SECTION 2. BACKGROUND

.01 Domestic Content Bonus Credit Amounts and Steel, Iron, or Manufactured Products . Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), amends §§ 45 and 48, in part, to provide rules that taxpayers must satisfy to receive bonus credit amounts for satisfying domestic content requirements with respect to steel, iron, and manufactured products with respect to qualified facilities and energy projects placed in service after December 31, 2022. The IRA also adds new § 45Y and new § 48E, which provide similar rules for domestic content bonus credit amounts with respect to qualified facilities, and qualified investments in qualified facilities or energy storage technologies, placed in service after December 31, 2024. On May 12, 2023, the Treasury Department and the IRS released Notice 2023-38, 2023-22 I.R.B. 872, which states that the Treasury Department and the IRS intend to propose regulations to address the application of the rules that taxpayers must satisfy to qualify for the domestic content bonus credit amounts under §§ 45, 45Y, 48, and 48E. Taxpayers may rely on Notice 202338 for the domestic content bonus credit requirements for any qualified facility, energy project, or qualified investment with respect to a qualified facility or energy storage technology the construction of which begins before the date that is 90 days after the date of publication of the forthcoming proposed regulations on the domestic content bonus credit requirements in the Fed- eral Register .

.02 Statutory Elective Payment Phase- outs and Exceptions . Section 45(b)(10), as amended by the IRA, provides the Statutory Elective Payment Phaseouts with respect to the credit determined under § 45 (§ 45 credit). Section 45(b)(10) (A) provides that in the case of a taxpayer making an election under § 6417 with respect to a § 45 credit, the amount of such credit will be replaced with the value of such credit (determined without regard to § 45(b)(10)), multiplied by the applicable percentage. Section 45(b)(10)(B) provides

1 Unless otherwise specified, all “section” or “§” references are to sections of the Code.

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that in the case of any qualified facility (1) that satisfies the requirements under § 45(b)(9)(B) (that is, the domestic content bonus credit requirements as set forth in Notice 2023-38 or other forthcoming guidance), or (2) with a maximum net output of less than 1 megawatt (as measured in alternating current), the applicable percentage is 100 percent. Section 45(b)(10) (C) states that subject to the exceptions in § 45(b)(10)(D), for any qualified facility that is not described in § 45(b)(10)(B), the applicable percentage is (1) 100 percent if construction of such facility begins before January 1, 2024, and (2) 90 percent if construction of such facility begins in calendar year 2024.

Section 45(b)(10)(D)(i) directs the Secretary to provide exceptions to the requirements under § 45(b)(10) if: (1) the inclusion of steel, iron, or manufactured products that are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent (Increased Cost Exception), or (2) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality (Non‑Availability Exception). Section 45(b)(10)(D)(ii) provides that in any case in which the Secretary provides an exception pursuant to § 45(b)(10)(D) (i), the applicable percentage is 100 percent. The Increased Cost Exception and the Non-Availability Exception are collectively referred to as the Domestic Content Exceptions in this notice.

Section 48(a)(13), as amended by the IRA, and §§ 45Y(g)(12) and 48E(d)(5), as added by the IRA, provide the Statutory Elective Payment Phaseout rules and Domestic Content Exceptions for credits determined under those Code sections, which are similar to the rules and exceptions provided under § 45(b)(10). ²