Internal Revenue Bulletin 2024-51 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2024–51
December 16, 2024
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Notice 2024-85, page 1349.
Notice 2024-85 provides that calendar years 2024 and 2025
will be regarded as the final transition period for purposes of
IRS enforcement and administration of the minimum report-
ing threshold for Form 1099-K, Payment Card and Third Party
Network Transactions. Under Notice 2024-85, a third party
settlement organization (TPSO) will be required to report pay-
ments in settlement of third party network transactions with
respect to a participating payee when the amount of total
payments for those transactions is more than $5,000 during
calendar year 2024; more than $2,500 during calendar year
2025; and more than $600 during calendar year 2026 and
after. Notice 2024-85 also provides that for calendar year
2024, the IRS will not assert penalties under section 6651
or 6656 for a TPSO’s failure to withhold and pay backup
withholding tax during the calendar year.
INCOME TAX
Announcement 2024-40, page 1352.
This announcement addresses the Federal income tax treat-
ment of certain amounts paid or incurred pursuant to agree-
ments with the Department of Commerce required under the
CHIPS Act of 2022.
Rev. Rul. 2024-27, page 1240.
2024 Base Period T-Bill Rate. The “base period T-bill rate”
for the period ending September 30, 2024 is published as
required by section 995(f) of the Internal Revenue Code.
T.D. 10009, page 1251.
These final regulations provide guidance regarding the
advanced manufacturing investment credit under section
48D of the Internal Revenue Code (Code) and the special
rules for the investment credit in section 50(a) of the Code.
The final regulations reflect changes made by the CHIPS Act
of 2022. The section 48D credit may be claimed for quali-
fied investments in an advanced manufacturing facility that
engages in the manufacturing of semiconductors or semi-
conductor manufacturing equipment.
T.D. 10010, page 1286.
The final regulations provide the rules for claiming the
Advanced Manufacturing Production Credit under section
45X of the Internal Revenue Code. The final regulations
describe the requirements for the production of eligible com-
ponents, including the domestic production requirement. The
final regulations also provide rules regarding the sale of eli-
gible components to unrelated persons, as well as special
rules that apply to sales between related persons. Finally, the
final regulations provide definitions of eligible components,
rules related to calculating the credit, and specific record-
keeping and reporting requirements.
T.D. 10014, page 1340.
These final regulations provide guidance under § 752 of
the Internal Revenue Code relating to a partner’s share of a
recourse partnership liability. A partner’s share of a recourse
partnership liability is the amount of a liability for which the
partner or a related person bears the economic risk of loss.
These final regulations clarify when a person is related to
a partner, address how a liability is allocated when multiple
partners bear the economic risk of loss for the same liability,
and provide guidance regarding tiered partnerships when a
partner that bears economic risk of loss is a partner in both
an upper-tier and lower-tier partnership.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
December 16, 2024 Bulletin No. 2024–51

