SECTION 2. BACKGROUND

.01 Advanced Manufacturing Produc- tion Credit (§ 45X)

(1) Overview Section 13502(a) of the IRA added new § 45X to the Code to establish the advanced manufacturing production credit. Section 45X(a)(1) and (2) provide that, for purposes of the general business credit under § 38 of the Code, the advanced manufacturing production credit for any taxable year is an amount equal to the sum of the credit amounts determined under § 45X(b) with respect to each eligible component (as defined in § 45X(c)) produced by the taxpayer and sold by such taxpayer to an unrelated person, but only if such production and sale is in a trade or business of the taxpayer.

Section 45X(a)(3) provides rules regarding the sale of components to an unrelated person, and generally provides a special rule that, for purposes of § 45X(a), treats a taxpayer as selling components to an unrelated person if such component is sold to such

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inverter described in § 45X(c)(2)(B) through (G), qualifying battery component, and applicable critical mineral. Section 45X(c)(1)(B) clarifies that the term “eligible component” does not include any property that is produced at a facility if the basis of any property that is part of such facility is taken into account for purposes of the qualifying advanced energy project credit allowed under § 48C after August 16, 2022 (that is, the date of enactment of the IRA).

Section 45X(c)(2)(A) generally defines “inverter” as an end product that is suitable to convert direct current electricity from 1 or more solar modules or certified distributed wind energy systems into alternating current electricity. Section 45X(c)(2)(B) through (G) define the following different types of eligible inverters: central inverter, commercial inverter, distributed wind inverter, microinverter, residential inverter, and utility inverter.

Section 45X(c)(3)(A) defines a “solar energy component” as photovoltaic cells, photovoltaic wafers, polymeric backsheets, solar grade polysilicon, solar modules, and torque tubes or structural fasteners. Section 45X(c)(3)(B) defines these different types of eligible solar energy components as well as the term “solar tracker.”

Section 45X(c)(4)(A) defines “wind energy component” as blades, nacelles, towers, offshore wind foundations, and related offshore wind vessels. Section 45X(c)(4)(B) defines these different types of eligible wind energy components.

Section 45X(c)(5)(A) defines a “qualifying battery component” as electrode active materials, battery cells, and battery modules. Section 45X(c)(5)(B) defines these different types of qualifying battery components.

Section 45X(c)(6) provides the following list of 50 minerals that when converted or purified to specified purities are considered an “applicable critical mineral” for purposes of the § 45X credit: aluminum, antimony, arsenic, barite, beryllium, bismuth, cerium, cesium, chromium, cobalt, dysprosium, erbium, europium, fluorspar, gadolinium, gallium, germanium, graphite, hafnium, holmium, indium, iridium, lanthanum, lithium, lutetium, magnesium,

manganese, neodymium, nickel, niobium, palladium, platinum, praseodymium, rhodium, rubidium, ruthenium, samarium, scandium, tantalum, tellurium, terbium, thulium, tin, titanium, tungsten, vanadium, ytterbium, yttrium, zinc, and zirconium.

(4) Special rules Section 45X(d) prescribes special rules applicable for the § 45X credit. Section 45X(d)(1) provides that persons are treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under the common control rules of § 52(b) of the Code. Section 45X(d)(2) provides that sales of eligible components are taken into account under § 45X only with respect to eligible components the production of which is within the United States (including continental shelf areas described in § 638(1) of the Code), or a U.S. territory (including continental shelf areas described in § 638(2)). Section 45X(d)(3) directs the Secretary to promulgate regulations adopting rules similar to the rules of § 52(d) to apportion credit amounts between estates or trusts and their beneficiaries on the basis of the income of the estates or trusts allocable to each and passthru any apportioned credit amounts to the beneficiaries. Section 45X(d)(4) provides that for purposes of the § 45X credit, a person is 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.

.02 Qualifying Advanced Energy Proj- ect Credit (§ 48C)

(1) Overview Section 48C was originally enacted by § 1302(b) of the American Recovery and Reinvestment Act of 2009, Public Law 111-5, Division B, Title I, Subtitle D, 123 Stat. 115, 345 (February 17, 2009), to provide an allocated credit for qualified investments in qualifying advanced energy projects. For purposes of the investment tax credit determined for any taxable year under § 46 of the Code, § 48C generally allows a qualifying advanced energy project credit equal to 30 percent of a taxpayer’s qualified investment for such

taxable year with respect to any qualifying advanced energy project of the taxpayer. ¹ The amount treated as the qualified investment for all taxable years with respect to a qualifying advanced energy project cannot exceed the amount allocated to the project by the Secretary.

