85798 Federal Register / Vol. 89, No. 208 / Monday, October 28, 2024 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 10010] 

RIN 1545–BQ85 

Advanced Manufacturing Production 

Credit 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final rule. 

SUMMARY: This document sets forth final 

regulations regarding the advanced 

manufacturing production credit 

established by the Inflation Reduction 

Act of 2022 to incentivize the 

production of eligible components 

within the United States. Eligible 

components include certain solar energy 

components, wind energy components, 

inverters, qualifying battery 

components, and applicable critical 

minerals. These final regulations also 

address specific recordkeeping and 

reporting requirements. These final 

regulations affect eligible taxpayers who 

produce and sell eligible components 

and intend to claim the benefit of an 

advanced manufacturing production 

credit, including by making elective 

payment or credit transfer elections. 

DATES: 

Effective date: These regulations are 

effective December 27, 2024. 

Applicability date: For date of 

applicability, see §§ 1.45X–1(j), 1.45X– 

2(f), 1.45X–3(g), and 1.45X–4(d). 

FOR FURTHER INFORMATION CONTACT: 

Mindy Chou, John Deininger, Derek 

Gimbel, or Alexander Scott at (202) 

317–6853 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Authority 

This document contains final 

regulations (final regulations) that 

amend the Income Tax Regulations (26 

CFR part 1) to implement the statutory 

provisions of section 45X of the Internal 

Revenue Code (Code). The final 

regulations are issued by the Secretary 

of the Treasury or her delegate 

(Secretary) under the authority granted 

under sections 45X(a)(3)(B)(i) and (ii), 

1502, 6001, 6417(h), 6418(h), and 

7805(a) of the Code. 

Section 45X(a)(3)(B)(i) of the Code 

provides a specific delegation of 

authority to the Secretary to prescribe 

the form and manner for a taxpayer to 

make an election such that ‘‘a sale of 

components by such taxpayer to a 

related person shall be deemed to have 

been made to an unrelated person.’’ 

Section 45X(a)(3)(B)(ii) provides a 

specific delegation of authority to the 

Secretary, ‘‘[a]s a condition of, and prior 

to, any election described in [section 

45X(a)(3)(B)(i)],’’ to ‘‘require such 

information or registration as the 

Secretary deems necessary for purposes 

of preventing duplication, fraud, or any 

improper or excessive amount 

determined under [section 45X(a)(1)].’’ 

Section 1502 of the Code requires the 

Secretary to ‘‘prescribe such regulations 

as he may deem necessary in order that 

the tax liability of any affiliated group 

of corporations making a consolidated 

return and of each corporation in the 

group, both during and after the period 

of affiliation, may be returned, 

determined, computed, assessed, 

collected, and adjusted, in such manner 

as clearly to reflect the income-tax 

liability and the various factors 

necessary for the determination of such 

liability, and in order to prevent 

avoidance of such tax liability.’’ Section 

1502 of the Code also provides that the 

Secretary ‘‘may prescribe rules that are 

different from the provisions of chapter 

1 that would apply if such corporations 

filed separate returns.’’ 

Section 6001 of the Code provides an 

express delegation of authority to the 

Secretary, stating that, ‘‘[e]very person 

liable for any tax imposed by this title, 

or for the collection thereof, shall keep 

such records, render such statements, 

make such returns, and comply with 

such rules and regulations as the 

Secretary may from time to time 

prescribe. Whenever in the judgment of 

the Secretary it is necessary, [s]he may 

require any person, by notice served 

upon such person or by regulations, to 

make such returns, render such 

statements, or keep such records, as the 

Secretary deems sufficient to show 

whether or not such person is liable for 

tax under this title.’’ 

Sections 6417(h) and 6418(h) of the 

Code direct the Secretary to issue such 

regulations or other guidance as may be 

necessary to carry out the purposes of 

each section, respectively. 

Finally, section 7805(a) of the Code 

authorizes the Secretary ‘‘to prescribe 

all needful rules and regulations for the 

enforcement of [the Code], including all 

rules and regulations as may be 

necessary by reason of any alteration of 

law in relation to internal revenue.’’ 

Background 

I. Overview of Section 45X 

Section 45X was added to the Code by 

section 13502(a) of Public Law 117–169, 

136 Stat. 1818 (August 16, 2022), 

commonly known as the Inflation 

Reduction Act of 2022 (IRA). In general, 

for purposes of the general business 

credit under section 38 of the Code, 

section 45X provides for the advanced 

manufacturing production credit 

(section 45X credit) with respect to 

eligible components produced by the 

taxpayer and sold during the taxable 

year to an unrelated person. Section 45X 

applies to eligible components 

produced and sold after December 31, 

2022. 

Under section 45X(a)(1), the total 

section 45X credit amount for the 

taxable year equals the sum of the credit 

amounts determined under section 

45X(b) with respect to each eligible 

component (as defined in section 

45X(c)(1)). Under section 45X(a)(2), any 

eligible component produced and sold 

by the taxpayer is taken into account 

only if the production and sale is in a 

trade or business of the taxpayer. 

Section 45X(a)(3) generally provides 

rules regarding the sale of eligible 

components to an unrelated person. 

However, section 45X(a)(3)(B) provides 

a special rule whereby if a taxpayer 

makes an election in the form and 

manner prescribed by the Secretary, a 

sale of eligible components by the 

taxpayer to a related person will be 

treated as if made to an unrelated 

person, referred to in these final 

regulations as the related person 

election (Related Person Election). As a 

condition of, and prior to, a taxpayer 

making the Related Person Election, the 

Secretary may require such information 

or registration as the Secretary deems 

necessary for purposes of preventing 

duplication, fraud, or any improper or 

excessive credit amount. 

II. Credit Amounts for Eligible 

Components 

Section 45X(b)(1) generally provides 

the credit amount determined with 

respect to any eligible component, 

including any other eligible component 

it incorporates, subject to the credit 

phase out rules provided at section 

45X(b)(3). Section 45X(b)(1)(A) through 

(M) and section 45X(b)(2) set forth the 

credit amounts for each type of eligible 

component. The credit amounts are 

generally subject to phase out rules 

under section 45X(b)(3), but the phase 

out rules do not apply to any applicable 

critical mineral. For any eligible 

component (except applicable critical 

minerals) sold after December 31, 2029, 

the credit amount for such component 

equals the product of the amount 

determined under section 45X(b)(1) for 

such component multiplied by the 

applicable phase out percentage under 

section 45X(b)(3)(B)(i) through (iv). In 

the case of an eligible component sold 

during calendar year 2030, 2031, and 


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1The preamble to these section 45X final 

regulations refers to U.S. territory to mean a 

possession as defined in section 638(2). 

2032, the phase out percentages are 75 

percent, 50 percent, and 25 percent, 

respectively. For any eligible 

component sold after December 31, 

2032, the phase out percentage is zero 

percent, and no section 45X credit is 

allowed other than for applicable 

critical minerals. 

Section 45X(b)(4) provides capacity 

limitations used to compute the credit 

amount for battery cells under section 

45X(b)(1)(K)(ii) and battery modules 

under section 45(b)(1)(L)(ii). Section 

45X(b)(4)(A) provides that the capacity 

determined with respect to a battery cell 

or battery module must not exceed a 

capacity-to-power-ratio of 100:1. Section 

45X(b)(4)(B) defines ‘‘capacity-to-powerratio’’ as the ratio of the capacity of a 

battery cell or battery module to the 

maximum discharge amount of such cell 

or module. 

III. Eligible Components 

Section 45X(c)(1)(A) defines an 

eligible component to mean any solar 

energy component, any wind energy 

component, any inverter described in 

section 45X(c)(2)(B) through (G), any 

qualifying battery component, and any 

applicable critical mineral. Section 

45X(c)(1)(B) clarifies that eligible 

components do 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 

section 48C after August 16, 2022 (the 

date of enactment of the IRA). 

Section 45X(c)(2)(A) generally defines 

an inverter as an end product that is 

suitable to convert direct current (DC) 

electricity from one or more solar 

modules or certified distributed wind 

energy systems into alternating current 

(AC) electricity. Section 45X(c)(2)(B) 

through (G) defines 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 a solar module, 

photovoltaic cell, photovoltaic wafer, 

solar grade polysilicon, torque tube, 

structural fastener, or polymeric 

backsheet. Section 45X(c)(3)(B) defines 

these different types of eligible solar 

energy components as well as a solar 

tracker. 

Section 45X(c)(4)(A) defines a 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) defines applicable 

critical minerals. The following 

minerals are eligible for the section 45X 

credit if converted or purified to 

specified purities or forms: 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. 

IV. Special Rules 

Section 45X(d)(1) provides that 

persons are related to each other for 

purposes of the section 45X credit if 

they would be treated as a single 

employer under section 52(b) of the 

Code and § 1.52–1(b). Section 52(b) and 

§ 1.52–1(b) generally provide that trades 

or businesses that are partnerships, 

trusts, estates, corporations, or sole 

proprietorships under common control 

are members of a controlled group and 

are treated as a single employer. Section 

52(b) requires the regulations under 

section 52(b) to be based on principles 

similar to the principles that apply 

under section 52(a), which generally 

provide that corporations that are 

members of a controlled group of 

corporations are treated as a single 

employer. Section 52(a) provides that a 

controlled group of corporations is 

defined with reference to section 

1563(a) of the Code. Section 52(b) and 

§ 1.52–1 provide rules based on 

principles similar to those under section 

52(a), but with certain modifications to 

account for different types of ownership 

interests. 

Section 45X(d)(2) provides that sales 

of eligible components are taken into 

account under section 45X only for 

eligible components that are produced 

within the United States (including 

continental shelf areas described in 

section 638(1) of the Code), or a U.S. 

territory (including continental shelf 

areas described in section 638(2)).1

Section 45X(d)(3) directs the 

Secretary to promulgate regulations 

adopting rules similar to the rules of 

section 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 to pass-thru any 

apportioned credit amounts to the 

beneficiaries. 

Section 45X(d)(4) provides that 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 that is sold to an 

unrelated person. 

V. Prior Guidance 

On October 24, 2022, the Department 

of the Treasury (Treasury Department) 

and the IRS published Notice 2022–47, 

2022–43 IRB 312, requesting comments 

on issues arising under section 45X that 

may require guidance. On December 15, 

2023, after full consideration of all the 

stakeholder input received in response 

to Notice 2022–47, the Treasury 

Department and the IRS published a 

notice of proposed rulemaking and a 

notice of public hearing (REG–107423– 

23) in the Federal Register (88 FR 

86844) to provide guidance on the 

advanced manufacturing production 

credit under section 45X (Proposed 

Regulations). While the Proposed 

Regulations are summarized in the 

Summary of Contents and Explanation 

of Revisions portion of this preamble, 

the provisions of the Proposed 

Regulations are explained in greater 

detail in the preamble to the Proposed 

Regulations. 

On March 6, 2023, the Treasury 

Department and the IRS published 

Notice 2023–18, 2023–10 IRB 508, 

establishing the qualifying advanced 

energy project allocation program 

(section 48C(e) program). On June 20, 

2023, the Treasury Department and the 

IRS published Notice 2023–44, 2023–25 

IRB 924, providing additional guidance 

on the section 48C(e) program, 

including rules for the interaction 

between sections 45X and 48C. The 

rules regarding the interaction between 

sections 45X and 48C provided in 

Notices 2023–18 and 2023–44 were 

addressed in the Proposed Regulations 

and have been incorporated into these 

final regulations. Section 5.05(2) of 

Notice 2023–18 and section 3 of Notice 

2023–44 are superseded by these final 

regulations. 


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Summary of Comments and 

Explanation of Revisions 

I. Overview 

This Summary of Comments and 

Explanation of Revisions summarizes 

the Proposed Regulations, all 

substantive comments submitted in 

response to the Proposed Regulations, 

and revisions adopted by these final 

regulations. The Treasury Department 

and the IRS received 193 written 

comments in response to the Proposed 

Regulations. The comments are 

available for public inspection at 

https://www.regulations.gov or upon 

request. A public hearing was held in 

person and telephonically on February 

22, 2024. After full consideration of the 

comments and testimony, these final 

regulations adopt the Proposed 

Regulations with modifications in 

response to the comments and 

testimony as described in this Summary 

of Comments and Explanation of 

Revisions. 

Comments merely summarizing the 

statute or the Proposed Regulations, 

recommending statutory revisions to 

section 45X or other statutes, and 

addressing issues that are outside the 

scope of this rulemaking (such as 

revising other Federal regulations and 

recommending changes to IRS forms) 

are generally not addressed in this 

Summary of Comments and Explanation 

of Revisions or adopted in these final 

regulations. Some commenters 

requested additional time to submit 

comments. The Proposed Regulations 

required all comments to be received by 

February 13, 2024; however, comments 

received later but before these final 

regulations were substantially 

developed were carefully considered in 

drafting these final regulations. The 

final regulations retain the same basic 

structure as the Proposed Regulations 

with certain revisions. 

II. General Rules Applicable to the 

Advanced Manufacturing Production 

Credit 

A. In general 

Proposed § 1.45X–1 would have 

provided general rules regarding the 

section 45X credit including generally 

applicable definitions, rules regarding 

the computation of the credit amount, 

the definition of ‘‘produced by the 

taxpayer,’’ the requirement to produce 

eligible components in the United 

States, the production and sale in a 

trade or business requirement, the sale 

of integrated components, the 

interaction between sections 45X and 

48C, and an anti-abuse rule. 

Commenters addressed certain aspects 

of these proposed rules, as described in 

Part II. of this Summary of Comments 

and Explanation of Revisions. These 

final regulations generally adopt 

proposed § 1.45X–1, with the 

modifications described in this Part II. 

of the Summary of Comments and 

Explanations of Revisions. 

B. Definition of Produced by the 

Taxpayer 

1. In General 

Section 45X(a)(1) allows a section 45X 

credit with respect to each eligible 

component which is produced by the 

taxpayer and sold to an unrelated 

person during the taxable year. 

Proposed § 1.45X–1(c)(1) would have 

defined ‘‘produced by the taxpayer’’ to 

mean a process conducted by the 

taxpayer that substantially transforms 

constituent elements, materials, or 

subcomponents into a complete and 

distinct eligible component that is 

functionally different from that which 

would result from mere assembly or 

superficial modification of the elements, 

materials, or subcomponents. Proposed 

§ 1.45X–1(c)(1)(i) would have provided 

that ‘‘produced by the taxpayer’’ does 

not include partial transformation that 

does not result in substantial 

transformation of constituent elements, 

materials, and subcomponents into a 

complete and distinct eligible 

component as described in proposed 

§ 1.45X–1(c)(1). Proposed § 1.45X– 

1(c)(1)(ii) would have provided that 

‘‘produced by the taxpayer’’ does not 

include minor assembly of two or more 

constituent elements, materials, or 

subcomponents, or superficial 

modification of the final eligible 

component, if the taxpayer does not also 

engage in the process resulting in a 

substantial transformation described in 

proposed § 1.45X–1(c)(1). Proposed 

§ 1.45X–1(c)(1)(iii) would have provided 

examples illustrating the definition of 

‘‘produced by the taxpayer.’’ 

Several commenters requested that 

the final regulations specifically state 

that taxpayers may produce eligible 

components using recycled materials. 

While the preamble to the Proposed 

Regulations stated that primary and 

secondary production are included in 

the definition of ‘‘produced by the 

taxpayer,’’ that issue was not addressed 

in the text of the Proposed Regulations. 

The preamble to the Proposed 

Regulations further stated that primary 

production involves producing an 

eligible component using non-recycled 

materials while secondary production 

involves producing an eligible 

component using recycled materials. 

The Treasury Department and the IRS 

agree with the request to clarify the 

general rule that production includes 

primary and secondary production, and 

these final regulations revise proposed 

§ 1.45X–1(c)(1) and (2) to add secondary 

production to the definition of produced 

by the taxpayer. 

A few commenters stated the 

definition of ‘‘produced by the 

taxpayer’’ should be defined 

consistently with section 263A of the 

Code to the extent possible and 

expressed concern that using different 

definitions will cause ‘‘increased 

technical uncertainty, additional 

compliance burden, especially for small 

business taxpayers, and unnecessary 

litigation and controversy.’’ Another 

commenter stated that the Proposed 

Regulations introduced new definitions, 

such as ‘‘substantial transformation’’ as 

production qualifiers, ‘‘raising concerns 

about its apparent conflict with the 

enacted statutes.’’ 

The term ‘‘produced by the taxpayer’’ 

is not defined in section 45X, nor is 

there any indication in section 45X 

suggesting that Congress intended the 

use of any existing statutory definition, 

such as the standard in section 263A. 

Section 45X provides a credit based on 

the production of numerous eligible 

components and a variety of production 

processes are utilized by manufacturers 

in the production of these eligible 

components. 

Given the variety of production 

processes and the highly technical 

nature of production, the Treasury 

Department and the IRS, in close 

coordination with the Department of 

Energy, proposed a definition that 

would apply broadly to eligible 

components. In addition, the proposed 

definition of ‘‘produced by the 

taxpayer’’ focused on requiring 

production of a complete and distinct 

eligible component and, accordingly, 

introduces a substantial transformation 

requirement to distinguish production 

from partial transformation, mere 

assembly, and superficial modification. 

The proposed definition of ‘‘produced 

by the taxpayer’’ along with the 

amendment clarifying that production 

includes secondary production is the 

appropriate standard to implement the 

section 45X credit. The definition 

provides the necessary flexibility to 

account for the highly technical nature 

of the production processes associated 

with eligible components. This standard 

also ensures that the section 45X credit 

is claimed by the taxpayer responsible 

for the key production activity and that 

such activity occurs in the United States 

or a United States territory. In contrast 

to section 45X, section 263A is designed 


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to ensure that taxpayers capture the 

direct and indirect costs associated with 

producing inventoriable goods for 

capitalization purposes. Moreover, in 

section 263A, the definition of 

production applies to a broad range of 

produced items, whereas the definition 

in section 45X applies to a limited 

number of statutorily enumerated 

eligible components. For these reasons, 

the Treasury Department and the IRS 

have concluded that the definition of 

‘‘produced by the taxpayer’’ in the 

Proposed Regulations with the 

clarifying amendment addressing 

secondary production appropriately 

implements section 45X(a)(1)(A), and 

thus decline to accept the commenter’s 

recommendation to define ‘‘produced 

by the taxpayer’’ for purposes of section 

45X consistent with the similar term 

under section 263A. 

Several commenters requested that 

the final regulations provide more 

specific guidance for certain eligible 

components to illustrate whether certain 

activities or processes result in 

substantial transformation versus partial 

transformation, mere assembly, or 

superficial modification. One 

commenter, for example, requested that 

the final rules confirm that the term 

‘‘produced’’ in the phrase ‘‘produced by 

the taxpayer’’ is applied within the 

context of the standard production 

process of each eligible component, 

such that the standard production 

process for each eligible component is 

deemed to be ‘‘substantial 

transformation’’ that meets the 

requirements of proposed § 1.45X– 

1(c)(1). The commenter provided an 

example of the production of a solar 

module, which ‘‘involves the final 

assembly of the other solar components, 

many of which separately qualify for 

their own section 45X credit, into the 

overall module.’’ The Treasury 

Department and the IRS recognize that 

certain eligible components, such as 

solar modules and battery modules 

using battery cells, are produced 

primarily by assembling other 

components. In these limited cases, the 

substantial transformation requirement 

is met by the taxpayer that assembles 

the constituent components to produce 

the solar module or battery module 

using battery cells. Because assembly is 

the activity that primarily produces 

these eligible components, the assembly 

necessary to achieve production of a 

solar module or battery module using 

battery cells should not generally be 

viewed as disqualifying ‘‘minor 

assembly.’’ The Treasury Department 

and the IRS also recognize that certain 

eligible components, such as nacelles, 

that have undergone substantial 

transformation to be considered 

‘‘produced by the taxpayer’’ may be 

produced and sold to a third party in a 

manner in which only minor assembly 

remains left to complete. In these cases, 

provided all other requirements of 

section 45X are met, the party that 

produces and sells the eligible 

components in such manner is not 

precluded from claiming the section 

45X credit. The third party that 

completes the eligible component by 

performing minor assembly is not 

entitled to the section 45X credit 

because that third party is not 

considered to produce the eligible 

component. For these reasons, and for 

clarity and consistency, the final 

regulations replace each instance of 

‘‘mere assembly’’ in the Proposed 

Regulations, with ‘‘minor assembly.’’ 

A commenter suggested adding an 

additional example to proposed 

§ 1.45X–1(c)(1)(iii) to clarify whether 

the integration of electrical 

subcomponents and software necessary 

to enable the functionality of an inverter 

is disqualifying minor assembly, and 

another commenter requested 

clarification on whether the coating of a 

battery separator is ‘‘superficial 

modification’’ or ‘‘substantial 

transformation.’’ A few commenters also 

requested that the final rules further 

clarify ‘‘substantial transformation’’ to 

ensure manufacturers claiming section 

45X credits are actually producing an 

eligible component in the United States 

and suggested using examples to 

differentiate between substantial and 

partial transformation for specific 

components, such as inverters for solar 

energy. 

As previously discussed, section 45X 

provides a credit based on the 

production of numerous eligible 

components and a variety of production 

processes are utilized by manufacturers 

in the production of these eligible 

components. Thus, listing specific 

production processes for each eligible 

component is not practicable and could 

also imply that other variations of 

production processes do not qualify as 

production. The Treasury Department 

and the IRS have determined that the 

inquiry into whether production 

activities or processes result in 

substantial transformation for a specific 

eligible component is highly fact 

dependent and conclude that the 

examples in proposed § 1.45X– 

1(c)(1)(iii), which are included in the 

final regulations, provide sufficient 

guidance to determine what types of 

activities or production steps do not 

qualify as substantial transformation. 

2. Special Rule for Production of Certain 

Eligible Components 

Proposed § 1.45X–1(c)(2) would have 

provided that for solar grade 

polysilicon, electrode active materials, 

and applicable critical minerals, 

produced by the taxpayer means 

processing, conversion, refinement, or 

purification of source materials, such as 

brines, ores, or waste streams, to derive 

a distinct eligible component. Several 

commenters requested that in addition 

to processing, conversion, refinement, 

and purification, the final regulations 

clarify that the production process 

includes extraction, while others 

requested maintaining the position in 

the Proposed Regulations to exclude 

costs of extraction. The Treasury 

Department and the IRS decline to 

amend the final regulations to expressly 

include the term ‘‘extraction,’’ as the 

action of extraction alone does not 

produce an eligible component. For the 

discussion and analysis of whether 

extraction costs are includible as 

production costs in the production of 

electrode active materials or applicable 

critical minerals, see Part IV.E.1.e. of 

this Summary of Comments and 

Explanation of Revisions. 

Another commenter asked whether 

recycling aluminum transformer wire 

(cleaning, melting, and bailing it) to 

send to an aluminum smelter 

constitutes ‘‘secondary aluminum 

production.’’ The Treasury Department 

and the IRS note that under both 

proposed § 1.45X–1(c)(2) and § 1.45X– 

1(c)(2) of these final regulations, 

substantial transformation for an 

applicable critical mineral requires that 

the applicable critical mineral be 

‘‘processed, converted, refined, or 

purified to derive a distinct eligible 

component.’’ Because a taxpayer in 

these circumstances would not derive a 

distinct eligible component, this would 

not be an eligible component produced 

by the taxpayer within the meaning of 

section 45X(a)(1)(A). 

These final regulations make a 

clarifying revision to the definition of 

produced by the taxpayer under 

proposed § 1.45X–1(c)(2) so that it 

references substantial transformation. 

While no comments were received on 

this issue, this revision is needed to 

appropriately align the definition of 

‘‘produced by the taxpayer’’ in § 1.45X– 

1(c)(2) with the requirements to qualify 

as an eligible taxpayer in § 1.45X– 

1(c)(3). 

3. Eligible Taxpayer 

a. In General 

Proposed § 1.45X–1(c)(3)(i) would 

have provided that the taxpayer 


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claiming a section 45X credit with 

respect to an eligible component must 

be the person that performs the actual 

production activities that bring about a 

substantial transformation resulting in 

the eligible component and that sells 

such eligible component to an unrelated 

person. 

b. Contract Manufacturing Arrangement 

Proposed § 1.45X–1(c)(3)(ii)(A) would 

have provided that, if the production of 

an eligible component is performed in 

whole or in part subject to a contract 

that is a contract manufacturing 

arrangement, then the party to such 

contract that may claim the section 45X 

credit with respect to such eligible 

component, provided all other 

requirements in section 45X are met, is 

the taxpayer that performs the actual 

production activities that bring about a 

substantial transformation resulting in 

the eligible component. The preamble to 

the Proposed Regulations stated that 

this proposed rule was intended to 

provide an administrable rule that 

provides clarity and certainty in 

determining which taxpayer may claim 

the section 45X credit in a contract 

manufacturing arrangement. 

c. Contract Manufacturing Defined 

Proposed § 1.45X–1(c)(3)(ii)(B) would 

have defined the term ‘‘contract 

manufacturing arrangement’’ to mean 

any agreement providing for the 

production of an eligible component if 

the agreement is entered into before the 

production of the eligible component to 

be delivered under the contract is 

completed. Proposed § 1.45X– 

1(c)(3)(ii)(B) would have further 

provided that a routine purchase order 

for off-the-shelf property is not treated 

as a contract manufacturing 

arrangement. Proposed § 1.45X– 

1(c)(3)(ii)(B) also would have provided 

that an agreement will be treated as a 

routine purchase order for off-the-shelf 

property if the contractor is required to 

make no more than de minimis 

modifications to the property to tailor it 

to the customer’s specific needs, or if at 

the time the agreement is entered into, 

the contractor knows or has reason to 

know that the contractor can satisfy the 

agreement out of existing stocks or 

normal production of finished goods. 

This definition of the term ‘‘routine 

purchase order’’ is based on the 

definition found in § 1.263A– 

2(a)(1)(ii)(B)(2)(ii). The Treasury 

Department and the IRS requested 

comments in the preamble to the 

Proposed Regulations on whether this 

definition should be further clarified or 

modified. Comments on the definition 

of manufacturing arrangements are 

discussed in Part II.B.3.d. of this 

Summary of Comments and Explanation 

of Revisions. 

d. Special Rule for Contract 

Manufacturing Arrangements 

Proposed § 1.45X–1(c)(3)(iii) would 

have explained the special rule allowing 

parties to a contract manufacturing 

arrangement to agree on which party to 

the contract will claim the section 45X 

credit for eligible components produced 

subject to such contract. Proposed 

§ 1.45X–1(c)(3)(iv) would have 

explained the certification requirements 

for the special rule. Several commenters 

expressed support for the contract 

manufacturing rules, but one 

commenter expressed concern about the 

treatment of contract manufacturing 

arrangements in effect prior to the 

applicability date of the Proposed 

Regulations. This commenter 

recommended that the final regulations 

adopt a safe harbor rule that would 

function as an exception to the general 

rule and provide that when one party is 

contractually entitled to purchase all or 

substantially all (for example, at least 90 

percent) of the output of the fabricator’s 

production of a given component for the 

taxable year, the purchaser would be 

treated as the producer for purposes of 

section 45X. The Treasury Department 

and the IRS decline to adopt the 

commenter’s request to add a safe 

harbor for contract manufacturing 

arrangements in place before the 

applicability date of the Proposed 

Regulations, but note that a taxpayer 

may still have the option of applying the 

special rule in § 1.45X–1(c)(3)(iii) of 

these final regulations for contract 

manufacturing arrangements entered 

into before the applicability date, 

provided all requirements of the special 

rule are met. 

The preamble to the Proposed 

Regulations stated that the Treasury 

Department and the IRS intend for the 

production cost incurred rules in 

proposed § 1.45X–3(e)(2) to apply to a 

credit claimant in a contract 

manufacturing arrangement. The 

Treasury Department and the IRS 

requested comments on whether the 

proposed rules need further clarification 

or modification as applied to contract 

manufacturing arrangements. One 

commenter requested allowing 

taxpayers that extract and recycle raw 

materials and taxpayers that process 

such materials and incorporate them 

into applicable critical minerals to 

apply the contract manufacturing 

arrangement provisions, in the event 

that costs of extraction and direct and 

indirect material costs are not includible 

in the eligible production costs of 

producing an applicable critical 

mineral. The Treasury Department and 

the IRS think that the clarification 

requested by this commenter is no 

longer necessary because these final 

regulations permit the inclusion of 

extraction and certain material costs in 

the cost of producing an applicable 

critical mineral if certain requirements 

are met. See Parts IV.E.1.e. and V.C. of 

this Summary of Comments and 

Explanation of Revisions for further 

discussion. 

Proposed § 1.45X–1(c)(3)(v) would 

have provided examples illustrating the 

application of the special rule. One 

commenter requested that proposed 

§ 1.45X–1(c)(3)(v)(C) (Example 3) 

specifically state that the domestic 

production requirement requires that 

each wind tower section must be 

produced in the United States. Proposed 

§ 1.45X–(1)(c)(3)(v)(C) (Example 3) 

states that a taxpayer could claim a 

credit for a tower for which it had three 

different producers each produce one 

section, provided that the parties all 

agree that the taxpayer is the sole party 

that can claim the credit and ‘‘all other 

requirements of section 45X are met.’’ 

The Treasury Department and the IRS 

have determined that the domestic 

production requirement is already 

included by this language and thus, 

additional clarification is not necessary. 

Another commenter questioned 

whether, in proposed § 1.45X– 

1(c)(3)(v)(C) (Example 3), V must sell 

the completed wind tower to Z for the 

special rule in proposed § 1.45X– 

1(c)(3)(iii) to apply. In the example, V 

enters into a contract manufacturing 

arrangement with W, X, and Y to make 

the wind tower, which V sells to Z. All 

parties to the contract manufacturing 

arrangement and Z are unrelated. The 

commenter stated that if V, W, X, and 

Y sign a certification statement and Y 

claims the section 45X credit, Y could 

claim the section 45X credit in 2025 

because that is when it sold the eligible 

component to V. Contrary to the 

commenter’s conclusion with respect to 

Y’s ability to claim a section 45X credit 

in 2025, Y is not eligible for the section 

45X credit until the eligible component, 

which is the wind tower comprised of 

all three wind tower sections, is 

produced and then sold to an unrelated 

person (in this case Z). Under the 

contract manufacturing arrangement, W, 

X, and Y are collectively viewed as 

producing the entire eligible component 

(wind tower) because all three sections 

together result in a single eligible 

component. Along with the production 

of the entire wind tower, V has to sell 

the completed wind tower to an 


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2See Joint Committee on Taxation, General 

Explanation of Tax Legislation Enacted in the 117th 

Congress, JCS–1–23 (December 21, 2023) at 267 

(‘‘The credit only applies to sales where the eligible 

components are produced within the United States 

or U.S. territories. This requirement is not intended 

to apply to subcomponents or materials used to 

produce eligible components.’’). 

unrelated person before the designated 

party is eligible for a section 45X credit. 

A commenter suggested revisions to 

the proposed rules to allow an 

allocation of any portion of the credit to 

parties who extract the mineral and 

perform initial refining processes, rather 

than allowing a credit to the taxpayer 

that purifies the critical mineral to the 

statutory minimum. Section 45X(c)(6) 

defines a list of applicable critical 

minerals with specific minimum purity 

levels which must be met for the 

taxpayer to have produced an eligible 

component. The Treasury Department 

and the IRS do not have the authority 

to modify these statutory requirements. 

However, the Treasury Department and 

the IRS seek to clarify that a taxpayer 

who performs extracting and refining 

activities may benefit from the contract 

manufacturing provisions described in 

this section. The final regulations 

accordingly add § 1.45X–1(c)(3)(v)(D) 

(Example 4) to demonstrate how the 

contract manufacturing provisions may 

apply in the situation described by the 

commenter. 

4. Timing of Production and Sale 

Proposed § 1.45X–1(c)(4)(i) would 

have provided that production of 

eligible components for which a 

taxpayer is claiming a section 45X credit 

may begin before December 31, 2022, 

but production of eligible components 

must be completed, and the eligible 

components must be sold, after 

December 31, 2022. Proposed § 1.45X– 

1(c)(4)(ii) would have provided an 

example illustrating the timing of the 

production and sale rule in proposed 

§ 1.45X–1(c)(4)(i). 

Some commenters requested further 

clarity on when production and sale of 

an eligible component may take place. 

One commenter requested that the final 

rules provide that a specific minimum 

percentage of production of an eligible 

component must occur after 2022 and 

that no sale of the eligible component be 

reported by the taxpayer before 2023. 

The Treasury Department and the IRS 

decline to adopt these percentage test 

suggestions because Congress clearly 

recognized that some production could 

occur prior to 2023 but did not specify 

an exact amount of production that 

must occur in taxable years either before 

or after 2023. Moreover, if a sale 

occurred before 2023, which requires a 

facts and circumstances analysis based 

in part on contractual terms, the 

component sold is not eligible for the 

section 45X credit. Accordingly, the 

final regulations adopt proposed 

§ 1.45X–1(c)(4)(i) and the example in 

proposed § 1.45X–1(c)(4)(ii) without 

modification. 

Another commenter stated that the 

Proposed Regulations do not specify 

whether production activities that 

qualify for the section 45X credit have 

to occur after the effective date of the 

rule or whether the activities can be 

retroactive. The commenter suggests the 

final rule specify the applicable period 

for the production activities and provide 

a reasonable transition rule for 

taxpayers who produce eligible 

components before the effective date of 

the final regulations. The Treasury 

Department and the IRS have 

determined that the Proposed 

Regulations and these final regulations 

are clear as to the timing of production 

and sale requirements under section 

45X. For clarification, and as described 

earlier, section 13502(c) of the IRA 

provides that section 45X applies to 

components produced and sold after 

December 31, 2022. The preamble to the 

Proposed Regulations clarified 

application of the section 45X effective 

date, stating that each of proposed 

§§ 1.45X–1 through 1.45X–4 would have 

applied to eligible components for 

which production is ‘‘completed’’ and 

sales occur after December 31, 2022, and 

during taxable years ending on or after 

the date of publication of these final 

regulations. Proposed § 1.45X–1(c)(4)(i) 

would have provided that production of 

eligible components may begin before 

December 31, 2022, and only required 

production of eligible components be 

completed, and sales must occur, after 

December 31, 2022. Proposed § 1.45X– 

1(c)(4)(ii) would have provided an 

example illustrating proposed § 1.45X– 

1(c)(4)(i). These final regulations adopt 

these proposed rules. The Treasury 

Department and the IRS do not have 

statutory authority to provide for a 

section 45X credit in a situation in 

which production was completed on or 

before December 31, 2022. 

C. Produced in the United States 

Consistent with section 45X(d)(2), 

proposed § 1.45X–1(d)(1) would have 

provided that sales are taken into 

account for purposes of the section 45X 

credit only for eligible components that 

are produced within the United States, 

as defined in section 638(1) of the Code, 

or a United States territory. Proposed 

§ 1.45X–1(d)(2) would have clarified 

that constituent elements, materials, and 

subcomponents used in the production 

of eligible components are not subject to 

the domestic production requirement 

provided in proposed § 1.45X–1(d)(1). 

Thus, while the eligible component 

must be produced domestically, its 

constituent elements, materials, and 

subcomponents need not be.2

Some commenters agreed with this 

approach in the Proposed Regulations. 

According to these commenters, the 

Proposed Regulations appropriately 

allowed the credit for eligible 

components produced in the United 

States provided that the activities 

necessary to transform them into 

eligible components are conducted in 

the United States. Furthermore, these 

commenters expressed concern that a 

contrary rule ignores the reality that 

some constituent elements, materials, 

and subcomponents cannot be sourced 

in the United States and would 

discourage investment in production 

activities that rely on foreign-sourced 

constituent elements, materials, and 

subcomponents. However, other 

commenters disagreed with the 

proposed approach, suggesting that 

allowing eligible components to be 

produced using foreign subcomponents 

is inconsistent with the section 45X 

credit’s objective of incentivizing 

domestic production of eligible 

components. 

The Treasury Department and the IRS 

note that, while section 45X specifically 

requires domestic production of an 

eligible component for credit eligibility, 

it is silent regarding the location of 

production or sourcing of constituent 

elements, materials, and 

subcomponents. Accordingly, imposing 

a domestic production requirement for 

constituent elements, materials, and 

subcomponents is not supported by the 

statutory language of section 45X. For 

these reasons, the Treasury Department 

and the IRS decline to adopt these 

suggestions and adopt the proposed rule 

without change. 

Beyond agreement or disagreement 

with this proposed rule, some 

commenters inquired about its scope. 

One commenter asked whether the 

domestic production rule applicable to 

eligible components also applies to 

eligible components that are both an 

eligible component and a ‘‘constituent 

element, material or subcomponent’’ of 

another eligible component. Another 

commenter asked whether raw materials 

and intermediate products used to 

produce eligible components are 

included in the definition of 

‘‘constituent elements, materials or 

subcomponents.’’ 


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The Treasury Department and the IRS 

confirm that all three of these categories 

of items are included in the definition 

of ‘‘constituent elements, materials, and 

subcomponents.’’ An eligible 

component that is a ‘‘constituent 

element, material or subcomponent’’ of 

another eligible component is not 

subject to the domestic production rule, 

and thus, an eligible component may 

incorporate another eligible component 

that is also a foreign-sourced 

‘‘constituent element, material or 

subcomponent’’ and still be eligible for 

a section 45X credit. In addition, raw 

materials and intermediate products 

generally qualify as constituent 

elements, materials, or subcomponents. 

A commenter also requested 

confirmation in the final regulations 

that there is no requirement that eligible 

components be used in the United 

States for section 45X credit eligibility. 

Consistent with section 45X(d)(2), 

proposed § 1.45X–1(d)(1) would have 

provided that sales are taken into 

account for purposes of the section 45X 

credit only for eligible components that 

are produced within the United States 

(or a United States territory). Thus, the 

Proposed Regulations specify only the 

location of production of the eligible 

component, and not the location of the 

sale or the use of such eligible 

component. Accordingly, the Treasury 

Department and the IRS conclude that 

the additional confirmation requested 

by the commenter is unnecessary, as 

there would be no statutory basis for 

requiring domestic sale or use. 

D. Production and Sale in a Trade or 

Business 

Proposed § 1.45X–1(e) would have 

stated that an eligible component must 

be produced and sold in a trade or 

business of the taxpayer, with the term 

‘‘trade or business’’ defined as a trade or 

business within the meaning of section 

162 of the Code. 

A commenter requested that proposed 

§ 1.45X–1(e) expressly include eligible 

components that are produced and then 

used to replace defective units pursuant 

to a contractual obligation entered into 

at the time of the original sale. The 

commenter stated that these warranty 

transactions do not appear to violate any 

of the anti-abuse provisions at proposed 

§ 1.45X–1(i). If an eligible component is 

produced and sold to an unrelated 

person in the normal course of a trade 

or business, and the eligible component 

is then replaced with a new eligible 

component produced by the same 

taxpayer, there is no new sale to an 

unrelated person for the replacement 

eligible component, but the replacement 

eligible component relates back to the 

original sales transaction. The precise 

issue is whether section 45X should be 

read to effectively incentivize the 

production of two eligible components 

where each is related to a single sales 

transaction. The Treasury Department 

and the IRS decline to adopt this 

suggestion because only one credit may 

be claimed with respect to the sale of an 

eligible component. 

