beginning after the date of enactment of this subparagraph, the term “eligible component” shall not include any property which includes any material assistance from a prohibited foreign entity (as defined in section 7701(a)(52), as applied by substituting “used in a product sold before January 1, 2027” for “used in a product sold before January 1, 2030” in subparagraph (D)(iv)(II)(bb) thereof).
The term “inverter” means an end product which is suitable to convert direct current electricity from 1 or more solar modules or certified distributed wind energy systems into alternating current electricity.
The term “central inverter” means an inverter which is suitable for large utility-scale systems and has a capacity which is greater than 1,000 kilowatts (expressed on a per alternating current watt basis).
The term “commercial inverter” means an inverter which—
is suitable for commercial or utility-scale applications,
has a rated output of 208, 480, 600, or 800 volt three-phase power, and
has a capacity which is not less than 20 kilowatts and not greater than 125 kilowatts (expressed on a per alternating current watt basis).
The term “distributed wind inverter” means an inverter which—
is used in a residential or non-residential system which utilizes 1 or more certified distributed wind energy systems, and
has a rated output of not greater than 150 kilowatts.
The term “certified distributed wind energy system” means a wind energy system which is certified by an accredited certification agency to meet Standard 9.1-2009 of the American Wind Energy Association (including any subsequent revisions to or modifications of such Standard which have been approved by the American National Standards Institute).
The term “microinverter” means an inverter which—
is suitable to connect with one solar module,
has a rated output of—
120 or 240 volt single-phase power, or
208 or 480 volt three-phase power, and
has a capacity which is not greater than 650 watts (expressed on a per alternating current watt basis).
The term “residential inverter” means an inverter which—
is suitable for a residence,
has a rated output of 120 or 240 volt single-phase power, and
has a capacity which is not greater than 20 kilowatts (expressed on a per alternating current watt basis).
The term “utility inverter” means an inverter which—
is suitable for commercial or utility-scale systems,
has a rated output of not less than 600 volt three-phase power, and
has a capacity which is greater than 125 kilowatts and not greater than 1000 kilowatts (expressed on a per alternating current watt basis)
1
1 So in original. Probably should be followed by a period.
The term “solar energy component” means any of the following:
Solar modules.
Photovoltaic cells.
Photovoltaic wafers.
Solar grade polysilicon.
Torque tubes or structural fasteners.
Polymeric backsheets.
The term “photovoltaic cell” means the smallest semiconductor element of a solar module which performs the immediate conversion of light into electricity.
The term “photovoltaic wafer” means a thin slice, sheet, or layer of semiconductor material of at least 240 square centimeters—
produced by a single manufacturer either—
directly from molten or evaporated solar grade polysilicon or deposition of solar grade thin film semiconductor photon absorber layer, or
through formation of an ingot from molten polysilicon and subsequent slicing, and
which comprises the substrate or absorber layer of one or more photovoltaic cells.
The term “polymeric backsheet” means a sheet on the back of a solar module which acts as an electric insulator and protects the inner components of such module from the surrounding environment.
The term “solar grade polysilicon” means silicon which is—
suitable for use in photovoltaic manufacturing, and
purified to a minimum purity of 99.999999 percent silicon by mass.
The term “solar module” means the connection and lamination of photovoltaic cells into an environmentally protected final assembly which is—
suitable to generate electricity when exposed to sunlight, and
ready for installation without an additional manufacturing process.
The term “solar tracker” means a mechanical system that moves solar modules according to the position of the sun and to increase energy output.
The term “torque tube” means a structural steel support element (including longitudinal purlins) which—
is part of a solar tracker,
is of any cross-sectional shape,
may be assembled from individually manufactured segments,
spans longitudinally between foundation posts,
supports solar panels and is connected to a mounting attachment for solar panels (with or without separate module interface rails), and
is rotated by means of a drive system.
The term “structural fastener” means a component which is used—
to connect the mechanical and drive system components of a solar tracker to the foundation of such solar tracker,
to connect torque tubes to drive assemblies, or
to connect segments of torque tubes to one another.
The term “wind energy component” means any of the following:
Blades.
Nacelles.
Towers.
Offshore wind foundations.
Related offshore wind vessels.
The term “blade” means an airfoil-shaped blade which is responsible for converting wind energy to low-speed rotational energy.
The term “offshore wind foundation” means the component (including transition piece) which secures an offshore wind tower and any above-water turbine components to the seafloor using—
fixed platforms, such as offshore wind monopiles, jackets, or gravity-based foundations, or
floating platforms and associated mooring systems.
The term “nacelle” means the assembly of the drivetrain and other tower-top components of a wind turbine (with the exception of the blades and the hub) within their cover housing.
The term “related offshore wind vessel” means any vessel which is purpose-built or retrofitted for purposes of the development, transport, installation, operation, or maintenance of offshore wind energy components.
The term “tower” means a tubular or lattice structure which supports the nacelle and rotor of a wind turbine.
The term “qualifying battery component” means any of the following:
Electrode active materials.
Battery cells.
Battery modules.
The term “electrode active material” means cathode materials, anode materials, anode foils, and electrochemically active materials, including solvents, additives, and electrolyte salts that contribute to the electrochemical processes necessary for energy storage.
The term “battery cell” means an electrochemical cell—
comprised of 1 or more positive electrodes and 1 or more negative electrodes,
with an energy density of not less than 100 watt-hours per liter, and
capable of storing at least 12 watt-hours of energy.
The term “battery module” means a module—
in the case of a module using battery cells, with 2 or more battery cells which are configured electrically, in series or parallel, to create voltage or current, as appropriate, to a specified end use, or
with no battery cells,
with an aggregate capacity of not less than 7 kilowatt-hours (or, in the case of a module for a hydrogen fuel cell vehicle, not less than 1 kilowatt-hour), and
which is comprised of all other essential equipment needed for battery functionality, such as current collector assemblies and voltage sense harnesses, or any other essential energy collection equipment.
The term “applicable critical mineral” means any of the following:
Aluminum which is—
converted from bauxite to a minimum purity of 99 percent alumina by mass, or
purified to a minimum purity of 99.9 percent aluminum by mass.
Antimony which is—
converted to antimony trisulfide concentrate with a minimum purity of 90 percent antimony trisulfide by mass, or
purified to a minimum purity of 99.65 percent antimony by mass.
Barite which is barium sulfate purified to a minimum purity of 80 percent barite by mass.
Beryllium which is—
converted to copper-beryllium master alloy, or
purified to a minimum purity of 99 percent beryllium by mass.
Cerium which is—
converted to cerium oxide which is purified to a minimum purity of 99.9 percent cerium oxide by mass, or
purified to a minimum purity of 99 percent cerium by mass.
Cesium which is—
converted to cesium formate or cesium carbonate, or
purified to a minimum purity of 99 percent cesium by mass.
Chromium which is—
converted to ferrochromium consisting of not less than 60 percent chromium by mass, or
purified to a minimum purity of 99 percent chromium by mass.
Cobalt which is—
converted to cobalt sulfate, or
purified to a minimum purity of 99.6 percent cobalt by mass.
Dysprosium which is—
converted to not less than 99 percent pure dysprosium iron alloy by mass, or
purified to a minimum purity of 99 percent dysprosium by mass.
Europium which is—
converted to europium oxide which is purified to a minimum purity of 99.9 percent europium oxide by mass, or
purified to a minimum purity of 99 percent by mass.
Fluorspar which is—
converted to fluorspar which is purified to a minimum purity of 97 percent calcium fluoride by mass, or
purified to a minimum purity of 99 percent fluorspar by mass.
Gadolinium which is—
converted to gadolinium oxide which is purified to a minimum purity of 99.9 percent gadolinium oxide by mass, or
purified to a minimum purity of 99 percent gadolinium by mass.