Section 48C has been amended several times, most recently by § 13501 of the IRA. Section 13501(a) of the IRA adds new § 48C(e) to the Code to extend the § 48C credit to provide an additional credit allocation of $10 billion. Section 13501(b) of the IRA modifies the definition of a “qualifying advanced energy project” contained in § 48C(c)(1)(A). Section 13501(c) and (d) of the IRA make conforming amendments to § 48C(c)(2) (A) and (f). The amendments made by § 13501 of the IRA are effective on January 1, 2023. See § 13501(e) of the IRA.

(2) New § 48C(e) Section 48C(e)(1) directs the Secretary to establish a program to consider and award certifications for qualified investments eligible for § 48C credits to qualifying advanced energy project sponsors.

Section 48C(e)(2) provides that the total amount of § 48C credits that may be allocated under such program cannot exceed $10 billion, of which no greater than $6 billion may be allocated to qualified investments which (1) prior to August 16, 2022 (the date of enactment of § 48C(e)), have not received a certification and allocation of credits under § 48C(d), and (2) are not located within one of the following census tracts described in § 45(b)(11)(B) (iii):

a) A census tract in which a coal mine has closed after December 31, 1999.

b) A census tract in which a coal-fired electric generating unit has been retired after December 31, 2009.

c) A census tract directly adjoining such a census tract described in a) or b).

Section 48C(e)(3)(A) provides that each applicant for certification must submit an application at such time and containing such information as the Secretary may require. Section 48C(e)(3)(B) provides that each applicant for certification has 2 years from the date of acceptance by

1 Section 48C(e)(4)(A) provides a base credit rate of 6 precent for allocations under § 48C(e). The base credit rate is increased to 30 precent for any project that satisfies the prevailing wage requirements of § 48C(e)(5)(A) and the apprenticeship requirements of § 48C(e)(6). See Notice 2022-51 requesting comments on prevailing wage and apprenticeship requirements.

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the Secretary of the application to provide to the Secretary evidence that the requirements of the certification have been met.

Section 48C(e)(3)(C) provides that an applicant who receives a certification has 2 years from the date of issuance of the certification to place the project in service and to notify the Secretary that such project has been so placed in service. If the project is not placed in service within the two year period, then the certification is no longer valid. If any certification is revoked under § 48C(e)(3), the total amount of the credits that may be allocated under § 48C(e)(2) is increased by the amount of § 48C credit with respect to such revoked certification.

Section 48C(e)(3)(D) provides that in the case of an applicant which receives a certification, if the Secretary determines that the project has been placed in service at a location that is materially different than the location specified in the application for such project, the certification is no longer valid.

Section 48C(e)(7) provides that the Secretary must, upon making a certification under § 48C(e), publicly disclose the identity of the applicant and the amount of the § 48C credit with respect to such applicant.

(3) Amendments to § 48C(c)(1)(A) As amended by the IRA, § 48C(c)(1) (A) defines the term “qualifying advanced energy project” as one of the three following project types, any portion of the qualified investment of which is certified by the Secretary under § 48C(e) as eligible for a § 48C credit:

(i) A project that re-equips, expands, or establishes an industrial or manufacturing facility for the production or recycling of one of the following nine property types:

(I) Property designed to be used to produce energy from the sun, water, wind, geothermal deposits or other renewable resources.

(II) Fuel cells, microturbines, or energy storage systems and components.

(III) Electric grid modernization equipment or components.

(IV) Property designed to capture, remove, use, or sequester carbon oxide emissions.

(V) Equipment designed to refine, electrolyze, or blend any fuel, chemical, or product which is renewable or low-carbon and low-emission.

(VI) Property designed to produce energy conservation technologies (including residential, commercial, and industrial applications).

(VII) Light, medium, or heavy-duty electric or fuel cell vehicles, as well as technologies, components, or materials for such vehicles, and associated charging or refueling infrastructure.

(VIII) Hybrid vehicles with a gross vehicle weight rating of not less than 14,000 pounds, as well as technologies, components, or materials for such vehicles.

(IX) Other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary.

(ii) A project that re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of (I) low- or zero-carbon process heat systems, (II) carbon capture, transport, utilization, and storage systems, (III) energy efficiency and reduction in waste from industrial processes, or (IV) any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary.

(iii) A project that re-equips, expands, or establishes an industrial facility for the processing, refining, or recycling of critical materials (as defined in § 7002(a) of the Energy Act of 2020 (30 USC § 1606(a)).

Section 48C(c)(2)(A) defines “eligible property” as any property that is necessary for the production or recycling of property described in § 48C(c)(1)(A)(i), re-equipping an industrial or manufacturing facility described in § 48C(c)(1)(A)(ii), or re-equipping, expanding, or establishing an industrial facility described in § 48C(c) (1)(A)(iii).

(4) Denial of Double Benefit As amended by § 13501(c) of the IRA, § 48C(f) provides that a § 48C credit is not allowed for a qualified investment for which a credit is allowed under §§ 48, 48A, 48B, 48E, 45Q or 45V.