E. Sale of Integrated Components 

1. In General 

Section 45X(d)(4) provides that, for 

purposes of section 45X, 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. Proposed § 1.45X– 

1(f)(1) was intended to be consistent 

with section 45X(d)(4), and thus would 

have provided that a taxpayer is treated 

as having produced and sold an eligible 

component to an unrelated person if 

such component is integrated, 

incorporated, or assembled into another 

eligible component that is then sold to 

an unrelated person. 

Although no comments were received 

regarding this general rule in the 

Proposed Regulations, the Treasury 

Department and the IRS want to clarify 

that section 45X(d)(4) provides only for 

deemed sale treatment and not deemed 

production. A taxpayer must produce 

(rather than merely purchase or acquire) 

an eligible component that is integrated, 

incorporated, or assembled into another 

eligible component that is then sold to 

an unrelated person in order for the 

deemed sale rule to apply. Thus, these 

final regulations clarify that a taxpayer 

is ‘‘treated as having sold’’ an eligible 

component to an unrelated person if the 

taxpayer produced such component and 

the component is integrated, 

incorporated, or assembled into another 

eligible component that is then sold to 

an unrelated person, rather than 

‘‘treated as having produced and sold’’ 

an eligible component that the taxpayer 

did not itself produce that is then 

integrated, incorporated, or assembled 

into another eligible component and 

then sold to an unrelated person. 

Proposed § 1.45X–1(f)(1) is clarified 

accordingly in these final regulations. 

2. Application of Section 45X(d)(4) to 

Produced Products 

Proposed § 1.45X–1(f)(2)(i) would 

have clarified that a taxpayer may claim 

a section 45X credit for each eligible 

component that the taxpayer produces 

and sells to an unrelated person, 

including any eligible component the 

taxpayer produces that was used as an 

element, material, or subcomponent and 

integrated, incorporated, or assembled 

into another complete and distinct 

eligible component or another complete 

and distinct product (that is not itself an 

eligible component) that the taxpayer 

also produces and sells to an unrelated 

person. Proposed § 1.45X–1(f)(2)(ii) 

would have provided an example of the 

credit eligibility of a sale of a product 

with incorporated eligible components 

to a related person. 

Commenters expressed agreement 

with proposed § 1.45X–1(f)(2)(i). One 

commenter stated that the clarification 

in § 1.45X–1(f)(2)(i) avoids the need for 

some vertically integrated producers of 

eligible components that incorporate the 

eligible components into another 

product that is not an eligible 

component to artificially restructure in 

order to create an intercompany sale. 

Another commenter requested a flexible 

interpretation of section 45X(d)(4) that 

would apply the section 45X credit as 

an additive credit across the supply 

chain to the final assembler. The 

commenter stated such an interpretation 

is consistent with the language in 

section 45X(b)(1), which provides that 

the section 45X credit amount is 

determined with respect to any eligible 

component, including any eligible 

component it incorporates. For example, 

in the commenter’s view, a taxpayer that 

produces a structural fastener would be 

eligible to receive a credit for its 

production of an eligible component as 

would the integrator, incorporator, 

assembler of the structural fastener into 

another eligible component. Although 

the Treasury Department and the IRS 

agree that section 45X(b)(1) provides 

that the credit amount is determined 

with respect to any eligible component 

produced by the taxpayer, including any 

eligible component the taxpayer 

incorporates that was also produced by 

the taxpayer, the Treasury Department 

and the IRS disagree with the 

implication that the calculation of the 

section 45X credit should be additive 

based on the number of eligible 

components used to produce an item in 

a case in which each eligible component 

is not produced by the taxpayer. Only 

the producer of an eligible component 

would be eligible for a section 45X 

credit. Proposed § 1.45X–1(f)(1) and (2) 

are finalized with no modifications 

because the Treasury Department and 

the IRS conclude the rules provide 

clarity as currently written. 


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F. Interaction Between Sections 45X and 

48C 

1. In General 

Consistent with section 45X(c)(1)(B), 

proposed § 1.45X–1(g)(1) would have 

provided that, for purposes of section 

45X, an eligible component must be 

produced at a section 45X facility and 

does not include any property 

(produced property) that is produced at 

a facility if the basis of any property that 

is part of the production unit that 

produces the produced property is 

eligible property that is included in a 

section 48C facility and is taken into 

account for purposes of a credit allowed 

under section 48C (section 48C credit) 

after August 16, 2022. 

Proposed § 1.45X–1(g)(2)(i) would 

have provided that a section 45X facility 

includes all tangible property that 

comprises an independently functioning 

production unit that produces one or 

more eligible components. Proposed 

§ 1.45X–1(g)(2)(ii) would have provided 

that a production unit is comprised of 

the tangible property that substantially 

transforms material inputs to complete 

the production process of an eligible 

component. 

Proposed § 1.45X–1(g)(3)(i) would 

have provided that a section 48C facility 

includes all eligible property included 

in a qualifying advanced energy project 

for which a taxpayer receives an 

allocation of section 48C credits and 

claims such credits after August 16, 

2022. Proposed § 1.45X–1(g)(3)(ii) 

would have defined eligible property 

that is included in a section 48C facility. 

With respect to the proposed rules on 

the interaction between sections 45X 

and 48C various comments were 

received. A commenter requested that 

the final rules not apply section 

45X(c)(1)(B) to disallow the section 45X 

credit in the event that the taxpayer 

claiming the section 45X credit 

incorporates into its eligible component 

a subcomponent that was produced by 

a section 48C facility, as long as that 

same taxpayer was not eligible for the 

section 48C credit with respect to the 

section 48C facility that produced the 

subcomponent. Revisions were made to 

these final regulations to clarify that the 

only equipment, or other tangible 

property, that must be included in the 

section 45X facility is the equipment 

used by the taxpayer that is necessary to 

be considered the producer of the 

potential eligible component. As further 

explained later, if production of a 

subcomponent (or like property) is not 

a requirement to be considered the 

producer under section 45X, then the 

equipment that is part of that section 

48C facility used to produce the 

subcomponent is not part of the section 

45X facility. As a result, it is possible 

that the same taxpayer could receive a 

section 48C credit on equipment used to 

produce a subcomponent (or like 

property), and a section 45X credit on 

the production of an eligible 

component. 

One commenter requested an example 

to help determine whether an eligible 

component produced at a facility 

located ‘‘adjacent’’ to a section 48C 

facility that received a section 48C 

credit impacts eligibility for the section 

45X credit. The physical proximity of a 

section 45X facility to a section 48C 

facility does not determine whether a 

product may be an eligible component 

and revisions to these final regulations 

were made to clarify that point. 

Another commenter requested more 

clarity to determine whether a facility 

that shares upstream raw materials and 

processes as a section 48C facility is still 

eligible for a section 45X credit and 

requested examples of upstream supply 

chains and processes that are eligible 

and ineligible for both sections 48C and 

45X. Several commenters requested 

additional clarity regarding the meaning 

and extent of the term ‘‘production 

unit.’’ 

Based on the comments and further 

consideration of the Proposed 

Regulations, revisions were made in 

these final regulations to simplify the 

rules and examples in proposed 

§ 1.45X–1(g)(1) through (4). Specifically, 

these final regulations make clear that 

the general rule is that property that 

would otherwise qualify as an eligible 

component (otherwise qualified 

property) is only an eligible component 

if the property is produced at a section 

45X facility and no part of that section 

45X facility is also a section 48C facility. 

These final regulations also revise the 

definition of section 45X facility, 

clarifying that a section 45X facility is 

the independently functioning tangible 

property used by the taxpayer that is 

necessary to be considered the producer 

of the otherwise qualified property 

within the meaning of § 1.45X–1(c)(1) or 

(2), as applicable. The Proposed 

Regulations would have relied on the 

concept of a ‘‘production unit’’ to define 

the scope of a section 45X facility, but 

there was overlap between the term 

production unit as proposed and the 

definition of a section 45X facility. After 

careful consideration, the Treasury 

Department and the IRS determined that 

the proposed term ‘‘production unit’’ 

introduced unnecessary complexity, 

particularly in light of the revisions to 

the definition of section 45X facility in 

these final regulations. Accordingly, 

these final regulations do not use the 

term production unit. 

The definition of section 45X facility 

in these final regulations includes 

independently functioning tangible 

property that is used and that is 

necessary for the otherwise qualified 

property to be considered produced by 

the taxpayer within the meaning of 

§ 1.45X–1(c)(1) or (2), as applicable. 

Accordingly, tangible property used to 

produce a subcomponent or other 

property which is later integrated, 

incorporated, or assembled into a 

distinct and final eligible component is 

not part of the section 45X facility. This 

rule, however, does not apply if the 

other property is of a type that the 

taxpayer must produce for the resulting 

eligible component to be considered 

produced by the taxpayer. This analysis 

can depend on the definition of the 

eligible component being ultimately 

produced. For example, section 

45X(c)(3)(B)(ii)(I)(bb) requires a single 

manufacturer to produce a photovoltaic 

wafer through formation of an ingot 

from polysilicon and subsequent slicing. 

Thus, the section 45X facility with 

respect to the photovoltaic wafers 

would include any equipment that is 

tangible property that is used to produce 

the ingot and any equipment that is 

tangible property that is used to perform 

the subsequent slicing. In contrast, 

equipment used to produce front glass 

of a solar module under section 

45X(c)(3)(B)(v) could be excluded from 

a section 45X facility because it is not 

necessary to use the front glass 

equipment to be considered the 

producer of the solar module for section 

45X. This rule may benefit a taxpayer 

that produces a subcomponent or other 

property of an eligible component using 

equipment that is also eligible property 

for purposes of the section 48C credit, 

but uses other equipment not related to 

the section 48C credit to produce the 

eligible component. 

Lastly, these final regulations add a 

specific rule for contract manufacturing 

arrangements in § 1.45X–1(g)(2)(ii) to 

address any uncertainty with respect to 

how to determine a section 45X facility 

in that situation. This rule clarifies that 

the tangible property used to produce 

the otherwise qualified property 

(regardless of who claims the credit) 

must be considered. 

4. Examples of Sections 45X and 48C 

Interaction 

Proposed § 1.45X–1(g)(4)(i) through 

(v) would have provided examples to 

illustrate the application of these rules. 

A few commenters requested that, 

contrary to proposed § 1.45X–1(g)(4)(ii) 

(Example 2), ingot and wafer production 


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should be treated as two separate 

manufacturing activities so that an ingot 

facility is eligible for the section 48C 

credit while a wafer facility is eligible 

for the section 45X credit. As required 

by section 45X(c)(3)(B)(ii)(I)(bb), 

however, a photovoltaic wafer must be 

produced by a single manufacturer 

either by forming an ingot from molten 

polysilicon (for example, Czochralski 

method) and then subsequently slicing 

it into wafers, or by forming molten or 

evaporated solar grade polysilicon or 

deposition into a sheet or layer (that is, 

thin-film deposition). As the statute 

requires production of a photovoltaic 

wafer by a single manufacturer that both 

forms an ingot and slices it into wafers, 

it is not appropriate to treat ingot and 

wafer production as two separate 

manufacturing activities. Rather, as both 

activities are necessary, it follows that 

the tangible property used to complete 

each activity must be within a single 

section 45X facility with respect to the 

eligible component produced. No 

comments were received on the other 

examples in proposed § 1.45X–1(g)(4)(i) 

through (v). However, all of the 

examples in proposed § 1.45X–1(g)(4)(i) 

through (v) were modified consistent 

with the revisions in § 1.45X–1(g)(1) 

through (3). 

A few commenters suggested that 

parties in a contract manufacturing 

arrangement under proposed § 1.45X– 

1(c)(3)(iii) could circumvent the 

prohibition under section 45X(c)(1)(B) 

that disallows a section 45X credit for 

items produced at a section 48C facility. 

More specifically, commenters 

suggested that a taxpayer could enter 

into a contract manufacturing 

arrangement under proposed § 1.45X– 

1(c)(3)(iii) to produce photovoltaic 

wafers that are then used to 

manufacture photovoltaic cells. If the 

taxpayer itself integrated, incorporated, 

or assembled the photovoltaic cells into 

solar modules, the taxpayer might claim 

a section 45X credit for all three 

products upon their sale, even though 

the photovoltaic wafers were 

manufactured by the contract 

manufacturer at a section 48C facility 

while the photovoltaic cells were 

manufactured at a section 45X facility, 

if the taxpayer was unaware that the 

contract manufacturer manufactured the 

photovoltaic wafers at a section 48C 

facility. The Proposed Regulations did 

not allow this, and the final regulations 

would continue to disallow a section 

45X credit for the photovoltaic wafers in 

this scenario. To the extent that the 

photovoltaic wafers were produced at a 

section 48C facility, the photovoltaic 

wafers would not qualify as an eligible 

component to any party to the contract 

manufacturing arrangement. As 

described earlier, these final regulations 

add a rule in § 1.45X–1(g)(2)(ii) to 

clarify the rules in a contract 

manufacturing arrangement situation, 

and the examples in § 1.45X–1(g)(4) 

have also been modified. 

G. Anti-Abuse Rule 

As explained in the preamble to the 

Proposed Regulations, proposed 

§ 1.45X–1(i)(1) would have provided a 

general anti-abuse rule that would make 

the section 45X credit unavailable in 

extraordinary circumstances in which, 

based on a consideration of all the facts 

and circumstances, the primary purpose 

of the production and sale of an eligible 

component is to obtain the benefit of the 

section 45X credit in a manner that is 

wasteful, such as discarding, disposing 

of, or destroying the eligible component 

without putting it to a productive use. 

Proposed § 1.45X–1(i)(1) would have 

provided that the rules of section 45X 

and the section 45X regulations must be 

applied in a manner consistent with the 

purposes of section 45X and the section 

45X regulations (and the regulations in 

this chapter under sections 6417 and 

6418 related to the section 45X credit). 

A purpose of section 45X and the 

section 45X regulations (and the 

regulations in this chapter under 

sections 6417 and 6418 related to the 

section 45X credit) is to provide 

taxpayers an incentive to produce 

eligible components in a manner that 

contributes to the development of 

secure and resilient supply chains. 

Accordingly, the section 45X credit is 

not allowable if the primary purpose of 

the production and sale of an eligible 

component is to obtain the benefit of the 

section 45X credit in a manner that is 

wasteful, such as discarding, disposing 

of, or destroying the eligible component 

without putting it to a productive use. 

A determination of whether the 

production and sale of an eligible 

component is inconsistent with the 

purposes of section 45X and the section 

45X regulations (and the regulations in 

this chapter under sections 6417 and 

6418 related to the section 45X credit) 

is based on all facts and circumstances. 

Proposed § 1.45X–1(i)(2) would have 

provided an example illustrating this 

anti-abuse rule. 

One commenter suggested that, in 

applying the anti-abuse rule, the 

taxpayer claiming a section 45X credit 

should not be held responsible for the 

activities of the customer after a sale has 

occurred (unless the customer is a 

related entity); the determination of 

whether a component is defective 

should be made at the factory gate; and 

‘‘productive use’’ should include the 

sale of an eligible component to an 

entity engaged in the business of 

directly (such as a utility) or indirectly 

(such as a project developer) deploying 

the batteries. Proposed § 1.45X–1(i)(1) 

provides that a determination of 

whether the production and sale of an 

eligible component is inconsistent with 

the purposes of section 45X and the 

section 45X regulations (and the 

regulations under sections 6417 and 

6418 related to the section 45X credit) 

is based on all the facts and 

circumstances. Under a facts and 

circumstances analysis, no single factor 

is determinative, and the considerations 

listed by the commenter would have to 

be evaluated in the context of all other 

facts and circumstances. The Treasury 

Department and the IRS thus decline to 

list specific parameters that 

automatically result in a finding of a 

favorable or unfavorable primary 

purpose. 

Another commenter suggested adding 

additional examples to proposed 

§ 1.45X–1(i) to make clear that the 

section 45X credit is never allowable 

with respect to any cost the primary 

purpose of which is to increase the 

amount of the section 45X credit. While 

both examples offered by the 

commenter involve possible abuses, the 

anti-abuse rule is intended to cover a 

broad range of abuses. Proposed 

§ 1.45X–1(i) would have provided that a 

determination of whether the 

production and sale of an eligible 

component is inconsistent with the 

purposes of section 45X and the section 

45X regulations is based on all facts and 

circumstances, and no single factor is 

determinative. Accordingly, the 

Treasury Department and the IRS 

decline to adopt the commenter’s 

suggestion. 

III. Sale to Unrelated Person 

A. In General 

Proposed § 1.45X–2(a) would have 

stated that the amount of the section 

45X credit for any taxable year is equal 

to the sum of the credit amounts 

determined under section 45X(b) (and 

described in proposed §§ 1.45X–3 and 

1.45X–4) with respect to each eligible 

component that is produced by the 

taxpayer and, during the taxable year, 

sold by the taxpayer to an unrelated 

person. Applicable Federal income tax 

principles apply to determine whether a 

transaction is in substance a sale (or the 

provision of a service, or some other 

disposition). Proposed § 1.45X–2(a) also 

would have cross-referenced proposed 

§ 1.45X–1(d) and (e) for additional 

requirements relating to sales. Section 


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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 section 52(b). 

Proposed § 1.45X–2(b) would have 

provided definitions of the terms 

‘‘person,’’ ‘‘related person,’’ and 

‘‘unrelated person’’ for purposes of the 

section 45X credit. 

A few commenters requested 

additional clarity in the final rules on 

how a sale is defined and when a sale 

is determined for the purpose of section 

45X. One commenter recommended that 

a sale be defined for 45X as the point 

when a taxpayer signs a binding 

contractual agreement with a buyer in 

the taxpayer’s trade or business for the 

purchase of an eligible component. 

Section 45X provides special rules 

addressing sales of eligible components 

to related persons that may be treated as 

sales to unrelated persons, and a general 

rule that an eligible component 

produced and sold by the taxpayer is 

only taken into account if such 

production and sale is in a trade or 

business of the taxpayer, but otherwise 

does not provide any specific rules 

regarding whether and when a sale have 

occurred. Proposed § 1.45X–2(a) would 

have provided that applicable Federal 

income tax principles apply to 

determine whether a transaction is in 

substance a sale (or the provision of a 

service, or some other disposition), and 

those same principles apply in 

determining when a transaction is a 

sale. More specific rules on the 

determination of whether and when a 

sale occurs is beyond the scope of these 

final regulations. Accordingly, the 

Treasury Department and the IRS 

maintain the standard in proposed 

§ 1.45X–2(a) and finalize the proposed 

rule without modification. 

Another commenter requested further 

clarification on the sale of eligible 

components in two scenarios. In the 

first scenario, Company A is a U.S. 

based company producing eligible 

components that it sells to Company B, 

which is not directly using the eligible 

components but resells to Company C to 

use in a manufacturing process or 

otherwise in its trade or business. For 

this first scenario, the commenter 

requested clarification on whether 

Company A is eligible to claim the 

section 45X credit for the domestic 

production and sale of the eligible 

components. In the second scenario, the 

commenter assumed the same facts as in 

the first scenario, but Company B or 

Company C is using Company A’s 

eligible component outside the United 

Sates. In this second scenario, the 

commenter requested clarification on 

whether Company A remains eligible to 

claim the section 45X credit for the 

domestic production and sale of the 

eligible components. 

In both scenarios under the Proposed 

Regulations, Company A is eligible to 

claim the section 45X credit for the 

domestic production and sale of the 

eligible components if the production 

and sale is in a trade or business of 

Company A, regardless of whether the 

first purchaser is using the eligible 

component in its trade or business or 

sells to a subsequent purchaser for use 

in the subsequent purchaser’s trade or 

business, and regardless of whether the 

purchaser or subsequent purchaser uses 

the eligible component in the United 

States. Because the Proposed 

Regulations clearly provide this result, 

no further revision is necessary in these 

final regulations. 

B. Special Rules for Sales to a Related 

Person 

Consistent with section 45X(a)(3)(A), 

proposed § 1.45X–2(c)(1) would have 

provided a special rule that, for 

purposes of section 45X(a), a taxpayer is 

treated as selling an eligible component 

to an unrelated person if such 

component is sold to such person by a 

person who is related to the taxpayer. 

Proposed § 1.45X–2(c)(2) would have 

provided an example to illustrate this 

special rule. 

Given the importance of whether 

parties are related persons or unrelated 

persons, a commenter proposed a 

particular fact pattern and requested 

clarification on who the purchaser is 

and whether they were related or 

unrelated to the producer and seller. In 

general, section 45X(d)(1) and proposed 

§ 1.45X–2(b)(2) 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 section 52(b). A 

request for application of the section 

52(b) regulations by the Treasury 

Department and the IRS to a particular 

fact pattern requiring a facts and 

circumstances analysis is outside the 

scope of these final regulations. 

Another commenter requested that 

the final rules clarify whether a Related 

Person Election is necessary when 

eligible components are sold by the 

producer to an unrelated person, who 

subsequently sells them to a person 

related to the producer of such eligible 

components. The commenter proposes 

amending proposed § 1.45X–2(c) to 

clarify that direct or indirect sales to a 

related person qualify if the producer 

knows or has reason to know the 

unrelated person is intending to sell the 

same eligible components to a person 

related to the producer. To provide 

assurance to commenter, a Related 

Person Election is not necessary in this 

situation because the first sale was to an 

unrelated party, but the Treasury 

Department and the IRS have 

determined that the rules as set out by 

proposed § 1.45X–2(c) do not require 

further clarification on this point. In 

addition, if there are circumstances in 

which purported sales are made to 

unrelated persons to circumvent the 

requirements of section 45X, proposed 

§ 1.45X–2(a) provides that applicable 

Federal income tax principles apply to 

determine whether a transaction will be 

respected as a sale. 

C. Related Person Election 

1. Availability of Election—In General 

Proposed § 1.45X–2(d)(1)(i) would 

have provided that a taxpayer may make 

a Related Person Election under section 

45X(a)(3)(B) to treat a sale of eligible 

components by such taxpayer to a 

related person as if made to an 

unrelated person. As a condition of, and 

prior to, a taxpayer making a Related 

Person Election, the Secretary may 

require such information or registration 

as the Secretary deems necessary for 

purposes of preventing duplication, 

fraud, or any improper or excessive 

credit amount determined under section 

45X(a)(1). Proposed § 1.45X–2(d)(1)(ii) 

would have provided the rules 

regarding the Related Person Election 

for members of a consolidated group (as 

defined in § 1.1502–1(h)). 

One commenter requested that 

taxpayers be allowed to exercise the 

Related Person Election in situations 

where it is difficult for the taxpayer to 

determine whether two entities are 

related under the section 52(b) 

regulations. Allowing the exercise of the 

Related Person Election as commenter 

requested would conflict with the 

language in section 45X(d)(1), which 

requires the parties be treated as a single 

employer under the section 52(b) 

regulations, not just that it be difficult 

to determine the status. Therefore, these 

final regulations do not adopt the 

commenter’s request. 

2. Anti-Abuse Rule 

Proposed § 1.45X–2(d)(4) would have 

provided an anti-abuse rule for the 

Related Person Election consistent with 

section 45X(a)(3)(B)(ii) for preventing 

duplication, fraud, or any improper or 

excessive amount of the section 45X 

credit. Proposed § 1.45X–2(d)(4)(i) 

would have provided that a Related 

Person Election may not be made if the 

taxpayer fails to provide the information 

required by proposed § 1.45X–2(d)(2) 


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with respect to the relevant eligible 

components, the taxpayer provides 

information that shows such 

components were put to an improper 

use as defined in proposed § 1.45X– 

2(d)(4)(ii) or were defective as defined 

in proposed § 1.45X–2(d)(4)(iii), or such 

components were actually put to an 

improper use or were defective. 

Proposed § 1.45X–2(d)(4)(ii) would 

have provided that an eligible 

component is put to an improper use if 

it is so used by the related person to 

which the eligible component is sold. 

The term improper use would mean a 

use that is wasteful, such as discarding, 

disposing of, or destroying the eligible 

component without putting it to a 

productive use. The Treasury 

Department and the IRS requested 

comments in the preamble to the 

Proposed Regulations on the definition 

of the term improper use and whether 

any clarifications to its scope are 

necessary. 

Proposed § 1.45X–2(d)(4)(iii) would 

have provided that a defective 

component means a component that 

does not meet the requirements of 

section 45X and the section 45X 

regulations. The Treasury Department 

and the IRS requested comments in the 

preamble to the Proposed Regulations 

on the definition of defective 

components and whether clarifications 

to its scope are necessary. 

In response to the Treasury 

Department and the IRS’s request for 

comments, one commenter requested 

additional guidance regarding when an 

eligible component can be deemed 

defective under section 45X. The 

commenter recommended clarification 

that an eligible component can be 

deemed defective and therefore 

ineligible for a tax credit under section 

45X ‘‘up until the point of sale of the 

eligible component to an unrelated 

party.’’ However, in circumstances 

where a taxpayer has made a valid 

Related Person Election, a sale of 

eligible components to a related person 

is treated as if made to an unrelated 

person, thus making a sale to an 

unrelated person not relevant for section 

45X credit determination purposes. The 

preamble to the Proposed Regulations 

stated that the Treasury Department and 

the IRS are concerned that the Related 

Person Election may be used by 

taxpayers to claim a credit for eligible 

components that are defective, not 

capable of being used for its intended 

purpose, do not meet the requirements 

for the section 45X credit, and therefore 

are not eligible for the section 45X 

credit. The Treasury Department and 

the IRS agree that if an eligible 

component is not defective at the time 

of sale, defects arising after the point of 

sale may occur in the ordinary course of 

a business and do not generally raise the 

improper claim concerns regarding 

defective components described in the 

Preamble to the Proposed Regulations. 

Accordingly, the final rules modify 

proposed § 1.45X–2(d)(4)(iii) to clarify 

that components with respect to which 

defects arise after the deemed sale are 

not considered defective components 

for purposes of the anti-abuse rule. 

Another commenter suggested that 

the definitions of improper use and 

defective components should provide 

an exception for a defective component 

that can be sold or given to a related or 

unrelated person conducting legitimate 

recycling operations and allowing 

defective components to earn a section 

45X credit provided they are properly 

recycled in the United States. The 

Treasury Department and the IRS 

decline to adopt this request because 

section 45X does not authorize allowing 

a section 45X credit for a defective 

component that does not meet the 

definition of an eligible component and 

is not capable of being used for its 

intended purpose without further 

substantial modification. 

D. Sales of Integrated Components to a 

Related Person 

1. In General 

Section 45X(d)(4) provides that for 

purposes of section 45X, 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 that is sold to an 

unrelated person. See Part II.E. of this 

Summary of Comments and Explanation 

of Revisions for rules applicable to 

eligible components that are integrated, 

incorporated, or assembled into other 

eligible components and sold to an 

unrelated person. 

Proposed § 1.45X–2(e)(1) would have 

provided that, for purposes of section 

45X and the section 45X regulations 

(and the regulations in this chapter 

under sections 6417 and 6418 related to 

the section 45X credit), a taxpayer that 

produces and sells an eligible 

component to a related person who then 

integrates, incorporates, or assembles 

the taxpayer’s eligible component into 

another complete and distinct eligible 

component that is subsequently sold to 

an unrelated person may claim a section 

45X credit in the taxable year of the sale 

to the unrelated person. 

Proposed § 1.45X–2(e)(2) would have 

provided examples to illustrate the 

treatment of sales of multiple 

incorporated eligible components to 

related and unrelated persons. One 

commenter questioned the practical 

application of the requirements in 

proposed § 1.45X–2(e)(2)(i) (Example 1) 

and expressed concern that although 

Company X and Y are related, the 

proposed rule would require a 

significant amount of coordination of 

information. This coordination would 

be necessary for the credit to be claimed 

in the proper tax year in which the 

ultimate product (photovoltaic cells 

produced by Y using photovoltaic 

wafers produced by X and purchased by 

Y) was sold to Company Z. Proposed 

§ 1.45X–2(e)(2)(i) (Example 1) illustrates 

the rule in section 45X(d)(4) requiring 

an ultimate actual sale to an unrelated 

person of an eligible component. 

Because section 45X(d)(4) expressly 

conditions the deemed sale on an actual 

subsequent sale to an unrelated person 

by the related person, the Treasury 

Department and the IRS do not have the 

authority to change this statutorily 

imposed conditional timing requirement 

despite any practical difficulties 

taxpayers may experience in obtaining 

such information. Taxpayers may, 

however, make a Related Person 

Election as illustrated in the example in 

§ 1.45X–2(e)(3)(ii) and claim the section 

45X credit upon the sale to the related 

person. This would obviate the need for 

such taxpayer to know when the related 

person actually makes the subsequent 

sale to an unrelated person. For these 

reasons, the final regulations adopt 

proposed § 1.45X–2(e)(2)(i) (Example 1) 

without modification. 

2. Special Rules Applicable to Related 

Person Election 

Proposed § 1.45X–2(e)(3) would have 

provided that if a taxpayer makes a 

valid Related Person Election under 

section 45X(a)(3)(B)(i) and proposed 

§ 1.45X–2(d)(1), and the taxpayer 

produces and then sells an eligible 

component to a related person, who 

then integrates, incorporates, or 

assembles the taxpayer’s eligible 

component into another complete and 

distinct eligible component that is 

subsequently sold to an unrelated 

person, the taxpayer’s sale of the eligible 

component to the related person is 

treated (solely for purposes of the 

section 45X credit and the section 45X 

regulations, and the regulations in this 

chapter under sections 6417 and 6418 

related to the section 45X credit) as if 

made to an unrelated person in the 

taxable year in which the sale to the 

related person occurs. One commenter 

expressed support for this proposed 

rule, as it applies thoughtfully to 

vertically integrated electric vehicle 

manufacturers engaging in sales of 


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multiple integrated eligible components 

to related and unrelated persons (with a 

Related Person Election). No other 

comments were received on this special 

rule, so it is adopted in these final 

regulations without revision. 

IV. Eligible Components 

A. In General 

Proposed § 1.45X–3(a) would have 

defined the term ‘‘eligible component’’ 

as any solar energy component, any 

wind energy component, any inverter, 

any qualifying battery component, and 

any applicable critical mineral, as each 

is respectively defined in the Proposed 

Regulations. For solar energy 

components, wind energy components, 

inverters, and qualifying battery 

components, proposed § 1.45X–3(b) 

through (e) would have provided 

definitions, rules for determining the 

credit amount, and documentation 

requirements. Proposed § 1.45X–3(f) 

would also have provided rules for 

applying the phase out of the section 

45X credit. Proposed § 1.45X–4 would 

have provided such information for 

applicable critical minerals (other than 

rules for applying the phase out, which 

does not apply to applicable critical 

minerals). 

Commenters addressed certain 

aspects of these proposed rules, as 

described in this Part IV. of the 

Summary of Comments and Explanation 

of Revisions. These final regulations 

generally adopt the rules as proposed in 

§ 1.45X–3, with the modifications 

described in this Part IV. of the 

Summary of Comments and Explanation 

of Revisions. 

B. Solar Energy Components—in 

General 

Consistent with section 45X(c)(3), 

proposed § 1.45X–3(b) would have 

provided that solar energy component 

means a solar module, photovoltaic cell, 

photovoltaic wafer, solar grade 

polysilicon, torque tube, structural 

fastener, or polymeric backsheet. 

Several commenters requested that the 

final regulations add other non-listed 

solar energy components (or 

alternatively, to provide a safe harbor) to 

allow for section 45X credit eligibility. 

Examples of other non-listed solar 

energy components commenters raised 

include the encapsulant used to protect 

the photovoltaic cells and hold the 

entire system together; charge transport 

materials used in photovoltaic cells; 

photovoltaic wire; solar mirror facets; 

and solar thermal receivers. A 

commenter also suggested adopting a 

functionally interdependent and 

integral part test analogous to section 48 

of the Code to include additional solar 

energy components. 

Section 45X(c)(3) expressly identifies 

the qualifying solar energy components 

that are eligible for the section 45X 

credit. The Treasury Department and 

the IRS do not have the authority to add 

to the set of solar energy components 

that are identified by statute, for 

example, by applying a functional 

interdependence or integral part test. 

For this reason, the Treasury 

Department and the IRS decline to 

adopt the commenters’ requests in these 

final regulations. 

1. Photovoltaic Cell 

Proposed § 1.45X–3(b)(1)(ii) would 

have provided that the credit amount for 

a photovoltaic cell is equal to the 

product of 4 cents multiplied by the 

capacity of such photovoltaic cell. The 

proposed rule provided that the 

capacity of each photovoltaic cell is 

expressed on a direct current watt basis 

and capacity is the nameplate capacity 

in direct current watts using Standard 

Test Conditions (STC), as defined by the 

International Electrotechnical 

Commission (IEC). The proposed rule 

further provided that in the case of a 

tandem technology produced in serial 

fashion, such as a monolithic 

multijunction cell composed of two or 

more sub-cells, capacity must be 

measured at the point of sale at the end 

of the single cell production unit; and, 

in the case of a four-terminal tandem 

technology produced by mechanically 

stacking two distinct cells or 

interconnected layers, capacity must be 

measured for each cell at each point of 

sale. 

A few commenters expressed concern 

that the proposed rule treats twoterminal and four-terminal tandem 

technologies differently, and that by 

labeling a monolithic two-terminal 

configuration as composed of sub-cells, 

the proposed rule would require this 

technology to be measured as a single 

cell rather than two distinct tandem 

cells. In contrast, proposed § 1.45X– 

3(b)(1)(ii) provides that mechanically 

stacked four-terminal tandem 

technology consists of ‘‘two distinct 

cells.’’ In the commenters’ view, the 

proposed rule would allow fourterminal cells to be measured before 

they are combined, while two-terminal 

cells would be measured after they are 

combined, resulting in higher capacity 

for four-terminal cells and increased 

credit amounts for four-terminal cells. A 

commenter also suggested that proposed 

§ 1.45X–3(b)(1)(ii) is currently 

problematic for future tandem 

technology cell production and, perhaps 

unintentionally, directs the 

development of certain tandem 

technologies. 

The Treasury Department and the IRS 

agree with the commenters’ concerns 

regarding disparate treatment between 

four-terminal and two-terminal cells 

and capacity and credit amounts. 

Accordingly, these final regulations 

revise proposed § 1.45X–3(b)(1)(ii) to 

add additional text at the end as 

follows: ‘‘Where that cell is sold to a 

customer who will use it as the bottom 

cell in a tandem module, its capacity 

should be measured with the customer’s 

intended top cell placed between the 

bottom cell and the one-sun light 

source.’’ 

2. Photovoltaic Wafer 

Consistent with section 

45X(c)(3)(B)(ii), proposed § 1.45X– 

3(b)(2)(i) would have defined a 

photovoltaic wafer to mean a thin slice, 

sheet, or layer of semiconductor 

material of at least 240 square 

centimeters that comprises the substrate 

or absorber layer of one or more 

photovoltaic cells. A photovoltaic wafer 

must be produced by a single 

manufacturer by forming an ingot from 

molten polysilicon (for example, 

Czochralski method) and then 

subsequently slicing it into wafers, 

forming molten or evaporated 

polysilicon into a sheet or layer, or 

depositing a thin-film semiconductor 

photon absorber into a sheet or layer 

(that is, thin-film deposition). 

Some commenters suggested revisions 

to the definition of a photovoltaic wafer 

to include non-traditional methods of 

producing wafers. For example, a 

commenter requested expanding the 

definition to include wafers produced 

by any of the emerging ‘kerfless’ or 

‘direct’ wafer technologies, as well as 

the polysilicon used by these 

technologies. The Treasury Department 

and the IRS have determined that direct 

wafer technologies fall within the 

statutory definition of photovoltaic 

wafers, if they are produced directly 

from evaporated solar grade polysilicon 

but disagree that any further 

clarification is needed in these final 

regulations. 

A commenter requested that the final 

regulations clarify that ingots must be 

produced within the United States for 

solar wafers to be eligible for the section 

45X credit. As required by section 

45X(c)(3)(B)(ii)(I)(bb), to qualify for a 

section 45X credit, a photovoltaic wafer 

must be produced by a single 

manufacturer either by forming an ingot 

and then subsequently slicing it into 

wafers, or by forming molten or 

evaporated solar grade polysilicon or 

deposition into a sheet or layer. Thus, 


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to qualify for a section 45X credit, both 

the ingot and the wafer must be 

produced domestically in accordance 

with section 45X(d)(2). Proposed 

§ 1.45X–1(d)(2) would have clarified 

that constituent elements, materials, and 

subcomponents used in the production 

of eligible components are not subject to 

the domestic production requirement 

provided in proposed § 1.45X–1(d)(1). 

Because the ingot production is part of 

the wafer production, ingots are not 

constituent elements, materials, or 

subcomponents. The Treasury 

Department and the IRS have 

determined it is unnecessary to specify 

that the ingot must be domestically 

produced as section 45X and proposed 

§ 1.45X–3(b)(2)(i) require the wafer to be 

domestically produced, which includes 

production of the ingot. See also Part 

II.F.2. of this Summary of Comments 

and Explanation of Revisions for a 

discussion of proposed § 1.45X– 

1(g)(4)(ii) (Example 2) concerning the 

production of ingots and wafers. 

3. Polymeric Backsheet 

Consistent with section 

45X(c)(3)(B)(iii), proposed § 1.45X– 

3(b)(3) would have defined polymeric 

backsheet to mean a sheet on the back 

of a solar module that acts as an electric 

insulator and protects the inner 

components of such module from the 

surrounding environment. 

Certain commenters recommended 

that the term be considered to include 

a product that qualifies solely based on 

the property’s functionality and not the 

property’s composition, in order for 

backsheets made of glass to be eligible 

components. One commenter stated that 

its product is used in solar panels and 

therefore its request is consistent with 

Congressional intent of expediting the 

transition to clean energy, the 

underlying intent of section 45X to 

create parity among technologies, and 

incentivizing the creation of a U.S.- 

based supply chain for current and 

future solar technologies. The 

commenter thought that other energy 

components were defined based on their 

function, not their ‘‘composition’’ (for 

example, inverter, photovoltaic cell, and 

solar module) and believes that glass 

performs the same function as a 

backsheet made of plastic. The 

commenter suggested that clarity on 

whether a backsheet made of glass is 

part of the definition of ‘‘polymeric 

backsheet’’ is important because it will 

help with decisions on pursuing a 

section 48C credit and for avoiding 

penalties under section 6694 of the 

Code (preparer penalty) or section 6662 

of the Code (substantial 

understatement). Another commenter 

recommended adding back glass as a 

solar energy component because it is 

better for the environment in that a 

domestic facility that uses recycled glass 

from retired solar modules is ‘‘cleaner’’ 

than an overseas facility. 