Germanium which is—
converted to germanium tetrachloride, or
purified to a minimum purity of 99.99 percent germanium by mass.
Graphite which is purified to a minimum purity of 99.9 percent graphitic carbon by mass.
Indium which is—
converted to—
indium tin oxide, or
indium oxide which is purified to a minimum purity of 99.9 percent indium oxide by mass, or
purified to a minimum purity of 99 percent indium by mass.
Lithium which is—
converted to lithium carbonate or lithium hydroxide, or
purified to a minimum purity of 99.9 percent lithium by mass.
Manganese which is—
converted to manganese sulphate, or
purified to a minimum purity of 99.7 percent manganese by mass.
Metallurgical coal which is suitable for use in the production of steel (within the meaning of the notice published by the Department of Energy entitled “Critical Material List; Addition of Metallurgical Coal Used for Steelmaking” (90 Fed. Reg. 22711 (May 29, 2025))), regardless of whether such production occurs inside or outside of the United States.
Neodymium which is—
converted to neodymium-praseodymium oxide which is purified to a minimum purity of 99 percent neodymium-praseodymium oxide by mass,
converted to neodymium oxide which is purified to a minimum purity of 99.5 percent neodymium oxide by mass
2
2 So in original. Probably should be followed by “, or”.
purified to a minimum purity of 99.9 percent neodymium by mass.
Nickel which is—
converted to nickel sulphate, or
purified to a minimum purity of 99 percent nickel by mass.
Niobium which is—
converted to ferronibium, or
purified to a minimum purity of 99 percent niobium by mass.
Tellurium which is—
converted to cadmium telluride, or
purified to a minimum purity of 99 percent tellurium by mass.
Tin which is purified to low alpha emitting tin which—
has a purity of greater than 99.99 percent by mass, and
possesses an alpha emission rate of not greater than 0.01 counts per hour per centimeter square.
Tungsten which is converted to ammonium paratungstate or ferrotungsten.
Vanadium which is converted to ferrovanadium or vanadium pentoxide.
Yttrium which is—
converted to yttrium oxide which is purified to a minimum purity of 99.999 percent yttrium oxide by mass, or
purified to a minimum purity of 99.9 percent yttrium by mass.
Any of the following minerals, provided that such mineral is purified to a minimum purity of 99 percent by mass:
Arsenic.
Bismuth.
Erbium.
Gallium.
Hafnium.
Holmium.
Iridium.
Lanthanum.
Lutetium.
Magnesium.
Palladium.
Platinum.
Praseodymium.
Rhodium.
Rubidium.
Ruthenium.
Samarium.
Scandium.
Tantalum.
Terbium.
Thulium.
Titanium.
Ytterbium.
Zinc.
Zirconium.
In this section—
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b).
Sales shall be taken into account under this section only with respect to eligible components the production of which is within—
the United States (within the meaning of section 638(1)), or
a possession of the United States (within the meaning of section 638(2)).
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
For purposes of this section, a person shall be treated as having sold an eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component which is sold to an unrelated person.
No credit shall be determined under subsection (a) for any taxable year if the taxpayer is—
a specified foreign entity (as defined in section 7701(a)(51)(B)), or
a foreign-influenced entity (as defined in section 7701(a)(51)(D), without regard to clause (i)(II) thereof).
In the case of a taxpayer for which section 7701(a)(51)(D)(i)(II) is determined to apply for any taxable year, no credit shall be determined under subsection (a) for such taxable year if such determination relates to an eligible component described in subsection (c)(1).
Treasury Regulations
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Treas. Reg. §1.45X-0Table of contents
This section lists the major captions contained in §§ 1.45X-1 through 1.45X-4.
(a) Overview.
(b) Credit amount.
(c) Definition of produced by the taxpayer.
(d) Produced in the United States.
(e) Production and sale in a trade or business.
(f) Sale of integrated components.
(g) Interaction between sections 45X and 48C.
(h) [Reserved]
(i) Anti-abuse rule.
(j) Applicability date.
(a) In general.
(b) Definitions.
(c) Special rule for sale to related person.
(d) Related person election.
(e) Sales of integrated components to related person.
(f) Applicability date.
(a) In general.
(b) Solar energy components.
(c) Wind energy components.
(d) Inverters.
(e) Qualifying battery component.
(f) Phase out rule.
(g) Applicability date.
(a) In general.
(b) Definitions.
(c) Credit amount.
(d) Applicability date.
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Treas. Reg. §1.45X-0(a)In general.
In general.
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Treas. Reg. §1.45X-0(b)Definitions.
Definitions.
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Treas. Reg. §1.45X-0(c)Credit amount.
Credit amount.
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Treas. Reg. §1.45X-0(d)Applicability date.
Applicability date.
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Treas. Reg. §1.45X-0(e)Qualifying battery component.
Qualifying battery component.
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Treas. Reg. §1.45X-0(f)Phase out rule.
Phase out rule.
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Treas. Reg. §1.45X-0(g)Applicability date.
Applicability date.
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Treas. Reg. §1.45X-0(h)§1.45X-0(h)
[Reserved]
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Treas. Reg. §1.45X-0(i)Anti-abuse rule.
Anti-abuse rule.
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Treas. Reg. §1.45X-0(j)Applicability date.
Applicability date.
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Treas. Reg. §1.45X-1General rules applicable to the advanced manufacturing production credit
(a) Overview—(1) In general. This section provides general rules regarding the advanced manufacturing production credit determined under section 45X of the Code (section 45X credit). Paragraph (a)(2) of this section provides definitions of certain terms that apply for purposes of section 45X and the section 45X regulations (as defined in paragraph (a)(2)(xv) of this section). Paragraphs (b) through (j) of this section provide the basic rules regarding the section 45X credit, including the definition of the term produced by the taxpayer, and rules to determine the taxpayer that produces an eligible component and whether such taxpayer is entitled to claim a section 45X credit in contract manufacturing arrangements; where the production of eligible components must occur; the treatment of integrated, incorporated or assembled eligible components; and the interaction between sections 45X and 48C of the Code. See § 1.45X-2 for rules regarding sales to unrelated persons, sales to related persons, and the related person election (Related Person Election), including rules regarding the time, place, and manner of making the Related Person Election. See § 1.45X-3 for the definitions of all eligible components (except applicable critical minerals) and the credit amounts available for each of these eligible components, including certain phase-out percentages. See § 1.45X-4 for the definitions of applicable critical minerals and the rules regarding the determination of the credit amount for applicable critical minerals.
(2) Generally applicable definitions. This paragraph (a)(2) provides definitions of terms that apply for purposes of section 45X and the section 45X regulations.
(i) Applicable critical mineral. The term applicable critical mineral means any of the minerals that are listed in section 45X(c)(6) and defined in § 1.45X-4(b).
(ii) Code. The term Code means the Internal Revenue Code.
(iii) Contract manufacturing arrangement. The term contract manufacturing arrangement is defined in paragraph (c)(3)(ii)(B) of this section.
(iv) Electrode active materials. The term electrode active materials is defined in section 45X(c)(5)(B)(i) and described in § 1.45X-3(e)(2).
(v) Eligible component. The term eligible component is defined in section 45X(c)(1)(A) and described in §§ 1.45X-3 and 1.45X-4.
(vi) Eligible taxpayer. The term eligible taxpayer is defined in paragraph (c)(3) of this section.
(vii) Extraction. The term extraction is defined in § 1.45X-3(e)(2)(iv)(B).
(viii) Guidance. The term guidance means guidance published in the Federal Register or Internal Revenue Bulletin, as well as administrative guidance such as forms, instructions, publications, or other guidance on the IRS.gov website. See §§ 601.601 and 601.602 of this chapter.
