SECTION 8. CONDITIONS FOR — Internal Revenue Bulletin 2025-8

USE OF THE FIRST UPDATED ELECTIVE SAFE HARBOR

.01 In General . The First Updated Elective Safe Harbor applies to both the Steel or Iron Requirement and the Manufactured Products Requirement of the Domestic Content Requirement for each Applicable Project for which a taxpayer elects to have the First Updated Elective Safe Harbor apply. Notice 2023-38 requires that costs that are included in the numerator and denominator for purposes of calculating the Domestic Cost Percentage are the direct materials and direct labor costs that are paid or incurred by the manufacturer of the Manufactured Product. Taxpayers are further required to calculate the direct costs of any U.S.

13 Consistent with Notice 2023-38, the direct cost of producing a Manufactured Product counts toward the Domestic Cost Percentage only if all its Manufactured Product Components are domestically produced.

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Components that may have been incorporated into Non-U.S. Manufactured Products. The Treasury Department and the IRS are aware that obtaining a manufacturer’s direct costs of manufacturing may require the taxpayer to gather cost data from multiple suppliers and manufacturers, including foreign manufacturers, and may present challenges for substantiation and verification.

.02 First Updated Elective Safe Harbor . Unless otherwise provided in this notice, a taxpayer electing to use the First Updated Elective Safe Harbor for an Applicable Project must use the Applicable Project Components, the Manufactured Product Components, and the Updated Assigned Cost Percentages listed in a table provided in sections 5-7 of this notice as the exclusive and exhaustive set of Applicable Project Components, Manufactured Product Components and Updated Assigned Cost Percentages for purposes of determining compliance with the Domestic Content Requirement for each Applicable Project for which the taxpayer makes this election. The requirements in the previous sentence apply regardless of whether property listed in a table provided in sections 5-7 of this notice is fully or fractionally owned or shared. The classifications and cost percentages provided in a tables provided in sections 5-7 of this notice will be accepted by the IRS for the identified Manufactured Products and Manufactured Product Components for purposes of determining compliance with the Steel or Iron Requirement and calculating the Domestic Cost Percentage if all other requirements in this notice and Notice 2023-38 are met. To be eligible for the First Updated Elective Safe Harbor, Applicable Projects are not required to be made of all the Applicable Project Components provided in a table provided in sections 5-7 of this notice, and each Applicable Project Component listed is not required to be made of the full list of Manufactured Product Components provided in a table provided in sections 5-7 of this notice. Taxpayers may still elect to use the First Updated Elective Safe Harbor even if entries in a table of this notice are not used as inputs to their Applicable Projects or Manufactured Products, or if the Applicable Project contains additional inputs not listed

in a table provided in sections 5-7 of this notice.

Any Applicable Project Component or Manufactured Product Component listed in a table provided in sections 5-7 of this notice that is not used as an input to the Applicable Project must be treated by the electing taxpayer as having a zero value in calculating the Domestic Cost Percentage. An Applicable Project Component or Manufactured Product Component contained in a taxpayer’s Applicable Project but not listed in a table provided in sections 5-7 of this notice will not disqualify the taxpayer from using the First Updated Elective Safe Harbor. However, such unlisted items may not count toward satisfying the Adjusted Percentage Rule. The absence of a Manufactured Product or Manufactured Product Component that is listed in a table provided in sections 5-7 of this notice, or the presence of a Manufactured Product or Manufactured Product Component that is not listed in sections a table provided in 5-7 of this notice, in an Applicable Project does not affect the Assigned Cost Percentages listed in sections 5-7 for purposes of the First Updated Elective Safe Harbor.

.03 First Updated Elective Safe Harbor Requirements .

(1) In general . Unless otherwise provided, all other provisions of Notice 202338 apply in determining whether an Applicable Project meets the Domestic Content Requirement. For example, the Applicable Project Components that are specified as subject to the Steel or Iron Requirement in sections 5-7 of this notice must satisfy the Steel or Iron Requirement described in section 3.02 of Notice 2023-38. See sections 8.03(8) and 10 of this notice for the First Updated Elective Safe Harbor’s election and certification requirements.