Part I
Section 995.—Taxation
of DISC Income to
Shareholders
2024 Base Period T-Bill Rate. The “base period
T-bill rate” for the period ending September 30,
2024, is published as required by section 995(f) of
the Internal Revenue Code.
Rev. Rul. 2024-27
Section 995(f)(1) of the Internal Rev-
enue Code provides that a shareholder of
a domestic international sales corporation
(“DISC”) shall pay interest for each taxable
year in an amount equal to the product of
the “shareholder’s DISC-related deferred
tax liability” for the year (as defined in
section 995(f)(2)) and the “base period
T-bill rate.” Under section 995(f)(4), the
base period T-bill rate is “the annual rate of
interest determined by the Secretary to be
equivalent to the average of the 1-year con-
stant maturity Treasury yields, as published
by the Board of Governors of the Federal
Reserve System, for the 1-year period end-
ing on September 30 of the calendar year
ending with (or of the most recent calendar
year ending before) the close of the taxable
year of the shareholder.”
The base period T-bill rate for the
period ending September 30, 2024, is 4.93
percent.
Pursuant to section 6622 of the Inter-
nal Revenue Code, interest must be com-
pounded daily. The table below provides fac-
tors for compounding the 2024 base period
T-bill rate daily for any number of days in
the shareholder’s taxable year (including
for a 52-53 week taxable year). To com-
pute the amount of the interest charge for
the shareholder’s taxable year, multiply the
amount of the shareholder’s DISC-related
deferred tax liability for that year by the
base period T-bill rate factor corresponding
to the number of days in the shareholder’s
taxable year for which the interest charge
is being computed. Generally, one would
use the factor for 365 days. One would use
a different factor only if the shareholder’s
taxable year for which the interest charge is
being determined is a short taxable year, if
the shareholder uses a 52-53 week taxable
year, or if the shareholder’s taxable year
is a leap year. As a 366-day year is used
when calculating the daily factors for leap
years such as 2024, the daily factors below
diverge from Rev. Rul. 2023-23 despite the
identical annual rate.
For the base period T-bill rates for peri-
ods ending in prior years, see Rev. Rul.
2023-23, 2023-51 I.R.B. 1472; Rev. Rul.
2022-21, 2022-47 I.R.B. 468; Rev. Rul.
2021-22, 2021-47 I.R.B. 726; Rev. Rul.
2020-25, 2020-48 I.R.B. 1109; Rev. Rul.
2019-27, 2019-51 I.R.B. 1378; and Rev.
Rul. 2018-31, 2018-50 I.R.B. 848.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Stefan A. Pruessmann of the
Office of Associate Chief Counsel (Inter-
national). For further information regard-
ing the revenue ruling, contact Mr. Pruess-
mann at (202) 317-3800 (not a toll-free
number).
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
10.000134699
20.000269417
30.000404153
40.000538907
50.000673679
60.000808469
70.000943277
80.001078104
90.001212948
100.001347811
110.001482692
120.001617591
130.001752509
140.001887444
150.002022398
December 16, 2024 1240 Bulletin No. 2024–51

Bulletin No. 2024–51 1241 December 16, 2024
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
160.002157370
170.002292360
180.002427368
190.002562395
200.002697439
210.002832502
220.002967583
230.003102682
240.003237800
250.003372935
260.003508089
270.003643261
280.003778451
290.003913660
300.004048886
310.004184131
320.004319394
330.004454675
340.004589975
350.004725293
360.004860628
370.004995983
380.005131355
390.005266746
400.005402155
410.005537582
420.005673027
430.005808491
440.005943973
450.006079473
460.006214991
470.006350528
480.006486082
490.006621656
500.006757247

December 16, 2024 1242 Bulletin No. 2024–51
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
510.006892857
520.007028485
530.007164131
540.007299795
550.007435478
560.007571179
570.007706898
580.007842636
590.007978392
600.008114166
610.008249958
620.008385769
630.008521598
640.008657445
650.008793311
660.008929195
670.009065097
680.009201017
690.009336956
700.009472913
710.009608889
720.009744883
730.009880895
740.010016925
750.010152974
760.010289041
770.010425126
780.010561230
790.010697352
800.010833492
810.010969651
820.011105828
830.011242024
840.011378237
850.011514469

Bulletin No. 2024–51 1243 December 16, 2024
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
860.011650720
870.011786989
880.011923276
890.012059581
900.012195905
910.012332248
920.012468608
930.012604987
940.012741384
950.012877800
960.013014234
970.013150687
980.013287158
990.013423647
1000.013560154
1010.013696680
1020.013833225
1030.013969788
1040.014106369
1050.014242968
1060.014379586
1070.014516223
1080.014652877
1090.014789551
1100.014926242
1110.015062952
1120.015199681
1130.015336427
1140.015473193
1150.015609976
1160.015746779
1170.015883599
1180.016020438
1190.016157295
1200.016294171

December 16, 2024 1244 Bulletin No. 2024–51
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
1210.016431066
1220.016567978
1230.016704909
1240.016841859
1250.016978827
1260.017115814
1270.017252818
1280.017389842
1290.017526884
1300.017663944
1310.017801023
1320.017938120
1330.018075236
1340.018212370
1350.018349523
1360.018486694
1370.018623883
1380.018761091
1390.018898318
1400.019035563
1410.019172827
1420.019310109
1430.019447409
1440.019584728
1450.019722066
1460.019859422
1470.019996796
1480.020134189
1490.020271601
1500.020409031
1510.020546479
1520.020683946
1530.020821432
1540.020958936
1550.021096459