(ix) IRA. The term IRA means Public Law 117-169, commonly known as the Inflation Reduction Act of 2022.
(x) IRS. The term IRS means the Internal Revenue Service.
(xi) Produced by the taxpayer. The term produced by the taxpayer is defined in paragraph (c) of this section.
(xii) Related person. The term related person is defined in § 1.45X-2(b)(2).
(xiii) Related Person Election. The term Related Person Election is defined in § 1.45X-2(d)(1).
(xiv) Secretary. The term Secretary means the Secretary of the Treasury or her delegate.
(xv) Section 45X regulations. The term section 45X regulations means the provisions of this section, §§ 1.45X-2 through 1.45X-4, and the regulations in this chapter under sections 6417 and 6418 of the Code that relate to the section 45X credit.
(xvi) Unrelated person. The term unrelated person is defined in section 45X(a)(3) and described in § 1.45X-2(b)(3).
(b) Credit amount. Except as otherwise provided in section 45X(b)(3) and § 1.45X-3(f), for purposes of section 38 of the Code, the amount of the section 45X credit for any taxable year is equal to the sum of the credit amounts provided under section 45X(b) and described in §§ 1.45X-3 and 1.45X-4 with respect to each eligible component that is produced by the taxpayer and, within the taxable year, sold by the taxpayer to an unrelated person. See § 1.45X-2 for rules regarding sales of eligible components to related persons that may be treated as if sold to unrelated persons for purposes of section 45X(a).
(c) Definition of produced by the taxpayer—(1) In general. The term produced by the taxpayer means a process conducted by the taxpayer that substantially transforms constituent elements, materials, or subcomponents into a complete and distinct eligible component that is functionally different from that which would result from minor assembly or superficial modification of the elements, materials, or subcomponents, and includes both primary and secondary production. Primary production involves producing an eligible component using non-recycled materials while secondary production involves producing an eligible component using recycled materials.
(i) Partial transformation. The term produced by the taxpayer does not include partial transformation that does not result in substantial transformation of constituent elements, materials, or subcomponents into a complete and distinct eligible component as described in this paragraph (c)(1).
(ii) Minor assembly or superficial modification. The term produced by the taxpayer does not include minor assembly of two or more constituent elements, materials, or subcomponents, or superficial modification of the final eligible component, if the taxpayer does not also engage in the process resulting in a substantial transformation described in paragraph (c)(1) or (2) of this section.
(iii) Examples. The following examples illustrate the application of this paragraph (c)(1).
(A) Example 1. Taxpayers X, Y, and Z each produce one of three sections of a wind tower that together make up the wind tower. No taxpayer has produced an eligible component within the meaning of section 45X(a)(1)(A) because no taxpayer has produced all sections of the wind tower.
(B) Example 2. Same facts as paragraph (c)(1)(iii)(A) of this section (Example 1), but taxpayers X, Y, and Z instead form Partnership XYZ. Partnership XYZ produces all three sections of the wind tower. Partnership XYZ has produced an eligible component within the meaning of section 45X(a)(1)(A).
(C) Example 3. Taxpayer V puts the external casing on a battery module (within the meaning of § 1.45X-3(e)(4)(i)(A)) that already had cells, battery management systems, and other components integrated into it. Taxpayer V has engaged in minor assembly and has not produced an eligible component within the meaning of section 45X(a)(1)(A).
(D) Example 4. Taxpayer U purchases two finished halves of a wind turbine nacelle and combines them into a single nacelle. Taxpayer U has engaged in minor assembly and has not produced an eligible component within the meaning of section 45X(a)(1)(A).
(E) Example 5. Taxpayer T purchases a dry cell battery and fills the electrolyte of the battery. Taxpayer T has engaged in minor assembly and has not produced an eligible component within the meaning of section 45X(a)(1)(A).
(F) Example 6. Taxpayer W purchases a prefabricated wind turbine blade and applies paint and finishes. Taxpayer W has engaged in superficial modification of the blade and has not produced an eligible component within the meaning of section 45X(a)(1)(A).
(2) Special rule for certain eligible components—(i) In general. For solar grade polysilicon, electrode active materials, and applicable critical minerals, the term produced by the taxpayer means processing, converting, refining, or purifying source materials, such as brines, ores, or waste streams, to substantially transform the source materials to derive a distinct eligible component, and includes both primary and secondary production. For the production process for electrode active materials and applicable critical minerals, the term conversion is defined in § 1.45X-3(e)(2)(iii)(A) or § 1.45X-4(c)(2)(i), respectively, and the term purification is defined in § 1.45X-3(e)(2)(iii)(B) or § 1.45X-4(c)(2)(ii), respectively.
(ii) Example. Taxpayers X, Y and Z are unrelated C corporations that have calendar year taxable years. In 2024, X extracts raw lithium from natural mineral deposits and purifies the extracted material to 90% lithium by mass. X subsequently hires Y to further purify the lithium material furnished by X to a purity of no less than 99.9% lithium by mass as required by section 45X(c)(6)(P)(ii) and § 1.45X-4(b)(16)(ii). In 2025, Y purifies the material to 99.9% lithium by mass (qualifying lithium). X subsequently sells the qualifying lithium to Z in 2026. X may not claim a section 45X credit for the qualifying lithium sold to Z because the qualifying lithium was not produced by X within the meaning of this paragraph (c)(2) of this section, given that X did not transform the lithium material to derive a distinct eligible component (i.e., lithium which satisfies the minimum purity of 99.9% lithium by mass prescribed by section 45X(c)(6)(P)(ii).
(3) Eligible taxpayer—(i) In general. Except as otherwise provided in paragraph (c)(3)(iii) of this section, a taxpayer claiming a section 45X credit with respect to an eligible component must be the taxpayer that directly performs the production activities that bring about a substantial transformation resulting in the eligible component and must sell such eligible component to an unrelated person.
(ii) Contract manufacturing arrangement—(A) In general. If the production of an eligible component is performed in whole or in part pursuant to a contract that is a contract manufacturing arrangement, then, provided the other requirements of section 45X are met, the party to such contract that may claim the section 45X credit with respect to such eligible component is the party that performs the actual production activities that bring about a substantial transformation resulting in the eligible component.
(B) Contract manufacturing arrangement defined. The term contract manufacturing arrangement means any agreement (or agreements) providing for the production of an eligible component if the agreement is entered into before the production of the eligible component to be delivered under the contract is completed. A routine purchase order for off-the-shelf property is not treated as a contract manufacturing arrangement for purposes of this paragraph (c)(3). An agreement will be treated as a routine purchase order for off-the-shelf property if the contractor is required to make no more than de minimis modifications to the property to tailor it to the customer's specific needs, or if at the time the agreement is entered into, the contractor knows or has reason to know that the contractor can satisfy the agreement out of existing stocks or normal production of finished goods.
(iii) Special rule for contract manufacturing arrangements. If an eligible component is produced by a taxpayer pursuant to a contract manufacturing arrangement, the parties to such agreement may determine by agreement the party that may claim the section 45X credit. If a taxpayer enters into contract manufacturing arrangements with multiple fabricators to produce an eligible component, the parties to such agreements may determine by agreement the party that may claim the section 45X credit. The IRS will not challenge the agreement of the parties provided all the parties submit signed certification statements in the manner required in Form 7207, Advanced Manufacturing Production Credit, or its instructions (as described in paragraph (c)(3)(iv) of this section) indicating that all parties agree as to the party that may claim the section 45X credit.
(iv) Certification statement requirements. A certification statement indicating that all parties to a contract manufacturing arrangement agree as to the party that will claim the section 45X credit must include—
(A) All required information set forth in guidance; and
(B) A properly signed penalty of perjury statement that includes the following: under penalties of perjury, I declare that I have examined this statement, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this statement are true, correct, and complete.
