Capitalizing on the 45X Advanced Manufacturing Tax Credit

For U.S. manufacturers, 2025 isn’t just another tax year. The 45X Advanced Manufacturing Tax Credit is putting serious dollars on the table for companies producing eligible clean energy components. If your company manufactures items like solar modules, wind turbine blades or battery cells, this is a tax credit worth understanding and acting on.

This provision, introduced under the Inflation Reduction Act and further clarified by the IRS in recent guidance, provides direct per-unit tax credits for components produced in the U.S. It’s a strategic advantage for manufacturers investing in domestic production and green technologies.

According to the Department of the Treasury, the advanced manufacturing tax credit under section 45X is projected to provide more than $30 billion in credits over the next decade to qualifying manufacturers. The IRS issued Notice 2023-44 in May 2023 to outline specific component eligibility, unit-based credit values, and how companies should structure claims to meet production and compliance requirements.

For the clean energy sector, this credit is one of the most important incentives available right now, particularly because it is refundable. That means if a business doesn’t owe enough in taxes to absorb the full credit amount, it can receive the balance as a cash refund from the IRS.

If you’re in manufacturing, especially clean energy, this credit could be the difference between a good year and a great one. But to access its full benefit, you’ll need to confirm that your components qualify and your operations meet the domestic production standards.

 

 

Who qualifies under the 45X advanced manufacturing tax credit?

The 45X credit is focused on supporting U.S. manufacturing of clean energy technologies. To qualify, your business must produce specific components within the U.S. that fall under the categories defined in the statute and IRS guidance. These include:

• Solar photovoltaic cells and modules
• Wind turbine components (blades, nacelles, towers)
• Battery cells and modules
• Inverters, PV wafers and related subcomponents
• Polysilicon and other raw material inputs
• Critical minerals used in energy storage or generation

It’s not enough to simply assemble these items. Your company must be engaged in the production of the component, which involves significant transformation or fabrication steps within the U.S. That could mean forming the casing of a solar inverter, creating the layered structures of a battery cell or synthesizing critical minerals into usable industrial forms.

For example, a Florida-based solar manufacturer that fabricates PV cells from wafers it produces onsite would likely qualify. A company that merely imports fully assembled battery modules, however, would not.

These distinctions matter. Not every clean energy manufacturer will qualify; those that do need to confirm eligibility based on exact product types and the location of production. This is where strategic tax support becomes essential. Our manufacturing accounting services include detailed eligibility analysis so you don’t leave potential credits on the table.

Documentation is also key. The IRS requires that the production of these components occurs within the U.S., and you’ll need to demonstrate that through facility records, production logs and financial statements that clearly attribute costs to the qualifying components.

Credit calculation, phaseouts and limitations

The advanced manufacturing tax credit under Section 45X is structured as a per-unit production credit, which makes it more accessible for manufacturers with high output. Instead of applying a flat percentage to expenses, the IRS allows companies to calculate credits based on the number and type of qualifying components they produce.

Here are a few examples of the 45X credit values as defined in IRS Notice 2023-44:

• $12 per square meter of eligible PV wafers
• $10 per module for thin-film PV modules
• $35 per battery cell and $10 per module
• $0.07 per watt of capacity for inverters
• $3 per kilogram for eligible critical minerals

These values apply to components produced after Jan. 1, 2023, and continue without limitation until Dec. 31, 2029. However, in 2030 the credit begins to phase out. The IRS guidance outlines the following reduction schedule:

• 2030: 75% of full credit
• 2031: 50% of full credit
• 2032: 25% of full credit
• 2033 and beyond: No credit available

It’s important to note that manufacturers cannot claim the 45X credit for components that also receive certain other credits or deductions. For instance, if your battery modules are claimed under a Section 48C investment credit, you’ll need to coordinate your elections to avoid double-dipping.

There are also limitations based on component type and whether it was produced for sale or internal use. The IRS requires substantiating documentation for both the volume and intended use of each item. This can become complex, especially for vertically integrated manufacturers that produce and consume components in-house.

Working with a tax advisor experienced in manufacturing incentives can help your team build the right framework to track production data and maximize credit claims without triggering compliance issues.

What counts as “produced in the U.S.”?

One of the most important qualifiers for the advanced manufacturing tax credit is that the component must be produced in the United States. But what does that actually mean?

According to guidance from the IRS and the Department of the Treasury, “production” refers to the substantial transformation of raw materials or components into finished goods. Simple assembly or packaging of imported products does not qualify.

Let’s say a company imports lithium cells from overseas, assembles them into modules in Florida and then sells them. That activity would not count as domestic production of battery cells. However, if that same company performs the cell manufacturing process, (including layering, electrolyte filling and final sealing) within the U.S., then it could qualify for the 45X credit.