(2) No Partial Safe Harbor Reliance . Taxpayers that elect to use the First Updated Elective Safe Harbor must apply in its entirety the section of this notice that is specific to the Applicable Project for which the taxpayer makes such election. For example, if a taxpayer’s Applicable Project is a land-based wind facility, the taxpayer must use the classifications for Applicable Project Components and Manufactured Product Components in section 6.02 of this notice with respect to landbased wind and must use the Updated

Assigned Cost Percentages for all the Manufactured Products and Manufactured Product Components (for example, Blades, Rotor Hub, Nacelle, and Power Converter) provided in section 6.02 of this notice that are used in the taxpayer’s Applicable Project without substitution.

(3) Determining Domestic Cost Per- centage . To determine the Domestic Cost Percentage using the First Updated Elective Safe Harbor, a taxpayer must refer to the section of this notice that describes the taxpayer’s Applicable Project and add up the Updated Assigned Cost Percentages for each listed U.S. Manufactured Product (as defined in section 3.03(1) of Notice 2023-38) and U.S. Component (as described in section 3.03(2)(b) of Notice 2023-38) of the taxpayer’s Applicable Project. This total value is the Domestic Cost Percentage for purposes of the First Updated Elective Safe Harbor. Any Manufactured Product or Manufactured Product Component listed in a table provided in sections 5-7 of this notice that is not a part of the taxpayer’s Applicable Project must take a zero value for the Updated Assigned Cost Percentage under the First Updated Elective Safe Harbor for such Manufactured Product or Manufactured Product Component, with all Updated Assigned Cost Percentages shown in sections 5-7 of this notice remaining unchanged. Any Manufactured Product or Manufactured Product Component not listed in a table provided in sections 5-7 of this notice must be disregarded for purposes of determining the Domestic Cost Percentage using the First Updated Elective Safe Harbor.

(4) Solar PV systems with Domes- tic C-Si PV Cells and Domestic Wafers . Taxpayers with ground-mount (tracking), ground-mount (fixed), rooftop (MLPE), or rooftop (string) solar PV systems may elect to use the associated cost percentages for ground-mount (tracking) with domestic c-Si PV cells and domestic wafers, ground-mount (fixed) with domestic c-Si PV cells and domestic wafers, rooftop (MLPE) with domestic c-Si PV cells and domestic wafers, or rooftop (string) with domestic c-Si PV cells and domestic wafers if all, or a portion of, the PV modules in the Applicable Project use domestically manufactured c-Si PV cells that exclusively use domestically manu

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factured wafers, as the terms are defined in section 5.07 of this notice and subject to the guidance in section 8.03(5) of this notice below.

(5) Foreign- and Domestic-Sourced Manufactured Products and/or Manufac- tured Product Components . Taxpayers who source the same type of Manufactured Product or Manufactured Product Component (that is, they are listed in the same row of a particular table in sections 5-7 of this notice) from both foreign and domestic sources (Mixed Source Item or MSI) in a particular Applicable Project described in sections 5-7 of this notice may use the First Updated Elective Safe Harbor to determine a single Updated Assigned Cost Percentage for each sep

For purposes of this formula: (a) DCPDomestic MSI means the Updated Assigned Cost Percentage derived from the tables in this notice of the Mixed Source Item.

(b) Nameplate CapacityDomesticMSI means the nameplate capacity of the Mixed Source Items of the same type in the Applicable Project that is produced in the United States.

(c) Nameplate CapacityMSI means the total nameplate capacity of the Mixed Source Items of the same type in the Applicable Project.

For Mixed Source Items without nameplate capacities, the portion of cost percentage provided in sections 5-7 of this notice that may count toward the Domestic Cost Percentage must be calculated by using the weighted average formula described above, modified by replacing the nameplate capacity of the Mixed Source Items with the nameplate capacities of the associated Applicable Project Components with which the Mixed Source Item is directly integrated. For this purpose, Mixed Source Items without nameplate capacities must apply: the total nameplate capacity of the associated PV module(s) for the Solar PV Table; the total nameplate capacity of the associated wind turbine for land-based wind; or the total nameplate capacity of the battery pack(s)

DCPDomestic MSI x Nameplate CapacityDomestic MSI

Nameplate Capacity MSI

for BESS. If a type of Mixed Source Item without nameplate capacity has multiple units that are both foreign- and domestic-sourced associated and directly integrated with the same Applicable Project Component with nameplate capacity, then all such Mixed Source Items must be treated as foreign-sourced.