(v) Examples. The following examples illustrate the application of this paragraph (c)(3).
(A) Example 1: Contract manufacturing with sale. Taxpayers X, Y and Z are unrelated C corporations that have calendar year taxable years. In 2024, pursuant to a contract manufacturing arrangement as described in paragraph (c)(3)(ii)(B) of this section, X hires Y to produce a solar module. The contract is a tolling arrangement and provides that Y will produce the solar module according to X's designs and specifications and using the materials and subcomponents that X provides. X and Y enter an agreement providing that X is the sole party that may claim a section 45X credit for the production and sale of the solar module, and X and Y each sign a certification statement as described in paragraph (c)(3)(iv) of this section reflecting this agreement. In 2025, Y produces and delivers the solar module to X, and in 2026, X sells the solar module to Z. X may claim a section 45X credit in taxable year 2026 for the solar module it sold to Z provided all other requirements of section 45X are met and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by X. Y could claim a section 45X credit if the agreement between X and Y had designated Y as the sole party that could claim a section 45X credit for the production and sale of the solar module provided all other requirements of section 45X are met and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by Y.
(B) Example 2: Contract manufacturing with no sale. Assume the facts are the same as in paragraph (c)(3)(v)(A) of this section (Example 1), except that X does not sell the solar module and instead X uses it to generate electricity for use in X's trade or business. Because there has been no sale, neither X nor Y may claim a section 45X credit for the solar module regardless of whether X and Y submit signed certification statements described in paragraph (c)(3)(iv) of this section.
(C) Example 3: Multiple contract manufacturing arrangements. Taxpayers V, W, X, Y, and Z are unrelated C corporations that have calendar year taxable years. In 2024, pursuant to three separate contract manufacturing arrangements as described in paragraph (c)(3)(ii)(B) of this section, V hires W, X, and Y to produce the bottom, middle and top segments, respectively, of a single wind tower that V designed. W, X, Y, and V enter into an agreement providing that V is the sole party that may claim a section 45X credit for the production and sale of the wind tower, and W, X, Y, and V each sign a certification statement as described in paragraph (c)(3)(iv) of this section reflecting this agreement. In 2024, W and X both produce and deliver their respective wind tower segments to the installation site, and in 2025, Y produces and delivers its wind tower segment to the installation site. In 2026, V sells the completed wind tower to Z. V may claim a section 45X credit in taxable year 2026 for the wind tower it sold to Z provided all other requirements of section 45X are met and the certification statements signed by V, W, X, and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by V. W or X or Y could be the party that could claim a section 45X credit if the agreement between V, W, X and Y had designated W or X or Y as the sole party that could claim a section 45X credit for the production and sale of the wind tower provided all other requirements of section 45X are met and the certification statements signed by V, W, X, and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by the party designated as the sole party that could claim a section 45X credit.
(D) Example 4: Applicable Critical Mineral Processing with Certification. Taxpayers X, Y, and Z are unrelated C corporations that have calendar year taxable years. In 2024, X extracts raw lithium from natural mineral deposits and purifies the extracted material to 90% lithium by mass. X subsequently hires Y to further process the lithium material pursuant to a contract manufacturing arrangement as described in paragraph (c)(3)(ii)(B) of this section. Specifically, the contract is a tolling arrangement and provides that X remains the owner for Federal income tax purposes throughout the purification process and that Y will further purify the lithium material furnished by X to a purity of no less than 99.9% lithium by mass as required by section 45X(c)(6)(P) and § 1.45X-4(b)(16)(ii). X and Y enter an agreement providing that X is the sole party that may claim a section 45X credit for the production and sale of the applicable critical mineral, and X and Y each sign a certification statement as described in paragraph (c)(3)(iv) of this section reflecting this agreement. In 2025, Y purifies the material to 99.9% lithium by mass (qualifying lithium) and delivers it to X. X subsequently sells the qualifying lithium to Z in 2026. X may claim a section 45X credit in taxable year 2026 for the qualifying lithium sold to Z, provided that all other requirements of section 45X are met, and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by X. Y could claim a section 45X credit if the agreement between X and Y had designated Y as the sole party that could claim a section 45X credit for the qualifying lithium, provided that all other requirements of section 45X are met, and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by Y. Neither X nor Y could claim a section 45X credit in the absence of a designating agreement and certification statement (described in paragraphs (c)(3)(iii) and (iv) of this section, respectively) for the reasons stated in paragraph (c)(3)(i) of this section.
(4) Timing of production and sale—(i) In general. Production of eligible components for which a taxpayer is claiming a section 45X credit may begin before December 31, 2022. Production of eligible components must be completed, and sales of eligible components must occur, after December 31, 2022.
(ii) Example. Taxpayer X has a calendar year taxable year. Taxpayer X begins production of a related offshore wind vessel (as defined in section 45X(c)(4)(B)(iv) and described in § 1.45X-3(c)(4)) in January 2022. Production is completed in December 2024 and the sale to an unrelated person occurs in 2025. Taxpayer X is eligible to claim the section 45X credit in 2025, assuming that all other requirements of section 45X are met.
(d) Produced in the United States—(1) In general. Sales are taken into account for purposes of the section 45X credit only for eligible components that are produced within the United States, as defined in section 638(1) of the Code, or a United States territory, which for purposes of section 45X and the section 45X regulations has the meaning of the term possession provided in section 638(2).
(2) Subcomponents. Constituent elements, materials, and subcomponents used in the production of eligible components are not subject to the domestic production requirement provided in paragraph (d)(1) of this section.
(e) Production and sale in a trade or business. An eligible component produced and sold by the taxpayer is taken into account for purposes of the section 45X credit only if the production and sale are in a trade or business (within the meaning of section 162 of the Code) of the taxpayer.
(f) Sale of integrated components—(1) In general. For purposes of the section 45X credit, section 45X(d)(4) provides that a taxpayer that produces an eligible component is treated as having sold such eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component that is then sold to an unrelated person.
(i) Integrated, incorporated, or assembled. The term integrated, incorporated, or assembled means the production activities by which an eligible component that is a constituent element, material, or subcomponent is substantially transformed into another complete and distinct eligible component that is not solar grade polysilicon, an electrode active material, or an applicable critical mineral. The term integrated, incorporated, or assembled does not mean the minor assembly or superficial modification of an eligible component used as an element, material, or subcomponent and other elements, materials, or subcomponents that results in a distinct product.
(ii) Special rule for eligible components resulting in solar grade polysilicon, electrode active materials, or applicable critical minerals. For solar grade polysilicon, electrode active materials, and applicable critical minerals, the term integrated, incorporated, or assembled means the production activities in which an eligible component is processed, converted, refined, or purified to derive a distinct eligible component that is solar grade polysilicon, an electrode active material, or an applicable critical mineral. The term integrated, incorporated, or assembled does not mean minor assembly or superficial modification of an eligible component used as an element, material, or subcomponent and other elements, materials, or subcomponents that results in a distinct product.
(2) Application—(i) In general. A taxpayer may claim a section 45X credit for each eligible component the taxpayer produces and sells to an unrelated person, including any eligible component the taxpayer produces that was used as a constituent element, material, or subcomponent and integrated, incorporated, or assembled into another complete and distinct eligible component or another complete and distinct product (that is not itself an eligible component) that the taxpayer also produces and sells to an unrelated person.
(ii) Example: Sale of product with incorporated eligible components to unrelated person. In 2022, X, a domestic corporation that has a calendar year taxable year, begins production of electrode active materials (EAMs) that are completed in 2023 and incorporated into battery cells that X also produces. In 2024, X incorporates those battery cells into battery modules (within the meaning of § 1.45X-3(e)(4)(i)(A)) and integrates the battery modules into electric vehicles. X sells the electric vehicles to Z, an unrelated person, in 2024. X may claim a section 45X credit for the EAMs, the battery cells, and the battery modules in 2024.
