The U.S. Department of the Treasury proposed extending Section 45X of the U.S. Federal Tax Code to primary aluminum smelters. This move is expected to stem the tide of declining production in the industry by supporting domestic producers, thus securing the supply of this material, which is important for clean energy.
As part of the Inflation Reduction Act, the original federal tax cut was instituted late in 2022 in an effort to increase domestic manufacturing of solar, wind, batteries and other materials such as aluminum, potentially making U.S. clean energy component manufacturing globally competitive.
Jason Walsh, executive director of the advocacy group BlueGreen Alliance, said about the extension of the tax credit: “Because of 45X, the cost of domestically manufactured clean energy goods will fall below the price of imports. This is the gamechanger our country needs to build a vibrant clean economy. We must build reliable supply chains here at home where we can use cleaner processes to avoid shipping bottlenecks and imports from countries with poor labor practices. This tax credit will transform our manufacturing base by linking climate action with high-paying manufacturing jobs.”
Researchers at the University of Massachusetts-Amherst’s Political Economy Research Institute claim that the 48C and 45X tax credits could potentially create 670,000 new manufacturing jobs.
Manufacturers can choose between two uncapped tax credits: the Advanced Manufacturing Production Tax Credit, known as the 45X MPTC, and the Advanced Energy Project Credit, or 48C ITC. Under 45X, manufacturers get tax credit for producing clean energy components. Clean energy components eligible for the 45X MPTC include photovoltaic modules and some of their subcomponents, inverters, tracking system components, batteries and certain critical minerals.
The 48C ITC offers tax credits for purchasing and commissioning property for the purpose of building a manufacturing facility. However, components produced at a facility that received a 48C ITC after August 2022 are not eligible for the tax credit. In addition, manufacturers cannot claim both credits.
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Lori Lovely is an award-winning writer and editor in central Indiana. She writes on technical topics, heavy equipment, automotive, motorsports, energy, water and wastewater, animals, real estate, home improvement, gardening and more. Reach her at: [email protected]