(6) Production Costs . The tables in sections 5-7 of this notice contain a line item for “Production,” which, although listed under the column for Manufactured Product Components, is not a Manufactured Product Component. With the exception noted in section 8.03(5) of this notice, above, “Production” refers to the production cost of the relevant Manufactured Product and can be included in the total Domestic Cost Percentage only if all the Manufactured Product Components of a Manufactured Product are domestically produced. See Notice 2023-38, section 3.03(2). The Updated Assigned Cost Percentage attributable to production costs for a particular Manufactured Product may be used if such Manufactured Product contains Manufactured Product Components not listed in a table provided in sections 5-7 of this notice or if entries in a table provided in sections 5-7 of this notice are not a part of such Manufactured Product, so long as the remainder of the Manufactured Product Components in sections 5-7

arate type of Mixed Source Item in the Applicable Project.

Taxpayers that elect to use the associated cost percentages for solar PV with domestic c-Si PV cells and domestic wafers where only a portion of the Applicable Project’s PV cells are domestic c-Si PV cells that exclusively use domestically manufactured wafers must treat any domestically manufactured PV cells that do not exclusively use domestic wafers as though such PV cells are foreign sourced for purposes of using the cost percentages in this notice, and may not include the “Production” cost percentage for PV modules containing such cells that otherwise meet the definition of a U.S. Manufactured Product in section 3.03(2) of Notice 2023-38. Furthermore, taxpayers that elect

to use the associated cost percentages for ground-mount (tracking) with domestic c-Si PV cells and domestic wafers, groundmount (fixed) with domestic c-Si PV cells and domestic wafers, rooftop (MLPE) with domestic c-Si PV cells and domestic wafers, or rooftop (string) with domestic c-Si PV cells and domestic wafers must use the corresponding Updated Assigned Cost Percentages for all the Manufactured Products and Manufactured Product Components in the Applicable Project for purposes of determining the Domestic Cost Percentage.

For Mixed Source Items (MSI), that have a nameplate capacity, the following weighted average formula may be used to determine the Updated Assigned Cost Percentage attributable to each type of Mixed Source Item:

that are a part of such Manufactured Product are mined, produced, or manufactured in the United States.

(7) Exclusive Safe Harbor . A taxpayer that elects to use the First Updated Elective Safe Harbor with respect to an Applicable Project must consider the steel or iron products, Manufactured Products, and Manufactured Product Components that are identified in a table provided in sections 5-7 of this notice as an exclusive and exhaustive set of steel or iron products, Manufactured Products, and Manufactured Product Components for purposes of determining compliance with the Domestic Content Requirement for that Applicable Project. The First Updated Elective Safe Harbor may still be used in instances in which a taxpayer’s Applicable Project does not contain every item identified in a table in sections 5-7 of this notice, or in which a taxpayer’s Applicable Project contains additional items not identified in a table provided in sections 5-7 of this notice, provided the taxpayer applies the requirements for determining Domestic Cost Percentage described in section 8.03(3)-(7) of this notice.

(8) Certification . Taxpayers must affirmatively elect to rely on the First Updated Elective Safe Harbor in sections 5-7 of this notice and must notify the IRS of this election by providing information on the

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Domestic Content Certification Statement as described in section 10 of this notice.

.04 Examples (1) Example 1. (a) In its taxable year beginning in June 2025, Taxpayer purchases a 100-megawatt direct current (MWdc) ground-mounted PV (tracker) (Applicable Project A) from Contractor under an EPC contract, places the project in service, and makes a valid election to use the First Updated Elective Safe Harbor to qualify for the domestic content bonus credit amount under § 48. Applicable Project A is an energy project for purposes of § 48 that is comprised of five categories of Applicable Project Components identified in the table in section 5.05 in this notice for a ground-mounted PV (tracker): PV modules, inverters, PV trackers, steel piles, and steel reinforcing products in foundation. For purposes of the Adjusted Percentage Rule, the adjusted percentage is 40 percent for energy projects that are not offshore wind facilities. See § 48(a)(12)(B).