In considering these comments, the 

Treasury Department and the IRS 

determined that the best reading of the 

statute is that the term ‘‘polymeric 

backsheet’’ is limited to backsheets 

made of polymeric materials that also 

meet the functional definition provided 

in section 45X(c)(3)(B)(iii). This 

excludes most glass backsheets because 

they are typically not composed of a 

polymer, but of soda-lime glass. The 

final regulations add the word 

‘‘polymeric’’ into the definition as a 

clarification. In reaching this 

determination, the Treasury Department 

and the IRS considered that when 

drafting the statute, Congress 

affirmatively included ‘‘polymeric’’ in 

the term and this inclusion should be 

given effect. Thus, the final regulations 

clarify that the definition is limited to 

a sheet on the back of solar modules 

composed, at least in part, of a polymer, 

that acts as an electric insulator and 

protects the inner components of such 

module from the surrounding 

environment. 

4. Solar Grade Polysilicon 

Consistent with section 

45X(c)(3)(B)(iv), proposed § 1.45X– 

3(b)(4) would have defined solar grade 

polysilicon to mean silicon that is 

suitable for use in photovoltaic 

manufacturing and purified to a 

minimum purity of 99.999999 percent 

silicon by mass. A commenter requested 

that the final rules state that the 

production of the silicon gas that is used 

for direct wafer production may receive 

the section 45X credit for polysilicon for 

the mass of silicon in the gas. The 

Treasury Department and the IRS have 

determined, in close consultation with 

the Department of Energy, that gas used 

for direct wafer production includes 

molecules of silicon contained within 

another substance. Accordingly, such 

gas is not a complete and distinct 

eligible component within the meaning 

of proposed § 1.45X–1(c)(1)(i). For this 

reason, the Treasury Department and 

the IRS decline to adopt this request in 

these final regulations. 

A few commenters requested 

guidance on how the purity level for 

solar grade polysilicon should be 

determined. One commenter requested 

that the final rules clarify that only 

impurities that are ‘‘material to the 

industry’’ should be counted in 

determining whether the minimum 

purity level is met. Because these final 

regulations add the purity standard in 

SEMI Specification PV17–1012 Category 

1 to proposed § 1.45X–3(b)(4), which 

distinguishes between material and 

immaterial impurities, the Treasury 

Department and the IRS decline to 

adopt the commenter’s suggestion of 

clarifying that the statutory purity level 

refers only to impurity levels that are 

‘‘material to the industry.’’ 

A commenter recommended adopting 

the standards for polysilicon feedstock 

in SEMI Specification PV17–1012. The 

Treasury Department and the IRS, in 

close consultation with the Department 

of Energy, have determined that SEMI 

Specification PV17–1012 Category 1 

meets the purity standard of 99.999999 

percent, while Categories 2 through 5 do 

not. The Treasury Department and the 

IRS thus agree with this request but only 

for Category 1, and these final 

regulations accordingly revise proposed 

§ 1.45X–3(b)(4) to add the purity 

standard in SEMI Specification PV17– 

1012 Category 1. 

5. Solar Module 

Proposed § 1.45X–3(b)(5)(ii) would 

have stated that the credit amount for a 

solar module is equal to the product of 

7 cents multiplied by the capacity of 

such module. The proposed rule also 

provided that the capacity of each solar 

module is expressed on a direct current 

watt basis, and that capacity is the 

nameplate capacity in direct current 

watts using STC, as defined by the IEC. 

A commenter requested producers be 

required to use ‘‘flash’’ values to 

determine the value of the tax credit for 

modules. The preamble to the Proposed 

Regulations explained that nameplate 

capacity is an appropriate, accurate, and 

consistent standard for the measurement 

of solar module capacity that can be 

used to measure the capacity of other 

eligible components. Using an industry 

standard such as nameplate capacity 

that is widely applicable to various 

eligible components provides greater 

taxpayer certainty, reduces taxpayer 

compliance burdens, and aids IRS 

administration. For these reasons, the 

Treasury Department and the IRS have 

determined that the best application of 

the statute is to require the use of 

nameplate capacity to measure the 

capacity of a solar module. The 

Treasury Department and the IRS 

therefore decline to adopt this 

suggestion to permit the use of ‘‘flash’’ 

value capacity measurements in these 

final regulations. 

6. Solar Tracker 

Consistent with section 

45X(c)(3)(B)(vi), proposed § 1.45X– 

3(b)(6) would have provided that a solar 


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tracker means a mechanical system that 

moves solar modules according to the 

position of the sun and to increase 

energy output. Section 45X(c)(3)(B)(vii) 

provides that torque tubes (as defined in 

proposed § 1.45X–3(b)(7)) or structural 

fasteners (as defined in proposed 

§ 1.45X–3(b)(8)) are solar tracker 

components that are eligible 

components for purposes of the section 

45X credit. 

Commenters requested that the 

definition of a solar tracker (not an 

eligible component) in section 

45X(c)(3)(B)(vi) be modified to allow 

solar thermal collectors, heliostats, and 

fixed tilt systems (additional items) to 

be solar tracker components as defined 

in section 45X(c)(3)(B)(vii). A solar 

tracker is defined in 45X(c)(3)(B)(vi) as 

a ‘‘mechanical system that moves solar 

modules according to the position of the 

sun to increase energy output.’’ To be a 

solar tracker, a device must be a 

mechanical system that moves a solar 

module. The Treasury Department and 

the IRS do not have authority to expand 

the definition of solar tracker to include 

additional items such as the ones 

suggested that increase energy output 

without moving solar modules. 

Moreover, modification of the definition 

of a solar tracker in the manner the 

commenter requested would not result 

in such additional items qualifying as 

eligible components because a solar 

tracker is not a solar energy component 

that is an eligible component under 

section 45X(c)(1)(A)(i). Section 

45X(c)(3)(B)(vii) provides that torque 

tubes and structural fasteners are the 

only two solar tracker components that 

may qualify as eligible components. The 

Treasury Department and the IRS do not 

have authority to expand the categories 

of eligible solar tracker components. For 

these reasons, the Treasury Department 

and the IRS decline to adopt this request 

in the final regulations. 

7. Torque Tube 

Consistent with section 

45X(c)(3)(B)(vii)(I), proposed § 1.45X– 

3(b)(7)(i) would have provided that 

torque tube means a structural steel 

support element (including longitudinal 

purlins) that: (i) is part of a solar tracker; 

(ii) is of any cross-sectional shape; (iii) 

may be assembled from individually 

manufactured segments; (iv) spans 

longitudinally between foundation 

posts; (v) supports solar panels and is 

connected to a mounting attachment for 

solar panels (with or without separate 

module interface rails); and (vi) is 

rotated by means of a drive system. 

Commenters suggested various 

statutory revisions to the definition of 

torque tube in section 

45X(c)(3)(B)(vii)(I). A commenter 

recommended replacing the definition 

with a more generalized term such as 

‘‘Tracker Structural Frame’’ to allow for 

other common solar collector 

morphologies. Another commenter 

requested removing or revising section 

45X(c)(3)(B)(vii)(I)(dd) to include single 

foundation mounted structures or 

ground-mounted carousel structures. 

One commenter proposed clarifying that 

aluminum bearings, steel damper arms, 

steel saddle brackets, and steel bottom 

brackets are included in the definition 

of torque tubes or structural fasteners. 

Alternatively, the commenter suggested 

providing either: (i) a non-exclusive list 

of items that are included in the 

definition of torque tube or structural 

fasteners, or (ii) a test similar to the 

functionally interdependent or integral 

part tests under proposed § 1.48– 

9(f)(2)(ii) and (f)(3) to determine when a 

component is included in the definition 

of a torque tube or structural fastener. 

Because section 45X(c)(3)(B)(vii)(I) 

specifically defines torque tube for 

purposes of section 45X, the Treasury 

Department and the IRS do not have the 

authority to expand the definition of 

torque tubes and solar tracker 

components in the final regulations to 

include additional solar energy 

components. As previously discussed, 

the Treasury Department and the IRS 

also lack authority to incorporate a 

functional interdependence or integral 

part tests that would allow other 

components not specified in the statute 

to qualify for the section 45X credit. For 

these reasons, the Treasury Department 

and the IRS decline to adopt these 

comments in the final regulations. 

8. Structural Fastener 

Consistent with section 

45X(c)(3)(B)(vii)(II), proposed § 1.45X– 

3(b)(8)(i) would have defined a 

structural fastener to mean a component 

that is used: (i) to connect the 

mechanical and drive system 

components of a solar tracker to the 

foundation of such solar tracker; (ii) to 

connect torque tubes to drive 

assemblies; or (iii) to connect segments 

of torque tubes to one another. 

Several commenters requested 

revisions to the definition of structural 

fastener in proposed § 1.45X–3(b)(8)(i). 

For example, commenters requested that 

the definition of structural fastener be 

extended ‘‘beyond steel and iron torque 

tubes to specifically allow for 

innovations made from other materials,’’ 

such as durable plastic; that solar frames 

made from greenhouse gas reducing 

steel and roll-form fabricated frames (as 

opposed to the current industry 

standard, imported extruded aluminum 

frames) qualify as structural fasteners, 

solar modules, or torque tubes; and that 

the definition of structural fasteners be 

expanded to include those that secure 

the photovoltaic module to the torque 

tube or module interface rails. The 

Treasury Department and the IRS do not 

have the authority to expand the 

definition of structural fasteners and 

solar tracker components in the final 

regulations to include additional solar 

energy components. However, the 

Treasury Department and the IRS note 

that a component that is used for any of 

the functions described in section 

45X(c)(3)(B)(vii)(II) would be considered 

a structural fastener for purposes of 

section 45X. The Treasury Department 

and the IRS think that proposed 

§ 1.45X–3(b)(8)(i) and the statutory 

definition of a structural fastener is 

sufficiently clear to address the 

requested clarifications. Proposed 

§ 1.45X–3(b)(8)(i) is therefore adopted in 

these final regulations without revision. 

Proposed § 1.45X–3(b)(8)(iii) would 

have required that, for substantiation 

purposes, a taxpayer must document 

that a structural fastener is used in a 

manner described in proposed § 1.45X– 

3(b)(8)(i)(A), (B), or (C), with a bill of 

sale or other similar documentation that 

explicitly describes such use. One 

commenter specifically supported the 

substantiation requirement for structural 

fasteners in proposed § 1.45X– 

3(b)(8)(iii). Another commenter 

requested the final rules require 

taxpayers to substantiate that the 

structural fasteners for which they are 

claiming the section 45X credit include 

only the manufactured component (bolt 

or rivet) itself. The Treasury Department 

and the IRS have determined there is no 

need for further clarification of the 

substantiation requirement for structural 

fasteners in addition to the specific 

requirements relating to use in proposed 

§ 1.45X–3(b)(8)(iii) and the general 

substantiation requirements in section 

6001 of the Code. For this reason, the 

Treasury Department and the IRS 

decline to adopt this comment in the 

final regulations. 

C. Wind Energy Components 

1. In General 

Consistent with section 45X(c)(4), 

proposed § 1.45X–3(c) would have 

provided that a wind energy component 

means a blade, nacelle, tower, offshore 

wind foundation, or related offshore 

wind vessel. Commenters generally 

requested expanding proposed § 1.45X– 

3(c) to include other non-listed wind 

energy components such as structural 

fasteners. Section 45X(c)(4) specifically 

provides a list of qualifying wind energy 


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eligible components. The Treasury 

Department and the IRS do not have the 

authority to expand the statutorily 

enumerated list of wind energy 

components eligible for a section 45X 

credit. For this reason, the Treasury 

Department and the IRS decline to 

adopt the commenters request in these 

final regulations. 

2. Nacelle 

Consistent with section 

45X(c)(4)(B)(iii), proposed § 1.45– 

3(c)(3)(i) would have defined a nacelle 

to mean the assembly of the drivetrain 

and other tower-top components of a 

wind turbine (with the exception of the 

blades and the hub) within their cover 

housing. 

A commenter stated that guidance 

should distinguish between 

manufacturing of eligible wind energy 

components (for example, in a 

manufacturing facility) from the 

installation of wind energy components 

at the relevant project site, as the latter 

does not constitute manufacturing or 

production of eligible components. The 

Treasury Department and the IRS have 

determined that the definition of 

‘‘produced by the taxpayer’’ provided in 

proposed § 1.45X–1(c)(1) is sufficient to 

clarify that production of an eligible 

component requires substantially 

transforming constituent elements, 

materials, or subcomponents into a 

complete and distinct eligible 

component that is functionally different 

from that which would result from 

disqualifying minor assembly or 

superficial modification of the elements, 

materials or subcomponents. 

Another commenter requested that 

the final regulations recognize that, 

where a new drivetrain and associated 

equipment (the pitch bearing, pitch 

system, main shaft, main bearing, 

gearbox, flex coupling, and slip ring) are 

produced for use in repowering of 

existing wind turbines and installed 

into an existing nacelle cover housing 

with certain other used equipment 

(including yaw bearing and baseplate), 

the nacelle is eligible for the section 45X 

credit. Under this commenter’s 

approach, the drivetrain of the nacelle 

must be new to be eligible for the 

section 45X credit. Another commenter 

also suggests inclusion of a ‘‘reasonable 

computation’’ of the section 45X credit 

for repowered eligible components. 

The Treasury Department and the IRS 

note that repowering is a form of onsite 

re-manufacturing that is typically 

accomplished through a hybrid of 

primary and secondary production that 

utilizes a mix of existing and new 

components. To produce a nacelle 

within the definition of proposed 

§ 1.45X–3(c)(3)(i), the taxpayer would 

need to meet the requirements of the 

definition of ‘‘produced by the 

taxpayer’’ provided in proposed 

§ 1.45X–1(c)(1), including by 

substantially transforming the 

combination of existing and new 

subcomponents into a new nacelle that 

is distinct from the original nacelle. In 

some circumstances, nacelle repowering 

may constitute production of an eligible 

component. For example, a taxpayer 

that manufactures and installs a new 

drivetrain and associated 

subcomponents within housing atop a 

wind tower will be considered to have 

substantially transformed the 

combination of new and existing 

subcomponents, so that taxpayer will 

have produced an eligible nacelle. In 

contrast, a taxpayer that merely replaces 

the controller in a nacelle with a new 

one will not have substantially 

transformed the combination of new 

and existing subcomponents, so that 

taxpayer will not have produced an 

eligible nacelle. Routine maintenance or 

part replacement would fall under the 

definition of disqualifying minor 

assembly or ‘‘superficial modification.’’ 

3. Related Offshore Wind Vessel 

Consistent with section 

45X(c)(4)(B)(iv), proposed 

§ 1.45X–3(c)(4)(i) would have defined 

related offshore wind vessel to mean 

any vessel that is purpose-built or 

retrofitted for purposes of the 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components. Proposed 

§ 1.45X–3(c)(4)(i) would have clarified 

that a vessel is purpose-built for 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components if it is built to 

be capable of performing such functions 

and it is of a type that is commonly used 

in the offshore wind industry. Proposed 

§ 1.45X–3(c)(4)(i) would have further 

clarified that a vessel is retrofitted for 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components if such vessel 

was incapable of performing such 

functions prior to being retrofitted, the 

retrofit causes the vessel to be capable 

of performing such functions, and the 

retrofitted vessel is of a type that is 

commonly used in the offshore wind 

industry. 

Under proposed § 1.45X–3(c)(4)(ii), 

consistent with section 45X(b)(1)(F)(i), 

the credit amount for a related offshore 

wind vessel would have been equal to 

10 percent of the sales price of the 

vessel. Under the Proposed Regulations 

the sales price of the vessel does not 

include the price of maintenance, 

services, or other similar items that may 

be sold with the vessel. For a related 

offshore wind vessel with respect to 

which a Related Person Election under 

section 45X(a)(3)(B)(i) has been made, 

the election would not cause the sale 

price of such vessel to be treated as 

having been determined with respect to 

a transaction between uncontrolled 

taxpayers for purposes of section 482 of 

the Code and the regulations 

thereunder. 

One commenter requested 

clarification on the valuation of 

retrofitted offshore wind vessels and 

requested guidance on whether the 

section 45X credit applies to the cost of 

the retrofit itself, the value-add of the 

retrofit, the cost of the final sale of a 

retrofitted vessel, or some other amount. 

The Treasury Department and the IRS 

confirm that the credit amount specified 

in section 45X(b)(1)(F)(i)—ten percent of 

the sales price of such vessel— 

specifically applies to any related 

offshore wind vessel which is purposebuilt or retrofitted as provided in 

section 45X(c)(4)(B)(iv). 

A commenter stated that the 

definition of an offshore wind vessel is 

too narrow and that more standard 

vessel types (for example, tugboats and 

barges) that are capable of doing 

offshore wind work should also be 

eligible for the section 45X credit if they 

are being constructed or retrofitted for 

the purpose of offshore wind work. The 

Treasury Department and the IRS note 

that section 45X(c)(4)(B)(iv) and 

proposed § 1.45X–3(c)(4)(i) would have 

defined a related offshore wind vessel to 

mean ‘‘any vessel’’ that is purpose-built 

or retrofitted for purposes of the 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components. Proposed 

§ 1.45X–3(c)(4)(i) would have clarified 

that a vessel is purpose-built for 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components if it is built to 

be capable of performing such functions 

and it is of a type that is commonly used 

in the offshore wind industry. Proposed 

§ 1.45X–3(c)(4)(i) would have further 

clarified that a vessel is retrofitted for 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components if such vessel 

was incapable of performing such 

functions prior to being retrofitted, the 

retrofit causes the vessel to be capable 

of performing such functions, and the 

retrofitted vessel is of a type that is 

commonly used in the offshore wind 

industry. Thus, if a vessel meets the 

definition of a related offshore wind 

vessel in proposed § 1.45X–3(c)(4)(i), 

there are no limitations as to the type of 


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vessel that may be an eligible 

component. 

The commenter’s requested 

clarification would require an 

application of the standard in proposed 

§ 1.45X–3(c)(4)(i) to specific cases for 

which a categorical determination of 

eligibility for additional vessel types 

would not be appropriate in these final 

regulations because such a 

determination would depend on the 

specific facts of each case. 

Although no comments were received 

on proposed § 1.45X–3(c)(4)(i), the 

Treasury Department and the IRS revise 

proposed § 1.45X–3(c)(4)(i) in these 

final regulations to clarify that Federal 

income tax principles apply in 

determining the accuracy of the sales 

price used to calculate the section 45X 

credit. This revision provides greater 

certainty as to what principles apply for 

purposes of the section 45X credit and 

is in addition to the specific exclusions 

from a vessel’s sales price in proposed 

§ 1.45X–3(c)(4)(i), which included 

maintenance, services, or other similar 

items that may be sold with the vessel. 

4. Total Rated Capacity of the 

Completed Wind Turbine 

Proposed § 1.45X–3(c)(6) would have 

provided that, for purposes of proposed 

§ 1.45X–3(c), the total rated capacity of 

the completed wind turbine means, for 

the completed wind turbine for which a 

blade, nacelle, offshore wind 

foundation, or tower was manufactured 

and sold, the nameplate capacity at the 

time of sale as certified to the relevant 

national or international standards, such 

as IEC 61400, or American National 

Standards Institute (ANSI)/American 

Clean Power Association (ACP) 101–1– 

2021, the Small Wind Turbine Standard 

(Standard). Under proposed 

§ 1.45X–3(c)(6), certification of the 

turbine to such Standards must be 

documented by a certificate issued by 

an accredited certification body and the 

total rated capacity of a wind turbine 

must be expressed in watts. 

One commenter expressed support for 

the proposal requiring that qualifying 

wind turbine components must be made 

and sold for use on certified wind 

turbines. Another commenter 

recommended including both American 

Wind Energy Association (AWEA) 9.1– 

2009 and ANSI/ACP 101–1–2021 as 

acceptable wind turbine certification 

standards. The commenter explained 

that ANSI/ACP 101–1–2021 is a revision 

of the AWEA standard (the original 

small wind certification standard, and 

all currently certified small wind 

systems are certified to this standard) 

that streamlines the certification 

process, but there is no requirement that 

turbines with the original certification 

must recertify to the new ANSI/ACP 

standard. Thus, the commenter states 

that including both standards in the 

final rules will allow currently certified 

turbines made in the United States to 

earn section 45X credits as well as new 

turbines currently in the certification 

process following the newer standard. 

The Treasury Department and the IRS 

agree with this request and these final 

regulations revise proposed § 1.45X– 

3(c)(6) to add both AWEA 9.1–2009 and 

ANSI/ACP 101–1–2021 as acceptable 

wind turbine certification standards. 

A commenter sought clarification as 

to whether a wind tower producer may 

rely on a certification of the total rated 

capacity of the turbine obtained from 

the original equipment manufacturer 

(OEM) that produces the completed 

wind turbine in which the wind tower 

is incorporated, provided the certificate 

was issued by an accredited certification 

body. The commenter noted that 

requiring wind tower producers to 

independently verify the capacity of the 

completed turbine would cause ‘‘undue 

expense and delay.’’ To provide 

assurance to the commenter, a wind 

tower producer may rely on an OEM’s 

certification of the total rated capacity of 

the completed wind turbine in which 

the tower was incorporated, but the 

Treasury Department and the IRS have 

determined that the rules as set out by 

proposed § 1.45X–3(c)(6) and (7) do not 

require further clarification on this 

point. 

D. Inverters 

1. In General 

Consistent with section 45X(c)(2), 

proposed § 1.45X–3(d) would define an 

inverter as an end product that is 

suitable to convert direct current (DC) 

electricity from one or more solar 

modules or certified distributed wind 

energy systems into alternating current 

(AC) electricity. Proposed § 1.45X–3(d) 

would have further provided that an 

end product is suitable to convert DC 

electricity from one or more solar 

modules or certified distributed wind 

energy systems into AC electricity if, in 

the form sold by the manufacturer, it is 

able to connect with such modules or 

systems and convert DC electricity to 

AC electricity from such connected 

source. For purposes of section 45X, the 

term inverter includes a central inverter, 

commercial inverter, distributed wind 

inverter, microinverter, or residential 

inverter. Proposed § 1.45X–3(d) would 

have clarified the definition of each of 

these types of inverters, including the 

required rated outputs. 

The preamble to the Proposed 

Regulations stated that section 45X(c)(2) 

requires certain types of inverters be 

‘‘suitable to’’ or ‘‘suitable for’’ a 

statutorily required use or application to 

be considered an eligible component. 

Proposed § 1.45X–3(d) would also have 

provided the calculation of the credit 

amount for each type of inverter. In 

general, the credit amount for each type 

of inverter would be equal to the 

product of the inverter’s total rated 

capacity and the amount prescribed in 

section 45X(b)(2)(B) for such inverter. 

One commenter requested the final 

rules provide a credit for utility-scale 

power converters and that a ‘‘utilityscale power converter’’ be defined in a 

manner consistent with section 2.1.9 of 

Underwriters Laboratories Standard 

1741 (2002). Specifically, the 

commenter requested modifying the 

final rules to provide a credit for 

products that only convert direct 

current to direct current or alternating 

current to direct current. Because 

section 45X(c)(2)(A) specifically defines 

the term inverter to mean ‘‘an end 

product which is suitable to convert 

direct current electricity . . . into 

alternating current electricity,’’ the 

Treasury Department and the IRS do not 

have the authority to expand the 

definition of inverter in the final 

regulations to include these additional 

products. For this reason, the Treasury 

Department and the IRS decline to 

adopt this comment in the final 

regulations. 

Another commenter requested that, 

for each type of inverter provided for 

under section 45X(c)(2), the rated 

output of alternating current power be 

defined as ‘‘the maximum continuous 

grid-tied power rating the inverter is 

capable of handling.’’ The commenter 

asserts that the suggested change will 

‘‘ensure consistent interpretation across 

technologies despite consumer-driven 

decisions impacting output.’’ Section 

45X(c)(2) uses the term ‘‘rated output’’ 

to define, in part, a commercial inverter, 

distributed wind inverter, 

microinverter, residential inverter, or 

utility inverter. The Treasury 

Department and the IRS decline to 

adopt this comment in the final 

regulations because the term rated 

output is in the statutory definition for 

these inverters. 

Several commenters requested that 

the final rules provide a section 45X 

credit for inverters that convert direct 

current from sources other than solar 

modules or certified distributed wind 

energy systems as long as these inverters 

meet the technical requirements of an 

inverter defined under section 

45X(c)(2). Section 45X(c)(2)(A) 


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specifically defines the term inverter to 

mean ‘‘an end product which is suitable 

to convert direct current electricity from 

one or more solar modules or certified 

distributed wind energy systems into 

alternating current electricity.’’ Other 

types of inverters such as bidirectional 

electric vehicle inverters or utility and 

commercial inverters that are in practice 

used with battery modules can meet the 

existing suitability standard within the 

definition without additional 

clarification required. For this reason, 

the Treasury Department and the IRS 

decline to adopt this comment in the 

final regulations. 

2. Central Inverter 

Consistent with section 45X(c)(2)(B), 

proposed § 1.45X–3(d)(2)(i) would have 

defined a central inverter as an inverter 

that is suitable for large utility-scale 

systems and has a capacity that is 

greater than 1,000 kilowatts, expressed 

on an alternating current watt basis. 

Proposed § 1.45X–3(d)(2)(i) would have 

further clarified that an inverter is 

suitable for large utility-scale systems if, 

in the form sold by the manufacturer, it 

is capable of serving as a component in 

a large utility-scale system and meets 

the core engineering specifications for 

such application. Proposed § 1.45X– 

3(d)(2)(ii) would have provided a credit 

equal to the product of 0.25 cents 

multiplied by the total rated capacity of 

the central inverter where the total rated 

capacity is expressed on an alternating 

current watt basis. 

One commenter requested the credit 

amount available for a central inverter 

be changed to match the credit available 

for utility inverters because utility 

inverters are eligible for a credit that is 

six times higher than central inverters. 

Because section 45X(b)(2)(B) provides 

the credit amounts available for central 

inverters and utility inverters, the 

Treasury Department and the IRS do not 

have the authority to make the 

requested change. For this reason, the 

Treasury Department and the IRS 

decline to adopt this comment in the 

final regulations. 

3. Commercial Inverter 

a. Definition 

Consistent with section 45X(c)(2)(C), 

proposed § 1.45X–3(d)(3)(i) would have 

provided that a commercial inverter 

means an inverter that is suitable for 

commercial or utility-scale applications, 

has a rated output of 208, 480, 600 or 

800 volt three-phase power, and has a 

capacity expressed on an alternating 

current watt basis that is not less than 

20 kilowatts and not greater than 125 

kilowatts. 

One commenter requested the 

definition of a commercial inverter be 

changed to provide a credit for inverters 

with a rated output greater than 800 volt 

three-phase power. Section 

45X(c)(2)(C)(ii) defines a commercial 

inverter, in part, as having ‘‘a rated 

output of 208, 480, 600, or 800 volt 

three-phase power.’’ The Treasury 

Department and the IRS do not have the 

authority to expand the definition of a 

commercial inverter in the final 

regulations to those with a rated output 

greater than 800 volt three-phase power. 

For this reason, the Treasury 

Department and the IRS decline to 

adopt this comment in the final 

regulations. 

A few commenters requested that the 

final rules modify the definition of a 

commercial inverter to include a DC 

optimized commercial inverter system, 

and that, when DC optimizers are paired 

with a commercial inverter, the credit 

amount available for commercial 

inverters should be determined in a 

manner similar to the credit 

computation for direct current 

optimized inverter systems (DC 

optimized inverter systems, as the term 

would have been defined in Proposed 

§ 1.45X–3(d)(5)(iii)(B) and discussed in 

Part IV.D.3.a. of this Summary of 

Comments and Explanation of 

Revisions). Generally, these commenters 

requested that, with the modified 

definition of commercial inverter, the 

available credit be computed as a 

product of $0.02 multiplied by the 

lesser of the sum of the alternating 

current capacity of each DC optimizer 

when paired with the inverter in the DC 

optimized inverter system or the 

alternating current capacity of the 

inverter in the DC optimized inverter 

system. No language in the statutory text 

or proposed rules prohibits the use of 

direct current optimizers with 

commercial inverters. Thus, it is 

unnecessary to modify the final rules to 

state that DC optimizers may be used 

with a commercial inverter. 

Section 45X(b)(1)(I) provides that the 

amount of the section 45X credit for an 

inverter is equal to the applicable 

amount with respect to each type of 

inverter multiplied by the capacity of 

such inverter (expressed on a per 

alternating current watt basis). The 

Treasury Department and the IRS do not 

have the authority to change the method 

for computing the credit for commercial 

inverters. In contrast, language that 

appears only in the definition of 

‘‘microinverter’’ in section 45X(c)(2)(E) 

(‘suitable to connect to one solar 

module’) does require clarification 

about how to apply the definition to DC 

optimized systems and multi-module 

microinverters. Because this language 

does not appear in the definition of 

‘‘commercial inverter’’ in section 

45X(c)(2)(C), there is no analogous need 

to clarify the application of the 

definition or credit calculation. For this 

reason, the Treasury Department and 

the IRS decline to adopt these requests 

pertaining to commercial inverters in 

the final regulations. 

b. Credit Amount 

Proposed § 1.45X–3(d)(3)(iii) would 

have provided a credit equal to the 

product of 2 cents multiplied by the 

total rated capacity of the commercial 

inverter where the total rated capacity is 

expressed on an alternating current watt 

basis. 

Commenters requested that DC 

optimizers be allowed to be paired with 

commercial or utility scale system 

configurations, like microinverters. This 

comment is not adopted for the reasons 

provided in Part IV.D.3.a. of this 

Summary of Comments and Explanation 

of Revisions. 

4. Microinverters 

a. Definition 

Consistent with section 45X(c)(2)(E), 

proposed § 1.45X–3(d)(5)(i) would have 

defined a microinverter as an inverter 

that is suitable to connect with one solar 

module; has a rated output of 120 or 240 

volt single-phase power, or 208 or 480 

volt three-phase power; and has a 

capacity, expressed on an AC watt basis, 

that is not greater than 650 watts. One 

commenter requested the final rules 

change the maximum capacity limit for 

the microinverter from 650 watts to 700 

watts to accommodate future 

technological advancements. Because 

section 45X(c)(2)(E)(iii) provides the 

maximum capacity of a microinverter, 

the Treasury Department and the IRS do 

not have the authority to make the 

requested change. For this reason, the 

Treasury Department and the IRS 

decline to adopt this comment in the 

final regulations. 

b. Suitable To Connect to One Solar 

Module—in General 

Proposed § 1.45X–3(d)(5)(iii)(A) 

would have clarified that an inverter is 

suitable to connect to one solar module 

if, in the form sold by the manufacturer, 

it is capable of connecting to one or 

more solar modules and regulating the 

DC electricity from each module 

independently before that electricity is 

converted into alternating current 

electricity. 

Proposed § 1.45X–3(d)(5)(iii)(B) 

would have clarified that a DC 

optimized inverter system may qualify 

as a microinverter. Proposed § 1.45X– 


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3(d)(5)(iii)(B) would have defined a DC 

optimized inverter system to mean an 

inverter that is comprised of an inverter 

connected to multiple DC optimizers 

that are each designed to connect to one 

solar module. Proposed § 1.45X– 

3(d)(5)(iii)(B) would have provided that 

a DC optimized inverter system is 

suitable to connect with one solar 

module if, in the form sold by the 

manufacturer, it is capable of 

connecting to one or more solar 

modules and regulating the DC 

electricity from each module 

independently before that electricity is 

converted into alternating current 

electricity. Proposed § 1.45X– 

3(d)(5)(iv)(B) would have provided that 

a DC optimized inverter system qualifies 

as a microinverter if each DC optimizer 

paired with the inverter in a DC 

optimized inverter system meets the 

requirements of section 45X(c)(2)(E) and 

a taxpayer must produce and sell the 

inverter and the DC optimizers in the 

DC optimized inverter system together 

as a combined end product. 

Several commenters agreed with the 

proposed rule permitting DC optimizers 

paired with an inverter to qualify as 

microinverters and receive the 

corresponding credit amount. One 

commenter suggested revising the 

definition of a DC optimized inverter 

systems to more clearly define the 

qualifying system components of a DC 

optimized inverter system. This 

commenter proposed that qualifying 

system components include items that 

control the DC output of one or more 

solar modules and are integral to the 

function of the inverter and modules. 

The Treasury Department and the IRS, 

in consultation with the Department of 

Energy, conclude that the additional 

confirmation the commenter is 

requesting is not necessary as it would 

not provide additional clarity. For this 

reason, the Treasury Department and 

the IRS decline to adopt this suggestion 

in the final regulations. 

Several commenters requested that 

the final rules remove the requirement 

that a taxpayer produce and sell both 

the inverter and the DC optimizers in 

the DC optimized inverter system as a 

combined end product. One commenter 

expressed the view that the requirement 

distorts the market, provides an unfair 

advantage to companies that already 

manufacture both items, and requires 

companies to seek out partnerships 

solely for the purpose of obtaining the 

section 45X credit. Other commenters 

that manufacture both products state 

that the proposed requirement is 

inconsistent with standard industry 

practices where a manufacturer sells the 

items separately. In contrast, one 

commenter supported the ‘‘combined 

end product’’ requirement and 

suggested it also be applied to multimodule inverters to prevent multiple 

entities from claiming section 45X 

credits for the same system. Section 

45X(c)(2)(A) defines an inverter as an 

end product that is suitable to convert 

DC electricity from one or more solar 

modules or certified distributed wind 

energy systems into AC electricity. For 

each type of inverter listed under 

section 45X(c)(2), section 45X(b)(1)(I) 

provides the applicable credit is 

determined as an amount equal to the 

product of each inverter’s applicable 

amount multiplied by the capacity of 

such inverter. The section 45X credit is 

separately computed for each inverter. 

The Treasury Department and the IRS 

do not have the authority to allow a 

credit solely for a DC optimizer, because 

it does not convert DC electricity into 

AC electricity as the definition of 

inverter in section 45X(c)(2) requires. 

The Treasury Department and the IRS 

also do not have the authority to change 

the number of inverter units used to 

compute the available credit amount. 

For these reasons, the Treasury 

Department and the IRS decline to 

adopt these comments in these final 

regulations. However, while proposed 

§ 1.45X–3(d)(5)(iv)(B) requires that the 

inverter and DC optimizer in the DC 

optimized inverter system must be 

produced and sold as a combined end 

product, the Treasury Department and 

the IRS clarify that the inverter and the 

DC optimizer do not need to be 

physically packaged together at sale, 

and the inverter and DC optimizer do 

not need to be fully interconnected and 

assembled at the time of sale. 

Proposed § 1.45X–3(d)(5) would have 

clarified that a multi-module inverter 

may also qualify as a microinverter. 

Proposed § 1.45X–3(d)(5)(iii)(C) would 

have defined a multi-module inverter to 

mean an inverter that is comprised of an 

inverter with independent connections 

and DC optimizing components for two 

or more modules. Proposed § 1.45X– 

3(d)(5)(iii)(C) would have further 

provided that a multi-module 

microinverter is suitable to connect with 

one solar module if it is capable of 

connecting to one or more solar 

modules and regulating the DC 

electricity from each module 

independently before that electricity is 

converted into alternating current 

electricity. Proposed § 1.45X– 

3(d)(5)(iv)(C) would have provided that 

multimodule inverter qualifies as a 

microinverter if it meets the 

requirements of section 45X(c)(2)(E). 

One commenter suggested revising 

the definition of a multi-module 

inverter to more clearly define the 

qualifying system components of a 

multi-module inverter. The commenter 

suggested that qualifying system 

components should be those items that 

control the DC output of one or more 

solar modules and are integral to the 

function of the inverter and modules. 

The same commenter also suggested 

revising the definition of a multimodule inverter to clarify that for a 

multi-module inverter to qualify as a 

microinverter, a taxpayer must produce 

and sell the inverter and the DC 

optimizers together as a combined end 

product. A different commenter agreed 

with this suggestion. 

A few commenters suggested revising 

the definition of a multi-module 

inverter to provide that a multi-module 

inverter includes a DC optimized 

inverter system such that each DC 

optimizer may connect with more than 

one solar module and the credit amount 

in such a system is computed similarly 

to a DC optimized inverter system, 

except that the DC optimizers are not 

required to be sold with the inverter as 

a ‘‘combined end product.’’ Other 

commenters disagreed with this 

suggestion and support the proposed 

rule that would not have allowed solar 

modules to share a connection to a 

multi-module inverter. 

The reasons provided for retaining the 

rule for DC optimized inverter systems 

also apply to adopting the requirement 

for multi-module inverters. The 

Treasury Department and the IRS think 

that requiring taxpayers to produce and 

sell the inverter and the DC optimizers 

together as a combined end product will 

create parity with DC optimized inverter 

systems and avoid potential abuse. For 

these reasons, the Treasury Department 

and the IRS adopt these comments in 

the final regulations. 

c. Credit Amount 

Proposed § 1.45X–3(d)(5)(iv)(A) 

would have provided that generally, the 

credit amount for a microinverter is 

equal to the product of 11 cents 

multiplied by the total rated capacity of 

the microinverter where the total rated 

capacity is expressed on an alternating 

current watt basis. 

Proposed § 1.45X–3(d)(5)(iv)(B) would 

have clarified how to determine the 

credit amount for a DC optimized 

inverter system that qualifies as a 

microinverter. Proposed § 1.45X– 

3(d)(5)(iv)(B) would have provided that 

the credit amount for a DC optimized 

inverter system that qualifies as a 

microinverter is equal to the product of 

11 cents multiplied by the lesser of the 

sum of the alternating current capacity 

of each DC optimizer when paired with 


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the inverter in the DC optimized 

inverter system or the alternating 

current capacity of the inverter in the 

DC optimized inverter system where 

capacity is measured in watts of 

alternating current converted from DC 

electricity by the inverter in a DC 

optimized inverter system. 

One commenter requested that the 

alternating current capacity of each DC 

optimizer when paired with the inverter 

in the DC optimized inverter system be 

calculated as the product of the 

optimizer’s rated input power capacity, 

the optimizer’s DC-to-DC conversion 

efficiency percentage, and the inverter’s 

DC-to-AC conversion efficiency 

percentage. Section 45X(b)(1)(I) 

provides the applicable credit is 

determined as an amount equal to the 

product of each inverter’s applicable 

amount multiplied by the capacity of 

such inverter (expressed on a per 

alternating current watt basis). The 

requirement that capacity is ‘‘expressed 

on an alternating current watt basis’’ 

already factors in any DC-to-DC 

conversion efficiency upstream of the 

DC-to-AC conversion, and the inverter’s 

DC-to-AC conversion efficiency 

percentage is accounted for by the use 

of ‘‘capacity of such inverter’’ 

(expressed on a per alternating current 

watt basis). Therefore, these 

requirements are duplicative of rules 

contained in the statutory text. For this 

reason, the Treasury Department and 

the IRS decline to adopt this suggestion 

in the final regulations. 

5. Utility Inverter 

Consistent with section 45X(c)(2)(G), 

proposed § 1.45X–3(d)(7)(i) would have 

defined a utility inverter as an inverter 

that is suitable for commercial or utilityscale systems, has a rated output of not 

less than 600 volt three-phase power, 

and has a capacity expressed on an 

alternating current watt basis that is 

greater than 125 kilowatts and not 

greater than 1000 kilowatts. 

