Understanding the Domestic Content Bonus for Commercial Solar Projects
Learn how the Domestic Content Bonus can enhance federal solar incentives.
The Domestic Content Bonus is a significant incentive for those looking to maximize the benefits of a commercial solar project. Introduced under the Inflation Reduction Act (IRA), it aims to boost the use of American-made materials in renewable energy projects.
What is the Domestic Content Bonus?
Under the IRA, offers a federal solar incentive in the Investment Tax Credit (ITC).
The ITC allows you to claim 30 percent of your solar system’s cost plus tax adders such as the Domestic Content Bonus. This tax adder applies to solar projects that utilize a certain percentage of domestically produced components.
Key Benefits
- Increased Tax Credits: Projects meeting the domestic content requirements can receive an extra 10 percent credit on top of the standard ITC or PTC.
- Economic Growth: By prioritizing American-made components, the bonus supports local manufacturers and job creation.
- Energy Independence: Utilizing domestic resources helps reduce dependency on foreign materials, promoting national energy security.
What qualifies the domestic content requirements?
To qualify for the Domestic Content Bonus, solar and storage projects must fulfill two criteria:
- The project must use 100 percent domestic steel and iron for construction materials.
- Projects that begin construction before 2025 must use at least 40 percent domestically manufactured products.
The first requirement is straightforward. Each structural component of iron and steel must be manufactured entirely in the U.S., including smelting down crude steel. This includes items such as utility-scale racking, ground screws, and foundational rebar, but items such as nuts, bolts, and screws do not need to comply with these requirements.
The second requirement is where things get a little tricky. To comply, at least 40 percent of the manufactured products must use domestic content.
Notably, the domestic content requirement increases five percentage points annually for projects that begin in 2025, 2026, and 2027, capping out at 55 percent.
Manufactured products are broken down further using a list of components to be considered because they are evaluated when calculating a project’s domestic content percentage.
The table above provides a helpful list of products and product components. However, it is worth noting that it is not an exhaustive list of all applicable project components for such facilities. Also, component lists may differ between the ITC and PTC.
The IRS recently issued new guidance that provides project developers with classifications and cost percentages to calculate if manufactured products and product components make a project eligible for the tax bonus.
Steps to Qualify
- Assess Component Sources: Evaluate your project's bill of materials to determine the percentage of domestic content.
- Verify Compliance: Ensure that the components meet the criteria set by the IRS for the Domestic Content Bonus.
- Documentation: Maintain thorough records of the origin of all materials used in the project.
- Apply for the Bonus: When filing for the ITC or PTC, include the additional documentation to claim the Domestic Content Bonus.
How Green Convergence Can Help
Navigating the complexities of federal solar incentives can be challenging, so choosing the right solar partner is essential. At Green Convergence, we specialize in optimizing commercial solar projects to maximize available benefits, such as the Domestic Content Bonus.
Our team of experts can help audit your supply chain, source American-made components, and handle the necessary documentation to ensure you receive the highest possible tax credits.
Understanding the requirements and benefits can help your commercial solar project achieve greater financial and sustainable success.
For more information on maximizing your solar investment with the Domestic Content Bonus, contact us. We can help you harness the sun's power and join the solar revolution.
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- Boost Commercial Solar Returns with the Energy Community Tax Bonus
- Maximize Tax Incentives: Low-Income Communities Bonus Credit Program
- Secure Your Commercial Solar Investment with Safe Harbor Strategies
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