(g) Interaction between sections 45X and 48C—(1) In general. For purposes of the section 45X credit, consistent with section 45X(c)(1)(B), property that would otherwise qualify as an eligible component (otherwise qualified property) is only an eligible component if the property is produced at a section 45X facility (as defined in paragraph (g)(2) of this section) and no part of that section 45X facility is also a section 48C facility (as defined in paragraph (g)(3) of this section).
(2) Section 45X facility—(i) In general. A section 45X facility comprises the independently functioning tangible property used by the taxpayer that is necessary to be considered the producer of the otherwise qualified property within the meaning of paragraph (c)(1) or (2) of this section, as applicable. The tangible property that comprises a section 45X facility may be in more than one location.
(ii) Special rule for contract manufacturing arrangement. In the case of a contract manufacturing arrangement where the parties have agreed to who can claim a section 45X credit under paragraph (c)(3)(iii) of this section, the section 45X facility under paragraph (g)(2)(i) of this section is determined by taking into account the tangible property used to produce the otherwise qualified property, regardless of which party to the arrangement claims the credit.
(3) Section 48C facility—(i) In general. A section 48C facility includes all eligible property included in a qualifying advanced energy project for which a taxpayer receives an allocation of section 48C credits under the allocation program established under section 48C(e) and claims such credits after August 16, 2022.
(ii) Eligible property. Eligible property is property that—
(A) Is necessary for the production or recycling of property described in section 48C(c)(1)(A)(i), re-equipping an industrial or manufacturing facility described in section 48C(c)(1)(A)(ii), or re-equipping, expanding, or establishing an industrial facility described in section 48C(c)(1)(A)(iii);
(B) Is tangible personal property, or other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment credit facility; and
(C) With respect to which depreciation (or amortization in lieu of depreciation) is allowable.
(4) Examples. The following examples illustrate the application of this paragraph (g), and assume any other requirements of section 45X that are not described have been met:
(i) Example 1: Two independent section 45X facilities—(A) Facts. Taxpayer owns and operates a manufacturing site that contains tangible property made up of Equipment A and Equipment B, each set of which functions independently and which is arranged in serial fashion. Equipment A is used by the taxpayer to produce otherwise qualified property 1. Equipment B is used to produce otherwise qualified property 2, a different type of product than otherwise qualified property 1. Taxpayer was allocated a section 48C credit under the section 48C(e) program for a section 48C facility that includes Equipment A and subsequently placed the section 48C facility and Equipment A in service in taxable year 2026. Taxpayer claimed a section 48C credit related to Equipment A for taxable year 2026.
(B) Analysis. The section 45X facility with respect to otherwise qualified property 1 is the tangible property made up of Equipment A, which is the independently functioning tangible property used by the taxpayer that is necessary to be considered the producer of the otherwise qualified property within the meaning of paragraph (c)(1) or (2) of this section. However, Equipment A is also eligible property that is considered part of a section 48C facility as defined in paragraph (g)(3) of this section. Therefore, otherwise qualified property 1 is not an eligible component under paragraph (g)(1) of this section because part (all in this case) of the section 45X facility where otherwise qualified property 1 was produced is also considered a section 48C facility. There is a separate section 45X facility with respect to otherwise qualified property 2. That section 45X facility is the tangible property made up of Equipment B. Equipment A is not included in the section 45X facility as it is not used to produce otherwise qualified property 2. None of the tangible property comprising the section 45X facility with respect to otherwise qualified property 2 is considered part of a section 48C facility. Thus, otherwise qualified property 2 is an eligible component under paragraph (g)(1) of this section.
(ii) Example 2: Single section 45X facility at different locations—(A) Facts. Taxpayer owns and operates two manufacturing sites at different locations. The tangible property at manufacturing site 1 is Equipment A, which is used to continue and finish the first part of the production process for otherwise qualified property. The tangible property at manufacturing site 2 is Equipment B, which is used to complete the production process of the same otherwise qualified property. Taxpayer was allocated a section 48C credit under the section 48C(e) program for Equipment A.
(B) Analysis. Equipment A and B comprise a single section 45X facility regardless of location under paragraph (g)(2)(i) of this section because both Equipment A and B were used to produce the otherwise qualified property and the use of Equipment A and B are necessary to consider the taxpayer the producer, consistent with the meaning of produced by the taxpayer in paragraph (c)(1) or (2) of this section. However, part of the property comprising the section 45X facility is also a section 48C facility under paragraph (g)(3) of this section because Equipment A is eligible property that is part of a section 48C facility. As a result, the otherwise qualified property is not considered an eligible component, and the sale of the otherwise qualified property will not generate a section 45X credit.
(iii) Example 3: Independent tangible property and production of component—(A) Facts. Taxpayer owns and operates two manufacturing sites. Manufacturing Site 1 contains tangible property that is Equipment A, which is used to produce photovoltaic cells. Manufacturing Site 2 contains tangible property that is Equipment B and tangible property that is Equipment C, which are arranged in serial fashion. Equipment B is used to produce photovoltaic cells. Equipment C is used to produce solar modules, in part, by combining the photovoltaic cells produced by Equipment A and Equipment B. Taxpayer was allocated a section 48C credit under the section 48C(e) program for a section 48C facility that includes Equipment B. Subsequently, Taxpayer places the section 48C facility and Equipment B in service in taxable year 2026. Taxpayer claimed a section 48C credit for Equipment B in taxable year 2026.
(B) Analysis. Equipment A and Equipment B each comprise a section 45X facility since each independently functions to produce otherwise qualified property, photovoltaic cells. No part of the section 45X facility comprised of Equipment A is eligible property that is included in a section 48C facility. Thus, the photovoltaic cells produced in the section 45X facility comprised of Equipment A are eligible components. The photovoltaic cells that are produced in the section 45X facility comprised of Equipment B are otherwise qualified property that cannot qualify as eligible components because part (all in this case) of the section 45X facility comprised of Equipment B where the photovoltaic cells are produced is also considered a section 48C facility. Solar modules, a different otherwise qualified property, are produced in using Equipment C, which is itself a separate section 45X facility. Equipment C does not have to include any of the tangible property included in Equipment A or B under paragraph (g)(2)(i) of this section because it is not necessary for the Taxpayer to use that equipment to be considered the producer of the solar modules for purposes of section 45X. As a result, no part of section 45X facility comprised of Equipment C where the solar modules are produced is considered a section 48C facility, and the solar modules are considered an eligible component for purposes of section 45X.
(iv) Example 4: Manufacturing under a contract manufacturing arrangement—(A) Facts. X is hired by Y to manufacture photovoltaic cells, but X and Y agree under paragraph (c)(3)(iii) of this section that Y will be the party to claim any section 45X credit resulting from the sale of the photovoltaic cells. X owns and operates a manufacturing site that contains equipment that is tangible property used to produce the photovoltaic cells. X was allocated a section 48C credit under the section 48C(e) program for a section 48C facility that includes the equipment used to produce the photovoltaic cells. The equipment is eligible property that is part of the section 48C facility that was placed in service in taxable year 2026. X claimed a section 48C credit for the equipment in taxable year 2026.
(B) Analysis. Under paragraph (g)(2)(ii) of this section, in determining the section 45X facility related to the photovoltaic cells (the otherwise qualified property), Y must consider the equipment that X used in producing the photovoltaic cells. In this case, that means that part of the section 45X facility is also considered a section 48C facility, as the equipment used to produce the photovoltaic cells is also eligible property that is part of a section 48C facility. Therefore, the photovoltaic cells are not eligible components for purposes of section 45X to X or Y, and there is no section 45X credit generated if the photovoltaic cells are sold.