One commenter requested reducing 

the required rated output from ‘‘not less 

than 600 volt three-phase power’’ to 

‘‘not less than 480 volt three-phase 

power.’’ Section 45X(c)(2)(G)(ii) defines 

a utility inverter, in part, as having ‘‘a 

rated output of not less than 600 volt 

three-phase power.’’ The Treasury 

Department and the IRS decline to 

adopt the commenter’s request because 

defining a utility inverter to include 

those with a rated output of not less 

than 480 volt three-phase power would 

be inconsistent with the statute. 

E. Qualifying Battery Components 

Proposed § 1.45X–3(e)(1) would 

define a qualifying battery component 

as electrode active materials, battery 

cells, or battery modules. 

1. Electrode Active Materials 

a. In General 

Proposed § 1.45X–3(e)(2)(i)(A) would 

have defined electrode active materials 

to include cathode electrode materials, 

anode electrode materials, and 

electrochemically active materials that 

contribute to the electrochemical 

processes necessary for energy storage. 

In general, electrode active materials are 

materials that are capable of being used 

within a battery for energy storage. 

Proposed § 1.45X–3(e)(2)(i)(A) would 

also have provided that the following 

materials in a battery or vehicle would 

not qualify for the section 45X credit as 

an electrode active material: battery 

management systems, terminal 

assemblies, cell containments, gas 

release valves, module containments, 

module connectors, compression plates, 

straps, pack terminals, bus bars, thermal 

management systems, and pack jackets. 

Proposed § 1.45X–3(e)(2)(v) would have 

clarified that a taxpayer may claim only 

one section 45X credit with respect to 

a material that qualifies as both an 

electrode active material and an 

applicable critical mineral. 

Some commenters recommended 

altering the definition of electrode 

active materials as defined in section 

45X(c)(5)(B)(i) and in proposed § 1.45X– 

3(e)(2)(i)(A). The Treasury Department 

and the IRS do not have the authority 

to alter the definition of electrode active 

materials as provided by the statute. For 

this reason, the Treasury Department 

and the IRS decline to adopt these 

recommendations in the final 

regulations. 

One commenter raised a concern that 

certain definitions in the Proposed 

Regulations applicable to electrode 

active materials would inadvertently 

exclude separators from being treated as 

an eligible component because those 

definitions do not include language 

specific to the separator production 

process. As proposed § 1.45X– 

3(e)(2)(i)(D) specifically included 

separators in the definition of 

electrochemically active materials, such 

changes to definitions are unnecessary, 

and the Treasury Department and the 

IRS decline to adopt the commenter’s 

recommendation. 

b. Cathode Electrode Materials and 

Anode Electrode Materials 

Proposed § 1.45X–3(e)(2)(i)(B) would 

have defined ‘‘cathode electrode 

materials’’ to mean the materials that 

comprise the cathode of a commercial 

battery technology, such as binders, and 

current collectors (that is, cathode foils). 

Proposed § 1.45X–3(e)(2)(i)(C) would 

have defined ‘‘anode electrode 

materials’’ to mean the materials that 

comprise the anode of a commercial 

battery technology, including anode 

foils. 

A commenter recommended that the 

definition of cathode electrode materials 

in proposed § 1.45–3(e)(2)(i)(B) and of 

anode electrode materials in proposed 

§ 1.45–3(e)(2)(i)(C) be clarified to specify 

that the materials be ‘‘battery-grade’’ so 

the precursor materials are eligible for 

the section 45X credit. Because these 

proposed definitions would require that 

the materials comprise the cathode or 

anode of a commercial battery 

technology, the Treasury Department 

and the IRS conclude that specifying 

that such materials be ‘‘battery-grade’’ 

would be redundant. For this reason, 

the Treasury Department and the IRS 

decline to adopt these recommendations 

in the final regulations. 

Another commenter recommended 

that the definition of cathode electrode 

materials be clarified to address its 

concern that the qualifier ‘‘commercial 

battery technology’’ excludes hydrogen 

fuel cells contrary to the definition of 

the term in the statute, which contains 

no such qualifier. The Treasury 

Department and the IRS do not have the 

authority to alter the definition of 

electrode active materials as battery 

components as provided by the statute. 

For this reason, the Treasury 

Department and the IRS decline to 

adopt this recommendation in the final 

regulations. The Treasury Department 

and the IRS note, however, that 

although electrode active materials in 

general must be capable of being used 

within a battery for energy storage, such 

materials would still be eligible for the 

section 45X credit if they are also 

capable of being used in other 

applications, such as hydrogen fuel 

cells. 

c. Electrochemically Active Materials 

Proposed § 1.45X–3(e)(2)(i)(D) would 

define ‘‘electrochemically active 

materials that contribute to the 

electrochemical processes necessary for 

energy storage’’ to mean the batterygrade materials that enable the 

electrochemical storage within a 

commercial battery technology. In 

addition to the list of electrochemically 

active materials provided in section 

45X(c)(5)(B)(i) (that is, solvents, 

additives, and electrolytic salts), these 

may include electrolytes, catholytes, 

anolytes, separators, and metal salts and 

oxides. 

One commenter requested the 

definition of electrochemically active 


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materials explicitly include solid-state 

electrolytes. Solid-state electrolytes are 

included in the definition of 

electrochemically active materials 

because Proposed § 1.45X 3(e)(2)(i)(D) 

includes ‘‘electrolytes,’’ with no 

particular form required. The Treasury 

Department and the IRS conclude that 

specifying that such materials are 

included in this definition would be 

redundant. For this reason, the Treasury 

Department and the IRS decline to 

adopt these recommendations in the 

final regulations. 

d. Battery Grade Materials 

Proposed § 1.45X–3(e)(2)(i)(F) would 

have defined ‘‘battery-grade materials’’ 

to mean the processed materials found 

in a final battery cell or an analogous 

unit, or the direct battery-grade 

precursors to those processed materials. 

A few commenters requested the final 

rules clarify the meaning of direct 

battery-grade precursors. Commenters 

also requested the final rules provide 

that silane gas, ultra-high molecular 

weight polyethylene, and needle coke 

meet the definition of electrochemically 

active materials as direct battery-grade 

precursors. While the Treasury 

Department and the IRS understand the 

desire for assurance, listing specific 

precursors that qualify as 

electrochemically active materials 

would not be possible or advisable 

because it could imply that unlisted 

materials do not qualify as 

electrochemically active materials, 

particularly as battery technologies may 

evolve over time. For this reason, the 

Treasury Department and the IRS 

decline to adopt these recommendations 

in these final regulations. 

e. Production Costs Incurred 

Proposed § 1.45X–3(e)(2)(iv) would 

have provided that costs incurred for 

purposes of determining the credit 

amount includes costs as defined in 

§ 1.263A–1(e) that are paid or incurred 

within the meaning of section 461 of the 

Code by the taxpayer for the production 

of an electrode active material only. 

Thus, under the Proposed Regulations, 

production costs with respect to an 

electrode active material would not 

include any costs incurred after the 

production of the electrode active 

material. 

The Proposed Regulations would not 

have allowed direct material costs as 

defined in § 1.263A–1(e)(2)(i)(A), 

indirect material costs as defined in 

§ 1.263A–1(e)(3)(ii)(E), or any costs 

related to the extraction or acquisition 

of raw materials to be taken into account 

as production costs. This limitation 

disallowed, for purposes of calculating 

the credit: the inclusion of the cost of 

acquiring the raw material used to 

produce the electrode active materials; 

the cost of materials used for 

conversion, purification, or recycling of 

the raw material; and other material 

costs related to the production of 

electrode active materials. The Proposed 

Regulations applied section 263A and 

the regulations under section 263A 

(section 263A regulations) solely to 

identify the types of costs that are 

includible in production costs incurred 

for the purpose of computing the 

amount of the section 45X credit. The 

Proposed Regulations did not apply 

section 263A or the section 263A 

regulations for any other purposes, such 

as to determine whether a taxpayer is 

engaged in production activities. 

The preamble to the Proposed 

Regulations explained that the rationale 

for the proposed rule was that the credit 

for the production of electrode active 

materials provides incentives for 

taxpayers to conduct activities that add 

value to the production of electrode 

active materials. Merely purchasing raw 

materials may enable a taxpayer to 

produce an electrode active material but 

it is not by itself an activity that adds 

value. In addition, excluding the costs 

of acquiring electrode active materials 

mitigates the risk of crediting the 

production costs for the same 

underlying material more than once as 

that material is used in various stages of 

the production process. For these 

reasons, material costs were not 

creditable costs under the Proposed 

Regulations. 

The Treasury Department and the IRS 

requested comments on the proposed 

rule for determining the costs incurred 

with respect to the production of 

electrode active materials. Specifically, 

comments were sought as to whether 

and how extraction and other similar 

value-added activities in the production 

of raw materials used in electrode active 

materials should be taken into account 

and how extraction should be defined, 

including whether the term should be 

defined consistent with proposed 

§ 1.30D–3(c)(8). Comments were also 

requested with respect to applicable 

critical minerals, which are summarized 

in Part V.C. of this Summary of 

Comments and Explanation of 

Revisions. Many of these comments had 

similarities, and the reasoning and 

revisions in these final regulations are 

described in this Part IV.E.1.e. of this 

Summary of Comments and Explanation 

of Revisions and are adopted for both 

electrode active materials and 

applicable critical minerals. 

Approximately 72 of the comments 

received addressed the definition and 

scope of production costs generally. 

Many commenters recommended that, 

contrary to the Proposed Regulations, all 

costs with respect to the production of 

electrode active materials be included in 

production costs for purpose of 

determining the credit, including direct 

material costs as defined in § 1.263A– 

1(e)(2)(i)(A), indirect material costs as 

defined in § 1.263A–1(e)(3)(ii)(E), and 

costs related to the extraction of raw 

materials. 

A significant number of commenters 

focused their recommendations on 

material costs or the costs of extraction, 

but there was agreement among many of 

them that ‘‘costs of production’’ should 

be interpreted broadly to include all 

costs. In support of this position, 

commenters asserted that section 

45X(b)(1)(J) and (M) do not place limits 

or otherwise qualify production costs 

eligible for the credit and that the 

regulations should not impose 

limitations not explicitly present in the 

Code itself. Some of these commenters 

also argued that, because the costs 

excluded from production costs in the 

Proposed Regulations are often a 

substantial or predominant portion of 

the total costs of producing some 

electrode active materials, substantial 

limitations on the inclusion of these 

costs would contradict Congress’s goal 

of incentivizing the production of 

electrode active materials. Commenters 

also disputed that direct and indirect 

costs are not incurred in value-adding 

activities. 

Some commenters also disagreed that 

the potential for over crediting (that is, 

crediting the same production costs 

multiple times) justifies denying a credit 

for these costs. A subset of these 

commenters disagreed that over 

crediting was a legitimate concern, 

arguing instead that section 45X 

provides a credit for costs incurred at 

different stages of production 

attributable to the same underlying 

material. Others agreed that over 

crediting might not be permissible but 

that the concern was insufficient to 

deny entirely credits for all costs that 

might be impermissibly claimed more 

than once for the same underlying 

material. In the view of these 

commenters, prohibiting crediting these 

same production costs multiple times 

would be the proper approach rather 

than entirely denying all credits for 

these costs. Some commenters noted 

that, in the case of certain specifically 

identified electrode active materials, 

there was no risk of crediting the same 

production costs multiple times and 

thus direct and indirect costs should be 

included in the costs of production for 

these electrode active materials. A third 


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set of commenters argued that credits 

should be permissible once under 

section 45X(b)(1)(M) for applicable 

critical minerals and again under 

section 45X(b)(1)(J) for electrode active 

materials. 

In the case of electrode active 

materials that are precursors for the 

production of other electrode active 

materials, one commenter 

recommended that the cost of the 

precursor electrode active materials 

only be included in the cost of 

production for which a credit may be 

claimed if the precursor electrode active 

materials are completely consumed in 

the production process and are not used 

for any other commercial purpose. 

A number of commenters proposed 

solutions to the problem of potentially 

crediting the same production costs 

multiple times. One solution 

commenters proposed was to reduce the 

basis of property for which a credit has 

been claimed by an upstream producer. 

Commenters also proposed a system 

under which a taxpayer would only be 

eligible for a credit on costs of material 

for which no other taxpayer had 

previously claimed a credit. This 

arrangement could be administered 

through a system of certifications in 

which taxpayers would be required to 

verify that its suppliers had not 

previously claimed credits for costs 

associated with the same materials for 

which the taxpayer is claiming credits. 

A commenter also urged that producers 

of electrode active materials be able to 

claim a credit if they can establish that 

the acquired electrode active materials 

and applicable critical minerals used in 

the production of electrode active 

materials were acquired from extraction 

or production outside the United States 

and thus were previously ineligible for 

a section 45X credit. 

In addition to general comments 

regarding the inclusion of direct, 

indirect, and extraction costs, 

commenters recommended clarification 

about more specific costs, including 

costs associated with transportation. 

Another commenter requested the final 

rules be modified to include costs of the 

production of anodes used in the 

aluminum production to convert 

alumina into aluminum. Other 

commenters asserted that the costs of 

processing and purification of materials 

in the production of electrode active 

materials add value and should, on that 

basis, be included in the scope of the 

credit. 

Several commenters recommended 

that the direct and indirect costs of the 

production of electrode active materials 

from recycled feedstock should be 

classified as production costs for 

purposes of the credit. According to one 

commenter, recycling processes begin 

with waste products at what is 

essentially a new supply chain. 

A commenter supported the Proposed 

Regulations’ exclusion of direct 

material, indirect material, and 

extraction costs from production costs 

eligible for the credit. This commenter 

was concerned that a contrary rule 

would invite fraud, waste, and abuse 

and that, in the case of extraction costs, 

would be difficult to administer without 

the creation of a tracing system. 

With respect to costs related to 

extraction, the Proposed Regulations 

would have excluded extraction costs 

because extraction could be far 

removed, particularly in the case of 

electrode active materials, in the supply 

chain from the ultimate production of 

the eligible component. However, 

commenters highlighted the critical 

importance of extraction to the 

production of both applicable critical 

minerals and electrode active materials 

as well as the close connection these 

costs often have to the final production 

of these materials. 

The Treasury Department and the IRS 

have reconsidered the treatment of 

extraction costs in these final 

regulations for taxpayers that extract 

raw materials domestically and for 

taxpayers that acquire either 

domestically or foreign-sourced 

extracted raw materials. For both 

electrode active materials and 

applicable critical minerals, the final 

regulations in §§ 1.45X–3(e)(2)(iv) and 

1.45X–4(c)(3), respectively, allow 

taxpayers to include extraction costs 

related to the extraction of raw materials 

in the United States or a United States 

territory, but only if those costs are paid 

or incurred by the taxpayer that claims 

the section 45X credit with respect to 

the relevant electrode active material or 

applicable critical mineral. The 

Treasury Department and the IRS note 

that the section 45X credit is available 

only to taxpayers that produce and sell 

an eligible component. Thus, the final 

regulations provide that extraction costs 

may be included in production costs 

consistent with the rules provided 

under section 263A only if such costs 

are incurred by the taxpayer that claims 

the section 45X credit with respect to 

the relevant applicable critical mineral 

or electrode active material. The 

Treasury Department and the IRS have 

determined that this inclusion of 

extraction costs incurred by the 

taxpayer most accurately captures the 

meaning ‘‘the costs incurred by the 

taxpayer with respect to the production 

of’’ applicable critical minerals and 

electrode active materials under section 

45X(b)(1)(J) and (M). If, however, a 

taxpayer acquires extracted raw material 

as a direct (or indirect) material cost, the 

material costs may be included as 

production costs consistent with the 

rules provided under section 263A 

regardless of whether the extracted 

material is domestically- or foreignsourced. 

With respect to direct and indirect 

material costs, the Proposed Regulations 

would have excluded direct and 

indirect material costs from production 

costs for both applicable critical 

minerals and electrode active materials. 

The Proposed Regulations excluded 

material costs from production costs 

based on an interpretation of the term 

‘‘costs incurred by the taxpayer with 

respect to production’’ in section 

45X(b)(1)(J) and (M) as being limited to 

value-added activities in the production 

process. Electrode active materials and 

applicable critical minerals differ from 

all other eligible components described 

in section 45X because their credit 

amounts are calculated as a percentage 

of production costs rather than 

specifying a fixed dollar amount or rate. 

The preamble to the Proposed 

Regulations stated that the mere 

purchase of materials does not itself add 

value in a production process despite 

being a necessary part of such process. 

Furthermore, it is unlikely that Congress 

intended to allow production costs 

associated with applicable critical 

minerals or electrode active materials to 

be credited multiple times, due to the 

high risk of fraud, waste, and abuse; the 

administrative burden of preventing 

these outcomes; and the limited 

effectiveness in supporting domestic 

production of new eligible components. 

The exclusion of direct and indirect 

material costs addressed these concerns. 

Numerous commenters highlighted 

the importance and appropriateness of 

including material costs in production 

costs. There was, however, 

disagreement as to whether and to what 

extent the costs of non-U.S. produced 

constituent elements, materials, and 

subcomponents used in the production 

of electrode active materials should be 

included in production costs. Some 

commenters recommended that the 

costs of all materials be included while 

others urged limitations to only credit 

materials produced domestically. One 

commenter proposed that the final 

regulations modify the proposed rule 

regarding constituent elements, 

materials, and subcomponents used in 

the production of applicable critical 

minerals to distinguish between imports 

of materials otherwise available from 

domestic sources and imported 


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materials that are not available from 

domestic sources. 

The Treasury Department and the IRS, 

after consultation with the Department 

of Energy, have reconsidered the 

proposed exclusion of all material costs 

based on these comments. The final 

regulations adopt a rule allowing 

taxpayers that produce applicable 

critical minerals and electrode active 

materials as specified in the statute to 

include direct and indirect materials 

costs (as described in the referenced 

section 263A regulations) in production 

costs if certain conditions are met, but 

only if those direct or indirect material 

costs do not relate to the purchase of 

materials that are an eligible component 

at the time of acquisition (such as an 

electrode active material or applicable 

critical mineral). In addition, two 

examples illustrating the revised 

production costs rule are included in 

§ 1.45X–3(e)(2)(iv)(A)(2). 

In finalizing this rule, the Treasury 

Department and the IRS considered the 

provisions of section 45X and 

determined this final rule appropriately 

implements the statute as a whole. 

Section 45X(a)(1) and (2) limit the 

section 45X credit to the sum of the 

credit amounts determined under 

section 45X(b) with respect to each 

eligible component that is produced by 

the taxpayer and, during such taxable 

year, sold to an unrelated person in the 

taxpayer’s trade or business. The statute 

allows a section 45X credit for the sale 

of an applicable critical mineral or 

electrode active material produced and 

sold by the taxpayer in its business. The 

section 45X credit for an applicable 

critical mineral or electrode active 

material is equal to 10 percent of the 

costs incurred by the taxpayer with 

respect to production, under section 

45X(b)(1)(M) and (J), respectively. 

In calculating a taxpayer’s costs 

incurred in the production of applicable 

critical minerals and electrode active 

materials, it is necessary to consider 

situations involving the integration of 

eligible components (whether directly 

made by the taxpayer or purchased from 

another taxpayer) in the course of 

producing an applicable critical mineral 

or electrode active material. Generally, 

integrating one eligible component into 

another produced eligible component 

results in two credits pursuant to 

section 45X(d)(4) if the taxpayer 

produced both, while integrating a 

purchased eligible component into 

another produced eligible component 

will only result in a credit for the 

eligible component produced by the 

taxpayer. In the case of an applicable 

critical mineral or electrode active 

material, however, the section 45X 

credit calculation differs from the other 

eligible components. Thus, further 

examination was needed to determine 

how a credit should be calculated in 

such a case. 

The Treasury Department and the IRS 

considered the treatment of a vertically 

integrated taxpayer. For example, 

assume a taxpayer produced an 

applicable critical mineral or electrode 

active material and incurred $50X of 

costs with respect thereto (EC 1) and 

integrated EC 1 into a separate 

applicable critical mineral or electrode 

active material (EC 2), incurring an 

additional $100X of costs with respect 

to the production of EC 2 (total 

production costs of $150X), with EC 2 

ultimately being sold by the taxpayer to 

an unrelated person. In calculating the 

section 45X credit, pursuant to section 

45X(d)(4), taxpayer 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. It is 

important to note that section 45X 

makes no distinction between integrated 

eligible components that were 

purchased or produced by the taxpayer. 

As section 45X(d)(4) directs the 

taxpayer to treat itself as selling both EC 

1 and EC 2 to the unrelated person, it 

is necessary to determine a credit for 

each EC 1 and EC 2 when both were 

produced by the taxpayer. 

In this example, the $50X of 

production costs attributable to EC 1 

were not incurred with respect to the 

production of EC 2, since the 

production of EC 2—in other words, the 

substantial transformation of EC 1 into 

EC 2—does not include the production 

of EC 1. Thus, the taxpayer would be 

eligible for a total section 45X credit of 

$15X: $5X (10% of $50X) for EC 1 and 

$10X (10% of $100X) for EC 2. If the 

$50X of production costs attributable to 

EC 1 were included for both EC 1 and 

EC 2, then the same costs would be 

double credited. Double crediting would 

result in the taxpayer generating a $20X 

credit from the sale of EC 1 and EC2, 

which would provide an increased 

credit amount as compared to the credit 

amount that should result from the 

$150X of actual production costs 

incurred (or, stated differently, a section 

45X credit that was 13.33 percent of the 

taxpayer’s actual $150X of production 

costs in the example). The correct result 

is taxpayer should be viewed as having 

incurred $50X of production costs for 

EC 1 and $100X of production costs for 

EC 2, resulting in a $15X credit, which 

also matches 10 percent of the 

taxpayer’s actual production costs 

($150X) and does not create a double 

crediting of costs. 

Alternatively, consider a taxpayer 

that, instead of producing EC 1, 

purchases EC 1 for $60X. The taxpayer 

then spends another $100X producing 

EC 2, using EC 1. Similar to the 

vertically integrated taxpayer, when the 

taxpayer sells EC 2, pursuant to section 

45X(d)(4), the taxpayer is treated as 

having sold EC 1 and EC 2 to an 

unrelated person. The difference is that 

in this case the taxpayer did not 

produce EC 1, and therefore the 

taxpayer does not satisfy section 

45X(a)(1)(A) for a section 45X credit for 

the sale of EC 1. If the taxpayer were 

permitted to include the costs for EC 1 

($60X) in calculating the credit for EC 

2, then the taxpayer would receive a 

larger credit for producing EC 2 than if 

the taxpayer had produced both EC 1 

and EC 2. Without a clearer indication 

in the statute that Congress intended to 

treat these two fact patterns differently, 

in a way that disadvantages vertically 

integrated production, the statute as a 

whole is appropriately implemented 

when the result is the same credit 

amount for EC 2 ($10X in these 

examples) whether the taxpayer 

purchases or produces EC 1. 

In comparing the two results of these 

examples under the final rule, the 

vertically integrated taxpayer gets a 

larger total section 45X credit by 

directly engaging in more credit 

generating activities, while the nonvertically integrated taxpayer receives a 

section 45X credit commensurate with 

its activities of producing EC 2, but no 

credit for integrated eligible components 

that it did not produce. These results are 

consistent with the general rule of 

section 45X(a)(1) and (2) and avoid 

allowing taxpayers to use the same cost 

in multiple credit calculations. 

Section 45X(d)(2) provides that only 

sales of eligible components produced 

within the United States, or a United 

States territory, are taken into account 

for purposes of section 45X and is 

additional support for the rule that does 

not include foreign applicable critical 

minerals or electrode active materials in 

production costs, regardless of whether 

purchased or produced by the taxpayer. 

Allowing a foreign produced applicable 

critical mineral or electrode active 

material to increase the section 45X 

credit conflicts with section 45X(d)(2), 

particularly when considered with the 

rule under section 45X(d)(4). The 

Treasury Department and the IRS also 

note that section 45X(d)(2) confirms that 

treatment as an ‘‘eligible component’’ is 

not dependent on where production 

occurred, and so a foreign applicable 

critical mineral or electrode active 


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material is an eligible component 

subject to the rule in section 45X(d)(4). 

The final rule is also consistent with 

the overall purpose of section 45X and 

addresses the concerns described in the 

preamble of the Proposed Regulations. 

While the final rule adopts certain 

commenters’ position that incurring 

material costs is necessary and may add 

value to a production process, the 

Treasury Department and IRS maintain 

that the inclusion of material costs must 

be balanced against the risk of multiple 

crediting of the same costs and the 

creation of incentives that are contrary 

to the purpose of section 45X. The final 

rule accomplishes this balance. Further, 

although applicable critical minerals 

and electrode active materials, or any 

other eligible component, produced 

outside the United States do not pose a 

risk of multiple crediting, permitting the 

production costs of a non-U.S. produced 

applicable critical mineral or electrode 

active material to be included in 

production costs would provide an 

incentive for the purchase of electrode 

active materials or applicable critical 

minerals produced abroad, which is 

inconsistent with the overall statutory 

scheme and purpose of section 45X (that 

is, to encourage domestic production of 

eligible components). Thus, excluding 

all costs of acquiring materials that are 

eligible components (for example, an 

applicable critical mineral or electrode 

active material at the time of 

acquisition) as a direct or indirect 

material cost with respect to the 

production of another applicable critical 

mineral or electrode active material 

appropriately implements the statute. It 

is also appropriate to have the same 

rules for applicable critical minerals and 

electrode active materials with respect 

to production costs, as the statutory 

language regarding calculation of the 

credit for applicable critical minerals 

and electrode active materials is the 

same. 

These final regulations also include 

certain substantiation requirements for a 

taxpayer that is claiming a section 45X 

credit with respect to an applicable 

critical mineral or electrode active 

material. The preamble to the Proposed 

Regulations supported not including all 

direct and indirect material costs by 

referencing the possibility that the same 

production costs may be credited 

multiple times and the potential for 

increased fraud and abuse related to 

claiming the section 45X credit. 

Proposed § 1.45X–4(c)(4) would have 

required the taxpayer to document that 

their product meets the criteria for an 

applicable critical mineral as described 

in section 45X(c)(6) with a certificate of 

analysis (COA) provided by the taxpayer 

to the person to which the taxpayer sold 

the applicable critical mineral. The 

Treasury Department and the IRS 

requested comments on this 

substantiation requirement, including 

whether a similar requirement should 

be applied to electrode active materials. 

Based on a review of the comments, 

including comments specifically 

suggesting certification statements, and 

the need to balance the expansion of 

costs included as production costs with 

respect to the Proposed Regulations 

while mitigating the risk of fraud, waste 

and abuse, these final regulations revise 

the substantiation rules in proposed 

§ 1.45X–4(c)(4) for applicable critical 

minerals and added substantiation rules 

for electrode active materials in 

§ 1.45X–3(e)(2)(iv)(C). In order to 

include direct or indirect materials costs 

as defined in § 1.263A–1(e)(2)(i)(A) and 

(e)(3)(ii)(E) as production costs when 

calculating a section 45X credit for the 

production and sale of an applicable 

critical mineral or electrode active 

material, a taxpayer must include, as at 

attachment to the return on which the 

section 45X credit is claimed, 

certifications from any supplier, 

including the supplier’s employer 

identification number and that is signed 

under penalties of perjury, from which 

the taxpayer purchased any constituent 

elements, materials, or subcomponents 

of the taxpayer’s eligible component, 

stating that the supplier is not claiming 

the section 45X credit with respect to 

any of the material acquired by the 

taxpayer, nor is the supplier aware that 

any prior supplier in the chain of 

production of that material claimed a 

section 45X credit for the material. A 

taxpayer must also prepare the 

following information, and maintain 

that information in the taxpayer’s books 

and records: (1) a document that 

provides an analysis of any constituent 

elements, materials, or subcomponents 

that concludes the material did not meet 

the definition of an eligible component 

(for example, did not meet the 

definition of applicable critical mineral 

or electrode active material) at the time 

of acquisition by the taxpayer (the 

document may be prepared by the 

taxpayer or ideally by an independent 

third-party); (2) a list of all direct and 

indirect material costs and the amount 

of such costs that were included within 

the taxpayer’s total production cost for 

each electrode active material or 

applicable critical mineral, as 

applicable; and (3) a document related 

to the taxpayer’s production activities 

with respect to the direct and indirect 

material costs that establishes the 

materials were used in the production of 

the electrode active material or 

applicable critical mineral, as applicable 

(the document may be prepared by the 

taxpayer or ideally by an independent 

third-party). Finally, the taxpayer must 

provide any other information related to 

the direct or indirect materials specified 

in guidance and comply with the 

directions for providing such 

information as specified in guidance. 

Failure to provide this documentation 

with the return filing, or providing a 

‘‘available upon request’’ statement, will 

constitute a failure to substantiate the 

claim. The Treasury Department and the 

IRS have determined, in consultation 

with the Department of Energy, that 

these revisions to the Proposed 

Regulations are necessary in order to 

properly substantiate credit amounts 

claimed under section 45X for 

applicable critical minerals and 

electrode active materials. 

2. Battery Cells—Definition 

a. In General 

Consistent with section 

45X(c)(5)(B)(ii), proposed § 1.45X– 

3(e)(3)(i) would have defined the term 

battery cell as an electrochemical cell 

comprised of one or more positive 

electrodes and one or more negative 

electrodes, with an energy density of not 

less than 100 watt-hours per liter, and 

capable of storing at least 12 watt-hours 

of energy. 

Commenters asked for additional 

guidance clarifying the volumetric 

energy density calculation methodology 

given the variety of battery shapes, 

sizes, and construction methodologies 

that exist in the market. The Treasury 

Department and the IRS understand 

these comments to be made with respect 

to calculating energy density under 

proposed § 1.45X–3(e)(3)(i)(B) and agree 

that clarification would be helpful. 

Energy density can refer to volumetric 

energy density but is commonly used to 

refer to gravimetric (mass-based) energy 

density. These final regulations clarify 

that energy density is referring to 

volumetric energy density in § 1.45X– 

3(e)(3)(i)(B). 

One commenter asked that the final 

rules provide that hydrogen fuel cells be 

included under the definition of battery 

cells by amending the definition of a 

battery cell to waive the requirement 

that a battery cell be capable of storing 

at least 12 watt-hours of energy and 

permitting this requirement to be met by 

‘‘a large hydrogen storage tank.’’ The 

Treasury Department and the IRS do not 

have the authority to amend the 

definition of a battery cell in the final 

regulations or to waive the requirement 

that it be capable of storing at least 12 


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watt-hours of energy. For this reason, 

the Treasury Department and the IRS 

decline to adopt this comment in the 

final regulations. 

At least one commenter raised a 

matter involving a vertically integrated 

manufacturer of electric vehicles that, 

together with a related person, operates 

a battery cell production facility. 

According to the commenter, the 

commenter purchases battery cells from 

this production facility and assembles, 

integrates, and incorporates them into 

battery modules at battery assembly 

facilities located in other States. 

Modules produced at these assembly 

facilities are then shipped to various 

electric vehicle production facilities. As 

described by the commenter, the 

process of taking completed battery cells 

and integrating, incorporating, and 

assembling them into completed battery 

packs happens across several different 

facilities, all of which are operated by 

the commenter and its affiliates that are 

separate legal entities. Each facility is 

neither solely a battery module facility 

nor solely a battery pack facility. The 

commenter requested that the final 

regulations allow a vertically integrated 

manufacturer and related parties to elect 

which facility will receive the credit in 

situations where the manufacturer and 

related parties complete all stages of the 

production process and can substantiate 

that the corresponding credit will not be 

duplicated. The Treasury Department 

and the IRS appreciate the complex 

operations that may be inherent in 

battery production. However, the statute 

requires a determination of the taxpayer 

that produces an eligible component 

and does not authorize the relief 

requested by the commenter. 

b. Capacity Measurement 

Proposed § 1.45X–3(e)(3)(ii) would 

have provided that taxpayers must 

measure the capacity of a battery cell in 

accordance with a national or 

international standard, such as IEC 

60086–1 (Primary Batteries), or an 

equivalent standard. Taxpayers can 

reference the United States Advanced 

Battery Consortium (USABC) Battery 

Test Manual for additional guidance. 

Several commenters agreed with the 

proposed definition because it provided 

taxpayers the ability and needed 

flexibility to determine the appropriate 

standard, but others recommended 

additional guidance or information be 

included in these final regulations. A 

commenter requested that the final 

regulations ‘‘retain the criteria that the 

standard used by the taxpayer must be 

one issued by a recognized standards 

setting body.’’ While not specifically 

using that language, these final 

regulations do maintain that concept by 

continuing to require measurement in 

accordance with a national or 

international standard. 

Another commenter requested that 

the final regulations eliminate the 

reference to ‘‘an equivalent standard’’ to 

IEC 60068–1 because ‘‘IEC 60086–1 is 

not applicable to rechargeable battery 

chemistries, and it is unknown therefore 

what an equivalent standard would be.’’ 

The Treasury Department and the IRS 

have determined that this clarification is 

unnecessary because the reference to 

IEC 60068–1 or ‘‘an equivalent 

standard’’ merely provides a nonexclusive example of an acceptable 

national or international standard for 

capacity measurement. These final 

regulations therefore do not adopt the 

commenter’s suggestion. 

Other commenters suggested the 

addition of various specific national or 

international standards to the language 

provided in proposed § 1.45X–3(e)(3)(ii) 

regarding the standards to be used for 

battery cell capacity measurement. The 

Treasury Department and the IRS 

understand the desire for assurance but 

have determined that these proposed 

additions, if included as examples, will 

not add further clarity to the final 

regulations. The Treasury Department 

and the IRS further do not think that 

there is a basis to include any of these 

proposed additions as the exclusive 

standard or standards for capacity 

measurement. The final regulations 

therefore do not adopt these 

commenters’ suggestions regarding 

particular national or international 

standards to be used for capacity 

measurement in § 1.45X–3(e)(3)(ii). 

Another commenter recommended 

that the final regulations require that 

battery cell ‘‘capacity’’ must be 

mathematically normalized to a 100- 

hour discharge time, regardless of the 

time otherwise dictated by the 

appropriate national or international 

standard. The Treasury Department and 

the IRS do not think there is a basis to 

adopt this requirement, as this would 

displace other national or international 

standards with a new requirement that 

is not in the statute. Therefore, the 

Treasury Department and the IRS 

decline to adopt additional specific 

standards in these final regulations 

beyond those provided in the Proposed 

Regulations. 

Some commenters noted that the 

USABC Battery Test Manual, which 

proposed § 1.45X–3(e)(3)(ii) states may 

be used for additional guidance 

regarding measurement of the capacity 

of a battery cell, is not applicable to all 

battery cell applications and 

technologies that may be eligible for the 

section 45X credit. One commenter 

suggested removing the reference to the 

USABC Battery Test Manual for this 

reason. Because the inclusion of this 

reference is intended to inform 

taxpayers of a resource that may be 

helpful in some cases, even if it may not 

be applicable in all cases, the Treasury 

Department and the IRS decline to 

adopt this suggestion. 

Another commenter suggested an 

additional requirement to conduct a 

performance test in a certified 

laboratory once every three years to 

verify the capacity of the battery cell. It 

was unclear from the comment when 

this performance testing would be 

required. Section 45X requires the 

production and sale of eligible 

components. Because an eligible 

component must meet the requirements 

under section 45X at the time of sale, it 

would be inappropriate to verify 

capacity once every three years. Thus, 

the Treasury Department and the IRS 

decline to adopt this additional capacity 

measurement requirement in the final 

regulations. 

3. Battery Modules—Definition 

Under section 45X(c)(5)(B)(iii), the 

term battery module, in the case of a 

module using battery cells, is a module 

with two or more battery cells which are 

configured electrically, in series or 

parallel, to create voltage or current, as 

appropriate, to a specified end use, with 

an aggregate capacity of not less than 7 

kilowatt-hours (or, in the case of a 

module for a hydrogen fuel cell vehicle, 

not less than 1 kilowatt-hour). Similarly, 

under section 45X(c)(5)(B)(iii), a battery 

module with no cells means a module 

with an aggregate capacity of not less 

than 7 kilowatt-hours (or, in the case of 

a module for a hydrogen fuel cell 

vehicle, not less than 1 kilowatt-hour). 

Consistent with section 45X(c)(5)(B)(iii), 

proposed § 1.45X–3(e)(4)(i) would have 

defined battery module to mean a 

module described in proposed § 1.45X– 

3(e)(4)(i)(A) (with cells) or (B) (without 

cells) with an aggregate capacity of not 

less than 7 kilowatt-hours (or, in the 

case of a module for a hydrogen fuel cell 

vehicle, not less than 1 kilowatt-hour). 

Some commenters suggested lowering 

the aggregate capacity limitation to 

incentivize domestic production of all 

battery types used in various industrial 

applications. One commenter 

recommended eliminating the capacity 

thresholds entirely for battery modules 

when used in medical or military 

applications. While the Treasury 

Department and the IRS appreciate 

commenters’ desire to incentivize 

domestic battery manufacturing, section 

45X(c)(5)(B)(iii)(II) provides the 


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aggregate capacity thresholds that 

battery modules must meet in order to 

be eligible components. The Treasury 

Department and the IRS decline to 

adopt the commenters’ request to alter 

or eliminate the aggregate capacity 

requirements for battery modules as 

such revisions would be inconsistent 

with the statute. Thus, these final 

regulations adopt proposed § 1.45X– 

3(e)(4)(i) without change. 

a. Modules Using Battery Cells 

Proposed § 1.45X–3(e)(4)(i)(A) would 

have defined a module using battery 

cells as a module with two or more 

battery cells that are configured 

electrically, in series or parallel, to 

create voltage or current (as 

appropriate), to a specified end use, 

meaning an end-use configuration of 

battery technologies. Under the 

proposed rule, an end-use configuration 

is the product that ultimately serves a 

specified end use. It is the collection of 

interconnected cells, configured to that 

specific end-use and interconnected 

with the necessary hardware and 

software required to deliver the required 

energy and power (voltage and current) 

for that use. The preamble to the 

Proposed Regulations explained that, as 

applied to batteries commonly used in 

electric vehicles, proposed § 1.45X– 

3(e)(4)(i)(A) would have permitted a 

credit for the production and sale of the 

battery pack in an electric vehicle, but 

it would not have permitted a credit for 

the production of a module that is not 

the end-use configuration. The Treasury 

Department and the IRS requested 

comments on this proposed 

interpretation of the phrase ‘‘to a 

specified end use’’ in section 

45X(c)(5)(B)(iii)(I)(aa). 

Many commenters raised concerns 

with the interpretation of the phrase ‘‘to 

a specified end use’’ in proposed 

§ 1.45X–3(e)(4)(i)(A). Some commenters 

asserted that requiring that modules be 

in an end-use configuration would be 

overly restrictive for certain product 

categories. For example, certain types of 

modules may be transported to the enduse site only partially assembled due to 

safety considerations, with final 

assembly performed by the battery 

manufacturer, the customer, or a thirdparty contractor. 

