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Throughout 2022, it became clear that the US solar manufacturing industry is poised for explosive growth as clean energy tax incentives became law. Businesses can seize the energy tax investment opportunity by taking advantage of federal tax credits that were recently passed as part of the Solar Energy Manufacturing for America Act. The bill will boost manufacturing by providing tax credits for American manufacturers at every stage of the solar manufacturing supply chain.
Section 45X Advanced Manufacturing Tax Credit
A new production tax credit that was introduced with the IRA as part of the Inflation Reduction Act of 2022, Section 45X Advanced Manufacturing Tax Credit is a credit for manufacturers of eligible components produced by a taxpayer within the United States and sold to an unrelated party. Eligible components include components within wind, solar, and battery projects, such as PV cells, PV wafers, solar modules, blades, nacelles, inverters, and battery cells and modules, among many others. Credit rates vary depending on the component, with some rates depending on the cost of production and others based on certain capacity factors.
For solar modules the credits are expected to include:
- Solar Cells – 4 cents per direct current watt of capacity
- Solar wagers – $12 per square meter
- Solar grade polysilicon – $3 per kilogram
- Polymeric backsheet- 40 cents per square meter
- Solar modules – 7 cents per direct current watt of capacity
The tax credits are available to the taxpayer who manufacturers the equipment in the United States or a possession of the United States. Credits are available on an annual basis for eligible components sold beginning in 2023, going through 2032 (with a phaseout beginning in 2030).
Section 48C Advanced Energy Project Investment Tax Credit
The IRA expanded a tax credit that provides incentives for solar manufacturers, among other clean energy producers, for purchasing and commissioning property to build a manufacturing facility before January 1, 2025. The credit was expanded under the IRA and includes additional types of qualified investments for up to $10 billion in credits. Section 48C offers a tax credit up to 30% on investments into production facilities. Qualified facilities may elect to claim the Section 48C investment tax credit in lieu of the Section 45X production tax credit.
It should be noted that a single project can’t claim both the 45X and 48C.
For more information about how your business can take advantage of these solar manufacturing tax credits, please visit Energy.gov and consult with your tax advisor. Wakefield Equipment provides best-in-class solar panel fabrication equipment that can optimize your manufacturing process. Give us a call and let us help you get the most out of your business.