Visit our Tax Updates Page to Discover the Latest Legislation Changes

45X: Advanced Manufacturing Production Credit

Schedule a Free Consultation

    Thank you for reaching out! Our tax specialist will get in touch with you in less than 24 hours

    What is the 45X Tax Credit?

    The Section 45X Advanced Manufacturing PTC is a federal tax credit aimed at encouraging the production and sale of eligible components for renewable energy systems, such as solar and wind energy components, inverters, qualifying battery components, and critical minerals.

    Credit-Eligible Components

    Credit-eligible product must be (1) produced by the taxpayer in the U.S. or related territories and (2) sold by the taxpayer to an unrelated party.

    Credit-Eligible Product Produced by the Taxpayer

    Produced keyboard_arrow_down keyboard_arrow_up

    To be considered “produced,” a significant transformation of the underlying components or raw materials is required, rather than simply engaging in assembly or minor modifications. This applies to items such as solar-grade polysilicon, electrode active materials, and critical minerals. The process involves the processing, conversion, refinement, or purification of source materials like brine, ores, or waste streams to derive a distinct eligible component.

    The definition of “produced” does not require U.S.-sourced raw materials or subcomponents, allowing for the use of internationally sourced inputs in the transformation process.

    Contract Manufacturing keyboard_arrow_down keyboard_arrow_up

    The party that is directly involved in the transformative production process is the party that may claim the credit.

    Parties may agree to shift the credit claim if:

    1) the agreement is entered into before the production of the eligible component is completed, 2.) the contract is not for a routine purchase of off-the-shelf items or for minor modifications, and 3) all relevant contracting parties provide signed certification statements indicating which person shall claim the credit.

    Anti-abuse Rule keyboard_arrow_down keyboard_arrow_up

    Denies § 45X credit to prevent exploiting the credit system, particularly in cases where components are produced and sold and then subsequently wasted or destroyed.

    45X Product Sold by the Taxpayer to Unrelated Persons

    Unrelated Person
    A person that would not be treated as a single employer with the credit claimant.

    Tax Year
    Must be sold in relevant tax year

    Unrelated Person Exception
    When sales of subcomponents are made among a consolidated group (or commonly controlled entities) for integration into components and ultimate sales to unrelated parties, the taxpayer may make a “related person election” in the form and a sale of components from taxpayer to a related person will be treated as an unrelated person.

    Additional Information

    • Payments
      Direct Pay (§6417)

      Taxpayers may elect to receive a direct payment (i.e., make an elective payment election) in lieu of a tax credit.

    • Price_Change
      Electing Taxpayers

      Taxpayers, partnerships, and S corporations electing to be treated as applicable entities can elect to treat the advanced manufacturing production credit as a payment of income tax.

    • Currency_Exchange
      Credit Transfer

      Eligible taxpayers, partnerships, and S corporations not electing payment can transfer their credit to an unrelated third party for cash. Applicable entities and electing taxpayers are not eligible.

    • Fact_Check
      Pre-filing Registration

      The IRS requires pre-filing registration before electing payment or transfer of credits for producing and selling eligible components. Register no earlier than the start of the credit-earning period and at least 120 days before the return due date (including extensions).

    Explore Additional Services

    Contact us to schedule an initial consultation

    mail mail Schedule a call