Similarly, a few commenters 

expressed concern that no taxpayer may 

be eligible for the battery module credit 

in certain cases. One commenter 

suggested that this result might occur if 

module manufacturers do not 

manufacture a pack in its end-use 

configuration. Further, those who 

purchase such items and convert them 

to their end-use configuration may 

struggle to demonstrate their activities 

amount to substantial transformation. 

One commenter suggested changing 

proposed § 1.45X–3(e)(4)(i)(A) to 

provide that ‘‘an end-use configuration 

is the product that ultimately serves a 

specified end use—whether delivered 

pre-assembled or assembled on-site.’’ 

Further, the commenter recommended 

an additional sentence at the end of 

proposed § 1.45X–3(e)(4)(i)(A) to 

identify the section 45X claimant in 

cases where assembly occurs by 

someone other than the taxpayer. 

Several commenters stated that 

proposed § 1.45X–3(e)(4)(i)(A) created 

confusion because the definition of 

battery module could, in some 

circumstances, include the items that 

are referred to in industry as ‘‘battery 

packs.’’ One commenter noted that 

while battery cells and modules 

predominantly originate from battery 

manufacturers, battery packs are 

assembled by electric vehicle 

manufacturers before being installed in 

electric vehicles. 

Some commenters requested that, if 

the definition of battery modules 

includes battery packs in the case of 

electric vehicle battery modules, the 

process to transform what is 

colloquially referred to in industry as a 

battery module into what is known as a 

‘‘battery pack’’ be clarified in the final 

regulations to constitute disqualifying 

minor assembly or ‘‘partial 

transformation.’’ Another commenter 

requested that the final regulations state 

that the rules are agnostic as to the form 

or manner in which a battery module 

with cells is incorporated into the 

electric vehicle. 

Other commenters supported the 

proposed definition of battery module 

with cells, stating that this definition 

appropriately captures the intention of 

the section 45X credit. One commenter 

asserted that the battery pack 

production covered by the proposed 

definition is a more valuable activity 

than the production of a single battery 

module and is the activity closer to the 

downstream consumer. 

The Treasury Department and the IRS 

appreciate the comments received 

regarding battery modules and have 

determined, in close consultation with 

the Department of Energy, that 

additional clarification is needed. 

Section 45X(c)(5)(B)(iii)(I)(aa) defines 

battery module using battery cells as ‘‘a 

module using battery cells, with two or 

more battery cells which are configured 

electrically, in series or parallel, to 

create voltage or current, as appropriate, 

to a specified end use[. . .].’’ Section 

45X(c)(5)(B)(iii)(II) provides a capacity 

threshold limitation of ‘‘[an] aggregate 

capacity of not less than 7 kilowatthours (or, in the case of a module for a 

hydrogen fuel cell vehicle, not less than 

1 kilowatt-hour)’’ that such battery 

module using battery cells (as defined in 

section 45X(c)(5)(B)(iii)(I)(aa)) must 

meet. 

In reviewing comments, the Treasury 

Department and the IRS understand that 

the explanation in the preamble of the 

Proposed Regulations regarding 

application to electric vehicles may not 

have aligned with industry 

understanding and the statutory text. 

Upon review of the comments received, 

the Treasury Department and the IRS 

wish to restate that the requirement 

found in section 45X(c)(5)(B)(iii)(I)(aa), 

that battery modules using battery cells 

that contain battery cells configured to 

a specified end use, applies regardless 

whether the items are typically called 

‘‘battery modules’’ or ‘‘battery packs’’ in 

industry practice. These final 

regulations are therefore clarified to 

provide that a battery module using 

battery cells becomes an eligible 

component upon first meeting the 

requirements of section 

45X(c)(5)(B)(iii)(I)(aa) and 

(c)(5)(B)(iii)(II), notwithstanding when 

this transformation may occur in a 

manufacturing production chain. 

At least one commenter requested a 

rule allowing the entity that assembles 

the pack to assign tax credits to the joint 

venture that manufactured the module. 

Alternatively, if the definition of 

specified end use is not adopted with 

respect to joint ventures, the regulations 

should instead allow for joint venture 

partners to assign battery-related section 

45X credits to the joint venture as the 

parties see fit, or in cases where the 

parties do not choose to assign the 

credits to one of the parents, the joint 

venture itself. This comment is not 

adopted as issues specific to joint 

ventures are outside the scope of these 

final regulations. For discussion of 

‘‘produced by the taxpayer’’ and the 

associated rules for who may claim the 

section 45X credit, see Part II.B. of this 

Summary of Comments and Explanation 

of Revisions. 

b. Modules With No Battery Cells 

Proposed § 1.45X–3(e)(4)(i)(B) would 

have defined the term ‘‘module with no 

battery cells’’ as a product with a 

standardized manufacturing process and 

form that is capable of storing and 

dispatching useful energy; that contains 

an energy storage medium that remains 

in the module (for example, it is not 

consumed through combustion); and 

that is not a custom-built electricity 

generation or storage facility. This 

proposed definition would allow battery 


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technologies, such as flow batteries and 

thermal batteries, to be eligible for the 

section 45X credit, but would not 

permit technologies that do not meet 

this definition, such as standalone fuel 

storage tanks or fuel tanks connected to 

engines or generation systems, to qualify 

as a module with no battery cells. 

Several commenters supported the 

proposed definition of a battery module, 

and specifically the inclusion of thermal 

batteries. Commenters also asked for 

clarification regarding a technologyneutral application of the proposed 

definition of a battery module. Other 

commenters suggested specific 

clarifications to the final regulations 

regarding certain types of thermal 

battery systems, such as thermal ice 

storage or thermal bricks. Some 

commenters requested that the final 

regulations incorporate similar language 

used in the section 48 proposed 

regulations to facilitate this technologyneutral treatment. For example, these 

commenters suggested that the final 

regulations should adopt the language 

in proposed § 1.48–9(e)(10)(ii) by 

specifically stating that ‘‘batteries of all 

types (such as lithium ion, vanadium 

flow, sodium sulfur, and lead-acid)’’ are 

eligible components. Commenters 

asserted that there is symmetry between 

the investment tax credits for energy 

storage property and advanced 

manufacturing credits for energy storage 

products. Additionally, commenters 

raised that technology-neutral treatment 

aligns with Congressional intent to 

establish eligibility criteria based on 

performance thresholds, not technology. 

The Treasury Department and the IRS, 

in close consultation with the 

Department of Energy, agree with 

commenters that a battery module with 

no battery cells does not require a 

specific storage medium nor are there 

chemistry-based requirements for 

qualifying battery modules. However, 

the Treasury Department and the IRS 

decline to include specific language as 

a non-exhaustive list of possible storage 

mediums. Including a non-exhaustive 

list of current storage mediums on an 

industry-by-industry basis is not 

practical and may inadvertently create 

confusion for other emerging 

technologies on whether those mediums 

would qualify for the section 45X credit. 

Some commenters disagreed with the 

requirement in proposed § 1.45X– 

3(e)(4)(i)(B) that the storage medium 

remain in the module, asserting that the 

requirement ‘‘may inadvertently 

exclude technologies’’ such as 

compressed air ‘‘that can deliver on the 

intent of the regulations.’’ The Treasury 

Department and the IRS decline to 

amend proposed § 1.45X–3(e)(4)(i)(B) in 

response to this comment. The Treasury 

Department and the IRS, in consultation 

with the Department of Energy, have 

determined that the proposed rule 

appropriately implements the statute. 

The requirement that the storage 

medium remain in the module gives 

meaning to both ‘‘battery’’ and to 

‘‘module.’’ For batteries, this 

requirement describes a feature common 

to electrochemical and more nascent 

types of batteries and distinguishes 

batteries from technologies that rely on 

fuel. For modules, this requirement 

helps segregate qualifying technologies 

from those that are self-contained and 

not merely one component of a larger 

system. 

Manufacturing the constituent 

components of battery modules without 

manufacturing the entire energy storage 

system does not result in the production 

of a module with no battery cells under 

the final regulations. For example, in 

thermal energy storage applications, the 

taxpayer must produce and sell the 

entire system and not just the storage 

medium. A manufacturer that only 

produces a thermal storage medium (for 

example, molten salt) in a thermal 

energy storage system would not be 

eligible for the credit. Requiring the 

production of the entire energy storage 

system from ‘‘energy in’’ through 

‘‘energy out’’ provides similar treatment 

for purposes of the section 45X credit to 

the production of a battery module 

using battery cells. 

Numerous comments requested 

additional clarification of ‘‘custom-built 

electricity . . . storage facility.’’ 

Commenters noted that the definition in 

proposed § 1.45X–3(e)(4)(i)(B) creates 

ambiguity as to which modifications 

made in order to meet site or use 

specifications would trigger the 

‘‘custom-built’’ disqualifier. Several 

commenters asserted that the Proposed 

Regulations create additional limitations 

on battery modules without cells that do 

not apply to the other eligible 

components. Commenters contended 

that the terms in the Proposed 

Regulations, such as ‘‘manufacturing,’’ 

‘‘standardized,’’ and ‘‘not custom-built,’’ 

do not appear in the statutory text and 

diverge from the general approach taken 

by the Proposed Regulations with 

respect to other eligible components. 

Some commenters asserted that nearly 

all thermal battery implementations are 

associated with custom-built generation 

and storage facilities. 

These commenters requested that the 

final regulations clarify that the eligible 

components may be assembled with 

other property to comprise a functioning 

energy generation or storage facility. 

Commenters also suggested additional 

clarity regarding the physical 

boundaries of a battery module and 

thought that using the proposed 

definition of ‘‘produced by the 

taxpayer’’ would allow for an eligible 

component to be assembled on-site, 

such as battery modules with no battery 

cells that are too heavy and large to 

transport fully assembled. Commenters 

asserted that most or all batteries will 

require some amount of on-site 

installation. Commenters generally 

requested that the final regulations 

provide a clear and principled 

definition of ‘‘custom-built’’ that 

continues to support a technologyneutral and inclusive implementation of 

section 45X. 

Commenters provided various 

alternatives to further clarify the 

definition of ‘‘custom-built’’ in the 

Proposed Regulations. One commenter 

recommended clarifying the definition 

of ‘‘a custom-built electricity storage 

facility’’ as ‘‘a facility (1) that contains 

an energy storage medium and (2) of 

which all, or substantially all, of the 

integral components are designed 

specifically for the facility and are not 

interchangeable with components of 

other facilities that utilize the same or 

similar electricity storage technology.’’ 

Another commenter asked that the final 

regulations clarify that a module with 

no battery cells is not treated as custombuilt if modules are produced by the 

taxpayer using the same or similar 

components or property generally used 

by the taxpayer to produce such 

modules but in different configurations 

or amounts to accommodate the storage 

needs or the site layout applicable to the 

storage asset. A commenter 

recommended clarifying the definition 

that a module with modular 

components manufactured offsite may 

undergo final assembly at its installation 

site without being considered a custombuilt facility and include an example 

regarding final assembly on site. 

Another suggestion included clarifying 

that modules with no cells are items of 

property that must be combined with 

other tangible personal property to store 

energy. 

Separately, a commenter noted that 

for contract manufacturing 

arrangements, ‘‘a routine order for offthe-shelf-property’’ is not eligible for the 

section 45X credit. The commenter 

suggested the final regulations provide 

that an agreement will be treated as a 

routine purchase order for off-the-shelf 

property if the contractor is required to 

make no more than de minimis 

modifications to the property to tailor it 

to the customer’s specific needs. 

However, if the manufacturer does make 

more than de minimis modifications, 


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the module may be custom-built. The 

commenter asserted that the proposed 

rule sets up a complicated dichotomy 

under which manufacturers of modules 

with no battery cells who enter into 

contract manufacturing arrangements 

will have to establish an undefined 

standard that are neither off the shelf 

nor custom-built. 

Commenters also provided specific 

examples regarding whether certain 

technologies or configurations would be 

considered custom-built. For example, 

physical site conditions at a customer’s 

site may require that the same 

components used for one pumped heat 

energy storage (PHES) are differently 

arranged for another PHES. The use of 

the PHES by a customer may require 

modified storage durations (for example, 

20 hours versus 10 hours), which would 

require additional storage media and 

vessels. The commenter asserted that 

this should not be considered custombuilt. Commenters also noted that, for 

closed-loop pumped storage 

hydropower systems, pipes and other 

related components are otherwise 

produced in a standardized process, and 

neither resemble nor are functionally 

equivalent to standalone fuel storage 

tanks or fuel tanks connected to engines 

or generation systems custom-built 

electricity generation or storage facility. 

Commenters also raised that these 

differences are based on the topography 

of the site where the system is located 

and not on the intended function of 

these components or the system as a 

whole. 

One commenter requested that the 

Treasury Department and the IRS 

include hydrogen fuel cell systems 

under the definition of a battery module 

using battery cells. Proposed § 1.45X– 

3(e)(4)(i)(B) would define the term 

‘‘module with no battery cells’’ as a 

product with a standardized 

manufacturing process and form that is 

capable of storing and dispatching 

useful energy, that contains an energy 

storage medium that remains in the 

module (for example, it is not consumed 

through combustion), and that is not a 

custom-built electricity generation or 

storage facility. 

In general, the Treasury Department 

and the IRS appreciate the complexity 

of the issues raised by commenters. 

Given the myriad of technologies, 

industry-specific applications, and 

customary business practices, the final 

regulations provide additional 

clarifications. The Treasury Department 

and the IRS understand the need for 

clear, administrable rules for both 

taxpayers and the IRS. The comments 

also illustrate the impracticality of 

providing rules to specifically address 

all situations. The Treasury Department 

and the IRS, in close consultation with 

the Department of Energy, have 

determined that the definition provided 

in proposed § 1.45X–3(e)(4)(i)(B) strikes 

the appropriate balance between brightline rules and the necessary flexibility 

for evolving industries. The Treasury 

Department and the IRS therefore 

decline to adopt suggested revisions to 

the definition of ‘‘module with no 

battery cells’’ in the final regulations. 

The Treasury Department and the IRS, 

in close consultation with the 

Department of Energy, also have 

determined that requiring battery 

modules be modular in the sense that 

they are both self-contained and not 

highly customized appropriately 

implements the statutory definition 

provided in section 45X(c)(5)(B)(iii). 

Because of this, the preamble to the 

Proposed Regulations further clarified 

that this proposed definition would 

allow battery technologies such as flow 

batteries and thermal batteries to be 

eligible for the section 45X credit, but it 

would not permit technologies that do 

not meet this definition such as 

standalone fuel storage tanks or fuel 

tanks connected to engines or 

generation systems to qualify as a 

module with no battery cells. For these 

reasons, the Treasury Department and 

the IRS decline to adopt this comment 

in the final regulations. 

One commenter recommended 

adopting the definition of modules 

using battery cells for the definition of 

modules with no battery cells, with the 

addition that the module should 

receive, store, and deliver energy for 

conversion to electricity. However, 

adopting the commenter’s 

recommended definition would not be 

appropriate for modules with no battery 

cells because the definition of modules 

using battery cells requires the inclusion 

of battery cells in the module. 

Accordingly, The Treasury Department 

and the IRS decline to adopt the 

commenter’s recommendation. 

The Treasury Department and the IRS 

agree with commenters who suggest that 

the examples illustrating the contrast 

between ‘‘substantial transformation’’ 

and disqualifying minor assembly, 

explained in Part II.B. of this Summary 

of Comments and Explanation of 

Revisions provide useful guidelines for 

taxpayers and the IRS in determining 

what is a standardized manufacturing 

process and not a custom-built 

electricity generation or storage facility. 

Thus, incidental onsite assembly of 

prefabricated modular components for 

final assembly that are generally 

produced in the ordinary course of a 

taxpayer’s trade or business would 

constitute a standardized manufacturing 

process for purposes of § 1.45X– 

3(e)(4)(i)(B). Battery modules with no 

battery cells that undergo a substantial 

transformation onsite or are specially 

manufactured for a single customer 

would constitute a custom-built 

electricity generation or storage facility. 

The Treasury Department and the IRS 

decline to provide a de minimis 

threshold which would exclude certain 

manufacturing or configurations that 

would otherwise qualify for the section 

45X credit using the principles 

described in Part II.B. of this Summary 

of Comments and Explanation of 

Revisions. 

c. Capacity Measurement 

Proposed § 1.45X–3(e)(4)(ii)(A) would 

have provided that, for modules using 

battery cells, taxpayers must measure 

the capacity of a module with a testing 

procedure that complies with a national 

or international standard published by a 

recognized standard setting 

organization. The capacity of a battery 

module using battery cells may not 

exceed the total capacity of the battery 

cells in the module. Proposed § 1.45X– 

3(e)(4)(ii)(B) would have provided that, 

for modules with no battery cells, 

taxpayers must measure the capacity 

using a testing procedure that complies 

with a national or international standard 

published by a recognized standard 

setting organization. If no such standard 

applies to a type of module with no 

battery cells, taxpayers must measure 

the capacity of such module as the 

Secretary may prescribe in regulations 

or other guidance. The Treasury 

Department and the IRS requested 

comments on what recognized national 

or international standards are currently 

available for measuring capacity of 

modules with no battery cells and 

whether further guidance may be 

required. 

One commenter suggested that the 

aggregate capacity measurement 

outlined in section 45X and the 

Proposed Regulations for battery 

modules is challenging to apply in the 

context of thermal battery modules with 

no cells. Another commenter explained 

that battery capacity measurements are 

subject to variations contingent upon 

environmental conditions during 

measurement and that capacity 

assessment for both battery cells and 

battery modules must occur within a 

standard testing environment. Some 

commenters agreed with the approach 

in the Proposed Regulations of allowing 

taxpayers to determine the appropriate 

national or international standards 

because taxpayers are in a better 

position to determine the appropriate 


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standard. Moreover, this approach 

provides the flexibility necessary for 

emerging technologies to qualify for the 

credit. Such commenters requested that 

the final regulations retain the criteria 

that the taxpayer must use a testing 

procedure issued by a recognized 

standards setting body. 

Other commenters explained that the 

Treasury Department and the IRS 

should prescribe a flexible approach to 

capacity measurement for battery 

modules with no battery cells such that 

different technologies are appropriately 

measured and provide alternative 

testing procedures that complies with a 

national or international standard 

published by a recognized standard 

setting organization that is relevant and 

applicable for the varying technologies. 

One commenter asserted that, in their 

view, such standards may include 

American Society of Mechanical 

Engineers (ASME) or International 

Standards Organization (ISO), but 

specifically recommended that capacity 

should be measured based on nameplate 

capacity as provided in 40 CFR 96.202 

in the absence of a bright-line standard. 

Another commenter supported this 

approach because of alleged difficulties 

in determining the minimum capacity of 

battery modules with no cells before 

they are placed in service. Other 

commenters suggested various 

standards, including ASME PTC 53; 

ANSI/American Society of Heating, 

Refrigerating and Air-Conditioning 

Engineers (ASHRAE) Standard 94.2– 

2010; and ASHRAE 94 testing methods 

(specifically, 94.1,94.2, and 94.3). 

Another commenter recommended that 

the final regulations require use of a 

conversion factor of 1.16RT/kW = 14/12 

and recommended that the regulations 

provide a capacity measure if there is no 

national or international standard for a 

given technology. 

A different commenter raised 

concerns regarding capacity 

measurement for battery modules with 

no battery cells and suggested adding to 

proposed § 1.45X–3(e)(4)(iii)(B), ‘‘. . . 

The capacity of each battery module is 

expressed on a kilowatt-hour basis in 

the actual useful energy unit that is 

specific to the battery module without 

cells. For example, both thermal and 

thermochemical battery modules have 

their capacity expressed on a kilowatthour-thermal basis.’’ 

The Treasury Department and the IRS, 

after consultation with the Department 

of Energy, have determined that 

taxpayers producing thermal and 

thermochemical battery modules with 

no battery cells must convert the energy 

storage to a kilowatt-hour basis and 

provide both methodology and testing 

regarding this conversion. Taxpayers 

must maintain this testing and 

methodology as part of books and 

records under section 6001. However, 

the kilowatt-hour conversion cannot 

exceed the direct conversion of the total 

nameplate capacity of the thermal 

battery module to kilowatt-hours (the 

capacity that is sold to the consumer). 

The taxpayer claiming the section 45X 

credit must use the same methodology 

consistently, subject to any updated 

standard of the same methodology and 

testing, for battery modules (with or 

without cells) sold in the taxpayer’s 

trade or business. The final regulations 

incorporate these clarifications in 

§ 1.45X–3(e)(4)(ii) regarding testing and 

methodology with respect to battery 

modules. 

One commenter requested the final 

rules remove the requirement that the 

capacity of a battery module not exceed 

the total capacity of the battery cells in 

the module because the different 

structures of each eligible component 

may affect the capacity measurement of 

the module. The Treasury Department 

and the IRS, in consultation with the 

Department of Energy, have determined 

that this rule serves an important 

function in reducing the potential to 

manipulate testing conditions in the 

measurement of capacity and in 

encouraging the application of reliable 

measurement standards for battery cells. 

The Treasury Department and the IRS 

therefore decline to remove the 

requirement that the capacity of a 

battery module not exceed the total 

capacity of the battery cells in the 

module. 

Another commenter requested that 

the final regulations provide that the 

entity that manufactures a battery 

module that exceeds the statutory 7 

kilowatt-hours threshold limitation in 

section 45X(c)(5)(B)(iii)(II) receives the 

$10/kWh module credit. As discussed 

in Part IV.E.3.a. of this Summary of 

Comments and Explanation of 

Revisions, the taxpayer that produces 

and sells the eligible component (when 

a battery module first becomes the 

eligible component) may claim the 

section 45X credit. Whether an eligible 

component is produced by the taxpayer 

is generally discussed in Part II.B. of 

this Summary of Comments and 

Explanation of Revisions. 

A commenter noted that proposed 

§ 1.45X–3(e)(4)(i), which provides the 

definition for battery modules ‘‘with an 

aggregate capacity of not less than 7 

kilowatt-hours,’’ aligns with section 

30D. The language in section 30D is 

based on the capacity of the complete 

battery installed on the vehicle. The 

commenter asserted that the parallel 

language describing the capacity 

threshold in section 45X and in section 

30D indicates that the eligible 

component for the section 45X credit for 

battery modules are the items 

commonly referred to in industry as 

‘‘battery packs.’’ This comment is not 

adopted. As explained in Part IV.E.3.a. 

of this Summary of Comments and 

Explanation of Revisions, a battery 

module (within the meaning of section 

45X) is an eligible component, 

regardless of whether industry 

nomenclature would describe that 

module as a ‘‘battery pack.’’ 

Proposed § 1.45X–3(e)(5)(i) would 

have provided a special rule where the 

capacity determined with respect to a 

battery cell or battery module must not 

exceed a capacity-to-power ratio of 

100:1. At least one commenter requested 

clarification on the definition of 

‘‘capacity to power ratio.’’ The 

commenter noted that term could mean 

either the maximum energy that the 

battery cell and module can hold or the 

maximum output that the battery cell 

and module can release instantaneously. 

The final regulations retain the 

proposed rule defining ‘‘capacity to 

power ratio’’ in § 1.45X–3(e)(5). The 

Treasury Department and the IRS 

confirm that the rule, with respect to a 

battery cell or battery module, the 

capacity-to-power ratio refers to both 

the power and the capacity as a cap on 

the section 45X credit amount, rather 

than an eligibility criterion. Power is the 

battery cell’s maximum rate of 

discharge; capacity is the maximum 

amount of energy the component can 

store. 

F. Phase-Out Rule 

Consistent with section 45X(b)(3), 

proposed § 1.45X–3(f)(1) would have 

provided that, in the case of any eligible 

component sold after December 31, 

2029, the amount of the section 45X 

credit determined with respect to such 

eligible component is equal to the 

product of the amount determined 

under proposed § 1.45X–3(b) through (e) 

with respect to such eligible component, 

multiplied by the phase out percentage 

under proposed § 1.45X–3(f)(2). 

Consistent with section 45X(b)(3)(C), 

proposed § 1.45X–3(f)(3) would have 

provided that the phase out rules 

described in proposed § 1.45X–3(f)(1) 

and (2) apply to all eligible components 

except applicable critical minerals. 

Proposed § 1.45X–3(f)(2) would have 

provided the phase out percentage is 

equal to 75 percent for eligible 

components sold during calendar year 

2030; 50 percent for eligible 

components sold during calendar year 

2031; 25 percent for eligible 


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components sold during calendar year 

2032, and zero percent for eligible 

components sold after calendar year 

2032. 

A commenter expressed concern that 

the phase out rules create disparate 

treatment of an applicable critical 

mineral produced by a taxpayer that 

with further value-added processing 

would result in the production of an 

electrode active material and provided 

the example of the production of natural 

graphite active anode materials. The 

commenter stated that if the production 

of the applicable critical mineral and 

production of the electrode active 

material occurs in a vertically integrated 

company, the taxpayer may only claim 

a section 45X credit for one component. 

Thus, the commenter requests the phase 

out rule be modified to not apply to 

electrode active materials. 

The Treasury Department and the IRS 

decline to adopt the commenter’s 

request. The Treasury Department and 

the IRS do not have the authority to 

allow a section 45X credit for the 

production of an electrode active 

material in amounts in excess of what 

is permitted under section 45X(b)(3). 

For these reasons, these final 

regulations adopt proposed § 1.45X–3(f) 

without modification. 

V. Applicable Critical Minerals 

Proposed § 1.45X–4 would have 

provided definitions for the listed 

applicable critical minerals (generally in 

accordance with section 45X(c)(6)), the 

credit amounts, and rules regarding 

production costs for purposes of 

determining credit amounts. 

Commenters addressed certain aspects 

of these proposed rules, as described in 

this Part V. of the Summary of 

Comments and Explanation of 

Revisions. These final regulations 

generally adopt the rules as proposed in 

§ 1.45X–4, with the modifications 

described in this Part V. of the Summary 

of Comments and Explanation of 

Revisions. 

A. In General 

Section 45X(c)(6) defines applicable 

critical minerals that are eligible 

components for purposes of the section 

45X credit. Consistent with section 

45X(c)(6), proposed § 1.45X–4 provides 

that an applicable critical mineral 

means any of the minerals that are listed 

in section 45X(c)(6) and defined in 

proposed § 1.45X–4(b). 

Several commenters requested that 

the final rules generally clarify and 

expand the eligibility of metals and 

metal alloys (including alloys made 

from primary and secondary metal 

production) under the purity 

requirements. Section 45X generally 

provides specific minimum purity 

requirements or forms for applicable 

critical minerals. Metals or metal alloys 

under the specified purity requirements 

that do not meet specified forms do not 

qualify for the section 45X credit. Thus, 

the Treasury Department and the IRS do 

not have the statutory authority to add 

additional metals and alloys to the list 

of applicable critical minerals in these 

final regulations. 

B. Definitions 

1. Aluminum 

Section 45X(c)(6)(A) provides that 

aluminum that is converted from 

bauxite to a minimum purity of 99 

percent alumina by mass or purified to 

a minimum purity of 99.9 percent 

aluminum by mass qualifies as an 

applicable critical mineral. Proposed 

§ 1.45X–4(b)(1) would have defined 

aluminum to mean aluminum that is 

converted from bauxite to a minimum 

purity of 99 percent alumina by mass or 

purified to a minimum purity of 99.9 

percent aluminum by mass. The 

preamble to the Proposed Regulations 

stated that section 45X(c)(6)(A) should 

be interpreted in light of the dynamics 

of the aluminum industry and the role 

that critical materials like aluminum 

play in the renewable energy and energy 

storage industry. Proposed § 1.45X– 

4(b)(1) would have interpreted section 

45X(c)(6)(A) to mean aluminum, 

including commodity-grade aluminum, 

described in section 45X(c)(6)(A)(i) and 

(ii). Proposed § 1.45X–4(b)(1) would 

have defined ‘‘commodity-grade 

aluminum’’ as aluminum that has been 

produced directly from aluminum that 

is described in proposed § 1.45X– 

4(b)(1)(i) or (ii), is limited to primary 

production of unwrought forms, and is 

in a form that is sold on international 

commodity exchanges, which would 

include commercial grade aluminum 

that is 99.7 percent aluminum by mass. 

A commenter expressed support for 

the definition of aluminum in the 

proposed rule, and stated that the 

statutory definition could be read to 

apply only to the refining of alumina 

and, as a result, not benefit domestic 

primary aluminum producers, nor 

achieve the spirit of the legislation to 

increase domestic manufacturing. The 

commenter noted confusion with the 

statutory definition, which stated in 

part, that aluminum ‘‘which is 

converted from bauxite to a minimum 

purity of 99 percent alumina by mass’’ 

meets the definition of aluminum— 

however, alumina is converted from 

bauxite, not aluminum. Thus, the 

commenter noted that the proposed rule 

correctly states the primary aluminum 

production process and will help 

United States primary aluminum 

producers bolster domestic operations 

and strengthen global competitiveness. 

A commenter requested that the final 

regulations provide that aluminum 

oxide (alumina) is a form of aluminum 

for the purposes of section 

45X(c)(6)(A)(i). The Treasury 

Department and the IRS note that 

section 45X(c)(6)(A)(i) provides 

eligibility for the credit for aluminum 

that is converted from bauxite to a 

minimum purity of 99 percent alumina 

by mass. One commenter requested that 

the definition of primary aluminum 

include molten metal. The Treasury 

Department and the IRS note that 

section 45X(c)(6)(A)(ii) does not restrict 

the form of aluminum purified to a 

minimum purity of 99.9 percent 

aluminum by mass. One commenter 

proposed lowering the eligible purity for 

aluminum to 96 percent. The Treasury 

Department and the IRS view this 

request as inconsistent with the statute. 

A few commenters requested the 

definition of primary aluminum include 

all unwrought primary aluminum 

smelted from aluminum oxide (that is, 

alumina). One commenter requested 

that the final rules clarify that 

aluminum produced through secondary 

production is eligible for the section 

45X credit. The preamble to the 

Proposed Regulations stated that 

proposed § 1.45X–4(b)(1) clarifies that 

the term ‘‘commodity-grade aluminum’’ 

is limited to primary production of 

unwrought forms by specifying that 

commodity-grade aluminum must be 

‘‘produced directly’’ from certain forms 

of aluminum. The Treasury Department 

and the IRS understand that the ability 

to ascertain and substantiate the process 

or processes used at an earlier point in 

the lifecycle of feedstock aluminum for 

secondary production is limited. The 

Treasury Department and the IRS are 

concerned that such limitations would 

pose significant substantiation and 

administrability issues if secondary 

production were permitted for 

commodity-grade aluminum under 

proposed § 1.45X–4(b)(1). 

A few commenters requested that the 

final rules replace the requirement that 

commodity-grade aluminum be ‘‘in a 

form sold on international commodity 

exchanges’’ with the requirement that 

such aluminum ‘‘has the ability to meet 

the chemical specifications of 

aluminum sold on international 

commodity exchanges,’’ because not all 

aluminum sold to third-party customers 

is traded through the London Metal 

Exchange, which imposes the shape 

requirements. The commenters state 


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that commercial grade aluminum is 

made into products that are alloyed to 

different specifications and shapes that 

are not traded through commodity 

markets, and the final rules should not 

distinguish among the end markets. 

Although the Treasury Department and 

the IRS view the requirement that 

commodity-grade aluminum be ‘‘in a 

form sold on international commodity 

exchanges’’ as providing important 

clarity and certainty for taxpayers and 

the IRS, as well as an objective and 

observable standard to determine 

eligibility, the Treasury Department and 

the IRS will continue to consider these 

comments as they work to finalize 

proposed § 1.45X–4(b)(1). 

One commenter requested the final 

regulations clarify ‘‘aluminum that is 

converted from alumina with a 

minimum purity of 99 percent on a fired 

basis should qualify as an applicable 

critical mineral.’’ The Treasury 

Department and the IRS think that the 

additional language specifying whether 

the purity is measured on a fired basis 

or dried basis is not necessary due to the 

specific purity standards already listed 

in section 45X and the proposed rules. 

In addition, although these terms are 

often included on a Certificate of 

Analysis (COA), the Treasury 

Department and IRS anticipate that 

using these terms may cause confusion 

in circumstances in which these terms 

are not included on a COA. 

With respect to all of the comments 

related to the definition of aluminum, 

the Treasury Department and the IRS 

have determined that additional 

consideration is necessary prior to 

finalizing proposed § 1.45X–4(b)(1), 

which the Treasury Department and the 

IRS intend to do at a later date. For that 

reason, § 1.45X–4(b)(1) is reserved in 

these final regulations. 

2. Neodymium 

Consistent with section 45X(c)(6)(R), 

proposed § 1.45X–4(b)(18) would have 

provided that the term neodymium 

means neodymium that is converted to 

neodymium-praseodymium oxide that 

is purified to a minimum purity of 99 

percent neodymium-praseodymium 

oxide by mass; converted to neodymium 

oxide that is purified to a minimum 

purity of 99.5 percent neodymium oxide 

by mass; or purified to a minimum 

purity of 99.9 percent neodymium by 

mass. 

One commenter requested that the 

final rules provide that the following are 

eligible for the section 45X credit: (1) 

neodymium if purified to the industry 

standard minimum purity of 99.0 

percent neodymium by mass; (2) 

neodymium converted to neodymiumpraseodymium and purified to a 

minimum purity of 99.0 percent 

neodymium-praseodymium by mass; (3) 

neodymium-praseodymium that is 

purified to a minimum purity of 99.0 

percent neodymium-praseodymium by 

mass; and (4) neodymium-iron-boron 

alloy or neodymium-praseodymiumiron-boron alloy purified to 99.0 percent 

by mass. The Treasury Department and 

the IRS do not have the statutory 

authority to modify the definition of 

neodymium or to modify purity 

percentages in proposed § 1.45X– 

4(b)(18) and these final regulations 

adopt this proposed rule without 

change. 

3. Vanadium 

Consistent with section 45X(c)(6)(X), 

proposed § 1.45X–4(b)(24) would have 

provided that the term vanadium means 

vanadium that is converted to 

ferrovanadium or vanadium pentoxide. 

One commenter requested that the 

definition of vanadium includes 

vanadium when it is purified to a 

minimum purity of 99 percent 

vanadium by mass. The Treasury 

Department and the IRS do not have the 

statutory authority to modify the 

definition of vanadium to include purity 

percentages, and these final regulations 

adopt this proposed rule without 

change. 

4. Magnesium 

Consistent with section 

45X(c)(6)(Z)(x), proposed § 1.45X– 

4(b)(26)(x) would have provided that the 

term magnesium means magnesium 

purified to a minimum purity of 99 

percent by mass. One commenter 

requested that the definition of 

magnesium be expanded to include 

magnesium oxide and magnesium 

hydroxide at purity levels that range 

from 90–98 percent. The Treasury 

Department and the IRS do not have the 

statutory authority to modify the 

definition of magnesium or to modify 

purity percentages in proposed § 1.45X– 

4(b)(26)(x), and these final regulations 

adopt this proposed rule without 

change. 

C. Credit Amount—in General 

Section 45X(b)(1) generally provides 

the credit amount determined with 

respect to any eligible component, 

including any eligible component it 

incorporates, subject to the credit phase 

out provided at section 45X(b)(3). 

Section 45X(b)(3)(C) provides that the 

credit phase out does not apply with 

respect to any applicable critical 

mineral. 

Section 45X(b)(1)(M) provides that, in 

the case of any applicable critical 

mineral, the credit amount is an amount 

equal to 10 percent of the costs incurred 

by the taxpayer with respect to 

production of such mineral. Proposed 

§ 1.45X–4(c)(3) would have provided 

that the costs incurred for purposes of 

determining the credit amount includes 

costs as defined in § 1.263A–1(e) that 

are paid or incurred within the meaning 

of section 461 of the Code by the 

taxpayer for the production of an 

applicable critical mineral only. As 

explained in the preamble to the 

Proposed Regulations, this rule has the 

effect of excluding any costs incurred 

after the production of the applicable 

critical mineral. The Proposed 

Regulations applied section 263A and 

the section 263A regulations solely to 

identify the types of costs that are 

includible in production costs incurred 

for purposes of computing the credit 

amount. The Proposed Regulations did 

not apply section 263A or the section 

263A regulations for any other 

purposes, such as to determine whether 

a taxpayer is engaged in production 

activities. 

Under the Proposed Regulations, 

direct or indirect materials costs, as 

defined in § 1.263A–1(e)(2)(i)(A) and 

(e)(3)(ii)(E), respectively, and any costs 

related to the extraction or acquisition 

of raw materials would not be taken into 

account as production costs. The 

Proposed Regulations would have 

attributed a wide range of costs to the 

production of an applicable critical 

mineral as costs incurred in producing 

the applicable critical mineral, 

including, but not limited to, labor, 

electricity used in the production of the 

applicable critical mineral, storage 

costs, depreciation or amortization, 

recycling, and overhead. However, the 

cost of acquiring the raw material used 

to produce the applicable critical 

mineral; the cost of materials used for 

conversion, purification, or recycling of 

the raw material; and other material 

costs related to the production of the 

applicable critical mineral were not 

taken into account. 

The Proposed Regulations provided a 

credit for the costs associated with 

production activities that add value to 

the applicable critical mineral and are 

conducted by the taxpayer that 

produces the applicable critical mineral. 

Because purchasing raw materials may 

enable a taxpayer to produce an 

applicable critical mineral but it is not 

by itself an activity that adds value, the 

Proposed Regulations excluded material 

costs from creditable costs. This 

exclusion of material costs mitigates the 

risk of crediting the same costs multiple 

times. 


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Many commenters made similar 

arguments with respect applicable 

critical minerals and the inclusion of 

direct material costs as defined in 

§ 1.263A–1(e)(2)(i)(A), indirect material 

costs as defined in § 1.263A– 

1(e)(3)(ii)(E), and costs related to the 

extraction of raw materials in their 

production costs for purposes of 

determining the credit. Commenters 

argued that there was insufficient 

textual support for a limitation, and any 

such limitation would work against the 

purposes of the credit. As with electrode 

active materials, commenters asserted 

that direct costs were often a substantial 

or predominant cost of producing 

applicable critical minerals. Denying 

credits for these costs would, in the 

opinion of commenters, be contrary to 

the goal of incentivizing extraction and 

production of applicable critical 

minerals. Commenters also disputed 

that direct and indirect costs are not 

incurred in value-adding activities. 

A number of commenters also 

disputed that a credit should only be 

available once for the same material. 

Several commenters argued that the 

statutory language and structure did, at 

a minimum, give taxpayers credits for 

production of applicable critical 

minerals and, when those applicable 

critical minerals were used to produce 

electrode active materials, additional 

credits for the production of the 

electrode active materials. According to 

these commenters, the dual credits 

reflect the fact that these are separate 

productive activities for which section 

45X provides separate credits. A 

commenter also urged that producers of 

applicable critical minerals be able to 

claim a credit if they can establish that 

the applicable critical minerals used in 

the production were acquired from 

production or extraction outside the 

United States and thus were previously 

ineligible for a section 45X credit. For 

applicable critical minerals that are 

produced using other precursor 

applicable critical minerals, a 

commenter recommended that the cost 

of the precursor applicable critical 

minerals be excluded from the cost of 

producing the applicable critical 

minerals. 