(v) Example 5: Multiple tangible property used to produce separate eligible components—(A) Facts. Assume the facts are the same as in paragraph (g)(4)(iv) of this section (Example 4), except that Y and X also agreed for X to produce photovoltaic wafers using other equipment that is tangible property that is different than the equipment X uses to produce the photovoltaic cells.
(B) Analysis. While Y must consider the equipment that X uses to produce the photovoltaic wafers (the otherwise qualified property) under paragraph (g)(2)(ii) of this section to determine the section 45X facility associated with the photovoltaic wafer production, Y is not required to include any of the equipment used by X to produce the photovoltaic cells because it was not necessary to use that equipment to be considered the producer of the photovoltaic wafers. As a result, no part of the section 45X facility related to photovoltaic wafers is part of a section 48C facility. Therefore, the photovoltaic wafers are eligible components for purposes of section 45X and Y will be entitled to claim a section 45X credit upon the sale.
(h) [Reserved]
(i) Anti-abuse rule—(1) In general. The rules of section 45X and the section 45X regulations must be applied in a manner consistent with the purposes of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit). A purpose of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit) is to provide taxpayers an incentive to produce eligible components in a manner that contributes to the development of secure and resilient supply chains. Accordingly, the section 45X credit is not allowable if the primary purpose of the production and sale of an eligible component is to obtain the benefit of the section 45X credit in a manner that is wasteful, such as discarding, disposing of, or destroying the eligible component without putting it to a productive use. A determination of whether the production and sale of an eligible component is inconsistent with the purposes of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit) is based on all facts and circumstances.
(2) Example—(i) Facts. Taxpayer is engaged in the activity of producing and selling multiple units of Eligible Component 1 (EC1). Taxpayer engages in no other activities. The cost of producing each unit of EC1 is less than the amount of the section 45X credit that would be available if each EC1 qualified for the section 45X credit. Taxpayer sells some of its units of EC1 to related persons and makes a Related Person Election pursuant to section 45X(a)(3)(B)(i). Taxpayer also sells some of its units of EC1 to unrelated persons. Taxpayer sells all units of EC1 at an amount equal to cost plus a markup to reflect an anticipated accommodation fee and establishes corresponding accounts receivable at the time of the respective sales. In addition, Taxpayer knows or reasonably expects that after acquiring the units of EC1, the related and unrelated transferees will not resell the units of EC1 or use them in their trades or businesses. Taxpayer intends to obtain the benefit from the section 45X credit by claiming such credits itself or monetizing such credits through an election under section 6417 or section 6418. Taxpayer eliminates the aforementioned accounts receivable at the time it claims the section 45X credit or receives related payments attributable to the section 45X credit, and further makes payments to the related and unrelated transferees as accommodation fees computed as a percentage of such benefits.
(ii) Analysis. Based on all of the facts and circumstances in paragraph (i)(2)(i) of this section, the primary purpose of Taxpayer's production and sale of EC1 is to obtain the benefit of the section 45X credit in a manner that is wasteful and will not be treated as the production and sale of eligible components in a trade or business of Taxpayer for purposes of section 45X(a)(1) and (2). Taxpayer is not eligible for the section 45X credit with respect to units of EC1 that it produced and sold. See sections 6417(d)(6) (excessive payments) and 6418(g)(2) (excessive credit transfer).
(j) Applicability date. This section applies to eligible components for which production is completed and sales occur after December 31, 2022, and during a taxable year ending on or after October 28, 2024.
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Treas. Reg. §1.45X-1(a)Overview—(1) In general.
Overview—(1) In general. This section provides general rules regarding the advanced manufacturing production credit determined under section 45X of the Code (section 45X credit). Paragraph (a)(2) of this section provides definitions of certain terms that apply for purposes of section 45X and the section 45X regulations (as defined in paragraph (a)(2)(xv) of this section). Paragraphs (b) through (j) of this section provide the basic rules regarding the section 45X credit, including the definition of the term produced by the taxpayer, and rules to determine the taxpayer that produces an eligible component and whether such taxpayer is entitled to claim a section 45X credit in contract manufacturing arrangements; where the production of eligible components must occur; the treatment of integrated, incorporated or assembled eligible components; and the interaction between sections 45X and 48C of the Code. See § 1.45X-2 for rules regarding sales to unrelated persons, sales to related persons, and the related person election (Related Person Election), including rules regarding the time, place, and manner of making the Related Person Election. See § 1.45X-3 for the definitions of all eligible components (except applicable critical minerals) and the credit amounts available for each of these eligible components, including certain phase-out percentages. See § 1.45X-4 for the definitions of applicable critical minerals and the rules regarding the determination of the credit amount for applicable critical minerals.
(2) Generally applicable definitions. This paragraph (a)(2) provides definitions of terms that apply for purposes of section 45X and the section 45X regulations.
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Treas. Reg. §1.45X-1(b)Credit amount.
Credit amount. Except as otherwise provided in section 45X(b)(3) and § 1.45X-3(f), for purposes of section 38 of the Code, the amount of the section 45X credit for any taxable year is equal to the sum of the credit amounts provided under section 45X(b) and described in §§ 1.45X-3 and 1.45X-4 with respect to each eligible component that is produced by the taxpayer and, within the taxable year, sold by the taxpayer to an unrelated person. See § 1.45X-2 for rules regarding sales of eligible components to related persons that may be treated as if sold to unrelated persons for purposes of section 45X(a).
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Treas. Reg. §1.45X-1(c)Definition of produced by the taxpayer—(1) In general.
Definition of produced by the taxpayer—(1) In general. The term produced by the taxpayer means a process conducted by the taxpayer that substantially transforms constituent elements, materials, or subcomponents into a complete and distinct eligible component that is functionally different from that which would result from minor assembly or superficial modification of the elements, materials, or subcomponents, and includes both primary and secondary production. Primary production involves producing an eligible component using non-recycled materials while secondary production involves producing an eligible component using recycled materials.
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Treas. Reg. §1.45X-1(d)Produced in the United States—(1) In general.
Produced in the United States—(1) In general. Sales are taken into account for purposes of the section 45X credit only for eligible components that are produced within the United States, as defined in section 638(1) of the Code, or a United States territory, which for purposes of section 45X and the section 45X regulations has the meaning of the term possession provided in section 638(2).
(2) Subcomponents. Constituent elements, materials, and subcomponents used in the production of eligible components are not subject to the domestic production requirement provided in paragraph (d)(1) of this section.
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Treas. Reg. §1.45X-1(e)Production and sale in a trade or business.
Production and sale in a trade or business. An eligible component produced and sold by the taxpayer is taken into account for purposes of the section 45X credit only if the production and sale are in a trade or business (within the meaning of section 162 of the Code) of the taxpayer.
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Treas. Reg. §1.45X-1(f)Sale of integrated components—(1) In general.
Sale of integrated components—(1) In general. For purposes of the section 45X credit, section 45X(d)(4) provides that a taxpayer that produces an eligible component is treated as having sold such eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component that is then sold to an unrelated person.
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Treas. Reg. §1.45X-1(g)Interaction between sections 45X and 48C—(1) In general.
Interaction between sections 45X and 48C—(1) In general. For purposes of the section 45X credit, consistent with section 45X(c)(1)(B), property that would otherwise qualify as an eligible component (otherwise qualified property) is only an eligible component if the property is produced at a section 45X facility (as defined in paragraph (g)(2) of this section) and no part of that section 45X facility is also a section 48C facility (as defined in paragraph (g)(3) of this section).
(2) Section 45X facility—(i) In general. A section 45X facility comprises the independently functioning tangible property used by the taxpayer that is necessary to be considered the producer of the otherwise qualified property within the meaning of paragraph (c)(1) or (2) of this section, as applicable. The tangible property that comprises a section 45X facility may be in more than one location.