Bulletin No. 2024–51 1245 December 16, 2024
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
1560.021234000
1570.021371559
1580.021509138
1590.021646734
1600.021784349
1610.021921983
1620.022059636
1630.022197306
1640.022334996
1650.022472704
1660.022610430
1670.022748175
1680.022885939
1690.023023721
1700.023161522
1710.023299341
1720.023437179
1730.023575036
1740.023712911
1750.023850804
1760.023988716
1770.024126647
1780.024264596
1790.024402564
1800.024540551
1810.024678556
1820.024816579
1830.024954622
1840.025092682
1850.025230762
1860.025368860
1870.025506976
1880.025645112
1890.025783266
1900.025921438

December 16, 2024 1246 Bulletin No. 2024–51
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
1910.026059629
1920.026197839
1930.026336067
1940.026474314
1950.026612579
1960.026750864
1970.026889166
1980.027027488
1990.027165828
2000.027304187
2010.027442564
2020.027580960
2030.027719374
2040.027857808
2050.027996259
2060.028134730
2070.028273219
2080.028411727
2090.028550254
2100.028688799
2110.028827363
2120.028965945
2130.029104546
2140.029243166
2150.029381804
2160.029520462
2170.029659137
2180.029797832
2190.029936545
2200.030075277
2210.030214028
2220.030352797
2230.030491585
2240.030630392
2250.030769217

Bulletin No. 2024–51 1247 December 16, 2024
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
2260.030908061
2270.031046924
2280.031185805
2290.031324705
2300.031463624
2310.031602562
2320.031741518
2330.031880493
2340.032019487
2350.032158499
2360.032297530
2370.032436580
2380.032575649
2390.032714736
2400.032853843
2410.032992967
2420.033132111
2430.033271273
2440.033410454
2450.033549654
2460.033688873
2470.033828110
2480.033967366
2490.034106641
2500.034245935
2510.034385247
2520.034524578
2530.034663928
2540.034803297
2550.034942684
2560.035082090
2570.035221515
2580.035360959
2590.035500422
2600.035639903

December 16, 2024 1248 Bulletin No. 2024–51
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
2610.035779403
2620.035918922
2630.036058460
2640.036198016
2650.036337592
2660.036477186
2670.036616799
2680.036756430
2690.036896081
2700.037035750
2710.037175438
2720.037315145
2730.037454871
2740.037594616
2750.037734379
2760.037874161
2770.038013962
2780.038153782
2790.038293621
2800.038433479
2810.038573355
2820.038713250
2830.038853164
2840.038993097
2850.039133049
2860.039273020
2870.039413009
2880.039553018
2890.039693045
2900.039833091
2910.039973156
2920.040113240
2930.040253342
2940.040393464
2950.040533604

Bulletin No. 2024–51 1249 December 16, 2024
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
2960.040673764
2970.040813942
2980.040954139
2990.041094355
3000.041234590
3010.041374844
3020.041515116
3030.041655408
3040.041795718
3050.041936047
3060.042076396
3070.042216763
3080.042357149
3090.042497554
3100.042637978
3110.042778420
3120.042918882
3130.043059363
3140.043199862
3150.043340381
3160.043480918
3170.043621474
3180.043762050
3190.043902644
3200.044043257
3210.044183889
3220.044324540
3230.044465210
3240.044605899
3250.044746607
3260.044887333
3270.045028079
3280.045168844
3290.045309628
3300.045450430

December 16, 2024 1250 Bulletin No. 2024–51
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
3310.045591252
3320.045732092
3330.045872952
3340.046013830
3350.046154728
3360.046295644
3370.046436580
3380.046577534
3390.046718508
3400.046859500
3410.047000511
3420.047141542
3430.047282591
3440.047423660
3450.047564747
3460.047705853
3470.047846979
3480.047988123
3490.048129287
3500.048270469
3510.048411671
3520.048552891
3530.048694131
3540.048835389
3550.048976667
3560.049117963
3570.049259279
3580.049400614
3590.049541967
3600.049683340
3610.049824732
3620.049966143
3630.050107572
3640.050249021
3650.050390489