A number of commenters proposed 

solutions to the problem of crediting the 

same production costs multiple times. 

One solution commenters proposed was 

to reduce the basis of property for which 

a credit has been claimed by an 

upstream producer. Commenters also 

proposed a system under which a 

taxpayer would only be eligible for a 

credit on costs of material for which no 

other taxpayer had previously claimed a 

credit. This arrangement could be 

administered through a system of 

certification or tracing in which 

taxpayers would be required to verify 

that its suppliers had not claimed 

previously claimed credits for costs 

associated with the same materials for 

which the taxpayer is claiming credits. 

Commenters generally agreed that 

producers should not need to be 

vertically integrated to claim credits. 

Instead, these commenters argued that 

each producer in the supply chain 

should be eligible to claim credits for, 

at a minimum, their addition to the 

value of the applicable critical minerals 

produced. 

Some commenters addressed the 

requirement in section 45X(d)(2) that 

extraction or production of applicable 

critical minerals occur within the 

United States or a possession of the 

United States. A commenter urged that 

only the cost of extraction of applicable 

critical minerals occurring in the 

geology of the United States or its 

possessions should qualify for the 

section 45X credit in calculating the 

cost of production of such mineral. 

Other commenters urged that credits be 

permitted to taxpayers that process 

applicable critical minerals extracted 

outside the United States provided that 

the processing occurs within the United 

States or its possessions. One 

commenter proposed that the final 

regulations modify the proposed rule 

regarding constituent elements, 

materials, and subcomponents used in 

the production of applicable critical 

minerals to distinguish between imports 

of materials otherwise available from 

domestic sources and imported 

materials that are not available from 

domestic sources. Although this 

suggested proposal deviates from the 

Proposed Regulations, it would still 

allow for credits associated with costs of 

foreign-sourced constituent elements, 

materials, and subcomponents but only 

where domestic alternatives are not 

available. 

Three commenters supported the 

Proposed Regulations’ exclusion of 

direct, indirect, and extraction costs 

from production costs eligible for the 

credit. One commenter was concerned 

that a contrary rule would invite fraud, 

waste, and abuse and that, in the case 

of extraction costs, would be difficult to 

administer without the creation of a 

tracing system. Two commenters 

specifically identified extraction costs 

as something that should be excluded 

from the costs of production for the 

credit. One recommended more explicit 

clarification that the cost of the 

extraction of raw materials is excluded 

from creditable production costs. 

With respect to these comments, refer 

to Part IV.E.1.e. of this Summary of 

Comments and Explanation of 

Revisions, which describes the revisions 

to the proposed rules for production 

costs of both electrode active materials 

and applicable critical minerals that are 

in these final regulations. 

Proposed § 1.45X–4(c)(4) would have 

required the taxpayer to document that 

their product meets the criteria for an 

applicable critical mineral as described 

in section 45X(c)(6) with a certificate of 

analysis provided by the taxpayer to the 

person to which the taxpayer sold the 

applicable critical mineral. The 

Treasury Department and the IRS 

requested comments on this 

substantiation requirement, including 

whether a similar requirement should 

be applied to electrode active materials. 

With respect to this proposed rule, refer 

to Part IV.E.1.e. of this Summary of 

Comments and Explanation of 

Revisions, which describes the revisions 

to the proposed rules for substantiation 

of both electrode active materials and 

applicable critical minerals that are in 

these final regulations. 

VI. Other Comments Received 

Regarding Ancillary Issues 

In response to the Proposed 

Regulations, certain commenters 

responded concerning the application of 

sections 6417 and 6418. A commenter 

noted that the Proposed Regulations do 

not explain the process for making a 

section 6417 elective pay election for a 

section 45X credit and recommends the 

final regulations provide more details 

and guidance on the payment amount 

and potential considerations. Another 

commenter requested additional 

clarification on application procedures, 

methods, reporting items, refund/ 

transfer periods, and other 

supplementary procedures relevant to 

the provisions of section 6417. Similar 

comments were received with respect to 

the transferability provisions of section 

6418 that may apply to the section 45X 

credit. A separate commenter requested 

clarification regarding a transfer of tax 

credits from vessel manufacturer 

(shipyard) to vessel owner, and the 

possible effects of different ownership 

arrangements of related offshore wind 

vessels. 

The comments related to sections 

6417 and 6418 are outside the scope of 

these final regulations under section 

45X, as the comments relate to rules 

under sections 6417 and 6418. Final 

regulations under sections 6417, 89 FR 

17546 (March 11, 2024), corrected in 89 

FR 26786 (April 16, 2024), and 

corrected in 89 FR 66562 (August 16, 

2024) and 6418, 89 FR 34770 (April 30, 


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2024), corrected in 89 FR 67859 (August 

22, 2024), are available and provide 

relevant information on the elective 

payment election under section 6417, 

making a transfer election under section 

6418, and the impacts of various 

ownership structures on the ability and 

requirements when making an election 

under either section 6417 or section 

6418. 

A commenter suggested that the 

Proposed Regulations should have 

addressed whether the section 45X 

credit can be carried back to offset prior 

year tax liabilities or whether it can be 

transferred to other taxpayers. The 

commenter suggested that the final 

regulations allow the credit to be carried 

back for a reasonable period of time or 

to be transferred to other eligible 

taxpayers under certain conditions and 

limitations. This request is outside the 

scope of these final regulations, but as 

a clarification, section 39 of the Code 

describes rules related to the carryback 

and carryforward of unused credits, 

including section 39(a)(4) which 

provides a 3-year carryback period for 

any applicable credit (as defined in 

section 6417(b)). Section 1.6418–5(h) 

also provides a rule clarifying that a 

transferee of a specified credit portion 

under section 6418 can apply section 

39(a)(4) to the extent the specified credit 

portion is described in section 6417(b) 

(list of applicable credits, taking into 

account any placed in service 

requirements in section 6417(b)(2), (3), 

and (5)). 

A commenter requested that the final 

regulations define what constitutes a 

disposition or a cessation of eligibility 

for the purpose of recapturing the credit 

within five years of being placed in 

service. According to the commenter, 

the final rules should define the terms 

‘‘disposition’’ and ‘‘cessation of 

eligibility’’ and provide examples and 

exceptions. As a clarification, the 

section 45X credit is not subject to the 

recapture provisions of section 50 of the 

Code because it is not an investment 

credit under section 46 of the Code. 

Further, there is no statutory authority 

under the provisions of section 45X to 

require recapture of the credit. Thus, 

these final regulations do not include 

any rules related to recapture. 

A commenter noted that the Proposed 

Regulations do not address whether the 

section 45X credit can be specially 

allocated to certain partners or whether 

the credit can be modified by a 

partnership agreement for partnerships 

that produce and sell eligible 

components, possibly ‘‘creating 

inconsistencies or unfairness for some 

partners who may have different 

interests or expectations.’’ The 

commenter requested that the final 

regulations include a rule allowing the 

section 45X credit to be specially 

allocated or modified by a partnership 

agreement. Because the commenter’s 

request is addressed under section 704 

and § 1.704–1(b)(4)(ii) and does not 

relate to credit eligibility under section 

45X, the Treasury Department and IRS 

decline to adopt a rule addressing 

partnership allocations in these final 

regulations. 

VII. Severability 

If any provision in this rulemaking is 

held to be invalid or unenforceable 

facially, or as applied to any person or 

circumstance, it shall be severable from 

the remainder of this rulemaking, and 

shall not affect the remainder thereof, or 

the application of the provision to other 

persons not similarly situated or to 

other dissimilar circumstances. 

Applicability Dates 

These regulations apply to eligible 

components for which production is 

completed and sales occur after 

December 31, 2022, and during taxable 

years ending on or after October 28, 

2024. Taxpayers may choose to apply 

these regulations to eligible components 

for which production is completed and 

sales occur after December 31, 2022, and 

during taxable years ending before 

October 28, 2024, provided that 

taxpayers follow these regulations in 

their entirety and in a consistent 

manner. 

Effect on Other Documents 

Section 5.05(2) of Notice 2023–18 and 

section 3 of Notice 2023–44, which 

relate to the interaction between 

sections 45X and 48C, are superseded 

for eligible components for which 

production is completed and sales occur 

after October 28, 2024. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6(b) of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520) (PRA) generally 

requires that a Federal agency obtain the 

approval of the Office of Management 

and Budget (OMB) before collecting 

information from the public, whether 

such collection of information is 

mandatory, voluntary, or required to 

obtain or retain a benefit. 

The collections of information in 

these final regulations contain reporting 

and recordkeeping requirements that are 

required to validate eligibility to claim 

a section 45X credit. These collections 

of information would generally be used 

by the IRS for tax compliance purposes 

and by taxpayers to facilitate proper 

reporting and compliance. The general 

recordkeeping requirements mentioned 

within these final regulations are 

considered general tax records under 

§ 1.6001–1(e). Specific certification 

statements under § 1.45X–1(c)(3) and 

statements required in §§ 1.45X– 

3(e)(2)(iv)(C) and 1.45X–4(c)(4) are 

considered general tax records and are 

required for the IRS to validate the 

taxpayer that may claim a section 45X 

credit. For PRA purposes, general tax 

records are already approved by OMB 

under 1545–0074 for individuals, 1545– 

0123 for business entities, and under 

1545–0092 for trust and estate filers. 

These final regulations also provide 

reporting requirements related to 

making the Related Person Election as 

described in § 1.45X–2(d) and 

calculating the section 45X credit 

amount as described in § 1.45X–1. The 

Related Person Election will be made by 

taxpayers with Forms 1040, 1041, 1120– 

S, 1065, and 1120, on Form 7207, 

Advanced Manufacturing Production 

Credit (or any successor forms); and 

credit calculations will be made on 

Form 3800 and supporting forms 

including Form 7207 (and any successor 

forms). These forms are approved under 

1545–0074 for individuals, 1545–0123 

for business entities, 1545–2306 for trust 

and estate filers of Form 7207, and 

1545–0895 for trust and estate filers of 

Form 3800. These final regulations are 

not changing or creating new collection 

requirements not already approved by 

OMB or will be approved under 5 CFR 

1320.10 by OMB. 

No public comments were received by 

the IRS directed specifically at the PRA 

or on the collection requirements, but 

commenters generally articulated the 

burdens associated with the 

documentation requirements contained 

in the Proposed Regulations. As 

described in the relevant portions of this 

preamble, the Treasury Department and 

the IRS have determined that the 

documentation requirements are 

necessary to administer the provisions 

of section 45X. 

III. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 


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notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

that are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless an 

agency determines that a proposal is not 

likely to have a significant economic 

impact on a substantial number of small 

entities, section 603 of the RFA requires 

the agency to present a final regulatory 

flexibility analysis (FRFA) of the final 

regulations. The Treasury Department 

and the IRS have not determined 

whether the final regulations will likely 

have a significant economic impact on 

a substantial number of small entities. 

This determination requires further 

study. Because there is a possibility of 

significant economic impact on a 

substantial number of small entities, a 

FRFA is provided in these final 

regulations. 

Pursuant to section 7805(f) of the 

Code, the Proposed Regulations were 

submitted to the Chief Counsel of the 

Office of Advocacy of the Small 

Business Administration for comment 

on its impact on small business, and no 

comments were received. 

A. Need for and Objectives of the Rule 

The final regulations provide greater 

clarity to taxpayers that intend to claim 

a section 45X credit. The final 

regulations provide necessary 

definitions, the time and manner to 

make the Related Person Election and 

rules regarding the determination of 

credit amounts. The Treasury 

Department and the IRS intend and 

expect that giving taxpayers guidance 

that allows them to claim the section 

45X credit will beneficially impact 

various industries. In particular, the 

section 45X credit encourages the 

domestic production of eligible 

components and incentivizes taxpayers 

to invest in clean energy projects that 

generate eligible credits. 

B. Affected Small Entities 

The RFA directs agencies to provide 

a description of, and if feasible, an 

estimate of, the number of small entities 

that may be affected by the proposed 

rules, if adopted. The Small Business 

Administration Office of Advocacy 

(SBA) estimates in its 2023 Frequently 

Asked Questions that 99.9 percent of 

American businesses meet its definition 

of a small business. The applicability of 

these final regulations does not depend 

on the size of the business, as defined 

by the SBA. 

As described more fully in the 

preamble to this final regulation and in 

this initial regulatory flexibility analysis 

(IRFA), section 45X and these final 

regulations may affect a variety of 

different entities across several different 

clean energy industries as multiple 

types of eligible components are 

provided for under the statute and 

manufacturers may produce more than 

one type. Although there is uncertainty 

as to the exact number of small 

businesses within this group, the 

current estimated number of 

respondents to these final rules is 

13,450 taxpayers. The estimated total 

annual reporting burden and estimated 

average annual burden per respondent 

will be computed when Form 7207 and 

the instructions to Form 7207 are 

updated to reflect these final 

regulations. 

The Treasury Department and the IRS 

utilize tax data as the basis for its RFA 

analysis. Tax entities supply 

information on tax forms, which 

information is processed and recorded 

by the IRS. This data is then available 

to the IRS office of Research, Applied 

Analytics and Statistics and to the 

Treasury Department’s Office of Tax 

Policy for use in estimating the impact 

of tax regulation on businesses. Tax data 

is the more appropriate data as it 

provides nearly universal coverage of 

the entities that are affected by these tax 

regulations. All taxpayers and many 

potential taxpayers are represented in 

the universe of tax data. Second, the tax 

data more accurately reflect the level of 

organization to which tax regulations 

are applicable because tax data is 

collected on the entity rather than the 

enterprise level. Overwhelmingly, 

business tax regulations apply to the 

entity level making tax data a natural fit 

for the analysis of regulatory impact. 

Further, with limited exceptions, tax 

regulations apply to all entities 

organized in a particular manner 

regardless of industry or size. Finally, 

analysis of the implications of tax 

regulations for the purposes of the PRA 

and any Special Analyses, including the 

Regulatory Impact Analysis, are carried 

out using tax data. Generally, restricting 

analysis for the RFA to tax data prevents 

difficulties in reconciling the different 

analyses within a given regulation. 

Reliance on tax data has some 

drawbacks. In general, tax forms do not 

collect information unless it is directly 

relevant to the calculation of tax 

liability. The Northern American 

Industry Classification System (NAICS) 

codes referenced by the Office of 

Advocacy of the Small Business 

Administration are included on tax 

forms for informational purposes and 

may not be reliable. For example, past 

the first two-digits of the NAICS code, 

economic sector level, entries may be 

left blank in the raw data. In addition, 

for a tax entity that is comprised of 

multiple different enterprises that each 

operate in a different industry, the 

NAICS code reported on a tax form may 

not reflect the appropriate industry for 

the regulation under analysis. 

Furthermore, most tax returns have no 

independent verification of the accuracy 

of NAICS codes. Notwithstanding this 

concern, tax data remains the most 

appropriate data for analysis of the 

implications of tax regulations. 

The Treasury Department and the IRS 

have considered other data alternatives 

including Census data sources, such as 

the Statistics of U.S. Businesses (SUSB) 

suggested by SBA’s Office of Advocacy. 

The 2020 SUSB includes only six 

million firms and eight million 

establishments while the proposed tax 

data includes approximately 18 million 

business entities. Unlike the SUSB data, 

the tax data includes more small 

businesses, not only ones with at least 

one employee. Tax data provides a more 

inclusive estimate of businesses affected 

by tax regulations. In conclusion, while 

tax data is an appropriate resource for 

evaluating the impact of tax regulations, 

this data does not permit some of the 

usual analysis presented to the SBA. 

Furthermore, since the NAICS codes 

reported on the tax return may not 

accurately reflect the industry of the 

entity, applying separate standards by 

industry is inadvisable. 

Thus, the Treasury Department and 

the IRS have determined that reliance 

on NAICS codes would not accurately 

reflect the entities affected by these 

regulations. Further, the Treasury 

Department and the IRS currently do 

not have useable tax data that reflects 

the entities that will be affected by these 

regulations. While there is uncertainty 

as to the exact number of small 

businesses within this group, the 

Treasury Department and the IRS 

continue to estimate that approximately 

13,450 taxpayers will be impacted. 

The Treasury Department and the IRS 

expect to receive more information on 

the impact on small businesses after 

taxpayers start to claim the section 45X 

credit using the guidance and 

procedures provided in these final 

regulations. 

C. Impact of the Rules 

The final regulations provide rules for 

how taxpayers can claim the section 

45X credit. Taxpayers that claim the 

section 45X credit will have 

administrative costs related to reading 

and understanding the rules as well as 

recordkeeping and reporting 

requirements because of the Related 

Person Election, computation of the 

section 45X credit and tax return 


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requirements. The costs will vary across 

different-sized entities and across the 

type of production activities in which 

such entities are engaged. 

The Related Person Election allows a 

taxpayer to make an irrevocable election 

annually with their Federal income tax 

return by providing the information 

required on Form 7207 (or any 

successor form), including, for example, 

the name, EIN of the taxpayer; a 

description of the taxpayer’s trade or 

business; the name, address and EINs of 

all related persons; a list of the eligible 

components that are sold, and the 

intended purpose of the eligible 

components sold by the related person. 

To make the Related Person Election 

and claim the section 45X credit, the 

taxpayer must file an annual Federal 

income tax return. The reporting and 

recordkeeping requirements for that 

Federal income tax return would be 

required for any taxpayer that is 

claiming a general business credit, 

regardless of whether the taxpayer was 

making a Related Person Election under 

section 45X. 

D. Alternatives Considered 

The Treasury Department and the IRS 

considered alternatives to these final 

regulations. For example, the Treasury 

Department and the IRS considered 

whether to impose certain pre-return 

filing requirements as a condition of 

making the Related Person Election as 

authorized in section 45X(a)(3)(B)(ii) to 

prevent duplication, fraud, or improper 

or excessive credits. These final 

regulations were designed to minimize 

burdens for taxpayers while ensuring 

that the IRS has sufficient information 

to determine eligibility for the section 

45X credit. The Treasury Department 

and the IRS determined that requiring 

registration before a taxpayer makes the 

Related Person Election is unnecessary 

at this time. These final regulations 

would allow taxpayers to make an 

irrevocable Related Person Election 

annually with their Federal income tax 

return by providing the information 

required on Form 7207 (or any 

successor form), which would provide 

the IRS with sufficient information to 

assist in preventing duplication, fraud, 

or the claiming of improper or excessive 

credits if eligible components are 

produced and then sold to related 

persons. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The final rule would not duplicate, 

overlap, or conflict with any relevant 

Federal rules. As discussed previously, 

the final rule would merely provide 

procedures and definitions to allow 

taxpayers to claim the section 45X 

credit. The Treasury Department and 

the IRS invite input from interested 

members of the public about identifying 

and avoiding overlapping, duplicative, 

or conflicting requirements. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a State, local, or Tribal government, 

in the aggregate, or by the private sector, 

of $100 million (updated annually for 

inflation). These final regulations do not 

include any Federal mandate that may 

result in expenditures by State, local, or 

Tribal governments, or by the private 

sector in excess of that threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. These final regulations 

do not have federalism implications and 

do not impose substantial direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

order. 

VI. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 (Consultation 

and Coordination with Indian Tribal 

governments) prohibits an agency from 

publishing any rule that has Tribal 

implications if the rule either imposes 

substantial, direct compliance costs on 

Indian Tribal governments, and is not 

required by statute, or preempts Tribal 

law, unless the agency meets the 

consultation and funding requirements 

of section 5 of the Executive order. This 

final rule does not have substantial 

direct effects on one or more federally 

recognized Indian tribes and does not 

impose substantial direct compliance 

costs on Indian Tribal governments 

within the meaning of the Executive 

order. 

VII. Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs 

designated this rule as a major rule as 

defined by 5 U.S.C. 804(2). 

Statement of Availability of IRS 

Documents 

IRS notices and other guidance cited 

in this preamble are published in the 

Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at https://www.irs.gov. 

Drafting Information 

The principal authors of these final 

regulations are Mindy Chou, John 

Deininger, Derek Gimbel, John Lovelace, 

and Alexander Scott. However, other 

personnel from the Office of Chief 

Counsel, the Treasury Department, and 

the IRS participated in the development 

of these regulations. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS amend 26 CFR part 1 as 

follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by adding entries 

in numerical order for §§ 1.45X–1 

through 1.45X–4 to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 1.45X–1 also issued under 26 

U.S.C. 45X, 6001, 6417(h) and 6418(h). 

Section 1.45X–2 also issued under 26 

U.S.C. 45X and 1502. 

Section 1.45X–3 also issued under 26 

U.S.C. 6001. 

Section 1.45X–4 also issued under 26 

U.S.C. 6001. 

* * * * * 

■ Par. 2. Sections 1.45X–0 through 

1.45X–4 are added to read as follows: 

Sec. 

* * * * * 

1.45X–0 Table of contents. 

1.45X–1 General rules applicable to the 

advanced manufacturing production 

credit. 

1.45X–2 Sale to unrelated person. 

1.45X–3 Eligible components. 

1.45X–4 Applicable critical minerals. 

* * * * * 

§ 1.45X–0 Table of contents. 

This section lists the major captions 

contained in §§ 1.45X–1 through 1.45X–4. 

§ 1.45X–1 General rules applicable to the 

advanced manufacturing production 

credit. 


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(a) Overview. 

(b) Credit amount. 

(c) Definition of produced by the taxpayer. 

(d) Produced in the United States. 

(e) Production and sale in a trade or 

business. 

(f) Sale of integrated components. 

(g) Interaction between sections 45X and 

48C. 

(h) [Reserved] 

(i) Anti-abuse rule. 

(j) Applicability date. 

§ 1.45X–2 Sale to unrelated person. 

(a) In general. 

(b) Definitions. 

(c) Special rule for sale to related person. 

(d) Related person election. 

(e) Sales of integrated components to 

related person. 

(f) Applicability date. 

§ 1.45X–3 Eligible components. 

(a) In general. 

(b) Solar energy components. 

(c) Wind energy components. 

(d) Inverters. 

(e) Qualifying battery component. 

(f) Phase out rule. 

(g) Applicability date. 

§ 1.45X–4 Applicable critical minerals. 

(a) In general. 

(b) Definitions. 

(c) Credit amount. 

(d) Applicability date. 

§ 1.45X–1 General rules applicable to the 

advanced manufacturing production 

credit. 

(a) Overview—(1) In general. This 

section provides general rules regarding 

the advanced manufacturing production 

credit determined under section 45X of 

the Code (section 45X credit). Paragraph 

(a)(2) of this section provides definitions 

of certain terms that apply for purposes 

of section 45X and the section 45X 

regulations (as defined in paragraph 

(a)(2)(xv) of this section). Paragraphs (b) 

through (j) of this section provide the 

basic rules regarding the section 45X 

credit, including the definition of the 

term produced by the taxpayer, and 

rules to determine the taxpayer that 

produces an eligible component and 

whether such taxpayer is entitled to 

claim a section 45X credit in contract 

manufacturing arrangements; where the 

production of eligible components must 

occur; the treatment of integrated, 

incorporated or assembled eligible 

components; and the interaction 

between sections 45X and 48C of the 

Code. See § 1.45X–2 for rules regarding 

sales to unrelated persons, sales to 

related persons, and the related person 

election (Related Person Election), 

including rules regarding the time, 

place, and manner of making the 

Related Person Election. See § 1.45X–3 

for the definitions of all eligible 

components (except applicable critical 

minerals) and the credit amounts 

available for each of these eligible 

components, including certain phaseout percentages. See § 1.45X–4 for the 

definitions of applicable critical 

minerals and the rules regarding the 

determination of the credit amount for 

applicable critical minerals. 

(2) Generally applicable definitions. 

This paragraph (a)(2) provides 

definitions of terms that apply for 

purposes of section 45X and the section 

45X regulations. 

(i) Applicable critical mineral. The 

term applicable critical mineral means 

any of the minerals that are listed in 

section 45X(c)(6) and defined in 

§ 1.45X–4(b). 

(ii) Code. The term Code means the 

Internal Revenue Code. 

(iii) Contract manufacturing 

arrangement. The term contract 

manufacturing arrangement is defined 

in paragraph (c)(3)(ii)(B) of this section. 

(iv) Electrode active materials. The 

term electrode active materials is 

defined in section 45X(c)(5)(B)(i) and 

described in § 1.45X–3(e)(2). 

(v) Eligible component. The term 

eligible component is defined in section 

45X(c)(1)(A) and described in §§ 1.45X– 

3 and 1.45X–4. 

(vi) Eligible taxpayer. The term 

eligible taxpayer is defined in paragraph 

(c)(3) of this section. 

(vii) Extraction. The term extraction is 

defined in § 1.45X–3(e)(2)(iv)(B). 

(viii) Guidance. The term guidance 

means guidance published in the 

Federal Register or Internal Revenue 

Bulletin, as well as administrative 

guidance such as forms, instructions, 

publications, or other guidance on the 

IRS.gov website. See §§ 601.601 and 

601.602 of this chapter. 

(ix) IRA. The term IRA means Public 

Law 117–169, commonly known as the 

Inflation Reduction Act of 2022. 

(x) IRS. The term IRS means the 

Internal Revenue Service. 

(xi) Produced by the taxpayer. The 

term produced by the taxpayer is 

defined in paragraph (c) of this section, 

and the related terms production 

activities and production process have 

the meaning given those terms in 

paragraph (c) of this section. 

(xii) Related person. The term related 

person is defined in § 1.45X–2(b)(2). 

(xiii) Related Person Election. The 

term Related Person Election is defined 

in § 1.45X–2(d)(1). 

(xiv) Secretary. The term Secretary 

means the Secretary of the Treasury or 

her delegate. 

(xv) Section 45X regulations. The 

term section 45X regulations means the 

provisions of this section, §§ 1.45X–2 

through 1.45X–4, and the regulations in 

this chapter under sections 6417 and 

6418 of the Code that relate to the 

section 45X credit. 

(xvi) Unrelated person. The term 

unrelated person is defined in section 

45X(a)(3) and described in § 1.45X– 

2(b)(3). 

(b) Credit amount. Except as 

otherwise provided in section 45X(b)(3) 

and § 1.45X–3(f), for purposes of section 

38 of the Code, the amount of the 

section 45X credit for any taxable year 

is equal to the sum of the credit 

amounts provided under section 45X(b) 

and described in §§ 1.45X–3 and 1.45X– 

4 with respect to each eligible 

component that is produced by the 

taxpayer and, within the taxable year, 

sold by the taxpayer to an unrelated 

person. See § 1.45X–2 for rules 

regarding sales of eligible components 

to related persons that may be treated as 

if sold to unrelated persons for purposes 

of section 45X(a). 

(c) Definition of produced by the 

taxpayer—(1) In general. The term 

produced by the taxpayer means a 

process conducted by the taxpayer that 

substantially transforms constituent 

elements, materials, or subcomponents 

into a complete and distinct eligible 

component that is functionally different 

from that which would result from 

minor assembly or superficial 

modification of the elements, materials, 

or subcomponents, and includes both 

primary and secondary production. 

Primary production involves producing 

an eligible component using nonrecycled materials while secondary 

production involves producing an 

eligible component using recycled 

materials. 

(i) Partial transformation. The term 

produced by the taxpayer does not 

include partial transformation that does 

not result in substantial transformation 

of constituent elements, materials, or 

subcomponents into a complete and 

distinct eligible component as described 

in this paragraph (c)(1). 

(ii) Minor assembly or superficial 

modification. The term produced by the 

taxpayer does not include minor 

assembly of two or more constituent 

elements, materials, or subcomponents, 

or superficial modification of the final 

eligible component, if the taxpayer does 

not also engage in the process resulting 

in a substantial transformation 

described in paragraph (c)(1) or (2) of 

this section. 

(iii) Examples. The following 

examples illustrate the application of 

this paragraph (c)(1). 

(A) Example 1. Taxpayers X, Y, and 

Z each produce one of three sections of 

a wind tower that together make up the 

wind tower. No taxpayer has produced 

an eligible component within the 

meaning of section 45X(a)(1)(A) because 


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no taxpayer has produced all sections of 

the wind tower. 

(B) Example 2. Same facts as 

paragraph (c)(1)(iii)(A) of this section 

(Example 1), but taxpayers X, Y, and Z 

instead form Partnership XYZ. 

Partnership XYZ produces all three 

sections of the wind tower. Partnership 

XYZ has produced an eligible 

component within the meaning of 

section 45X(a)(1)(A). 

(C) Example 3. Taxpayer V puts the 

external casing on a battery module 

(within the meaning of § 1.45X– 

3(e)(4)(i)(A)) that already had cells, 

battery management systems, and other 

components integrated into it. Taxpayer 

V has engaged in minor assembly and 

has not produced an eligible component 

within the meaning of section 

45X(a)(1)(A). 

(D) Example 4. Taxpayer U purchases 

two finished halves of a wind turbine 

nacelle and combines them into a single 

nacelle. Taxpayer U has engaged in 

minor assembly and has not produced 

an eligible component within the 

meaning of section 45X(a)(1)(A). 

(E) Example 5. Taxpayer T purchases 

a dry cell battery and fills the electrolyte 

of the battery. Taxpayer T has engaged 

in minor assembly and has not 

produced an eligible component within 

the meaning of section 45X(a)(1)(A). 

(F) Example 6. Taxpayer W purchases 

a prefabricated wind turbine blade and 

applies paint and finishes. Taxpayer W 

has engaged in superficial modification 

of the blade and has not produced an 

eligible component within the meaning 

of section 45X(a)(1)(A). 

(2) Special rule for certain eligible 

components—(i) In general. For solar 

grade polysilicon, electrode active 

materials, and applicable critical 

minerals, the term produced by the 

taxpayer means processing, converting, 

refining, or purifying source materials, 

such as brines, ores, or waste streams, 

to substantially transform the source 

materials to derive a distinct eligible 

component, and includes both primary 

and secondary production. For the 

production process for electrode active 

materials and applicable critical 

minerals, the term conversion is defined 

in § 1.45X–3(e)(2)(ii)(A) or § 1.45X– 

4(c)(2)(i), respectively, and the term 

purification is defined in § 1.45X– 

3(e)(2)(ii)(B) or § 1.45X–4(c)(2)(ii), 

respectively. 

(ii) Example. Taxpayers X, Y and Z 

are unrelated C corporations that have 

calendar year taxable years. In 2024, X 

extracts raw lithium from natural 

mineral deposits and purifies the 

extracted material to 90% lithium by 

mass. X subsequently hires Y to further 

purify the lithium material furnished by 

X to a purity of no less than 99.9% 

lithium by mass as required by section 

45X(c)(6)(P) and § 1.45X–4(b)(16)(ii). In 

2025, Y purifies the material to 99.9% 

lithium by mass (qualifying lithium). X 

subsequently sells the qualifying 

lithium to Z in 2026. X may not claim 

a section 45X credit for the qualifying 

lithium sold to Z because the qualifying 

lithium was not produced by X within 

the meaning of this paragraph (c)(2) of 

this section, given that X did not 

transform the lithium material to derive 

a distinct eligible component (i.e., 

lithium which satisfies the minimum 

purity of 99.9% lithium by mass 

prescribed by section 45X(c)(6)(P)). 

(3) Eligible taxpayer—(i) In general. 

Except as otherwise provided in 

paragraph (c)(3)(iii) of this section, a 

taxpayer claiming a section 45X credit 

with respect to an eligible component 

must be the taxpayer that directly 

performs the production activities that 

bring about a substantial transformation 

resulting in the eligible component and 

must sell such eligible component to an 

unrelated person. 

(ii) Contract manufacturing 

arrangement—(A) In general. If the 

production of an eligible component is 

performed in whole or in part pursuant 

to a contract that is a contract 

manufacturing arrangement, then, 

provided the other requirements of 

section 45X are met, the party to such 

contract that may claim the section 45X 

credit with respect to such eligible 

component is the party that performs 

the actual production activities that 

bring about a substantial transformation 

resulting in the eligible component. 

(B) Contract manufacturing 

arrangement defined. The term contract 

manufacturing arrangement means any 

agreement (or agreements) providing for 

the production of an eligible component 

if the agreement is entered into before 

the production of the eligible 

component to be delivered under the 

contract is completed. A routine 

purchase order for off-the-shelf property 

is not treated as a contract 

manufacturing arrangement for 

purposes of this paragraph (c)(3). An 

agreement will be treated as a routine 

purchase order for off-the-shelf property 

if the contractor is required to make no 

more than de minimis modifications to 

the property to tailor it to the customer’s 

specific needs, or if at the time the 

agreement is entered into, the contractor 

knows or has reason to know that the 

contractor can satisfy the agreement out 

of existing stocks or normal production 

of finished goods. 

(iii) Special rule for contract 

manufacturing arrangements. If an 

eligible component is produced by a 

taxpayer pursuant to a contract 

manufacturing arrangement, the parties 

to such agreement may determine by 

agreement the party that may claim the 

section 45X credit. If a taxpayer enters 

into contract manufacturing 

arrangements with multiple fabricators 

to produce an eligible component, the 

parties to such agreements may 

determine by agreement the party that 

may claim the section 45X credit. The 

IRS will not challenge the agreement of 

the parties provided all the parties 

submit signed certification statements in 

the manner required in Form 7207, 

Advanced Manufacturing Production 

Credit, or its instructions (as described 

in paragraph (c)(3)(iv) of this section) 

indicating that all parties agree as to the 

party that may claim the section 45X 

credit. 

(iv) Certification statement 

requirements. A certification statement 

indicating that all parties to a contract 

manufacturing arrangement agree as to 

the party that will claim the section 45X 

credit must include— 

(A) All required information set forth 

in guidance; and 

(B) A properly signed penalty of 

perjury statement that includes the 

following: under penalties of perjury, I 

declare that I have examined this 

statement, including accompanying 

documents, and to the best of my 

knowledge and belief, the facts 

presented in support of this statement 

are true, correct, and complete. 

(v) Examples. The following examples 

illustrate the application of this 

paragraph (c)(3). 

(A) Example 1: Contract 

manufacturing with sale. Taxpayers X, 

Y and Z are unrelated C corporations 

that have calendar year taxable years. In 

2024, pursuant to a contract 

manufacturing arrangement as described 

in paragraph (c)(3)(ii)(B) of this section, 

X hires Y to produce a solar module. 

The contract is a tolling arrangement 

and provides that Y will produce the 

solar module according to X’s designs 

and specifications and using the 

materials and subcomponents that X 

provides. X and Y enter an agreement 

providing that X is the sole party that 

may claim a section 45X credit for the 

production and sale of the solar module, 

and X and Y each sign a certification 

statement as described in paragraph 

(c)(3)(iv) of this section reflecting this 

agreement. In 2025, Y produces and 

delivers the solar module to X, and in 

2026, X sells the solar module to Z. X 

may claim a section 45X credit in 

taxable year 2026 for the solar module 

it sold to Z provided all other 

requirements of section 45X are met and 

the certification statements signed by X 


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and Y meet the requirements described 

in paragraph (c)(3)(iv) of this section 

and are properly submitted by X. Y 

could claim a section 45X credit if the 

agreement between X and Y had 

designated Y as the sole party that could 

claim a section 45X credit for the 

production and sale of the solar module 

provided all other requirements of 

section 45X are met and the certification 

statements signed by X and Y meet the 

requirements described in paragraph 

(c)(3)(iv) of this section and are properly 

submitted by Y. 

(B) Example 2: Contract 

manufacturing with no sale. Assume the 

facts are the same as in paragraph 

(c)(3)(v)(A) of this section (Example 1), 

except that X does not sell the solar 

module and instead X uses it to generate 

electricity for use in X’s trade or 

business. Because there has been no 

sale, neither X nor Y may claim a 

section 45X credit for the solar module 

regardless of whether X and Y submit 

signed certification statements 

described in paragraph (c)(3)(iv) of this 

section. 

(C) Example 3: Multiple contract 

manufacturing arrangements. Taxpayers 

V, W, X, Y, and Z are unrelated C 

corporations that have calendar year 

taxable years. In 2024, pursuant to three 

separate contract manufacturing 

arrangements as described in paragraph 

(c)(3)(ii)(B) of this section, V hires W, X, 

and Y to produce the bottom, middle 

and top segments, respectively, of a 

single wind tower that V designed. W, 

X, Y, and V enter into an agreement 

providing that V is the sole party that 

may claim a section 45X credit for the 

production and sale of the wind tower, 

and W, X, Y, and V each sign a 

certification statement as described in 

paragraph (c)(3)(iv) of this section 

reflecting this agreement. In 2024, W 

and X both produce and deliver their 

respective wind tower segments to the 

installation site, and in 2025, Y 

produces and delivers its wind tower 

segment to the installation site. In 2026, 

V sells the completed wind tower to Z. 

V may claim a section 45X credit in 

taxable year 2026 for the wind tower it 

sold to Z provided all other 

requirements of section 45X are met and 

the certification statements signed by V, 

W, X, and Y meet the requirements 

described in paragraph (c)(3)(iv) of this 

section and are properly submitted by 

V. W or X or Y could be the party that 

could claim a section 45X credit if the 

agreement between V, W, X and Y had 

designated W or X or Y as the sole party 

that could claim a section 45X credit for 

the production and sale of the wind 

tower provided all other requirements of 

section 45X are met and the certification 

statements signed by V, W, X, and Y 

meet the requirements described in 

paragraph (c)(3)(iv) of this section and 

are properly submitted by the party 

designated as the sole party that could 

claim a section 45X credit. 

(D) Example 4: Applicable Critical 

Mineral Processing with Certification. 

Taxpayers X, Y, and Z are unrelated C 

corporations that have calendar year 

taxable years. In 2024, X extracts raw 

lithium from natural mineral deposits 

and purifies the extracted material to 

90% lithium by mass. X subsequently 

hires Y to further process the lithium 

material pursuant to a contract 

manufacturing arrangement as described 

in paragraph (c)(3)(ii)(B) of this section. 

Specifically, the contract is a tolling 

arrangement and provides that X 

remains the owner for Federal income 

tax purposes throughout the purification 

process and that Y will further purify 

the lithium material furnished by X to 

a purity of no less than 99.9% lithium 

by mass as required by section 

45X(c)(6)(P) and § 1.45X–4(b)(16)(ii). X 

and Y enter an agreement providing that 

X is the sole party that may claim a 

section 45X credit for the production 

and sale of the applicable critical 

mineral, and X and Y each sign a 

certification statement as described in 

paragraph (c)(3)(iv) of this section 

reflecting this agreement. In 2025, Y 

purifies the material to 99.9% lithium 

by mass (qualifying lithium) and 

delivers it to X. X subsequently sells the 

qualifying lithium to Z in 2026. X may 

claim a section 45X credit in taxable 

year 2026 for the qualifying lithium sold 

to Z, provided that all other 

requirements of section 45X are met, 

and the certification statements signed 

by X and Y meet the requirements 

described in paragraph (c)(3)(iv) of this 

section and are properly submitted by 

X. Y could claim a section 45X credit if 

the agreement between X and Y had 

designated Y as the sole party that could 

claim a section 45X credit for the 

qualifying lithium, provided that all 

other requirements of section 45X are 

met, and the certification statements 

signed by X and Y meet the 

requirements described in paragraph 

(c)(3)(iv) of this section and are properly 

submitted by Y. Neither X nor Y could 

claim a section 45X credit in the 

absence of a designating agreement and 

certification statement (described in 

paragraphs (c)(3)(iii) and (iv) of this 

section, respectively) for the reasons 

stated in paragraph (c)(2)(i) of this 

section. 

