Skip to content
Federal Tax

Senator Casey: Hydrogen Production Credit Revisions Needed

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

Final regulations on the Code Sec. 45V Clean Hydrogen Production Credit should incorporate feedback from industry stakeholders to make the credit accessible to producers of hydrogen created by coal mine methane, natural gas, and nuclear power, according to Senator Rob Casey (D-PA).

The Section 45V credit under the Inflation Reduction Act (PL 117-169) provides between $0.60 to $3 per kilogram of produced hydrogen across four credit rate tiers based on the amount of emissions from a taxpayer’s production process. Energy attribute certificates (EACs) are awarded to taxpayers that determine which credit tier they qualify for, as established in proposed regs issued in December. The method for awarding EACs incorporates three criteria: incrementality, deliverability, and temporal matching.

According to Casey, Pennsylvanian stakeholders were “alarmed” after the IRS released initial guidance and “several major participants of the Regional Clean Hydrogen Hubs placed their investments on hold” in response. The Infrastructure Investment and Jobs Act created the regional hydrogen hubs.

Casey’s recommendations to President Biden in a May 24 letter incorporate feedback from local companies, utility providers, and unions. First, final regs should allow taxpayers that produce hydrogen using methane from coal mines to qualify for the credit. Casey explained that methane “leaking” into the atmosphere can be “harnessed” into hydrogen.

Next, final regs should not penalize hydrogen producers using “cleaner” sources of natural gas. Currently, the proposed regs “assumes all natural gas is produced with the same level of carbon intensity.” Consequently, taxpayers who spend more and go to greater lengths to cut down on emissions are given the same benefit as those who do not. Future guidance could instead rely on “foreground” data that “accurately” measures emissions.

Lastly, the senator said that relicensed nuclear power plants should fall under the definition of “additional” power for the purpose of qualifying for the credit. He added that his state has four nuclear power plants that account for a third of its energy. “Unfortunately, the current 45V guidance heavily penalizes hydrogen producers that use nuclear energy,” wrote Casey. “Instead, Treasury’s rules should acknowledge that avoiding the decommissioning of current carbon-free energy is just as important as bringing new clean energy generation online.”

In late March, nearly 100 presenters testified at a three-day public rulemaking hearing. Comments on the three EAC criteria “pillars” varied. Some told the IRS that all three pillars should be implemented in final regs, while others argued they undermine incentivization of clean hydrogen.

For more information on the Clean Hydrogen Production Credit, see Checkpoint’s Federal Tax Coordinator ¶ L-18501.


Get all the latest tax, accounting, audit, and corporate finance news with Checkpoint Edge. Sign up for a free 7-day trial today.

More answers