The US Inflation Reduction Act (“IRA Part 2”)

On May 12th, the Department of Treasury and IRS released guidance on the domestic content ITC/PTC adders for the IRA in respect to the domestic content bonus credit guidance. To qualify for the adder, projects must meet certain requirements regarding the source of iron and steel as well as the source of “Manufactured Products” such as solar panels, trackers, inverters, wind turbines, battery packs, etc.

While Section 45x manufacturing tax credits have been known since the IRA was passed in August 2022, suppliers have faced uncertainty about which products/components would be required for the tax credit adder for customers. Thus, this situation resulted in the limitation of the manufacturing expansion. Now with more visibility, US manufacturing is expected to accelerate.

For example, all steel and iron that is used for construction materials which are structural in function must be US-made. The requirement does not apply to steel used in other products and components (e.g., nuts, bolts).