(ii) Special rule for contract manufacturing arrangement. In the case of a contract manufacturing arrangement where the parties have agreed to who can claim a section 45X credit under paragraph (c)(3)(iii) of this section, the section 45X facility under paragraph (g)(2)(i) of this section is determined by taking into account the tangible property used to produce the otherwise qualified property, regardless of which party to the arrangement claims the credit.
(3) Section 48C facility—(i) In general. A section 48C facility includes all eligible property included in a qualifying advanced energy project for which a taxpayer receives an allocation of section 48C credits under the allocation program established under section 48C(e) and claims such credits after August 16, 2022.
(ii) Eligible property. Eligible property is property that—
(A) Is necessary for the production or recycling of property described in section 48C(c)(1)(A)(i), re-equipping an industrial or manufacturing facility described in section 48C(c)(1)(A)(ii), or re-equipping, expanding, or establishing an industrial facility described in section 48C(c)(1)(A)(iii);
(B) Is tangible personal property, or other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment credit facility; and
(C) With respect to which depreciation (or amortization in lieu of depreciation) is allowable.
(4) Examples. The following examples illustrate the application of this paragraph (g), and assume any other requirements of section 45X that are not described have been met:
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Treas. Reg. §1.45X-1(h)§1.45X-1(h)
[Reserved]
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Treas. Reg. §1.45X-1(i)Anti-abuse rule—(1) In general.
Anti-abuse rule—(1) In general. The rules of section 45X and the section 45X regulations must be applied in a manner consistent with the purposes of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit). A purpose of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit) is to provide taxpayers an incentive to produce eligible components in a manner that contributes to the development of secure and resilient supply chains. Accordingly, the section 45X credit is not allowable if the primary purpose of the production and sale of an eligible component is to obtain the benefit of the section 45X credit in a manner that is wasteful, such as discarding, disposing of, or destroying the eligible component without putting it to a productive use. A determination of whether the production and sale of an eligible component is inconsistent with the purposes of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit) is based on all facts and circumstances.
(2) Example—(i) Facts. Taxpayer is engaged in the activity of producing and selling multiple units of Eligible Component 1 (EC1). Taxpayer engages in no other activities. The cost of producing each unit of EC1 is less than the amount of the section 45X credit that would be available if each EC1 qualified for the section 45X credit. Taxpayer sells some of its units of EC1 to related persons and makes a Related Person Election pursuant to section 45X(a)(3)(B)(i). Taxpayer also sells some of its units of EC1 to unrelated persons. Taxpayer sells all units of EC1 at an amount equal to cost plus a markup to reflect an anticipated accommodation fee and establishes corresponding accounts receivable at the time of the respective sales. In addition, Taxpayer knows or reasonably expects that after acquiring the units of EC1, the related and unrelated transferees will not resell the units of EC1 or use them in their trades or businesses. Taxpayer intends to obtain the benefit from the section 45X credit by claiming such credits itself or monetizing such credits through an election under section 6417 or section 6418. Taxpayer eliminates the aforementioned accounts receivable at the time it claims the section 45X credit or receives related payments attributable to the section 45X credit, and further makes payments to the related and unrelated transferees as accommodation fees computed as a percentage of such benefits.
(ii) Analysis. Based on all of the facts and circumstances in paragraph (i)(2)(i) of this section, the primary purpose of Taxpayer's production and sale of EC1 is to obtain the benefit of the section 45X credit in a manner that is wasteful and will not be treated as the production and sale of eligible components in a trade or business of Taxpayer for purposes of section 45X(a)(1) and (2). Taxpayer is not eligible for the section 45X credit with respect to units of EC1 that it produced and sold. See sections 6417(d)(6) (excessive payments) and 6418(g)(2) (excessive credit transfer).
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Treas. Reg. §1.45X-1(j)Applicability date.
Applicability date. This section applies to eligible components for which production is completed and sales occur after December 31, 2022, and during a taxable year ending on or after October 28, 2024.
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Treas. Reg. §1.45X-1(v)Example 5: Multiple tangible property used to produce separate eligible components—(A) Facts.
Example 5: Multiple tangible property used to produce separate eligible components—(A) Facts. Assume the facts are the same as in paragraph (g)(4)(iv) of this section (Example 4), except that Y and X also agreed for X to produce photovoltaic wafers using other equipment that is tangible property that is different than the equipment X uses to produce the photovoltaic cells.
(B) Analysis. While Y must consider the equipment that X uses to produce the photovoltaic wafers (the otherwise qualified property) under paragraph (g)(2)(ii) of this section to determine the section 45X facility associated with the photovoltaic wafer production, Y is not required to include any of the equipment used by X to produce the photovoltaic cells because it was not necessary to use that equipment to be considered the producer of the photovoltaic wafers. As a result, no part of the section 45X facility related to photovoltaic wafers is part of a section 48C facility. Therefore, the photovoltaic wafers are eligible components for purposes of section 45X and Y will be entitled to claim a section 45X credit upon the sale.
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Treas. Reg. §1.45X-1(x)IRS.
IRS. The term IRS means the Internal Revenue Service.
(xi) Produced by the taxpayer. The term produced by the taxpayer is defined in paragraph (c) of this section.
(xii) Related person. The term related person is defined in § 1.45X-2(b)(2).
(xiii) Related Person Election. The term Related Person Election is defined in § 1.45X-2(d)(1).
(xiv) Secretary. The term Secretary means the Secretary of the Treasury or her delegate.
(xv) Section 45X regulations. The term section 45X regulations means the provisions of this section, §§ 1.45X-2 through 1.45X-4, and the regulations in this chapter under sections 6417 and 6418 of the Code that relate to the section 45X credit.
(xvi) Unrelated person. The term unrelated person is defined in section 45X(a)(3) and described in § 1.45X-2(b)(3).
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Treas. Reg. §1.45X-2Sale to unrelated person
(a) In general. The amount of the section 45X credit for any taxable year is equal to the sum of the credit amounts determined under section 45X(b) (and described in §§ 1.45X-3 and 1.45X-4) with respect to each eligible component that is produced by the taxpayer and, during the taxable year, sold by the taxpayer to an unrelated person. Applicable Federal income tax principles apply to determine whether a transaction is in substance a sale (or the provision of a service, or some other disposition). See § 1.45X-1(d) and (e) for additional requirements relating to sales.
(b) Definitions. This paragraph (b) provides definitions of terms that apply for purposes of this section.
(1) Person. The term person means an individual, a trust, estate, partnership, association, company, or corporation, as provided in section 7701(a)(1) of the Code. For purposes of this section, an entity disregarded as separate from a person (for example, under § 301.7701-3 of this chapter) is not a person.
(2) Related person. The term related person means a person who is related to another person if such persons would be treated as a single employer under the regulations in this chapter under section 52(b) of the Code.
(3) Unrelated person. The term unrelated person means a person who is not a related person as defined in paragraph (b)(2) of this section.
(c) Special rule for sale to related person—(1) In general. For purposes of section 45X(a), a taxpayer is treated as selling an eligible component to an unrelated person if such component is sold to such person by a person who is a related person with respect to the taxpayer.
(2) Example. X and Y are members of a group of trades or businesses under common control under section 52(b), and thus are related persons under section 45X(d)(1). Each of X and Y has a calendar year taxable year. Z is an unrelated person. X is in the trade or business of producing and selling solar modules. X produces and sells solar modules to Y in 2023. Y sells the solar modules to Z in 2024. X may claim a section 45X credit for the sale of the solar modules in 2024, the taxable year of X in which Y sells the solar modules to Z.