Bulletin No. 2024–51 1251 December 16, 2024
ANNUAL RATE (4.93%), COMPOUNDED DAILY
DAYSFACTOR
3660.050531976
3670.050673482
3680.050815008
3690.050956552
3700.051098115
3710.051239697
26 CFR 1.48D-0 through -5; 26 CFR
1.50-0 and -2
T.D. 10009
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Advanced Manufacturing
Investment Credit Rules
under Sections 48D and 50
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document con-
tains final regulations to implement the
advanced manufacturing investment credit
established by the CHIPS Act of 2022 to
incentivize the manufacture of semicon-
ductors and semiconductor manufactur-
ing equipment within the United States.
The final regulations adopt with certain
modifications rules proposed in the first
of two notices of proposed rulemaking to
implement the credit, other than proposed
rules regarding the elective payment elec-
tion that were addressed in the final rule
adopted in connection with the second
notice of proposed rulemaking. The final
regulations provide the eligibility require-
ments for the credit, and a special 10-year
credit recapture rule that applies if there
is a significant transaction involving the
material expansion of semiconductor
manufacturing capacity in a foreign coun-
try of concern. The final regulations affect
taxpayers that claim the advanced manu-
facturing investment credit.
DATES: Effective date: These regulations
are effective on December 23, 2024.
Applicability dates: For dates of appli-
cability see §§1.48D-1(d), 1.48D-2(q),
1.48D-3(h), 1.48D-4(d), 1.48D-5(f) and
1.50-2(e).
FOR FURTHER INFORMATION
CONTACT: Concerning these final regu-
lations, contact Lani Sinfield of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries), (202) 317-4137
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document amends the Income
Tax Regulations (26 CFR part 1) by add-
ing regulations authorized to be issued
by the Secretary of the Treasury or her
delegate (Secretary) under sections 50(a)
and 7805(a) of the Internal Revenue Code
(Code) regarding the application of sec-
tions 48D and 50(a)(3) and (a)(6)(D) and
(E) of the Code (final regulations).
Section 50(a)(3)(C) provides an
express delegation of authority to the Sec-
retary to provide guidance relating to the
recapture requirement in section 50(a)(3)
for the advanced manufacturing invest-
ment credit, stating, “The Secretary shall
issue such regulations or other guidance
as the Secretary determines necessary or
appropriate to carry out the purposes of
this paragraph, including regulations or
other guidance which provide for require-
ments for recordkeeping or information
reporting for purposes of administering
the requirements of this paragraph.”
In addition, section 50(a)(6)(D)(i) pro-
vides an express delegation of authority
to the Secretary to determine, in coordi-
nation with the Secretary of Commerce
and the Secretary of Defense, significant
transactions, stating, “[t]he term ‘appli-
cable transaction’ means, with respect to
any applicable taxpayer, any significant
transaction (as determined by the Secre-
tary, in coordination with the Secretary of
Commerce and the Secretary of Defense)
involving the material expansion of semi-
conductor manufacturing capacity of
such applicable taxpayer in the People’s
Republic of China or a foreign country
of concern (as defined in section 9901(7)
of the William M. (Mac) Thornberry
National Defense Authorization Act for
Fiscal Year 2021).”
The final regulations are also issued
under the express delegation of authority
under section 7805(a), which provides that
“[t]he Secretary shall prescribe all needful
rules and regulations for the enforcement
of [the Code], including all rules and reg-
ulations as may be necessary by reason of
any alteration of law in relation to internal
revenue.”
Background
I. Overview
Section 107(a) of the CHIPS Act of
2022 (CHIPS Act), enacted as Division
A of Public Law 117-167, 136 Stat. 1366,
1393 (August 9, 2022), added section
48D to the Code to establish the advanced

