Domestic Content Bonus Guidance

Treasury and Internal Revenue Service (IRS) released additional guidance on the Inflation Reduction Act’s (IRA) domestic content bonus

The domestic content bonus applies to facilities and projects built using the required amounts of domestically produced steel, iron, and manufactured products. To receive the bonus, all manufacturing processes for steel and iron components must take place in the United States. A statutorily required minimum percentage of the costs of the manufactured products and components of manufactured products that comprise a facility must be mined, produced, or manufactured in the United States.

Under the Production Tax Credit for clean energy (PTC), facilities that meet domestic content requirements receive a 10 percent bonus. Under the Investment Tax Credit for clean energy (ITC), projects that meet the domestic content requirement receive up to a 10-percentage point bonus.

Projects are eligible for the full value of the bonus only if they meet the domestic content requirement and one of the following requirements: 1) the project has a maximum net output of less than 1 megawatt of energy; 2) construction of the project began before January 29, 2023; or 3) the project satisfies the Inflation Reduction Act’s prevailing wage and apprenticeship requirements. 

This notice creates a new elective safe harbor that gives clean energy developers the option of relying on DOE-provided default cost percentages for an exhaustive set of manufactured products and their components. This safe harbor is in lieu of obtaining direct cost information from suppliers. The guidance also amends last May’s Notice to add more safe harbor classifications, including the addition of hydropower technologies, as well as to provide clarity for rooftop solar.