(d) Related person election—(1) Availability of election—(i) In general. In such form and manner as the Secretary may prescribe, a taxpayer may make an election under section 45X(a)(3)(B) (Related Person Election), to treat a sale of eligible components by such taxpayer to a related person as if made to an unrelated person. As a condition of, and prior to, a taxpayer making a Related Person Election (as described in paragraph (d)(2) of this section), the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper or excessive credit amount determined under section 45X(a)(1).
(ii) Members of a consolidated group. A Related Person Election is made by a member of a consolidated group (as defined in § 1.1502-1(h)) in the manner described in paragraph (d)(3)(ii) of this section. A member of a consolidated group that sells eligible components in an intercompany transaction (as defined in § 1.1502-13(b)(1)) may make the Related Person Election to claim the section 45X credit in the year of the intercompany sale. For the treatment of the selling member's gain or loss from that sale, see § 1.1502-13.
(2) Time and manner of making election—(i) In general. A taxpayer must make an affirmative Related Person Election annually on the taxpayer's timely filed original Federal income tax return, including extensions in such form and in such manner as may be prescribed in guidance. The Related Person Election will be applicable to all sales of eligible components to related persons by the taxpayer for each trade or business that the taxpayer engages in during the taxable year that resulted in a credit claim and for which the taxpayer has made the Related Person Election.
(ii) Required information. For all sales of eligible components to related persons, the taxpayer must provide all required information set forth in guidance. Such information may include, for example, the taxpayer's name, employer identification number (EIN), a description of the taxpayer's trade or business (including principal business activity code); the name(s) and EINs of all related persons; a listing of the eligible components that are sold; and the intended purpose of any sales of eligible components to or from related persons.
(3) Scope and effect of election—(i) In general. A separate Related Person Election must be made with respect to related person sales made by a taxpayer for each eligible trade or business of the taxpayer. The election applies only to such trade or business for which the Related Person Election is made. An election under this section applies to all sales to related persons (including between members of the same consolidated group) of eligible components produced by the taxpayer during the taxable year with respect to each trade or business for which the Related Person Election is made and is irrevocable for the taxable year for which the election is made. An election under paragraph (d)(2)(i) of this section applies solely for purposes of the section 45X credit and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit).
(ii) Application to consolidated groups. For a trade or business of a consolidated group, a Related Person Election must be made by the agent for the group on behalf of the members claiming the section 45X credit and filed with the group's timely filed original Federal income tax return, including extensions, with respect to each trade or business that the consolidated group conducts. See § 1.1502-77 (providing rules regarding the status of the common parent as agent for its members). A separate election must be filed on behalf of each member claiming the section 45X credit, and each election must include the name and EIN of the agent for the group and the member on whose behalf the election is being made.
(iii) Application to partnerships. The Related Person Election for a partnership must be made on the partnership's timely filed original Federal income tax return, including extensions, with respect to each trade or business that the partnership conducts. The election applies only to such trade or business for which the Related Person Election is made. An election by a partnership does not apply to any trade or business conducted by a partner outside the partnership.
(4) Anti-abuse rule—(i) In general. A Related Person Election may not be made if, with respect to the eligible components relevant to such election, the taxpayer fails to provide the information described in paragraph (d)(2) of this section, provides information described in paragraph (d)(2) of this section that shows that such components are described in paragraph (d)(4)(ii) or (iii) of this section, or such components are described in paragraph (d)(4)(ii) or (iii) of this section.
(ii) Improper use. For purposes of this paragraph (d)(4) the term improper use means a use that is wasteful, such as discarding, disposing of, or destroying the eligible component without putting it to a productive use by the related person to which the eligible component is sold.
(iii) Defective components. The term defective component means a component that does not meet the requirements of section 45X and the section 45X regulations.
(e) Sales of integrated components to related person—(1) In general. For purposes of section 45X and the section 45X regulations (and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit), a taxpayer that produces and then sells an eligible component to a related person, who then integrates, incorporates, or assembles the taxpayer's eligible component into another complete and distinct eligible component that is subsequently sold to an unrelated person, may claim a section 45X credit (or make an election under section 6417 or section 6418) with respect to the taxable year in which the related person's sale to the unrelated person occurs.
(2) Examples. The following examples illustrate the rules provided in paragraph (e)(1) of this section.
(i) Example 1: Sales of multiple incorporated eligible components to related persons. X and Y are C corporations that are members of a group of trades or businesses under common control under section 52(b), and thus are related persons under section 45X(d)(1) and paragraph (b)(2) of this section. Each of X and Y has a calendar year taxable year. Z is an unrelated person. X and Y are in the trade or business of producing and selling photovoltaic wafers and cells. X produces and sells photovoltaic wafers to Y in 2023. Y incorporates the photovoltaic wafers into photovoltaic cells and sells the photovoltaic cells to Z in 2024. X may claim a section 45X credit for the sale of the photovoltaic wafers in 2024, the taxable year of X in which Y sells the photovoltaic cells to Z.
(ii) Example 2: Sales of multiple incorporated eligible components to related and unrelated persons. W, X, and Y are domestic C corporations that are members of a group of trades or businesses under common control under section 52(b), and thus are related persons under section 45X(d)(1) and paragraph (b)(2) of this section. Each of W, X, and Y has a calendar year taxable year. W produces electrode active materials (EAMs) and sells the EAMs to X in 2023. In 2024, X incorporates the EAMs into battery cells that it produces and sells the battery cells to Y. In 2025, Y incorporates the battery cells into battery modules (within the meaning of § 1.45X-3(e)(4)(i)(A)) that it produces and sells the battery modules to Z, an unrelated person. W may claim a section 45X credit for EAMs sold to X, X may claim a section 45X credit for the battery cells sold to Y, and Y may claim a section 45X credit for the battery modules sold to Z in 2025, the taxable year of each of W, X, and Y in which the battery modules are sold to Z.
(3) Special rules applicable to related person election—(i) In general. If a taxpayer makes a valid Related Person Election under section 45X(a)(3)(B)(i) and paragraph (d)(1) of this section, and the taxpayer produces and then sells an eligible component to a related person, who then integrates, incorporates, or assembles the taxpayer's eligible component into another complete and distinct eligible component that is subsequently sold to an unrelated person, the taxpayer's sale of the eligible component to the related person is treated (solely for purposes of the section 45X credit and the section 45X regulations, and the regulations in this chapter under sections 6417 and 6418 related to the section 45X credit) as if made to an unrelated person in the taxable year in which the sale to the related person occurs.
(ii) Example: Sales of multiple integrated eligible components to related and unrelated persons with a related person election. W, X, and Y are domestic C corporations that are members of a group of trades or businesses under common control and thus are related persons under section 45X(d)(1) and paragraph (b)(2) of this section. Each of W, X, and Y has a calendar year taxable year. W produces electrode active materials (EAMs) and sells the EAMs to X in 2023. W makes a valid Related Person Election under paragraph (d)(1) of this section in 2023 with regard to the sale. In 2024, X incorporates the EAMs into battery cells that it produces and sells the battery cells to Y. X makes a valid Related Person Election under paragraph (d)(1) of this section in 2024 with regard to the sale. In 2025, Y incorporates the battery cells into battery modules that it produces and sells the battery modules to Z, an unrelated person. W may claim a section 45X credit for the sale of the EAMs in 2023 because the sale to X is treated as if made to an unrelated person solely for purposes of section 45X(a). X may claim a section 45X credit for the sale of the battery cells in 2024 because the sale to Y is treated as if made to an unrelated person solely for purposes of section 45X(a). Y may claim a section 45X credit for the sale of battery modules in 2025 because Z is an unrelated person.
(f) Applicability date. This section applies to eligible components for which production is completed and sales occur after December 31, 2022, and during a taxable year ending on or after October 28, 2024.
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