December 16, 2024 1252 Bulletin No. 2024–51
manufacturing investment credit (section
48D credit) as an investment credit for
purposes of section 46 of the Code, which
is a current year general business credit
under section 38 of the Code.
Section 48D(a) provides that the section
48D credit is an amount equal to 25 per-
cent of the qualified investment for any
taxable year with respect to any advanced
manufacturing facility of an eligible tax-
payer. Section 48D(b)(1) provides that the
“qualified investment” with respect to any
advanced manufacturing facility for any
taxable year is the basis of any qualified
property placed in service by the taxpayer
during such taxable year which is part of
an advanced manufacturing facility. How-
ever, the section 48D credit only applies to
property placed in service after December
31, 2022, and, for any property the con-
struction of which begins prior to January
1, 2023, only to the extent of the basis
thereof attributable to the construction,
reconstruction, or erection after August 9,
2022 (the date of enactment of the CHIPS
Act). See section 107(f)(1) of the CHIPS
Act. In addition, the section 48D credit
does not apply to property the construc-
tion of which begins after December 31,
2026. See section 48D(e).
Section 48D(b)(2) provides that, for
purposes of section 48D(b), the term
“qualified property” means tangible prop-
erty with respect to which depreciation
(or amortization in lieu of depreciation)
is allowable that is integral to the opera-
tion of the advanced manufacturing facil-
ity if (I) constructed, reconstructed, or
erected by the taxpayer, or (II) acquired
by the taxpayer, if the original use of such
property commences with the taxpayer.
Qualified property includes any building
or its structural components satisfying
such requirements unless the building or
portion of the building is used for offices,
administrative services, or other functions
unrelated to manufacturing.
Section 48D(b)(3) provides that the
term “advanced manufacturing facility”
means a facility for which the primary
purpose is the manufacturing of semicon-
ductors or semiconductor manufacturing
equipment.
Section 48D(b)(4) provides that the
qualified investment with respect to any
advanced manufacturing facility for any
taxable year shall not include the portion
of the basis of any such property that is
attributable to qualified rehabilitation
expenditures (as defined in section 47(c)
(2) of the Code).
Section 48D(b)(5) states that rules sim-
ilar to the rules of subsections (c)(4) and
(d) of section 46 (as in effect on the day
before the date of the enactment of the
Revenue Reconciliation Act of 1990) shall
apply for purposes of section 48D(a).
Section 48D(c) provides that, for pur-
poses of the section 48D credit, an “eligi-
ble taxpayer” is any taxpayer that (1) is not
a foreign entity of concern (as defined in
section 9901(6) of the William M. (Mac)
Thornberry National Defense Authoriza-
tion Act for Fiscal Year 2021, as amended
by section 103 of the CHIPS Act), and (2)
has not made an applicable transaction
(as defined in section 50(a) of the Code)
during the taxable year.
Section 107(b) of the CHIPS Act added
new section 50(a)(3), (6)(D) and (E) to
the Code to provide special recapture
rules for certain expansions in connection
with advanced manufacturing facilities.
Under section 50(a)(3)(A), if there is an
