To qualify for tax credits, energy storage projects must meet specific domestic content requirements. Here are the key points:
Domestic Content Requirements
- General Requirements: Energy storage projects, such as battery storage facilities, must be constructed using certain percentages of steel, iron, or manufactured products that were mined, produced, or manufactured in the United States.
- Specific Percentages: While the specific percentages for energy storage are not detailed, projects generally need to adhere to a certain domestic content threshold. For instance, 100% of structural steel and structural iron must be domestically sourced for some projects.
- Bonus Credit Criteria: For projects to qualify for the 10% domestic content bonus credit, they typically need to meet one of the following criteria:
- Have a maximum net output of less than 1 megawatt.
- Construction began before January 29, 2023.
- The project satisfies prevailing wage and apprenticeship requirements.
- Guidance and Simplifications: IRS Notice 2024-41 provides an elective safe harbor that simplifies the process for determining domestic content by assigning cost percentages for certain manufactured products and components. This notice helps in calculating whether the project meets domestic content requirements without needing detailed cost data from manufacturers.
Tax Credits Available
- Investment Tax Credit (ITC): The domestic content bonus increases the applicable “energy percentage” for ITC by either 10 percentage points (if one of the criteria is met) or 2 percentage points (if none are met).
- Production Tax Credit (PTC): The bonus increases the PTC by 10% for qualified facilities that meet the domestic content requirements.
Overall, the domestic content requirements aim to incentivize the use of U.S.-made materials in energy projects, including energy storage, to support local manufacturing and economic growth.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-domestic-content-requirements-for-energy-storage-projects-to-qualify-for-tax-credits/
