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New Guidelines On IRA Section 45X for Manufacturing Released


A set of guidelines related to the Inflation Reduction Act (IRA)’s Section 45X was officially released by the US Department of Treasury on Thursday, December 14th.

These guidelines will come into play when the Treasury implements the tax credit for advanced manufacturing production. They are meant to incentivize the production of several components necessary for technologies related to the implementation of renewable power solutions, including components for solar and wind power generation equipment, inverters, several minerals critical for battery production, as well as battery parts.

It should be noted that these regulations will affect a specific sector of taxpayers, namely those in the business of producing or selling such materials in the United States and its legal territories who wish to claim the credits. These also include businesses that choose to make voluntary payments.

According to Deputy Treasury Secretary Wally Adeyemo, the implementation of the regulations under Section 45X will herald a manufacturing renaissance in the country spearheaded by domestic enterprise. 

What Are These Regulations About?

Section 45X defines the phrase “produced by the taxpayer” for primary production which involves the production of producing eligible components with raw or unrecycled materials, as well as secondary production where components are made with recycled items.

The new guidelines also provide rules regarding the sale of eligible components to unrelated parties via anyone related to the main taxpayer. These rules also include one that allows a taxpayer to opt for an election to treat the sale of such components to related persons as if these were being sold to unrelated individuals.

Section 45X also provides definitions and the amount of credit accorded to other eligible components which may include those related to the generation of power using solar or wind technologies, inverters, and several battery components. Phase-out rules for minerals deemed eligible under the guidelines are also included.

As of press time, these guidelines are pending approval. Involved agencies are set to hold a hearing in February of next year to finalize these rules, and the public may comment on these over 60 days prior to ratification.

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