applicable transaction by an applicable
taxpayer before the close of the 10-year
period beginning on the date such tax-
payer placed in service property that is
eligible for the section 48D credit, then
the taxpayer’s Federal income tax liability
under chapter 1 of the Code (chapter 1) for
the taxable year in which such transaction
occurs must be increased by 100 percent
of the aggregate decrease in the cred-
its allowed under section 38 for all prior
taxable years which would have resulted
solely from reducing to zero any invest-
ment credit determined under section 46
that is attributable to the section 48D
credit with respect to such property (appli-
cable transaction recapture rule). Section
50(a)(3)(B) provides an exception to the
applicable transaction recapture rule for
an applicable taxpayer that demonstrates
to the satisfaction of the Secretary that the
applicable transaction has been ceased or
abandoned within 45 days of a determina-
tion and notice by the Secretary. Section
50(a)(3)(C) authorizes the Secretary to
issue such regulations or other guidance
as the Secretary determines necessary or
appropriate to carry out the purposes of
the applicable transaction recapture rule,
including regulations or other guidance
providing for recordkeeping requirements
or information reporting for purposes of
administering the requirements of sec-
tion 50(a)(3).
As added to the Code by section 107(b)
(2) of the CHIPS Act, section 50(a)(6)(D)
provides that for purposes of section 50(a),
the term “applicable transaction” means,
with respect to any applicable taxpayer,
any significant transaction (as determined
by the Secretary, in coordination with the
Secretary of Commerce and the Secretary
of Defense) involving the material expan-
sion of semiconductor manufacturing
capacity of such applicable taxpayer in a
foreign country of concern (as defined in
section 9901(6) of the William M. (Mac)
Thornberry National Defense Authoriza-
tion Act for Fiscal Year 2021, as amended
by section 103 of the CHIPS Act) other
than certain transactions that primarily
involve the expansion of manufactur-
ing capacity for legacy semiconductors
(as defined in section 9902(a)(6) of the
William M. (Mac) Thornberry National
Defense Authorization Act for Fiscal Year
2021, as amended by section 103 of the
CHIPS Act).
Section 50(a)(6)(E) defines an “appli-
cable taxpayer” for purposes of sec-
tion 50(a) as any taxpayer who has been
allowed a section 48D credit for any prior
taxable year.
II. Proposed and Temporary Regulations
On March 23, 2023, the Department of
the Treasury (Treasury Department) and
the IRS published proposed regulations
(REG-120653-22) in the Federal Regis-
ter (88 FR 17451) related to the section
48D credit under the authority granted
by sections 48D(d), 50(a), and 7805(a)
(March 2023 proposed regulations). The
March 2023 proposed regulations primar-
ily would apply long-established credit
mechanics and procedures common to
all investment tax credits (including the
section 48D credit) previously set forth in
regulations and subregulatory guidance.
In addition, the March 2023 proposed reg-
ulations included proposed definitions and
rules that would apply for determining
who is an eligible taxpayer, what quali-
fies as qualified property or an advanced
manufacturing facility, whether the begin-
ning of construction requirement is met,

