The US Department of the Treasury and the IRS released final rules for the Advanced Manufacturing Production Credit (Section 45X of the Internal Revenue Code), to spur continued growth of US clean energy manufacturing. The Advanced Manufacturing Production Credit helps to level the playing field for US companies to onshore production of critical clean energy technologies like solar and wind components, batteries and energy storage, and critical minerals.

The Advanced Manufacturing Production Credit provides a tax credit for the production and sale of statutorily specified eligible components to unrelated persons. Such eligible components include solar and wind energy components, inverters, qualifying battery components and 50 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.

The eligible components must be produced in the United States or a territory of the United States.

The final rules are largely in line with proposed regulations released in December 2023. The final rules clarify definitions and confirm credit amounts for eligible components, including solar energy components, wind energy components, inverters, qualifying battery components, and applicable critical minerals; define key terms to incentivize production in the United States and clarify the circumstances under which taxpayers can claim the credit; and finalize important safeguards to prevent potential fraud, waste, or abuse—including safeguards against duplicative crediting of the same component, crediting of activities that are not value-added, or extraordinary circumstances in which components are produced but not put to productive use.

The Advanced Manufacturing Production Credit has been a major driver of the boom in clean energy manufacturing with more than $126 billion in private sector announcements made since the law passed—including around $77 billion for batteries, $6 billion for critical minerals, $19 billion for solar, and $8 billion for wind—according to recent data from the Rhodium Group/MIT’s Clean Investment Monitor (CIM).

The final rules will give taxpayers additional clarity and certainty to drive even more investment in clean energy and critical minerals, the agency said. Because the Advanced Manufacturing Production Credit is eligible for the Inflation Reduction Act’s novel monetization provisions to help ensure businesses receive the full value of the incentives—elective pay and transferability—the tax credit is particularly powerful for start-up companies that have low tax liability.