(4) Timing of production and sale—(i) 

In general. Production of eligible 

components for which a taxpayer is 

claiming a section 45X credit may begin 

before December 31, 2022. Production of 

eligible components must be completed, 

and sales of eligible components must 

occur, after December 31, 2022. 

(ii) Example. Taxpayer X has a 

calendar year taxable year. Taxpayer X 

begins production of a related offshore 

wind vessel (as defined in section 

45X(4)(B)(iv) and described in § 1.45X– 

3(c)(4)) in January 2022. Production is 

completed in December 2024 and the 

sale to an unrelated person occurs in 

2025. Taxpayer X is eligible to claim the 

section 45X credit in 2025, assuming 

that all other requirements of section 

45X are met. 

(d) Produced in the United States—(1) 

In general. Sales are taken into account 

for purposes of the section 45X credit 

only for eligible components that are 

produced within the United States, as 

defined in section 638(1) of the Code, or 

a United States territory, which for 

purposes of section 45X and the section 

45X regulations has the meaning of the 

term possession provided in section 

638(2). 

(2) Subcomponents. Constituent 

elements, materials, and subcomponents 

used in the production of eligible 

components are not subject to the 

domestic production requirement 

provided in paragraph (d)(1) of this 

section. 

(e) Production and sale in a trade or 

business. An eligible component 

produced and sold by the taxpayer is 

taken into account for purposes of the 

section 45X credit only if the 

production and sale are in a trade or 

business (within the meaning of section 

162 of the Code) of the taxpayer. 

(f) Sale of integrated components—(1) 

In general. For purposes of the section 

45X credit, section 45X(d)(4) provides 

that a taxpayer that produces an eligible 

component is treated as having sold 

such eligible component to an unrelated 

person if such component is integrated, 

incorporated, or assembled into another 

eligible component that is then sold to 

an unrelated person. 

(i) Integrated, incorporated, or 

assembled. The term integrated, 

incorporated, or assembled means the 

production activities by which an 

eligible component that is a constituent 

element, material, or subcomponent is 

substantially transformed into another 

complete and distinct eligible 

component that is not solar grade 

polysilicon, an electrode active material, 

or an applicable critical mineral. The 

term integrated, incorporated, or 

assembled does not mean the minor 

assembly or superficial modification of 

an eligible component used as an 

element, material, or subcomponent and 

other elements, materials, or 


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subcomponents that results in a distinct 

product. 

(ii) Special rule for eligible 

components resulting in solar grade 

polysilicon, electrode active materials, 

or applicable critical minerals. For solar 

grade polysilicon, electrode active 

materials, and applicable critical 

minerals, the term integrated, 

incorporated, or assembled means the 

production activities in which an 

eligible component is processed, 

converted, refined, or purified to derive 

a distinct eligible component that is 

solar grade polysilicon, an electrode 

active material, or an applicable critical 

mineral. The term integrated, 

incorporated, or assembled does not 

mean minor assembly or superficial 

modification of an eligible component 

used as an element, material, or 

subcomponent and other elements, 

materials, or subcomponents that results 

in a distinct product. 

(2) Application—(i) In general. A 

taxpayer may claim a section 45X credit 

for each eligible component the 

taxpayer produces and sells to an 

unrelated person, including any eligible 

component the taxpayer produces that 

was used as a constituent element, 

material, or subcomponent and 

integrated, incorporated, or assembled 

into another complete and distinct 

eligible component or another complete 

and distinct product (that is not itself an 

eligible component) that the taxpayer 

also produces and sells to an unrelated 

person. 

(ii) Example: Sale of product with 

incorporated eligible components to 

unrelated person. In 2022, X, a domestic 

corporation that has a calendar year 

taxable year, begins production of 

electrode active materials (EAMs) that 

are completed in 2023 and incorporated 

into battery cells that X also produces. 

In 2024, X incorporates those battery 

cells into battery modules (within the 

meaning of § 1.45X–3(e)(4)(i)(A)) and 

integrates the battery modules into 

electric vehicles. X sells the electric 

vehicles to Z, an unrelated person, in 

2024. X may claim a section 45X credit 

for the EAMs, the battery cells, and the 

battery modules in 2024. 

(g) Interaction between sections 45X 

and 48C—(1) In general. For purposes of 

the section 45X credit, consistent with 

section 45X(c)(1)(B), property that 

would otherwise qualify as an eligible 

component (otherwise qualified 

property) is only an eligible component 

if the property is produced at a section 

45X facility (as defined in paragraph 

(g)(2) of this section) and no part of that 

section 45X facility is also a section 48C 

facility (as defined in paragraph (g)(3) of 

this section). 

(2) Section 45X facility—(i) In general. 

A section 45X facility comprises the 

independently functioning tangible 

property used by the taxpayer that is 

necessary to be considered the producer 

of the otherwise qualified property 

within the meaning of paragraph (c)(1) 

or (2) of this section, as applicable. The 

tangible property that comprises a 

section 45X facility may be in more than 

one location. 

(ii) Special rule for contract 

manufacturing arrangement. In the case 

of a contract manufacturing arrangement 

where the parties have agreed to who 

can claim a section 45X credit under 

paragraph (c)(3)(iii) of this section, the 

section 45X facility under paragraph 

(g)(2)(i) of this section is determined by 

taking into account the tangible 

property used to produce the otherwise 

qualified property, regardless of which 

party to the arrangement claims the 

credit. 

(3) Section 48C facility—(i) In general. 

A section 48C facility includes all 

eligible property included in a 

qualifying advanced energy project for 

which a taxpayer receives an allocation 

of section 48C credits under the 

allocation program established under 

section 48C(e) and claims such credits 

after August 16, 2022. 

(ii) Eligible property. Eligible property 

is property that— 

(A) Is necessary for the production or 

recycling of property described in 

section 48C(c)(1)(A)(i), re-equipping an 

industrial or manufacturing facility 

described in section 48C(c)(1)(A)(ii), or 

re-equipping, expanding, or establishing 

an industrial facility described in 

section 48C(c)(1)(A)(iii); 

(B) Is tangible personal property, or 

other tangible property (not including a 

building or its structural components), 

but only if such property is used as an 

integral part of the qualified investment 

credit facility; and 

(C) With respect to which 

depreciation (or amortization in lieu of 

depreciation) is allowable. 

(4) Examples. The following examples 

illustrate the application of this 

paragraph (g), and assume any other 

requirements of section 45X that are not 

described have been met: 

(i) Example 1: Two independent 

section 45X facilities—(A) Facts. 

Taxpayer owns and operates a 

manufacturing site that contains 

tangible property made up of Equipment 

A and Equipment B, each set of which 

functions independently and which is 

arranged in serial fashion. Equipment A 

is used by the taxpayer to produce 

otherwise qualified property 1. 

Equipment B is used to produce 

otherwise qualified property 2, a 

different type of product than otherwise 

qualified property 1. Taxpayer was 

allocated a section 48C credit under the 

section 48C(e) program for a section 48C 

facility that includes Equipment A and 

subsequently placed the section 48C 

facility and Equipment A in service in 

taxable year 2026. Taxpayer claimed a 

section 48C credit related to Equipment 

A for taxable year 2026. 

(B) Analysis. The section 45X facility 

with respect to otherwise qualified 

property 1 is the tangible property made 

up of Equipment A, which is the 

independently functioning tangible 

property used by the taxpayer that is 

necessary to be considered the producer 

of the otherwise qualified property 

within the meaning of paragraph (c)(1) 

or (2) of this section. However, 

Equipment A is also eligible property 

that is considered part of a section 48C 

facility as defined in paragraph (g)(3) of 

this section. Therefore, otherwise 

qualified property 1 is not an eligible 

component under paragraph (g)(1) of 

this section because part (all in this 

case) of the section 45X facility where 

otherwise qualified property 1 was 

produced is also considered a section 

48C facility. There is a separate section 

45X facility with respect to otherwise 

qualified property 2. That section 45X 

facility is the tangible property made up 

of Equipment B. Equipment A is not 

included in the section 45X facility as 

it is not used to produce otherwise 

qualified property 2. None of the 

tangible property comprising the section 

45X facility with respect to otherwise 

qualified property 2 is considered part 

of a section 48C facility. Thus, 

otherwise qualified property 2 is an 

eligible component under paragraph 

(g)(1) of this section. 

(ii) Example 2: Single section 45X 

facility at different locations—(A) Facts. 

Taxpayer owns and operates two 

manufacturing sites at different 

locations. The tangible property at 

manufacturing site 1 is Equipment A, 

which is used to continue and finish the 

first part of the production process for 

otherwise qualified property. The 

tangible property at manufacturing site 

2 is Equipment B, which is used to 

complete the production process of the 

same otherwise qualified property. 

Taxpayer was allocated a section 48C 

credit under the section 48C(e) program 

for Equipment A. 

(B) Analysis. Equipment A and B 

comprise a single section 45X facility 

regardless of location under paragraph 

(g)(2)(i) of this section because both 

Equipment A and B were used to 

produce the otherwise qualified 

property and the use of Equipment A 

and B are necessary to consider the 


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taxpayer the producer, consistent with 

the meaning of produced by the 

taxpayer in paragraph (c)(1) or (2) of this 

section. However, part of the property 

comprising the section 45X facility is 

also a section 48C facility under 

paragraph (g)(3) of this section because 

Equipment A is eligible property that is 

part of a section 48C facility. As a result, 

the otherwise qualified property is not 

considered an eligible component, and 

the sale of the otherwise qualified 

property will not generate a section 45X 

credit. 

(iii) Example 3: Independent tangible 

property and production of 

component—(A) Facts. Taxpayer owns 

and operates two manufacturing sites. 

Manufacturing Site 1 contains tangible 

property that is Equipment A, which is 

used to produce photovoltaic cells. 

Manufacturing Site 2 contains tangible 

property that is Equipment B and 

tangible property that is Equipment C, 

which are arranged in serial fashion. 

Equipment B is used to produce 

photovoltaic cells. Equipment C is used 

to produce solar modules, in part, by 

combining the photovoltaic cells 

produced by Equipment A and 

Equipment B. Taxpayer was allocated a 

section 48C credit under the section 

48C(e) program for a section 48C facility 

that includes Equipment B. 

Subsequently, Taxpayer places the 

section 48C facility and Equipment B in 

service in taxable year 2026. Taxpayer 

claimed a section 48C credit for 

Equipment B in taxable year 2026. 

(B) Analysis. Equipment A and 

Equipment B each comprise a section 

45X facility since each independently 

functions to produce otherwise 

qualified property, photovoltaic cells. 

No part of the section 45X facility 

comprised of Equipment A is eligible 

property that is included in a section 

48C facility. Thus, the photovoltaic cells 

produced in the section 45X facility 

comprised of Equipment A are eligible 

components. The photovoltaic cells that 

are produced in the section 45X facility 

comprised of Equipment B are 

otherwise qualified property that cannot 

qualify as eligible components because 

part (all in this case) of the section 45X 

facility comprised of Equipment B 

where the photovoltaic cells are 

produced is also considered a section 

48C facility. Solar modules, a different 

otherwise qualified property, are 

produced in using Equipment C, which 

is itself a separate section 45X facility. 

Equipment C does not have to include 

any of the tangible property included in 

Production Unit A or B under paragraph 

(g)(2)(i) of this section because it is not 

necessary for the Taxpayer to use that 

equipment to be considered the 

producer of the solar modules for 

purposes of section 45X. As a result, no 

part of section 45X facility comprised of 

Equipment C where the solar modules 

are produced is considered a section 

48C facility, and the solar modules are 

considered an eligible component for 

purposes of section 45X. 

(iv) Example 4: Manufacturing under 

a contract manufacturing 

arrangement—(A) Facts. X is hired by Y 

to manufacture photovoltaic cells, but X 

and Y agree under paragraph (c)(3)(iii) 

of this section that Y will be the party 

to claim any section 45X credit resulting 

from the sale of the photovoltaic cells. 

X owns and operates a manufacturing 

site that contains equipment that is 

tangible property used to produce the 

photovoltaic cells. X was allocated a 

section 48C credit under the section 

48C(e) program for a section 48C facility 

that includes the equipment used to 

produce the photovoltaic cells. The 

equipment is eligible property that is 

part of the section 48C facility that was 

placed in service in taxable year 2026. 

X claimed a section 48C credit for the 

equipment in taxable year 2026. 

(B) Analysis. Under paragraph 

(g)(2)(ii) of this section, in determining 

the section 45X facility related to the 

photovoltaic cells (the otherwise 

qualified property), Y must consider the 

equipment that X used in producing the 

photovoltaic cells. In this case, that 

means that part of the section 45X 

facility is also considered a section 48C 

facility, as the equipment used to 

produce the photovoltaic cells is also 

eligible property that is part of a section 

48C facility. Therefore, the photovoltaic 

cells are not eligible components for 

purposes of section 45X to X or Y, and 

there is no section 45X credit generated 

if the photovoltaic cells are sold. 

(v) Example 5: Two independent 

production units manufacturing under a 

contract manufacturing arrangement— 

(A) Facts. Assume the facts are the same 

as in paragraph (g)(4)(iv) of this section 

(Example 4), except that Y and X also 

agreed for X to produce photovoltaic 

wafers using other equipment that is 

tangible property that is different than 

the equipment X uses to produce the 

photovoltaic cells. 

(B) Analysis. While Y must consider 

the equipment that X uses to produce 

the photovoltaic wafers (the otherwise 

qualified property) under paragraph 

(g)(2)(ii) of this section to determine the 

section 45X facility associated with the 

photovoltaic wafer production, Y is not 

required to include any of the 

equipment used by X to produce the 

photovoltaic cells because it was not 

necessary to use that equipment to be 

considered the producer of the 

photovoltaic wafers. As a result, no part 

of the section 45X facility related to 

photovoltaic wafers is part of a section 

48C facility. Therefore, the photovoltaic 

wafers are eligible components for 

purposes of section 45X and Y will be 

entitled to claim a section 45X credit 

upon the sale. 

(h) [Reserved] 

(i) Anti-abuse rule—(1) In general. 

The rules of section 45X and the section 

45X regulations must be applied in a 

manner consistent with the purposes of 

section 45X and the section 45X 

regulations (and the regulations in this 

chapter under sections 6417 and 6418 

related to the section 45X credit). A 

purpose of section 45X and the section 

45X regulations (and the regulations in 

this chapter under sections 6417 and 

6418 related to the section 45X credit) 

is to provide taxpayers an incentive to 

produce eligible components in a 

manner that contributes to the 

development of secure and resilient 

supply chains. Accordingly, the section 

45X credit is not allowable if the 

primary purpose of the production and 

sale of an eligible component is to 

obtain the benefit of the section 45X 

credit in a manner that is wasteful, such 

as discarding, disposing of, or 

destroying the eligible component 

without putting it to a productive use. 

A determination of whether the 

production and sale of an eligible 

component is inconsistent with the 

purposes of section 45X and the section 

45X regulations (and the regulations in 

this chapter under sections 6417 and 

6418 related to the section 45X credit) 

is based on all facts and circumstances. 

(2) Example—(i) Facts. Taxpayer is 

engaged in the activity of producing and 

selling multiple units of Eligible 

Component 1 (EC1). Taxpayer engages 

in no other activities. The cost of 

producing each unit of EC1 is less than 

the amount of the section 45X credit 

that would be available if each EC1 

qualified for the section 45X credit. 

Taxpayer sells some of its units of EC1 

to related persons and makes a Related 

Person Election pursuant to section 

45X(a)(3)(B)(i). Taxpayer also sells some 

of its units of EC1 to unrelated persons. 

Taxpayer sells all units of EC1 at an 

amount equal to cost plus a markup to 

reflect an anticipated accommodation 

fee and establishes corresponding 

accounts receivable at the time of the 

respective sales. In addition, Taxpayer 

knows or reasonably expects that after 

acquiring the units of EC1, the related 

and unrelated transferees will not resell 

the units of EC1 or use them in their 

trades or businesses. Taxpayer intends 

to obtain the benefit from the section 

45X credit by claiming such credits 


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itself or monetizing such credits through 

an election under section 6417 or 

section 6418. Taxpayer eliminates the 

aforementioned accounts receivable at 

the time it claims the section 45X credit 

or receives related payments attributable 

to the section 45X credit, and further 

makes payments to the related and 

unrelated transferees as accommodation 

fees computed as a percentage of such 

benefits. 

(ii) Analysis. Based on all of the facts 

and circumstances in paragraph (i)(2)(i) 

of this section, the primary purpose of 

Taxpayer’s production and sale of EC1 

is to obtain the benefit of the section 

45X credit in a manner that is wasteful 

and will not be treated as the 

production and sale of eligible 

components in a trade or business of 

Taxpayer for purposes of section 

45X(a)(1) and (2). Taxpayer is not 

eligible for the section 45X credit with 

respect to units of EC1 that it produced 

and sold. See sections 6417(d)(6) 

(excessive payments) and 6418(g)(2) 

(excessive credit transfer). 

(j) Applicability date. This section 

applies to eligible components for 

which production is completed and 

sales occur after December 31, 2022, and 

during a taxable year ending on or after 

October 28, 2024. 

§ 1.45X–2 Sale to unrelated person. 

(a) In general. The amount of the 

section 45X credit for any taxable year 

is equal to the sum of the credit 

amounts determined under section 

45X(b) (and described in §§ 1.45X–3 and 

1.45X–4) with respect to each eligible 

component that is produced by the 

taxpayer and, during the taxable year, 

sold by the taxpayer to an unrelated 

person. Applicable Federal income tax 

principles apply to determine whether a 

transaction is in substance a sale (or the 

provision of a service, or some other 

disposition). See § 1.45X–1(d) and (e) 

for additional requirements relating to 

sales. 

(b) Definitions. This paragraph (b) 

provides definitions of terms that apply 

for purposes of this section. 

(1) Person. The term person means an 

individual, a trust, estate, partnership, 

association, company, or corporation, as 

provided in section 7701(a)(1) of the 

Code. For purposes of this section, an 

entity disregarded as separate from a 

person (for example, under § 301.7701– 

3 of this chapter) is not a person. 

(2) Related person. The term related 

person means a person who is related to 

another person if such persons would be 

treated as a single employer under the 

regulations in this chapter under section 

52(b) of the Code. 

(3) Unrelated person. The term 

unrelated person means a person who is 

not a related person as defined in 

paragraph (b)(2) of this section. 

(c) Special rule for sale to related 

person—(1) In general. For purposes of 

section 45X(a), a taxpayer is treated as 

selling an eligible component to an 

unrelated person if such component is 

sold to such person by a person who is 

a related person with respect to the 

taxpayer. 

(2) Example. X and Y are members of 

a group of trades or businesses under 

common control under section 52(b), 

and thus are related persons under 

section 45X(d)(1). Each of X and Y has 

a calendar year taxable year. Z is an 

unrelated person. X is in the trade or 

business of producing and selling solar 

modules. X produces and sells solar 

modules to Y in 2023. Y sells the solar 

modules to Z in 2024. X may claim a 

section 45X credit for the sale of the 

solar modules in 2024, the taxable year 

of X in which Y sells the solar modules 

to Z. 

(d) Related person election—(1) 

Availability of election—(i) In general. 

In such form and manner as the 

Secretary may prescribe, a taxpayer may 

make an election under section 

45X(a)(3)(B) (Related Person Election), 

to treat a sale of eligible components by 

such taxpayer to a related person as if 

made to an unrelated person. As a 

condition of, and prior to, a taxpayer 

making a Related Person Election (as 

described in paragraph (d)(2) of this 

section), the Secretary may require such 

information or registration as the 

Secretary deems necessary for purposes 

of preventing duplication, fraud, or any 

improper or excessive credit amount 

determined under section 45X(a)(1). 

(ii) Members of a consolidated group. 

A Related Person Election is made by a 

member of a consolidated group (as 

defined in § 1.1502–1(h)) in the manner 

described in paragraph (d)(3)(ii) of this 

section. A member of a consolidated 

group that sells eligible components in 

an intercompany transaction (as defined 

in § 1.1502–13(b)(1)) may make the 

Related Person Election to claim the 

section 45X credit in the year of the 

intercompany sale. For the treatment of 

the selling member’s gain or loss from 

that sale, see § 1.1502–13. 

(2) Time and manner of making 

election—(i) In general. A taxpayer must 

make an affirmative Related Person 

Election annually on the taxpayer’s 

timely filed original Federal income tax 

return, including extensions in such 

form and in such manner as may be 

prescribed in guidance. The Related 

Person Election will be applicable to all 

sales of eligible components to related 

persons by the taxpayer for each trade 

or business that the taxpayer engages in 

during the taxable year that resulted in 

a credit claim and for which the 

taxpayer has made the Related Person 

Election. 

(ii) Required information. For all sales 

of eligible components to related 

persons, the taxpayer must provide all 

required information set forth in 

guidance. Such information may 

include, for example, the taxpayer’s 

name, employer identification number 

(EIN), a description of the taxpayer’s 

trade or business (including principal 

business activity code); the name(s) and 

EINs of all related persons; a listing of 

the eligible components that are sold; 

and the intended purpose of any sales 

of eligible components to or from 

related persons. 

(3) Scope and effect of election—(i) In 

general. A separate Related Person 

Election must be made with respect to 

related person sales made by a taxpayer 

for each eligible trade or business of the 

taxpayer. The election applies only to 

such trade or business for which the 

Related Person Election is made. An 

election under this section applies to all 

sales to related persons (including 

between members of the same 

consolidated group) of eligible 

components produced by the taxpayer 

during the taxable year with respect to 

each trade or business for which the 

Related Person Election is made and is 

irrevocable for the taxable year for 

which the election is made. An election 

under paragraph (d)(2)(i) of this section 

applies solely for purposes of the 

section 45X credit and the section 45X 

regulations (and the regulations in this 

chapter under sections 6417 and 6418 

related to the section 45X credit). 

(ii) Application to consolidated 

groups. For a trade or business of a 

consolidated group, a Related Person 

Election must be made by the agent for 

the group on behalf of the members 

claiming the section 45X credit and 

filed with the group’s timely filed 

original Federal income tax return, 

including extensions, with respect to 

each trade or business that the 

consolidated group conducts. See 

§ 1.1502–77 (providing rules regarding 

the status of the common parent as 

agent for its members). A separate 

election must be filed on behalf of each 

member claiming the section 45X credit, 

and each election must include the 

name and EIN of the agent for the group 

and the member on whose behalf the 

election is being made. 

(iii) Application to partnerships. The 

Related Person Election for a 

partnership must be made on the 

partnership’s timely filed original 


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Federal income tax return, including 

extensions, with respect to each trade or 

business that the partnership conducts. 

The election applies only to such trade 

or business for which the Related 

Person Election is made. An election by 

a partnership does not apply to any 

trade or business conducted by a partner 

outside the partnership. 

(4) Anti-abuse rule—(i) In general. A 

Related Person Election may not be 

made if, with respect to the eligible 

components relevant to such election, 

the taxpayer fails to provide the 

information described in paragraph 

(d)(2) of this section, provides 

information described in paragraph 

(d)(2) of this section that shows that 

such components are described in 

paragraph (d)(4)(ii) or (iii) of this 

section, or such components are 

described in paragraph (d)(4)(ii) or (iii) 

of this section. 

(ii) Improper use. For purposes of this 

paragraph (d)(4) the term improper use 

means a use that is wasteful, such as 

discarding, disposing of, or destroying 

the eligible component without putting 

it to a productive use by the related 

person to which the eligible component 

is sold. 

(iii) Defective components. The term 

defective component means a 

component that does not meet the 

requirements of section 45X and the 

section 45X regulations. 

(e) Sales of integrated components to 

related person—(1) In general. For 

purposes of section 45X and the section 

45X regulations (and the regulations in 

this chapter under sections 6417 and 

6418 related to the section 45X credit), 

a taxpayer that produces and then sells 

an eligible component to a related 

person, who then integrates, 

incorporates, or assembles the 

taxpayer’s eligible component into 

another complete and distinct eligible 

component that is subsequently sold to 

an unrelated person, may claim a 

section 45X credit (or make an election 

under section 6417 or section 6418) 

with respect to the taxable year in 

which the related person’s sale to the 

unrelated person occurs. 

(2) Examples. The following examples 

illustrate the rules provided in 

paragraph (e)(1) of this section. 

(i) Example 1: Sales of multiple 

incorporated eligible components to 

related persons. X and Y are C 

corporations that are members of a 

group of trades or businesses under 

common control under section 52(b), 

and thus are related persons under 

section 45X(d)(1) and paragraph (b)(2) of 

this section. Each of X and Y has a 

calendar year taxable year. Z is an 

unrelated person. X and Y are in the 

trade or business of producing and 

selling photovoltaic wafers and cells. X 

produces and sells photovoltaic wafers 

to Y in 2023. Y incorporates the 

photovoltaic wafers into photovoltaic 

cells and sells the photovoltaic cells to 

Z in 2024. X may claim a section 45X 

credit for the sale of the photovoltaic 

wafers in 2024, the taxable year of X in 

which Y sells the photovoltaic cells to 

Z. 

(ii) Example 2: Sales of multiple 

incorporated eligible components to 

related and unrelated persons. W, X, 

and Y are domestic C corporations that 

are members of a group of trades or 

businesses under common control 

under section 52(b), and thus are related 

persons under section 45X(d)(1) and 

paragraph (b)(2) of this section. Each of 

W, X, and Y has a calendar year taxable 

year. W produces electrode active 

materials (EAMs) and sells the EAMs to 

X in 2023. In 2024, X incorporates the 

EAMs into battery cells that it produces 

and sells the battery cells to Y. In 2025, 

Y incorporates the battery cells into 

battery modules (within the meaning of 

§ 1.45X–3(e)(4)(i)(A)) that it produces 

and sells the battery modules to Z, an 

unrelated person. W may claim a 

section 45X credit for EAMs sold to X, 

X may claim a section 45X credit for the 

battery cells sold to Y, and Y may claim 

a section 45X credit for the battery 

modules sold to Z in 2025, the taxable 

year of each of W, X, and Y in which 

the battery modules are sold to Z. 

(3) Special rules applicable to related 

person election—(i) In general. If a 

taxpayer makes a valid Related Person 

Election under section 45X(a)(3)(B)(i) 

and paragraph (d)(1) of this section, and 

the taxpayer produces and then sells an 

eligible component to a related person, 

who then integrates, incorporates, or 

assembles the taxpayer’s eligible 

component into another complete and 

distinct eligible component that is 

subsequently sold to an unrelated 

person, the taxpayer’s sale of the eligible 

component to the related person is 

treated (solely for purposes of the 

section 45X credit and the section 45X 

regulations, and the regulations in this 

chapter under sections 6417 and 6418 

related to the section 45X credit) as if 

made to an unrelated person in the 

taxable year in which the sale to the 

related person occurs. 

(ii) Example: Sales of multiple 

integrated eligible components to 

related and unrelated persons with a 

related person election. W, X, and Y are 

domestic C corporations that are 

members of a group of trades or 

businesses under common control and 

thus are related persons under section 

45X(d)(1) and paragraph (b)(2) of this 

section. Each of W, X, and Y has a 

calendar year taxable year. W produces 

electrode active materials (EAMs) and 

sells the EAMs to X in 2023. W makes 

a valid Related Person Election under 

paragraph (d)(1) of this section in 2023 

with regard to the sale. In 2024, X 

incorporates the EAMs into battery cells 

that it produces and sells the battery 

cells to Y. X makes a valid Related 

Person Election under paragraph (d)(1) 

of this section in 2024 with regard to the 

sale. In 2025, Y incorporates the battery 

cells into battery modules that it 

produces and sells the battery modules 

to Z, an unrelated person. W may claim 

a section 45X credit for the sale of the 

EAMs in 2023 because the sale to X is 

treated as if made to an unrelated 

person solely for purposes of section 

45X(a). X may claim a section 45X 

credit for the sale of the battery cells in 

2024 because the sale to Y is treated as 

if made to an unrelated person solely for 

purposes of section 45X(a). Y may claim 

a section 45X credit for the sale of 

battery modules in 2025 because Z is an 

unrelated person. 

(f) Applicability date. This section 

applies to eligible components for 

which production is completed and 

sales occur after December 31, 2022, and 

during a taxable year ending on or after 

October 28, 2024. 

§ 1.45X–3 Eligible components. 

(a) In general. For purposes of the 

section 45X credit, eligible component 

means any solar energy component (as 

defined in paragraph (b) of this section), 

any wind energy component (as defined 

in paragraph (c) of this section), any 

inverter (as defined in paragraph (d) of 

this section), any qualifying battery 

component (as defined in paragraph (e) 

of this section), and any applicable 

critical mineral (as defined in § 1.45X– 

4(b)). See paragraph (f) of this section 

for certain phase-out rules applicable to 

eligible components other than 

applicable critical minerals. 

(b) Solar energy components. Solar 

energy component means a solar 

module, photovoltaic cell, photovoltaic 

wafer, solar grade polysilicon, torque 

tube, structural fastener, or polymeric 

backsheet, each as defined in this 

paragraph (b). 

(1) Photovoltaic cell—(i) Definition. 

Photovoltaic cell means the smallest 

semiconductor element of a solar 

module that performs the immediate 

conversion of light into electricity that 

is either a thin film photovoltaic cell or 

a crystalline photovoltaic cell. 

(ii) Credit amount. For a photovoltaic 

cell, the credit amount is equal to the 

product of 4 cents multiplied by the 

capacity of such photovoltaic cell. The 


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capacity of each photovoltaic cell is 

expressed on a direct current watt basis. 

Capacity is the nameplate capacity in 

direct current watts using Standard Test 

Conditions (STC), as defined by the 

International Electrotechnical 

Commission (IEC). In the case of a 

tandem technology produced in serial 

fashion, such as a monolithic 

multijunction cell composed of two or 

more sub-cells, capacity must be 

measured at the point of sale at the end 

of the single cell production unit. In the 

case of a four-terminal tandem 

technology produced by mechanically 

stacking two distinct cells or 

interconnected layers, capacity must be 

measured for each cell at each point of 

sale. If a cell is sold to a customer who 

will use it as the bottom cell in a tandem 

module, its capacity should be 

measured with the customer’s intended 

top cell placed between the bottom cell 

and the one-sun light source. 

(iii) Substantiation. The taxpayer 

must document the capacity of a 

photovoltaic cell in a bill of sale or 

design documentation, such as an IEC 

certification (for example, IEC 61215 or 

IEC 60904). 

(2) Photovoltaic wafer—(i) Definition. 

Photovoltaic wafer means a thin slice, 

sheet, or layer of semiconductor 

material of at least 240 square 

centimeters that comprises the substrate 

or absorber layer of one or more 

photovoltaic cells. A photovoltaic wafer 

must be produced by a single 

manufacturer by forming an ingot from 

molten polysilicon (for example, 

Czochralski method) and then 

subsequently slicing it into wafers, 

forming molten or evaporated 

polysilicon into a sheet or layer, or 

depositing a thin-film semiconductor 

photon absorber into a sheet or layer 

(that is, thin-film deposition). 

(ii) Credit amount. For a photovoltaic 

wafer, the credit amount is $12 per 

square meter. 

(3) Polymeric backsheet—(i) 

Definition. Polymeric backsheet means a 

sheet on the back of a solar module, 

composed, at least in part, of a polymer, 

that acts as an electric insulator and 

protects the inner components of such 

module from the surrounding 

environment. 

(ii) Credit amount. For a polymeric 

backsheet, the credit amount is 40 cents 

per square meter. 

(4) Solar grade polysilicon—(i) 

Definition. Solar grade polysilicon 

means silicon that is suitable for use in 

photovoltaic manufacturing and 

purified to a minimum purity of 

99.999999 percent silicon by mass. 

Satisfaction of the minimum purity 

requirement will be determined in 

accordance with the standards provided 

in SEMI Specification PV17–1012, 

Category 1. 

(ii) Credit amount. For solar grade 

polysilicon, the credit amount is $3 per 

kilogram. 

(5) Solar module—(i) Definition. Solar 

module means the connection and 

lamination of photovoltaic cells into an 

environmentally protected final 

assembly that is— 

(A) Suitable to generate electricity 

when exposed to sunlight; and 

(B) Ready for installation without an 

additional manufacturing process. 

(ii) Credit amount. For a solar 

module, the credit amount is equal to 

the product of 7 cents multiplied by the 

capacity of such module. The capacity 

of each solar module is expressed on a 

direct current watt basis. Capacity is the 

nameplate capacity in direct current 

watts using STC, as defined by the IEC. 

(iii) Substantiation. The taxpayer 

must document the capacity of a solar 

module in a bill of sale or design 

documentation, such as an IEC 

certification (for example, IEC 61215 or 

IEC 61646). 

(6) Solar tracker. Solar tracker means 

a mechanical system that moves solar 

modules according to the position of the 

sun and to increase energy output. A 

torque tube (as defined in paragraph 

(b)(7) of this section) or structural 

fastener (as defined in paragraph (b)(8) 

of this section) are solar tracker 

components that are eligible 

components for purposes of the section 

45X credit. 

(7) Torque tube—(i) Definition. 

Torque tube means a structural steel 

support element (including longitudinal 

purlins) that— 

(A) Is part of a solar tracker; 

(B) Is of any cross-sectional shape; 

(C) May be assembled from 

individually manufactured segments; 

(D) Spans longitudinally between 

foundation posts; 

(E) Supports solar panels and is 

connected to a mounting attachment for 

solar panels (with or without separate 

module interface rails); and 

(F) Is rotated by means of a drive 

system. 

(ii) Credit amount. For a torque tube, 

the credit amount is 87 cents per 

kilogram. 

(iii) Substantiation. The taxpayer 

must document that a torque tube is part 

of a solar tracker with a specification 

sheet, bill of sale, or other similar 

documentation that explicitly describes 

its application as part of a solar tracker. 

(8) Structural fastener—(i) Definition. 

Structural fastener means a component 

that is used— 

(A) To connect the mechanical and 

drive system components of a solar 

tracker to the foundation of such solar 

tracker; 

(B) To connect torque tubes to drive 

assemblies; or 

(C) To connect segments of torque 

tubes to one another. 

(ii) Credit amount. For a structural 

fastener, the credit amount is $2.28 per 

kilogram. 

(iii) Substantiation. The taxpayer 

must document that a structural fastener 

is used in a manner described in 

paragraph (b)(8)(i)(A), (B), or (C) of this 

section with a bill of sale or other 

similar documentation that explicitly 

describes such use. 

(c) Wind energy components. Wind 

energy component means a blade, 

nacelle, tower, offshore wind 

foundation, or related offshore wind 

vessel, each as defined in this paragraph 

(c). 

(1) Blade—(i) Definition. Blade means 

an airfoil-shaped blade that is 

responsible for converting wind energy 

to low-speed rotational energy. 

(ii) Credit amount. For a blade, the 

credit amount is equal to the product of 

2 cents multiplied by the total rated 

capacity of the completed wind turbine 

for which the blade is designed. 

(2) Offshore wind foundation—(i) 

Definition. Offshore wind foundation 

means the component (including 

transition piece) that secures an offshore 

wind tower and any above-water turbine 

components to the seafloor using— 

(A) Fixed platforms, such as offshore 

wind monopiles, jackets, or gravitybased foundations; or 

(B) Floating platforms and associated 

mooring systems. 

(ii) Credit amount. For a fixed 

offshore wind foundation platform, the 

credit amount is equal to the product of 

2 cents multiplied by the total rated 

capacity of the completed wind turbine 

for which the fixed offshore wind 

foundation platform is designed. For a 

floating offshore wind foundation 

platform, the credit amount is equal to 

the product of 4 cents multiplied by the 

total rated capacity of the completed 

wind turbine for which the floating 

offshore wind foundation platform is 

designed. 

(3) Nacelle—(i) Definition. Nacelle 

means the assembly of the drivetrain 

and other tower-top components of a 

wind turbine (with the exception of the 

blades and the hub) within their cover 

housing. 

(ii) Credit amount. For a nacelle, the 

credit amount is equal to the product of 

5 cents multiplied by the total rated 

capacity of the completed wind turbine 

for which the nacelle is designed. 

(4) Related offshore wind vessel—(i) 

Definition. Related offshore wind vessel 


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means any vessel that is purpose-built 

or retrofitted for purposes of the 

development, transport, installation, 

operation, or maintenance of offshore 

wind energy components. A vessel is 

purpose-built for development, 

transport, installation, operation, or 

maintenance of offshore wind energy 

components if it is built to be capable 

of performing such functions and it is of 

a type that is commonly used in the 

offshore wind industry. A vessel is 

retrofitted for development, transport, 

installation, operation, or maintenance 

of offshore wind energy components if 

such vessel was incapable of performing 

such functions prior to being retrofitted, 

the retrofit causes the vessel to be 

capable of performing such functions, 

and the retrofitted vessel is of a type 

that is commonly used in the offshore 

wind industry. 

(ii) Credit amount. For a related 

offshore wind vessel, the credit amount 

is equal to 10 percent of the sales price 

of the vessel. The sales price of the 

vessel, determined under Federal 

income tax principles, does not include 

the price of maintenance, services, or 

other similar items that may be sold 

with the vessel. For a related offshore 

wind vessel with respect to which an 

election under section 45X(a)(3)(B)(i) 

has been made, such election will not 

cause the sale price of such vessel to be 

treated as having been determined with 

respect to a transaction between 

uncontrolled taxpayers for purposes of 

section 482 of the Code and the 

regulations in this chapter. 

(5) Tower—(i) Definition. Tower 

means a tubular or lattice structure that 

supports the nacelle and rotor of a wind 

turbine. 

(ii) Credit amount. For a tower, the 

credit amount is equal to the product of 

3 cents multiplied by the total rated 

capacity of the completed wind turbine 

for which the tower is designed. 

(6) Total rated capacity of the 

completed wind turbine. For purposes 

of this section, total rated capacity of 

the completed wind turbine means, for 

the completed wind turbine for which a 

blade, nacelle, offshore wind 

foundation, or tower was manufactured 

and sold, the nameplate capacity at the 

time of sale as certified to the relevant 

national or international standards, such 

as IEC 61400, or ANSI/ACP 101–1– 

2021, the Small Wind Turbine Standard 

(Standard). Certification of the turbine 

to such Standards must be documented 

by a certificate issued by an accredited 

certification body. The total rated 

capacity of a wind turbine must be 

expressed in watts. 

(7) Substantiation. Taxpayers must 

maintain specific documentation 

regarding wind energy components for 

which a section 45X credit is claimed. 