Bulletin No. 2024–51 1253 December 16, 2024
and what qualifies as a significant trans-
action involving a material expansion of
semiconductor manufacturing capacity
in a foreign country of concern for pur-
poses of the special 10-year recapture rule
under section 50(a)(3). Consistent with
the statutory directive in section 50(a)
(6)(D)(i) to coordinate with the Depart-
ment of Commerce and the Department
of Defense regarding such significant
transactions, the Treasury Department and
the IRS, in coordination with the Depart-
ment of Commerce and the Department of
Defense, incorporated in the March 2023
proposed regulations definitional concepts
set forth in proposed 15 CFR part 231 as
contained in the proposed rule, Preventing
the Improper Use of CHIPS Act Fund-
ing, published in the Federal Register
(88 FR 17439) by the CHIPS Program
Office, National Institute of Standards and
Technology, Department of Commerce
(Commerce Proposed Rule). The Com-
merce Proposed Rule would have pro-
vided guardrails to prevent the improper
use of CHIPS Act funding overseen by
the Department of Commerce. On Sep-
tember 25, 2023, the CHIPS Program
Office, National Institute of Standards and
Technology, Department of Commerce
published the final rule, Preventing the
Improper Use of CHIPS Act Funding, in
the Federal Register (88 FR 65600) to
add part 231, subchapter C, to 15 CFR
chapter II (Commerce Final Rule).
In addition, §1.48D-6 of the March
2023 proposed regulations set forth the
general requirements that would apply for
making an elective payment election under
section 48D(d), and the general require-
ment that an eligible taxpayer, partnership,
or S corporation would need to comply
with the registration procedures in pro-
posed §1.48D-6(c)(2) as a condition of, and
prior to, any amount being treated as a pay-
ment under section 48D(d)(1) or (d)(2)(A)
(i)(I). However, the March 2023 proposed
regulations under proposed §1.48D-6(c)(2)
reserved on the procedures and additional
information required for completing the
pre-filing registration process.
On June 21, 2023, the Treasury Depart-
ment and the IRS published proposed
regulations (REG-105595-23) in the Fed-
eral Register (88 FR 40123) authorized
by section 48D(d)(6) to update proposed
§1.48D-6 of the March 2023 proposed
regulations (June 2023 proposed regula-
tions). Also on June 21, 2023, the Treasury
Department and the IRS published tempo-
rary regulations (TD 9975) in the Federal
Register (88 FR 40086) authorized by
section 48D(d)(6) under §1.48D-6T to
set forth mandatory information and reg-
istration requirements for taxpayers plan-
ning to make an elective payment election
under section 48D(d) to treat the amount
of the section 48D credit as a payment
of Federal income tax, or in the case of
a partnership or S corporation, to receive
a payment in the amount of such credit.
The temporary regulations are applicable
to property placed in service on or after
December 31, 2022, and during a taxable
year ending on or after June 21, 2023, and
will expire on June 12, 2026. A public
hearing on the June 2023 proposed regu-
lations was held on August 24, 2023. On
March 11, 2024, the Treasury Department
and the IRS published final regulations
(TD 9989) in the Federal Register (89 FR
17596) authorized by section 48D(d)(6)
under §1.48D-6 to remove the temporary
regulations (TD 9975) and adopt the June
2023 proposed regulations with modifica-
tions in response to all comments received
on the proposed rules and all testimony
heard at the public hearings held on July
26, 2023 (March 2023 proposed regula-
tions) and August 24, 2023 (June 2023
proposed regulations) (March 2024 final
regulations).
The Treasury Department and the IRS
received more than 40 comments respond-
ing to the March 2023 proposed regula-
tions. A public hearing on the March 2023
proposed regulations was held on July 26,
2023. As described in the following Sum-
mary of Comments and Explanation of
Revisions, this Treasury decision adopts
§§1.48D-1 through 1.48D-5 and 1.50-2 of
the March 2023 proposed regulations with
certain modifications after full consider-
ation of all comments received on those
proposed rules and all testimony heard at
the July 26, 2023, public hearing.
Summary of Comments and
Explanation of Revisions
I. Overview
The final regulations set forth in
§§1.48D-1 through 1.48D-5 and 1.50-2
retain the basic approach and structure of
the March 2023 proposed regulations, with
certain revisions in response to comments
submitted by commenters in response to
the March 2023 proposed regulations.
The Treasury Department and the IRS
have refined and clarified certain aspects
of the proposed regulations in these final
regulations. Specifically, the definitions of
“semiconductor manufacturing,” “semi-
conductor manufacturing equipment,”
and “significant transaction” have been
clarified. The final regulations do not set
forth rules for §1.48D-6 of the March
2023 proposed regulations, because the
June 2023 proposed regulations updated
§1.48D-6 of the March 2023 proposed
regulations and the June 2023 proposed
regulations were finalized by the March
2024 final regulations. Consistent with
the proposed regulations, the final regu-
lations primarily apply long-established
credit mechanics and procedures common
to all investment tax credits (including the
section 48D credit) previously set forth in
regulations and subregulatory guidance.
In addition, consistent with the statutory
directive in section 50(a)(6)(D)(i) to coor-
dinate with the Department of Commerce
and the Department of Defense regarding
the scope of significant transactions that
are applicable transactions, the Treasury
Department and the IRS, in coordination
with the Department of Commerce and
the Department of Defense, have incorpo-
rated in the final regulations definitional
concepts, as determined by the Secretary
of Commerce in the Commerce Final Rule
in 15 CFR part 231, necessary to align
the final regulations related to applicable
transactions that result in the recapture of
the section 48D credit with the provisions
of the Commerce Final Rule.
II. Comments on and Changes to
Proposed §1.48D-1
Commenters requested that the final
regulations address whether the taxpayer
in proposed §1.48D-1(c)(2) actually
claims a rehabilitation credit. Proposed
§1.48D-1(c)(2) includes an example
(proposed example) in which a taxpayer
incurred capital expenditures to recon-
struct a building. The proposed example
indicates that all of the expenditures are
“qualified investment” for purposes of the

