Inflation Reduction Act of 2022 (IRA)
The Inflation Reduction Act, enacted in August 2022, established significant federal incentives for renewable energy projects, including tax credits for solar energy facilities. The IRA also established a Domestic Content Bonus Credit, providing an additional tax credit incentive for projects that meet specified U.S. domestic content requirements for steel, iron and manufactured products. These requirements have become an important consideration in the selection and procurement of equipment for qualifying solar projects.
- IRS Notice 2023-38, issued in May 2023, provided the initial detailed guidance for determining whether a renewable energy project satisfies the IRA’s Domestic Content Bonus Credit requirements. The notice established the Steel or Iron Requirement and Manufactured Products Requirement, including rules for determining the percentage of manufactured-product costs attributable to U.S.-produced components. It also established certification and documentation requirements for taxpayers seeking the domestic content bonus credit.
- IRS Notice 2024-41, issued in May 2024, expanded and modified the Domestic Content guidance established in Notice 2023-38. The notice introduced an Elective Safe Harbor that allows taxpayers to use specified cost percentages for manufactured products and components when determining compliance with the Domestic Content Bonus Credit requirement. The notice also expanded the types of projects and components covered by the safe harbor.
- IRS Notice 2025-08, issued in January 2025, further updated the Domestic Content Safe Harbor established under Notice 2024-41. The updated guidance provides revised cost percentages and classifications for solar photovoltaic components, including inverters and other major equipment, and provides clarity for determining compliance with the Domestic Content requirement.