For blades, nacelles, offshore wind 

foundations, or towers, a taxpayer must 

document the turbine model for which 

such component is designed and the 

total rated capacity of the completed 

wind turbine in technical 

documentation associated with the sale 

of such component. For related offshore 

wind vessel, such documentation could 

include the contract to construct or 

retrofit (along with retrofit plans), sales 

contract, U.S. Coast Guard bill of sale, 

U.S. Coast Guard Certificate of 

Documentation (COD), and U.S. Coast 

Guard Certificate of Inspection (COI). 

(d) Inverters—(1) In general. Inverter 

means an end product that is suitable to 

convert direct current (DC) electricity 

from one or more solar modules or 

certified distributed wind energy 

systems into alternating current 

electricity. An end product is suitable to 

convert DC electricity from one or more 

solar modules or certified distributed 

wind energy systems into alternating 

current electricity if, in the form sold by 

the manufacturer, it is able to connect 

with such modules or systems and 

convert DC electricity to alternating 

current electricity from such connected 

source. The term inverter includes a 

central inverter, commercial inverter, 

distributed wind inverter, 

microinverter, or residential inverter. 

Only an inverter that meets at least one 

of the requirements in paragraphs (d)(2) 

through (7) of this section is an eligible 

component for purposes of the section 

45X credit. 

(2) Central inverter—(i) Definition. 

Central inverter means an inverter that 

is suitable for large utility-scale systems 

and has a capacity that is greater than 

1,000 kilowatts. The capacity of a 

central inverter is expressed on an 

alternating current watt basis. An 

inverter is suitable for large utility-scale 

systems if, in the form sold by the 

manufacturer, it is capable of serving as 

a component in a large utility-scale 

system and meets the core engineering 

specifications for such application. 

(ii) Credit amount. For a central 

inverter the total rated capacity of 

which is expressed on an alternating 

current watt basis, the credit amount is 

equal to the product of 0.25 cents 

multiplied by the total rated capacity of 

the central inverter. 

(iii) Substantiation. The taxpayer 

must document that a central inverter 

meets the core engineering 

specifications for use in a large utilityscale system and has a capacity that is 

greater than 1,000 kilowatts with a 

specification sheet, bill of sale, or other 

similar documentation that explicitly 

describes such specifications and 

capacity. 

(3) Commercial inverter—(i) 

Definition. Commercial inverter means 

an inverter that— 

(A) Is suitable for commercial or 

utility-scale applications; 

(B) Has a rated output of 208, 480, 

600, or 800 volt three-phase power; and 

(C) Has a capacity expressed on an 

alternating current watt basis that is not 

less than 20 kilowatts and not greater 

than 125 kilowatts. 

(ii) Suitable for commercial or utilityscale applications. An inverter is 

suitable for commercial or utility-scale 

applications if, in the form sold by the 

manufacturer, it is capable of serving as 

a component in commercial or utilityscale systems and meets the core 

engineering specifications for such 

application. 

(iii) Credit amount. For a commercial 

inverter the total rated capacity of 

which is expressed on an alternating 

current watt basis, the credit amount is 

equal to the product of 2 cents 

multiplied by the total rated capacity of 

the commercial inverter. 

(iv) Substantiation. The taxpayer must 

document that a commercial inverter 

meets the core engineering 

specifications for use in commercial or 

utility-scale applications, the inverter’s 

rated output, and the inverter’s capacity 

in a specification sheet, bill of sale, or 

other similar documentation. 

(4) Distributed wind inverter—(i) In 

general. Distributed wind inverter means 

an inverter that is used in a residential 

or non-residential system that utilizes 

one or more certified distributed wind 

energy systems and has a total rated 

output, expressed on an alternating 

current watt basis, of not greater than 

150 kilowatts. 

(ii) Certified distributed wind energy 

system. Certified distributed wind 

energy system means a wind energy 

system that is certified by an accredited 

certification agency to meet Standard 

9.1–2009 of the American Wind Energy 

Association; IEC 61400–1, 61400–2, 

61400–11, 61400–12; or ANSI/ACP 101– 

1–2021, the Standard, including any 

subsequent revisions to or modifications 

of such Standard that have been 

approved by ANSI. 

(iii) Credit amount. For a distributed 

wind inverter the total rated capacity of 

which is expressed on an alternating 

current watt basis, the credit amount is 

equal to the product of 11 cents 

multiplied by the total rated capacity of 

the distributed wind inverter. 

(iv) Substantiation. The taxpayer must 

document that a distributed wind 

inverter is used in a residential or nonresidential system that utilizes one or 


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more certified distributed wind energy 

systems with a specification sheet, bill 

of sale, or other similar documentation 

that explicitly describes such use and 

the total rated output of the inverter on 

an alternating current watt basis. 

(5) Microinverter—(i) Definition. 

Microinverter means an inverter that— 

(A) Is suitable to connect with one 

solar module; 

(B) Has a rated output described in 

paragraph (d)(5)(ii) of this section; and 

(C) Has a capacity, expressed on an 

alternating current watt basis, that is not 

greater than 650 watts. 

(ii) Rated output. For purposes of 

paragraph (d)(5)(i)(B) of this section, for 

an inverter to be a microinverter, the 

inverter must have a rated output of— 

(A) 120 or 240 volt single-phase 

power; or 

(B) 208 or 480 volt three-phase power. 

(iii) Suitable to connect to one solar 

module—(A) In general. An inverter is 

suitable to connect to one solar module 

if, in the form sold by the manufacturer, 

it is capable of connecting to one or 

more solar modules and regulating the 

DC electricity from each module 

independently before that electricity is 

converted into alternating current 

electricity. 

(B) Application to direct current (DC) 

optimized inverter systems. A DC 

optimized inverter system means an 

inverter that is comprised of an inverter 

connected to multiple DC optimizers 

that are each designed to connect to one 

solar module. A DC optimized inverter 

system is suitable to connect with one 

solar module if, in the form sold by the 

manufacturer, it is capable of 

connecting to one or more solar 

modules and regulating the DC 

electricity from each module 

independently before that electricity is 

converted into alternating current 

electricity. 

(C) Application to multi-module 

inverters. A multi-module inverter 

means an inverter that is comprised of 

an inverter with independent 

connections and DC optimizing 

components for two or more modules. A 

multi-module microinverter is suitable 

to connect with one solar module if it 

is capable of connecting to one or more 

solar modules and regulating the DC 

electricity from each module 

independently before that electricity is 

converted into alternating current 

electricity. 

(iv) Credit amount—(A) In general. 

For a microinverter the total rated 

capacity of which is expressed on an 

alternating current watt basis, the credit 

amount is equal to the product of 11 

cents multiplied by the total rated 

capacity of the microinverter. 

(B) DC optimized inverter systems. A 

DC optimized inverter system qualifies 

as a microinverter if it meets the 

requirements of paragraph (d)(5)(i) of 

this section. For purposes of paragraph 

(d)(5)(i)(C) of this section, a DC 

optimized inverter system’s capacity is 

determined separately for each DC 

optimizer paired with the inverter in a 

DC optimized inverter system. If each 

DC optimizer paired with the inverter in 

a DC optimized inverter system meets 

the requirements of paragraph (d)(5)(i) 

of this section, then the DC optimized 

inverter system qualifies as a 

microinverter. The credit amount for a 

DC optimized inverter system that 

qualifies as a microinverter is equal to 

the product of 11 cents multiplied by 

the lesser of the sum of the alternating 

current capacity of each DC optimizer 

when paired with the inverter in the DC 

optimized inverter system or the 

alternating current capacity of the 

inverter in the DC optimized inverter 

system. For purposes of this paragraph 

(d)(5)(iv)(B), capacity must be measured 

in watts of alternating current converted 

from DC electricity by the inverter in a 

DC optimized inverter system. For a DC 

optimized inverter system to qualify as 

a microinverter, a taxpayer must 

produce and sell the inverter and the DC 

optimizers in the DC optimized inverter 

system together as a combined end 

product. 

(C) Multi-module inverters. A multimodule inverter qualifies as a 

microinverter if it meets the 

requirements of paragraph (d)(5)(i) of 

this section. For purposes of paragraph 

(d)(5)(i)(C) of this section, a multimodule inverter’s capacity is 

determined separately for each internal 

DC optimizer paired with the inverter. 

The credit amount for a multi-module 

inverter is equal to the product of 11 

cents multiplied by the total alternating 

current capacity of the DC optimizers in 

the multi-module inverter when paired 

with the inverter in the system. For 

purposes of this paragraph (d)(5)(iv)(C), 

capacity must be measured in watts of 

alternating current converted from DC 

electricity by the inverter in a multimodule microinverter. 

(v) Substantiation. The taxpayer must 

document that a microinverter meets the 

core engineering specifications to be 

suitable to connect with one solar 

module, the inverter’s rated output, and 

the inverter’s capacity in a specification 

sheet, bill of sale, or other similar 

documentation. In the case of a DC 

optimized inverter system, the taxpayer 

must also document that the DC 

optimizers and the inverter in such 

system were sold as a combined end 

product. 

(6) Residential inverter—(i) Definition. 

Residential inverter means an inverter 

that— 

(A) Is suitable for a residence; 

(B) Has a rated output of 120 or 240 

volt single-phase power; and 

(C) Has a capacity expressed on an 

alternating current watt basis that is not 

greater than 20 kilowatts. 

(ii) Suitable for a residence. An 

inverter is suitable for a residence if, in 

the form sold by the manufacturer, it is 

capable of serving as a component in a 

residential system and meets the core 

engineering specifications for such 

application. 

(iii) Credit amount. For a residential 

inverter the total rated capacity of 

which is expressed on an alternating 

current watt basis, the credit amount is 

equal to the product of 6.5 cents 

multiplied by the total rated capacity of 

the residential inverter. 

(iv) Substantiation. The taxpayer must 

document that a residential inverter 

meets the core engineering 

specifications for use in a residence, the 

inverter’s rated output, and the 

inverter’s capacity in a specification 

sheet, bill of sale, or other similar 

documentation. 

(7) Utility inverter—(i) Definition. 

Utility inverter means an inverter that— 

(A) Is suitable for commercial or 

utility-scale systems; 

(B) Has a rated output of not less than 

600 volt three-phase power; and 

(C) Has a capacity expressed on an 

alternating current watt basis that is 

greater than 125 kilowatts and not 

greater than 1000 kilowatts. 

(ii) Suitable for commercial or utilityscale systems. An inverter is suitable for 

commercial or utility-scale systems if, in 

the form sold by the manufacturer, it is 

capable of serving as a component in 

such systems and meets the core 

engineering specifications for such 

application. 

(iii) Credit amount. For a utility 

inverter the total rated capacity of 

which is expressed on an alternating 

current watt basis, the credit amount is 

equal to the product of 1.5 cents 

multiplied by the total rated capacity of 

the utility inverter. 

(iv) Substantiation. The taxpayer must 

document that a utility inverter meets 

the core engineering specifications for 

use in commercial or utility-scale 

systems, the inverter’s rated output, and 

the inverter’s capacity in a specification 

sheet, bill of sale, or other similar 

documentation. 

(e) Qualifying battery component—(1) 

In general. Qualifying battery 

component means electrode active 

materials, battery cells, or battery 


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modules, each as defined in this 

paragraph (e). 

(2) Electrode active materials—(i) 

Definitions—(A) Electrode active 

materials. Electrode active materials 

means cathode electrode materials, 

anode electrode materials, and 

electrochemically active materials that 

contribute to the electrochemical 

processes necessary for energy storage. 

Electrode active materials do not 

include battery management systems, 

terminal assemblies, cell containments, 

gas release valves, module 

containments, module connectors, 

compression plates, straps, pack 

terminals, bus bars, thermal 

management systems, and pack jackets. 

(B) Cathode electrode materials. 

Cathode electrode materials means the 

materials that comprise the cathode of a 

commercial battery technology, such as 

binders, and current collectors (for 

example, cathode foils). 

(C) Anode electrode materials. Anode 

electrode materials means the materials 

that comprise the anode of a commercial 

battery technology, including anode 

foils. 

(D) Electrochemically active 

materials. Electrochemically active 

materials that contribute to the 

electrochemical processes necessary for 

energy storage means battery-grade 

materials that enable the 

electrochemical storage within a 

commercial battery technology. In 

addition to solvents, additives, and 

electrolyte salts, electrochemically 

active materials that contribute to the 

electrochemical processes necessary for 

energy storage may include electrolytes, 

catholytes, anolytes, separators, and 

metal salts and oxides. 

(E) Example. A commercial battery 

technology contains Cathode Active 

Material (CAM), which is a powder used 

in the battery that is made by processing 

and combining Battery-Grade Materials 

A and B. Battery-Grade Material A is a 

derivative of Material C, which has been 

refined to the necessary level to enable 

electrochemical storage. The production 

costs for CAM and its direct inputs 

(Battery-Grade Material A and BatteryGrade Material B) are eligible for the 

section 45X credit for electrode active 

materials, but the unrefined Material C 

is not. 

(F) Battery-grade materials. Batterygrade materials means the processed 

materials found in a final battery cell or 

an analogous unit, or the direct batterygrade precursors to those processed 

materials. 

(ii) Credit amount. For an electrode 

active material, the credit amount is 

equal to 10 percent of the costs incurred 

by the taxpayer with respect to 

production of such materials. 

(iii) Production processes for 

electrode active materials—(A) 

Conversion. For purposes of section 

45X, the term conversion means a 

chemical transformation from one 

species to another. 

(B) Purification. For purposes of 

section 45X, the term purification 

means increasing the mass fraction of a 

certain element. 

(iv) Production costs incurred—(A) In 

general—(1) Definition of production 

costs incurred. Costs incurred by the 

taxpayer with respect to production of 

an electrode active material includes all 

costs as defined in § 1.263A–1(e) that 

are paid or incurred within the meaning 

of section 461 of the Code by the 

taxpayer for the production of such 

electrode active material including 

direct materials costs as defined in 

§ 1.263A–1(e)(2)(i)(A), or indirect 

materials costs as defined in § 1.263A– 

1(e)(3)(ii)(E), but does not include direct 

or indirect materials costs that relate to 

the purchase of materials that are an 

eligible component at the time of 

acquisition (for example, an electrode 

active material as defined in paragraph 

(e)(2)(i) of this section or applicable 

critical mineral as defined in § 1.45X– 

4(b)). This definition of production costs 

incurred also includes any costs 

incurred by the taxpayer related to the 

extraction, as defined in paragraph 

(e)(2)(iv)(B) of this section, of raw 

materials in the United States or a 

United States territory, but only if those 

costs are paid or incurred by the 

taxpayer that claims the section 45X 

credit with respect to the relevant 

electrode active material. Section 263A 

of the Code and the regulations in this 

chapter under section 263A apply solely 

to identify the types of costs that are 

includible in production costs incurred 

for purposes of computing the amount 

of the section 45X credit, but do not 

apply for any other purpose, such as to 

determine whether a taxpayer is 

engaged in production activities. 

(2) Production costs for production of 

incorporated eligible components. The 

production costs that a taxpayer pays or 

incurs in the production of an eligible 

component (whether produced 

domestically or not) that the taxpayer 

then incorporates into a further distinct 

electrode active material within the 

meaning of § 1.45X–1(f)(1) are not 

included in the costs incurred by the 

taxpayer in producing the further 

distinct electrode active material. A 

taxpayer may not include the same 

production costs in the calculation of 

the credit amount for more than one 

eligible component. For example, if the 

taxpayer pays or incurs production costs 

of $50X for eligible component 1 and an 

additional $100X of production costs for 

eligible component 2 that included 

integrating eligible component 1 within 

the meaning of § 1.45X–1(f)(1), then the 

production costs for eligible component 

1 equal $50X and the production costs 

for eligible component 2 equal $100X. 

(3) Examples. The following examples 

illustrate the rules of this section: 

(i) Example 1. Taxpayers X, Y and Z 

are unrelated C corporations that have 

calendar year taxable years. In 2024, X 

extracts raw nickel from natural mineral 

deposits located in the United States 

and purifies the extracted material to 

99% nickel by mass (qualifying nickel) 

as required by section 45X(c)(6)(S) and 

§ 1.45X–4(b)(19)(ii). Y subsequently 

purchases the qualifying nickel and uses 

the material to produce battery-grade 

nickel salts which qualify as electrode 

active materials within the meaning of 

paragraph (e)(2) of this section. Y sells 

the battery-grade nickel salts to Z in tax 

year 2026. Y may claim a section 45X 

credit for the battery-grade nickel salts 

in tax year 2026 because Y produced, 

within the meaning of § 1.45X–1(c)(2), 

an eligible component. In calculating its 

production costs with respect to such 

credit, Y may not include the purchase 

price it paid to X for the qualifying 

nickel because the qualifying nickel met 

the minimum purity requirement 

prescribed by section 45X(c)(6)(S) such 

that the material constituted an 

applicable critical mineral (and, 

accordingly, an eligible component) at 

the time at which Y acquired the 

qualifying nickel. 

(ii) Example 2. Assume the facts are 

the same as in paragraph 

(e)(2)(iv)(A)(2)(i) of this section 

(Example 1), except that X purifies the 

extracted raw nickel material to a purity 

of 90% nickel by mass, rather than 99% 

nickel by mass as required by section 

45X(c)(6)(S) and § 1.45X–4(b)(19)(ii). Y 

may claim a section 45X credit for the 

battery-grade nickel salts in tax year 

2026 because Y produced, within the 

meaning of § 1.45X–1(c)(2), an eligible 

component. In calculating its 

production costs with respect to such 

credit, Y may include the purchase 

price of the 90% nickel material among 

its production costs, provided that Y 

satisfies the substantiation requirements 

described in paragraph (e)(2)(iv)(C) of 

this section, because, at the time at 

which Y acquired such material, the 

material did not meet the minimum 

purity as required by section 

45X(c)(6)(S) to constitute an applicable 

critical mineral. 

(B) Definition of extraction. The term 

extraction means the activities 


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performed to harvest minerals or natural 

resources from the ground or from a 

body of water. Extraction includes, but 

is not limited to, operating equipment to 

harvest minerals or natural resources 

from mines and wells and the physical 

processes involved in refining. 

Extraction also includes operating 

equipment to extract minerals or natural 

resources from the waste or residue of 

prior extraction, including crude oil 

extraction to the extent that processes 

applied to that crude oil yield an 

applicable critical mineral or an 

electrode active material as a byproduct. 

Extraction concludes when activities are 

performed to convert raw mined or 

harvested products or raw well effluent 

to substances that can be readily 

transported or stored for direct use in 

critical mineral or electrode active 

material processing. Extraction does not 

include activities that begin with a 

recyclable commodity (as such activities 

are recycling). Extraction does not 

include the chemical and thermal 

processes involved in refining. 

(C) Substantiation. In order to include 

direct or indirect materials costs as 

defined in § 1.263A–1(e)(2)(i)(A) and 

(e)(3)(ii)(E) as production costs when 

calculating a section 45X credit for the 

production and sale of an electrode 

active material, a taxpayer, as part of 

filing an annual tax return (or a return 

for a short year within the meaning of 

section 443 of the Code), must include 

the information in paragraph 

(e)(2)(iv)(C)(1) of this section as an 

attachment to that return, prepare the 

information required in paragraphs 

(e)(2)(iv)(C)(2) through (4) of this section 

and maintain that information in the 

taxpayer’s books and records under 

section 6001, and comply with 

directions for the information required 

in paragraph (e)(2)(iv)(C)(5) of this 

section as specified in guidance: 

(1) Certifications from any supplier, 

including the supplier’s employer 

identification number and that is signed 

under penalties of perjury, from which 

the taxpayer purchased any constituent 

elements, materials, or subcomponents 

of the taxpayer’s electrode active 

material, stating that the supplier is not 

claiming the section 45X credit with 

respect to any of the material acquired 

by the taxpayer, nor is the supplier 

aware that any prior supplier in the 

chain of production of that material 

claimed a section 45X credit for the 

material. 

(2) A document that provides an 

analysis of any constituent elements, 

materials, or subcomponents that 

concludes the material did not meet the 

definition of an eligible component (for 

example, did not meet the definition of 

applicable critical mineral or electrode 

active material) at the time of 

acquisition by the taxpayer. The 

document may be prepared by the 

taxpayer or ideally by an independent 

third-party. 

(3) A list of all direct and indirect 

material costs and the amount of such 

costs that were included within the 

taxpayer’s total production cost for each 

electrode active material. 

(4) A document related to the 

taxpayer’s production activities with 

respect to the direct and indirect 

material costs that establishes the 

materials were used in the production of 

the electrode active material. The 

document may be prepared by the 

taxpayer or ideally by an independent 

third-party. 

(5) Any other information related to 

the direct or indirect materials specified 

in guidance. 

(D) Failure to provide the 

documentation described in paragraph 

(e)(2)(iv)(C) of this section with the 

return filing, or providing an available 

upon request statement, will constitute 

a failure to substantiate the claim. 

(v) Materials that are both electrode 

active materials and applicable critical 

minerals—(A) In general. A material 

that qualifies as an electrode active 

material and an applicable critical 

material is eligible for the section 45X 

credit. A taxpayer may claim the section 

45X credit with respect to such material 

either as an electrode active material or 

an applicable critical material, but not 

both. 

(B) Example. Lithium carbonate is an 

electrode active material because it is a 

direct battery-grade precursor to 

electrolyte salts, which are processed 

materials found in a final battery cell. 

Lithium carbonate is also eligible for the 

45X critical minerals credit. A taxpayer 

who produces and sells lithium 

carbonate may claim either the electrode 

active material credit or the critical 

mineral credit for its production and 

sale of lithium carbonate but may not 

take both credits. 

(3) Battery cells—(i) Definition. 

Battery cell means an electrochemical 

cell— 

(A) Comprised of one or more positive 

electrodes and one or more negative 

electrodes; 

(B) With a volumetric energy density 

of not less than 100 watt-hours per liter; 

and 

(C) Capable of storing at least 12 watthours of energy. 

(ii) Capacity measurement. Taxpayers 

must measure the capacity of a battery 

cell in accordance with a national or 

international standard, such as IEC 

60086–1 (Primary Batteries), or an 

equivalent standard. Taxpayers can 

reference the United States Advanced 

Battery Consortium (USABC) Battery 

Test Manual for additional guidance. 

(iii) Credit amount. For a battery cell, 

the credit amount is equal to the 

product of $35 multiplied by the 

capacity of such battery cell, subject to 

the limitation provided in paragraph 

(e)(5) of this section. The capacity of a 

battery cell is expressed on a kilowatthour basis. 

(4) Battery module definitions and 

applicable rules—(i) Battery module 

defined. The term battery module means 

a module described in paragraph 

(e)(4)(i)(A) or (B) of this section with an 

aggregate capacity of not less than 7 

kilowatt-hours (or, in the case of a 

module for a hydrogen fuel cell vehicle, 

not less than 1 kilowatt-hour). 

(A) Modules using battery cells. A 

module using battery cells, is a module 

with two or more battery cells that are 

configured electrically, in series or 

parallel, to create voltage or current, as 

appropriate, to a specified end use, 

meaning an end-use configuration of 

battery technologies. An end-use 

configuration is the product that 

combines cells into a module such that 

any subsequent manufacturing is done 

to the module rather than to the cells 

individually. Where multiple points in 

a supply chain may be eligible under 

this section, the first module produced 

and sold that meets the requirements of 

this section and the kilowatt-hour 

requirement in paragraph (e)(4)(i) of this 

section will be the only module eligible. 

(B) Modules with no battery cells. A 

module with no battery cells means a 

product with a standardized 

manufacturing process and form that is 

capable of storing and dispatching 

useful energy, that contains an energy 

storage medium that remains in the 

module (for example, it is not consumed 

through combustion), and that is not a 

custom-built electricity generation or 

storage facility. For example, neither 

standalone fuel storage tanks nor fuel 

tanks connected to engines or 

generation systems qualify as modules 

with no battery cells. 

(ii) Capacity measurement—(A) 

Modules using battery cells. Taxpayers 

must measure the capacity of a module 

using battery cells with a testing 

procedure that complies with a national 

or international standard published by a 

recognized standard setting 

organization. The capacity of a battery 

module may not exceed the total 

nameplate capacity of the battery cells 

in the module. Taxpayers must measure 

the capacity of a battery cell in 

accordance with a national or 

international standard, such as IEC 


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60086–1 (Primary Batteries), or an 

equivalent standard. Taxpayers can 

reference the USABC Battery Test 

Manual for additional guidance. 

(B) Modules with no battery cells. 

Taxpayers must measure the capacity of 

a module with no battery cells with a 

testing procedure that complies with a 

national or international standard 

published by a recognized standard 

setting organization. Taxpayers 

producing thermal and thermochemical 

battery modules described in paragraph 

(e)(4)(i)(B) of this section must convert 

the energy storage to a kilowatt-hour 

basis and provide both methodology 

and testing regarding this conversion. 

Such conversion of the kilowatt-hour 

basis cannot exceed the total direct 

conversion of the total nameplate 

capacity of the thermal battery module 

to kilowatt-hours. 

(C) Substantiation of capacity 

measurement. Taxpayers must maintain 

the testing standard and methodology 

with respect to the capacity 

measurement described in paragraphs 

(e)(4)(ii)(A) and (B) of this section as 

part of books and records under section 

6001 and § 1.6001–1. The testing 

procedure and methodology must 

consistently be used, subject to any 

updated standard of the same 

methodology and testing, for battery 

modules (with or without cells) sold in 

the taxpayer’s trade or business. 

(iii) Credit amount—(A) Modules 

using battery cells. For a battery module 

with cells, the credit amount is equal to 

the product of $10 multiplied by the 

capacity of such battery module, subject 

to the limitation provided in paragraph 

(e)(5) of this section. The capacity of 

each battery module is expressed on a 

kilowatt-hour basis. 

(B) Modules with no battery cells. For 

a battery module without cells, the 

credit amount is equal to the product of 

$45 multiplied by the capacity of such 

battery module, subject to the limitation 

provided in paragraph (e)(5) of this 

section. The capacity of each battery 

module is expressed on a kilowatt-hour 

basis. 

(5) Limitation on capacity of battery 

cells and battery modules—(i) In 

general. For purposes of paragraphs 

(e)(3)(iii) and (e)(4)(iii) of this section, 

the capacity determined with respect to 

a battery cell or battery module must not 

exceed a capacity-to-power ratio of 

100:1. 

(ii) Capacity to power ratio. For 

purposes of paragraph (e)(5)(i) of this 

section, capacity-to-power ratio means, 

with respect to a battery cell or battery 

module, the ratio of the capacity of such 

cell or module to the maximum 

discharge amount of such cell or 

module. 

(f) Phase out rule—(1) In general. 

Except as provided in paragraph (f)(3) of 

this section, in the case of any eligible 

component sold after December 31, 

2029, the amount of the section 45X 

credit determined with respect to such 

eligible component must be equal to the 

product of— 

(i) The amount determined under this 

section with respect to such eligible 

component, multiplied by 

(ii) The phase out percentage under 

paragraph (f)(2) of this section. 

(2) Phase out percentages. The phase 

out percentage is equal to— 

(i) 75 percent for eligible components 

sold during calendar year 2030; 

(ii) 50 percent for eligible components 

sold during calendar year 2031; 

(iii) 25 percent for eligible 

components sold during calendar year 

2032, and 

(iv) Zero percent for eligible 

components sold after calendar year 

2032. 

(3) Exception for applicable critical 

minerals. The phase out rules described 

in paragraphs (f)(1) and (2) of this 

section apply to all eligible components 

except applicable critical minerals. 

(g) Applicability date. This section 

applies to eligible components for 

which production is completed and 

sales occur after December 31, 2022, and 

during a taxable year ending on or after 

October 28, 2024. 

§ 1.45X–4 Applicable critical minerals. 

(a) In general. The term applicable 

critical mineral means any of the 

minerals that are listed in section 

45X(c)(6) and defined in paragraph (b) 

of this section. 

(b) Definitions. The following 

definitions apply for the purpose of this 

section— 

(1) [Reserved] 

(2) Antimony. The term antimony 

means antimony that is— 

(i) Converted to antimony trisulfide 

concentrate with a minimum purity of 

90 percent antimony trisulfide by mass; 

or 

(ii) Purified to a minimum purity of 

99.65 percent antimony by mass. 

(3) Barite. The term barite means 

barite that is barium sulfate purified to 

a minimum purity of 80 percent barite 

by mass. 

(4) Beryllium. The term beryllium 

means beryllium that is— 

(i) Converted to copper-beryllium 

master alloy; or 

(ii) Purified to a minimum purity of 

99 percent beryllium by mass. 

(5) Cerium. The term cerium means 

cerium that is— 

(i) Converted to cerium oxide that is 

purified to a minimum purity of 99.9 

percent cerium oxide by mass; or 

(ii) Purified to a minimum purity of 

99 percent cerium by mass. 

(6) Cesium. The term cesium means 

cesium that is— 

(i) Converted to cesium formate or 

cesium carbonate; or 

(ii) Purified to a minimum purity of 

99 percent cesium by mass. 

(7) Chromium. The term chromium 

means chromium that is— 

(i) Converted to ferrochromium 

consisting of not less than 60 percent 

chromium by mass; or 

(ii) Purified to a minimum purity of 

99 percent chromium by mass. 

(8) Cobalt. The term cobalt means 

cobalt that is— 

(i) Converted to cobalt sulfate; or 

(ii) Purified to a minimum purity of 

99.6 percent cobalt by mass. 

(9) Dysprosium. The term dysprosium 

means dysprosium that is— 

(i) Converted to not less than 99 

percent pure dysprosium iron alloy by 

mass; or 

(ii) Purified to a minimum purity of 

99 percent dysprosium by mass. 

(10) Europium. The term europium 

means europium that is— 

(i) Converted to europium oxide that 

is purified to a minimum purity of 99.9 

percent europium oxide by mass; or 

(ii) Purified to a minimum purity of 

99 percent of europium by mass. 

(11) Fluorspar. The term fluorspar 

means fluorspar that is— 

(i) Converted to fluorspar that is 

purified to a minimum purity of 97 

percent calcium fluoride by mass; or 

(ii) Purified to a minimum purity of 

99 percent fluorspar by mass. 

(12) Gadolinium. The term 

gadolinium means gadolinium that is— 

(i) Converted to gadolinium oxide that 

is purified to a minimum purity of 99.9 

percent gadolinium oxide by mass; or 

(ii) Purified to a minimum purity of 

99 percent gadolinium by mass. 

(13) Germanium. The term 

germanium means germanium that is— 

(i) Converted to germanium 

tetrachloride; or 

(ii) Purified to a minimum purity of 

99.99 percent germanium by mass. 

(14) Graphite. The term graphite 

means natural or synthetic graphite that 

is purified to a minimum purity of 99.9 

percent graphitic carbon by mass. The 

term 99.9 percent graphitic carbon by 

mass means graphite that is 99.9 percent 

carbon by mass. 

(15) Indium. The term indium means 

indium that is— 

(i) Converted to— 

(A) Indium tin oxide; or 

(B) Indium oxide that is purified to a 

minimum purity of 99.9 percent indium 

oxide by mass; or 


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(ii) Purified to a minimum purity of 

99 percent indium by mass. 

(16) Lithium. The term lithium means 

lithium that is— 

(i) Converted to lithium carbonate or 

lithium hydroxide; or 

(ii) Purified to a minimum purity of 

99.9 percent lithium by mass. 

(17) Manganese. The term manganese 

means manganese that is— 

(i) Converted to manganese sulphate; 

or 

(ii) Purified to a minimum purity of 

99.7 percent manganese by mass. 

(18) Neodymium. The term 

neodymium means neodymium that is— 

(i) Converted to neodymiumpraseodymium oxide that is purified to 

a minimum purity of 99 percent 

neodymium-praseodymium oxide by 

mass; 

(ii) Converted to neodymium oxide 

that is purified to a minimum purity of 

99.5 percent neodymium oxide by mass; 

or 

(iii) Purified to a minimum purity of 

99.9 percent neodymium by mass. 

(19) Nickel. The term nickel means 

nickel that is— 

(i) Converted to nickel sulphate; or 

(ii) Purified to a minimum purity of 

99 percent nickel by mass. 

(20) Niobium. The term niobium 

means niobium that is— 

(i) Converted to ferronibium; or 

(ii) Purified to a minimum purity of 

99 percent niobium by mass. 

(21) Tellurium. The term tellurium 

means tellurium that is— 

(i) Converted to cadmium telluride; or 

(ii) Purified to a minimum purity of 

99 percent tellurium by mass. 

(22) Tin. The term tin means tin that 

purified to low alpha emitting tin that— 

(i) Has a purity of greater than 99.99 

percent by mass; and 

(ii) Possesses an alpha emission rate 

of not greater than 0.01 counts per hour 

per centimeter square. 

(23) Tungsten. The term tungsten 

means tungsten that is converted to 

ammonium paratungstate or 

ferrotungsten. 

(24) Vanadium. The term vanadium 

means vanadium that is converted to 

ferrovanadium or vanadium pentoxide. 

(25) Yttrium. The term yttrium means 

yttrium that is— 

(i) Converted to yttrium oxide that is 

purified to a minimum purity of 99.999 

percent yttrium oxide by mass; or 

(ii) Purified to a minimum purity of 

99.9 percent yttrium by mass. 

(26) Other minerals. The following 

minerals are also applicable critical 

minerals provided that such mineral is 

purified to a minimum purity of 99 

percent by mass: 

(i) Arsenic. 

(ii) Bismuth. 

(iii) Erbium. 

(iv) Gallium. 

(v) Hafnium. 

(vi) Holmium. 

(vii) Iridium. 

(viii) Lanthanum. 

(ix) Lutetium. 

(x) Magnesium. 

(xi) Palladium. 

(xii) Platinum. 

(xiii) Praseodymium. 

(xiv) Rhodium. 

(xv) Rubidium. 

(xvi) Ruthemium. 

(xvii) Samarium. 

(xviii) Scandium. 

(xix) Tantalum. 

(xx) Terbium. 

(xxi) Thulium. 

(xxii) Titanium. 

(xxiii) Ytterbium. 

(xxiv) Zinc. 

(xxv) Zirconium. 

(c) Credit amount—(1) In general. For 

any applicable critical mineral, the 

credit amount is equal to 10 percent of 

the costs incurred by the taxpayer with 

respect to production of such mineral. 

(2) Production processes for 

applicable critical minerals—(i) 

Conversion. For purposes of section 

45X, the term conversion means a 

chemical transformation from one 

species to another. 

(ii) Purification. For purposes of 

section 45X, the term purification 

means increasing the mass fraction of a 

certain element. 

(3) Production costs incurred—(i) In 

general. Costs incurred by the taxpayer 

with respect to the production of 

applicable critical minerals includes all 

costs as defined in § 1.263A–1(e) that 

are paid or incurred within the meaning 

of section 461 of the Code by the 

taxpayer for the production of an 

applicable critical mineral, including 

direct or indirect materials costs as 

defined in § 1.263A–1(e)(2)(i)(A) and 

(e)(3)(ii)(E), respectively, but only if 

those direct or indirect material costs do 

not relate to the purchase of materials 

that are an eligible component at the 

time of acquisition (for example, an 

electrode active material as defined in 

§ 1.45X–3(e)(2)(i) or applicable critical 

mineral as defined in paragraph (b) of 

this section). This definition of 

production costs incurred would 

include any costs incurred by the 

taxpayer related to the extraction of raw 

materials in the United States or a 

United States territory, but only if those 

costs are paid or incurred by the 

taxpayer that claims the section 45X 

credit with respect to the relevant 

applicable critical mineral. Section 

263A of the Code and the regulations in 

this chapter under section 263A apply 

solely to identify the types of costs that 

are includible in production costs 

incurred for purposes of computing the 

amount of the section 45X credit, but do 

not apply for any other purpose, such as 

to determine whether a taxpayer is 

engaged in production activities. 

(ii) Production costs for production of 

incorporated eligible components. The 

production costs that a taxpayer pays or 

incurs in the production of an eligible 

component (whether produced 

domestically or not) that the taxpayer 

then incorporates into a further distinct 

applicable critical mineral within the 

meaning of § 1.45X–1(f)(1) are not 

included in the costs incurred by the 

taxpayer in producing the further 

distinct applicable critical mineral. A 

taxpayer may not include the same 

production costs in the calculation of 

the credit amount for more than one 

eligible component. For example, if the 

taxpayer pays or incurs production costs 

of $50X for eligible component 1 and an 

additional $100X of production costs for 

eligible component 2 that included 

integrating eligible component 1 within 

the meaning of § 1.45X–1(f)(1), then the 

production costs for eligible component 

1 equal $50X and the production costs 

for eligible component 2 equal $100X. 

(4) Substantiation. In order to include 

direct or indirect materials costs as 

defined in § 1.263A–1(e)(2)(i)(A) and 

(e)(3)(ii)(E) as production costs when 

calculating a section 45X credit for the 

production and sale of an applicable 

critical mineral, a taxpayer, as part of 

filing an annual tax return (or a return 

for a short year within the meaning of 

section 443 of the Code), must include 

the information in paragraph (c)(4)(i) of 

this section as an attachment to that 

return, prepare the information required 

in paragraph (c)(4)(ii) through (iv) of 

this section and maintain that 

information in the taxpayer’s books and 

records under section 6001, and comply 

with directions for the information 

required in paragraph (c)(4)(v) of this 

section as specified in guidance: 

(i) Certification from any supplier, 

including the supplier’s employer 

identification number and that is signed 

under penalties of perjury, from which 

the taxpayer purchased any constituent 

elements, materials, or subcomponents 

of the taxpayer’s applicable critical 

mineral, stating that the supplier is not 

claiming the section 45X credit with 

respect to any of the material acquired 

by the taxpayer, nor is the supplier 

aware that any prior supplier in the 

chain of production of that material 

claimed a section 45X credit for the 

material. 


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(ii) A document that provides an 

analysis of any constituent elements, 

materials, or subcomponents that 

concludes the material did not meet the 

definition of an eligible component (for 

example, an applicable critical mineral 

or electrode active material) at the time 

of acquisition by the taxpayer. The 

document may be prepared by the 

taxpayer or ideally by an independent 

third-party. 

(iii) A list of all direct and indirect 

material costs and the amount of such 

costs that were included within the 

taxpayer’s total production cost for each 

applicable critical mineral. 

(iv) A document related to the 

taxpayer’s production activities with 

respect to the direct and indirect 

material costs that establishes the 

materials were used in the production of 

the applicable critical mineral. The 

document may be prepared by the 

taxpayer or ideally by an independent 

third-party. 

(v) Any other information related to 

the direct or indirect materials specified 

in guidance. 

(5) Failure to provide the 

documentation described in paragraph 

(c)(4) of this section with the return 

filing, or providing an available upon 

request statement, will constitute a 

failure to substantiate the claim. 

(d) Applicability date. This section 

applies to eligible components for 

which production is completed and 

sales occur after December 31, 2022, and 

during a taxable year ending on or after 

October 28, 2024. 

Douglas W. O’Donnell, 

Deputy Commissioner. 

Approved: October 17, 2024. 

Aviva R. Aron-Dine, 

Deputy Assistant Secretary of the Treasury 

(Tax Policy). 

[FR Doc. 2024–24840 Filed 10–24–24; 8:45 am] 

BILLING CODE 4830–01–P 


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