(b) In accordance with the table in section 5.05 of this notice, taxpayer identifies the steel piles and steel reinforcing products in foundation as steel or iron products and the PV modules, inverters, and PV trackers as Manufactured Products.

(c) All of the steel piles and steel reinforcing products in foundation are manufactured in the United States and meet the Steel or Iron Requirement.

(d) Two sets of PV modules are used in the Applicable Project A. One set has a capacity of 60 MWdc and are PV modules manufactured in the United States that incorporate c-Si PV cells and wafers that are manufactured in the United States, with the modules’ remaining Manufactured Product Components, as identified in accordance with the table in section 5.05 of this notice, also manufactured in the United States. The remaining set has a capacity of 40 MWdc and are PV modules that are not manufactured in the United States and that have no U.S. Components. None of Applicable Project A’s PV inverters are manufactured in the United States or have any U.S. Components.

(e) The PV trackers used in Applicable Project A are manufactured in the United States and have seven categories of Manufactured Product Components (torque tubes, structural fasteners, drive system, dampers, actuator, controllers, and rails) of which a portion of the torque tubes are manufactured in the United States. The PV trackers are associated and directly integrated with all the PV modules used in Applicable Project A. The torque tubes manufactured in the United States are the only torque tubes associated and directly integrated with 80 MWdc of Applicable Project A’s PV modules. The remainder of torque tubes and other PV tracker components are not manufactured in the United States. The PV trackers are Non-U.S. Manufactured Products because some of their Manufactured Product Components are not produced in the United States.

(f) Applicable Project A’s steel or iron products identified in the table in section 5.05 of this notice meet the Steel or Iron Requirement. The Taxpayer makes a valid election to use the associated cost percentages for ground-mount (tracking) with domestic c-Si PV cells & domestic wafers. The Taxpayer is able to do so because a portion of the PV modules in the Applicable Project use domestically manufactured crystalline silicon cells that exclusively use domestically manufactured wafers. The table in

section 5.05 of this notice identifies the torque tube Manufactured Product Component of a PV tracker of a PV system as constituting 8.6% of the total cost of Manufactured Products for this type of Applicable Project. The table in section 5.05 of this notice identifies the Manufactured Product Components of a PV module as constituting 69.7% (51.6% + 4.7% + 4.7% + 3.0% + 3.0% + 0.8% + 0.2% + 0.2% + 1.2%

0.3%) of the total cost of Manufactured Products for an Applicable Project that is a ground-mounted PV (tracker) with domestic c-Si PV cells & domestic wafers. In addition to these costs, the table in section 5.05 of this notice provides that the cost to produce PV modules for such an Applicable Project constitutes 3.7% of the total cost of Manufactured Products for such an Applicable Project. Based on a nameplate capacity weighted average of Applicable Project Component categories and Manufactured Product Component categories identified in the table in section 5.05 of this notice, the total Updated Assigned Cost Percentage attributable to the PV modules of Applicable Project A would be calculated as: (69.7%
3.7%) x 60 / 100 = 44.0%. Based on a nameplate capacity weighted average (using the capacities of the Applicable Project Components associated with the torque tubes),the Updated Assigned Cost Percentage attributable to the torque tubes of Applicable Project A would be calculated as: 8.6% x 80 / 100 = 6.9%. Applicable Project A’s overall Domestic Cost Percentage is: 44.0% + 6.9% = 50.9%. Applicable Project A satisfies the Adjusted Percentage Rule because its Domestic Cost Percentage of 50.9% exceeds the adjusted percentage that applies to Applicable Project A (40%).

