Recent guidance from the IRS and Treasury modifies an existing safe harbor and provides a new elective safe harbor for determining domestic content bonus credit amounts.
Very generally, the domestic content bonus provides taxpayers claiming clean energy tax credits with the opportunity to claim up to an additional 10% credit for constructing projects using domestically produced steel, iron and manufactured products.
Last year, the IRS provided rules for taxpayers to qualify for the credit amounts and related record-keeping and certification requirements.
Notice 2024-41, issued this month, modifies the existing safe harbor provided in “Table 2--Categorization of Applicable Project Components” to include hydropower and pumped hydropower storage facilities.
Notice 2024-41 also provides a new safe harbor that allows taxpayers to elect to use the classifications of components and cost percentages (instead of direct costs of the manufacturer) to determine if the taxpayer satisfies the adjusted percentage rule. Read more.