Calculating the home content material prices for photo voltaic modules assembled within the U.S. will probably be tough, judging by preliminary steerage issued by the Treasury Division immediately. U.S.-manufactured modules might want to supply all of their main elements (together with cells) from the USA, to ensure that the total value of the absolutely assembled module to be thought-about a home product. In any other case, solely the prices of that module’s U.S.-sourced elements will rely towards the share of home content material.
Background
As a part of the Inflation Discount Act‘s extension of the Manufacturing Tax Credit score (PTC) and the 30% Funding Tax Credit score (ITC), tasks that meet the home content material requirement obtain as much as a 10-percentage level bonus.
Tasks are eligible for the total worth of the bonus provided that they meet the home content material requirement and one of many following necessities:
- The undertaking has a most web output of lower than 1 MW of power;
- Building of the undertaking started earlier than Jan. 29, 2023; or
- The undertaking satisfies the Inflation Discount Act’s prevailing wage and apprenticeship necessities.
Defining a home product
The home content material bonus applies to amenities constructed utilizing the required quantities of domestically produced metal, iron and “manufactured merchandise.” To obtain the bonus:
- All metal and iron manufacturing processes should happen in the USA.
- No less than 40% of the prices of the manufactured merchandise and elements of manufactured merchandise that comprise a facility should come from merchandise and elements that have been mined, produced or manufactured in the USA. That is anticipated to extend to 55% after 2026.
A manufactured product is produced in the USA if the manufacturing processes for the product happen in the USA and all of the elements of the product are manufactured in the USA. “Parts” is the important thing phrase there, not subcomponents as a result of …
PV module product outlined
Photovoltaic module contains: photovoltaic cells, mounting body or backrail, glass, encapsulant, backsheet, junction field (together with pigtails and connectors), edge seals, pottants, adhesives, bus ribbons and bypass diodes).
If a type of elements isn’t sourced from the USA, then the total value of the module and its meeting won’t rely towards the home content material proportion — solely the U.S.-sourced elements.
Think about this instance supplied within the steerage:
Manufactured Product 1 is manufactured in the USA and has two listed elements. Parts 1A and 1B are manufactured in the USA. It’s a U.S. product.
Manufactured Product 2 is manufactured in the USA and has three listed elements. Parts 2A and 2B are manufactured in the USA. Element 2C is manufactured outdoors of the USA. Manufactured Product 2 is a non-U.S. manufactured product as a result of Element 2C is manufactured outdoors of the USA.
The prices on this instance that rely towards the home content material proportion calculation are the full value of Manufactured Product 1, and the 2 U.S. elements of Product 2.
This implies:
- The price of U.S. module meeting itself doesn’t think about as a U.S. manufactured product value except it’s a 100% U.S. module.
- Module makers might want to present a breakdown all of those part sources and prices to your information and for calculating your home content material proportion (the 40% talked about earlier).
- Philip Shen at Roth Capital Advisors states in an trade be aware that “our checks additionally point out that there is no such thing as a grace interval for foreign-produced cells.”
Having stated that, the maths can nonetheless work out, relying on these part prices …
Calculating the home content material value proportion
Adjusted Proportion Rule: Divide the Home Manufactured Merchandise and Parts Value (3.03(2)(b) by the Whole Manufactured Merchandise Value (3.03(2)(c) for the “Home Value Proportion” calculated for an Relevant Challenge. The APR rule is glad if the Home Value Proportion equals or exceeds the adjusted proportion that applies to the Relevant Challenge.
Different notes from the steerage
Metal means construction, not bolts | The Metal or Iron Requirement is met if all manufacturing processes with respect to any metal or iron gadgets which are Relevant Challenge Parts happen in the USA, besides metallurgical processes involving refinement of metal components. The Metal or Iron Requirement applies to Relevant Challenge Parts which are development supplies made primarily of metal or iron and are structural in operate — so racking, trackers, floor screws. It doesn’t apply to metal or iron utilized in elements and subcomponents reminiscent of nuts, bolts, screws, washers, cupboards, covers, cabinets, clamps, fittings, sleeves, adapters, tie wire, spacers, door hinges and related gadgets which are made primarily of metal or iron however aren’t structural in operate.
The discover additionally describes a protected harbor concerning the classification of sure elements in consultant varieties of certified amenities, power tasks, or power storage applied sciences. The Treasury Division and the IRS intend to suggest that the forthcoming proposed laws will apply to taxable years ending after Could 12, 2023.
“Importantly, the steerage permits builders to make the most of the home content material bonus credit score for tasks that start development this yr, which is able to velocity up the deployment of fresh power within the near-term,” says Abigail Ross Hopper, president and CEO of the Photo voltaic Power Industries Affiliation (SEIA).
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