(2) Example 2. (a) Assume the same facts as in Example 1, except that the second set of PV modules used in Applicable Project A, with a capacity of 40 MWdc, are manufactured in the United States with domestically produced PV cells using foreign wafers though none of those modules’ other components are produced in the United States. The taxpayer makes a valid election to use the associated cost percentages for ground-mount (tracking) with domestic c-Si PV cells & domestic wafers. The Taxpayer is able to do so because a portion of the PV modules in Applicable Project A use domestically manufactured c-Si cells that exclusively use domestically manufactured wafers. Consistent with section 8.03(5) of this notice, the 40 MW of PV modules using foreign wafers must be treated as having foreign cells and the PV modules also are Non-U.S. Manufactured Products. In this case, the Domestic Cost Percentage would be the same as in Example 1, or 50.9%, even though the second set of PV modules are manufactured in the United States and contain domestically produced PV cells. When a taxpayer elects to use the associated cost percentages for PV systems with domestic c-Si cells and domestic wafers it must treat any domestically-produced PV cells that do not exclusively use domestic wafers as not being U.S. Components, and hence must treat the modules in which those cells are used as Non-U.S. Manufactured Products for purposes of using such cost percentages.

(3) Example 3. (a) Assume the same facts as in Example 2, except that the taxpayer does not elect to use the associated cost percentages for ground-mount (tracking) with domestic c-Si PV cells & domestic wafers.

(b) Applicable Project A’s steel or iron products identified in the table in section 5.05 of this notice meet the Steel or Iron Requirement. The table in section 5.05 of this notice identifies the torque tube Manufactured Product Component of a PV tracker of a PV system that does not contain domestic c-Si cells and wafers as constituting 11.0% of the total cost of Manufactured Products for this type of Applicable Project.

The table in section 5.05 of this notice identifies the Manufactured Product Components of a PV module as constituting 61.1% (38.0% + 6.0% + 6.0% + 3.8% + 3.8% + 1.0% + 0.3% + 0.3% + 1.5%

0.4%) of the total cost of Manufactured Products for an Applicable Project that is a ground-mounted PV (tracker). In addition to these costs, the table in section 5.05 of this notice provides that the cost to produce PV modules for such an Applicable Project constitutes 4.7% of the total cost of Manufactured Products for such an Applicable Project. Based on a nameplate capacity weighted average of Applicable Project Component categories and Manufactured Product Component categories identified in the table in section 5.05 of this notice, the total Updated Assigned Cost Percentage attributable to the first set of PV modules of Applicable Project A would be calculated as: (61.1% + 4.7%) x 60 / 100 = 39.5%. Based on a nameplate capacity weighted average of Applicable Project Component categories and Manufactured Product Component categories identified in the table in section 5.05 of this notice, the total Updated Assigned Cost Percentage attributable to the second set of PV modules of Applicable Project A would be calculated as: (38.0%) x 40 / 100 = 15.2%. Based on a nameplate capacity weighted average (using the capacities of the Applicable Project Components associated with the torque tubes), the Updated Assigned Cost Percentage attributable to the torque tubes of Applicable Project A would be calculated as: 11.0% x 80 / 100 = 8.8%. Applicable Project A’s overall Domestic Cost Percentage is: 39.5% + 15.2% + 8.8% = 63.5%. Applicable Project A satisfies the Adjusted Percentage Rule because its Domestic Cost Percentage of 63.5% exceeds the adjusted percentage that applies to Applicable Project A (40%).

(4) Example 4. (a) In its taxable year beginning June 2025, Taxpayer purchases a 100-megawatt direct current (MWdc) ground-mounted PV (tracker) (Applicable Project B) from Contractor under an EPC contract, places the project in service, and makes a valid election to use the First Updated Elective Safe Harbor to qualify for the domestic content bonus credit amount under § 48. Applicable Project B is an energy project for purposes of § 48 that is comprised of five categories of Applicable Project Components identified in the table in section 5.05 in this notice for a groundmounted PV (tracker): PV modules, inverters, PV trackers, steel piles, and steel reinforcing products in foundation. For purposes of the Adjusted Percentage Rule, the adjusted percentage is 40 percent for energy projects that are not offshore wind facilities. See § 48(a)(12)(B).

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