The burden of proof lies with the taxpayer. You’ll need clear records of where the raw materials came from, where the transformation took place and what specific production steps occurred at each facility. This can include:

• Facility location records
• Equipment utilization reports
• Bill of materials documentation
• Shipping and receiving logs

It’s also worth noting that the IRS has flagged domestic production verification as a likely audit focus. Businesses should prepare to validate their claims with unit-level tracking and third-party substantiation where possible.

For manufacturers that operate across multiple states or jurisdictions, aligning internal reporting systems with 45X requirements can be a challenge. That’s why many of our clients rely on JMCO’s tax consulting services to build audit-ready documentation systems tailored to their production models.

 

 

Pairing the 45X credit with other incentives

Manufacturers pursuing the 45X advanced manufacturing tax credit may also benefit from layering it with other clean energy and production-based tax incentives. With the right structure, these credits can work together without overlap, giving companies an expanded set of options to reduce their overall tax liability.

One key opportunity lies in the relationship between 45X and Section 48C, the Qualifying Advanced Energy Project Credit. While 45X provides a per-unit production credit, 48C offers a credit of up to 30% of the investment cost for facilities that manufacture certain clean energy components. These two incentives can coexist if your company produces multiple component types at different stages or locations and ensures proper segregation of costs and claims.

Another relevant incentive is Section 179D, the energy-efficient commercial buildings deduction. Manufacturers investing in sustainable facility upgrades, such as high-efficiency HVAC systems or insulation that meets DOE standards, may claim this deduction. While 179D is not directly tied to production, it can support tax planning related to the same operational footprint as your 45X activities.

There’s also an additional benefit available when components meet domestic content thresholds. As of 2024, the IRS provides enhanced bonus credits under several programs if manufacturers can demonstrate that a sufficient percentage of materials and processes occur within the United States. The Department of Energy’s Advanced Manufacturing Office outlines criteria and best practices for sourcing and tracking domestic content.

Another route for enhanced savings involves siting facilities in designated energy communities. These are locations that have experienced a loss of fossil fuel-related jobs or tax revenue. These areas can unlock bonus credits across multiple tax provisions, which may be relevant for manufacturers with flexibility in location decisions.

The IRS clean energy page offers updated guidance on compatibility rules, safe harbor provisions, and frequently asked questions regarding the layering of energy incentives. Careful planning is needed to ensure credits are claimed in accordance with IRS rules and that cost allocations are documented separately when required.

Coordinating these credits effectively can improve long-term planning and create opportunities for reinvestment. Companies should review their full incentive profile before making capital investment decisions, especially if facility expansion, retooling or workforce scaling is involved.

Documentation and compliance: What manufacturers need to track

Claiming the 45X advanced manufacturing tax credit isn’t just about producing the right components. It also requires proactive documentation and ongoing compliance practices that align with IRS expectations.

First, manufacturers need to maintain unit-level production tracking. This includes the quantity of eligible components produced, where they were produced and confirmation that production activities meet IRS-defined standards. Without this, the IRS may disallow credits or request repayment during an audit.

Documentation should include:

• Detailed bills of materials
• Daily or weekly production logs
• Facility-specific output reports
• Quality control records that confirm the production method

Companies also need to show that components were produced for sale or use and that they were not simultaneously claimed under other tax credits. For vertically integrated companies, this can mean separating intercompany transactions or using cost accounting methods that clearly assign value to each production stage.

Reporting obligations under Section 45X may also include registration or notification with the IRS before filing a return claiming the credit. While the IRS has not finalized all the forms specific to 45X as of Q3 2025, they have stated that similar standards to Sections 48C and 45Y will apply.

If your company outsources certain aspects of production or operates in multiple jurisdictions, coordinate documentation between plants and vendors. Third-party attestations or verification reports may be needed to support domestic production claims.

At James Moore, we work closely with manufacturers to prepare audit-ready documentation. This includes systems that connect financial and operational data, so every tax credit claim is supported by accurate records. For many of our clients, this means reducing risk while also improving decision-making based on real-time production insights.

Optimize your claim on the advanced manufacturing tax credit with James Moore

The 45X advanced manufacturing tax credit represents a substantial opportunity for U.S.-based manufacturers producing clean energy components. From solar modules and wind turbines to battery cells and inverters, this credit rewards production that supports the country’s long-term energy goals.

At James Moore, we help manufacturers understand what applies to their specific operation, set up documentation systems that support IRS compliance, and uncover overlapping incentives without triggering conflicts. With the right planning, the 45X credit can improve cash flow, support capital investments, and reinforce the value of domestic production.

If your company is producing qualifying components or considering facility expansion in the clean energy space, it’s time to review your tax strategy.

Contact a James Moore professional to get a tailored analysis of how the advanced manufacturing tax credit can support your growth plans. Together, we can build a strategy that supports both compliance and your long-term goals.

 

 

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