The IRS has issued a notice that provides a new elective safe harbor for the Domestic Content Bonus Credit and modifies two previous notices. (Notice 2025-8, 2025-8 IRB)
Domestic content bonus credit.
The Inflation Reduction Act of 2022 (IRA) amended Code Sec. 45 and Code Sec. 48 to provide a Domestic Content Bonus Credit for certain qualified facilities or energy projects placed in service after December 31, 2022.
The IRA also added new Code Sec. 45Y and Code Sec. 48E to provide a Domestic Content Bonus Credit for certain investments in “qualified facilities” or energy storage technologies placed in service after December 31, 2024.
Taxpayers can claim the credit if they certify that their facility, energy project, or energy storage technology was built using the required amounts of steel, iron, or manufactured products that were mined, produced, or manufactured in the United States.
Prior notices.
In May 2023, the IRS released Notice 2023-38, which provided guidance on how to qualify for the credit and described a safe harbor for classifying certain components in representative types of qualified facilities, energy projects or energy storage technologies.
A year later, the agency released Notice 2024-41, which modified the May 2023 notice. Among other things, Notice 2024-41 provided an updated safe harbor that taxpayers can elect to use to classify applicable project components and to calculate the domestic cost percentage.
New guidance.
Notice 2025-8 updates in several ways the elective safe harbor contained in Notice 2024-41.
In a press release, the Treasury Department said the new guidance “reflects improved default values that more closely align with the characteristics and costs of applicable project components and manufactured product components in the marketplace, as analyzed by the Department of Energy.”
The modifications include revising the Solar PV Table and the Land-Based Wind Table from Table 1, clarifying rules and defined terms, reclassifying manufactured products and manufactured product components, and providing new associated cost percentages for those components.
Taxpayers may use the safe harbor tables included in the notice for projects beginning construction up to 90 days after the release of further guidance.
For more on Domestic Content Bonus Credit, see Checkpoint’s Federal Tax Coordinator ¶L-16401B.
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