The US Department of the Treasury and Internal Revenue Service (IRS) have issued comprehensive guidance on the Inflation Reduction Act's (IRA) domestic content bonus, a cornerstone of President Biden's economic agenda aimed at fortifying domestic manufacturing and fostering clean energy advancement.
According to the directive, the domestic content bonus is designed to incentivize the utilization of domestically sourced steel, iron, and manufactured products in construction endeavors, mandating that all manufacturing processes for steel and iron components occur within the United States.
In a concerted effort with the Department of Energy (DOE), the Treasury has set forth this guidance to furnish taxpayers with clear directives, thereby expediting the adoption of the bonus provision and galvanizing investments in American-made clean energy.
“The new guidance provides important clarity and certainty on eligibility for the domestic content bonus,” affirmed a spokesperson for the Treasury.
Moreover, to facilitate taxpayers in determining compliance with the minimum percentage of domestically sourced components, the directive introduces a novel elective safe harbor. This provision enables clean energy developers to opt for DOE-provided default cost percentages, streamlining the evaluation process for an exhaustive array of manufactured products and their components.
In elaborating on the significance of these incentives, US Deputy Secretary of the Treasury, Wally Adeyemo, remarked: “Today's guidance provides important clarity to companies and simplifies the process. This should help companies make more clean power investments using US-made equipment, generating new business for manufacturers and creating more good-paying jobs.”
Senior Advisor to the President for International Climate Policy, John Podesta, concurred, emphasizing the crucial role of the domestic content bonus in bolstering American workers and businesses: “Today's new safe harbor approach will make it simpler for more companies to take advantage of this powerful incentive and support good-paying American jobs.”
The Treasury and IRS have further articulated their intent to issue supplementary guidance, encompassing additional sectors such as offshore wind, and propose regulations governing projects employing elective pay, thereby advancing the IRA's mission of promoting US solar manufacturing.
