The Inflation Reduction Act of 2022 (IRA) established a collection of interrelated tax credits and incentives supporting domestic clean and renewable energy production. However, organizations wishing to participate in the production of such energy require supporting equipment. Fortunately, the IRA also established a crucial new tax credit under Section 45X for businesses that manufacture and sell a variety of energy components.

Taxpayers qualify for the Section 45X credit based on their production of eligible components within the United States and the sale of such components to unrelated persons. Eligible components include solar energy components, wind energy components, a variety of inverters, battery components, or critical minerals. The amount of this credit is calculated through different methods depending on the specific components that are produced and sold. This credit first took effect at the beginning of 2023 (i.e., production and sales occurring after Dec. 31, 2022). However, it has a longer-term horizon with expiration currently slated for the end of 2032.