December 16, 2024 1254 Bulletin No. 2024–51
section 48D credit and a portion of those
expenditures are also qualified rehabilita-
tion expenditures (QREs) (as defined in
section 47(c)(2) and §1.48-12(c)) for pur-
poses of the rehabilitation credit. The pro-
posed example concludes that the amount
of the taxpayer’s qualified investment
does not include the portion of the basis
of the property that is attributable to any
QREs.
Section 48D(b)(4) and proposed
§1.48D-1(c)(1) provide that qualified
investment with respect to any advanced
manufacturing facility for any taxable
year does not include the portion of the
basis of the property that is attributable
to QREs. The Treasury Department and
the IRS have determined that it would
be inconsistent with section 48D(b)(4) to
exclude from qualified basis the portion of
the basis that is attributable to QREs only
when a taxpayer actually claims a rehabil-
itation credit. Accordingly, the final reg-
ulations modify the proposed example to
clarify that qualified investment does not
include the basis of the property that is
attributable to QREs even if the taxpayer
does not determine a rehabilitation credit.
Commenters requested that the final
regulations clarify whether the section
48D credit has an impact on any other
credits established by the Code. The Trea-
sury Department and the IRS note that sec-
tion 48D(b)(4) provides a special rule for
coordination with the rehabilitation credit
but does not provide any special rules to
coordinate section 48D with other cred-
its established by the Code. Additionally,
the Code includes numerous tax credits.
Addressing the impact of the section 48D
credit on every other credit established by
the Code (if any) would require a careful
examination of numerous provisions apart
from those found in section 48D and the
section 48D regulations. For these rea-
sons, addressing whether the section 48D
credit has an impact on other credits estab-
lished by the Code is not necessary for
purposes of the final regulations.
III. Comments on and Changes to
Proposed §1.48D-2
A. Basis
Commenters requested clarification
on the proper method for determining the
portion of basis attributable to the con-
struction, reconstruction, or erection after
the date of enactment (August 9, 2022)
for property the construction of which
began prior to the effective date (Janu-
ary 1, 2023) of section 107 of the CHIPS
Act. The commenters requested that the
final regulations provide some flexibility
to address the difficulties associated with
tracking and allocating costs around a
date occurring in the middle of the month
(August 9, 2022). The commenters also
requested that the final regulations allow
for the use of any reasonable method and
specifically provide that rules similar to
the cost allocation rules in §§1.48-2(b)(2),
1.48-11(b)(5)(i), and 1.48-12(c)(1) are
applicable. One commenter requested that
the final regulations clarify that basis can
be determined on the principles of section
461 of the Code. The commenter argued
that this would clarify, for example, that
in cases where a taxpayer has made a pay-
ment for construction services prior to
August 10, 2022, such payment will be
included in the basis of qualified property
because the amount is incurred only when
the service is performed.
For the avoidance of doubt, no provi-
sion of Federal law, including the CHIPS
Act or the Code, permits determining
any amount of a section 48D credit with
respect to any basis in property attributable
to construction, reconstruction, or erection
that occurred before August 10, 2022 (the
first day after the August 9, 2022, date of
enactment of the CHIPS Act). However,
a rule to address the proper method for
allocating basis attributable to the period
beginning on the day after the date of
enactment (August 10, 2022) and ending
on the day immediately before the effec-
tive date of section 48D (December 31,
2022) is consistent with the purpose and
structure of the statute. Accordingly, the
final regulations clarify that for property
the construction of which began before
January 1, 2023, the portion of basis of
such property attributable to construction,
reconstruction, or erection after August 9,
2022, the date of enactment of the CHIPS
Act, (if any) must be allocated using any
reasonable method, including by applying
the principles of section 461. The final
regulations further clarify that rules sim-
ilar to the rules in §§1.48-2(b)(2), 1.48-
11(b)(5)(i), and 1.48-12(c)(1) apply.
Commenters requested that the final
regulations provide methods for allocat-
ing basis for dual-use property or prop-
erty comprised of eligible and non-el-
igible components by square footage,
cost, or allow the taxpayer to utilize any
reasonable method for allocating cost
among properties and time periods. Two
commenters requested that the final reg-
ulations provide a percentage-based safe
harbor rule that allows 100 percent of the
basis to qualify if, for example, 80 or 90
percent of the basis is allocable to qual-
ified basis. Commenters also requested
that the Treasury Department and the IRS
consider whether rules are needed to allo-
cate basis in qualified property in the case
of vertically integrated companies that
manufacture, for example, ingots, wafers,
and semiconductors. Section 48D does
not address methods of allocating basis.
Section 48D is an investment credit under
section 46, and, thus, the investment credit
rules for allocating the basis of qualified
property apply. Further, the Code includes
provisions that control for such purposes
(see, for example, section 1012). For these
reasons, the inclusion of special rules for
allocating basis in qualified property as
requested by the commenters is not neces-
sary for purposes of the final regulations.
One commenter requested that the final
regulations revise the definition of “basis”
in proposed §1.48D-2(c) to allow capi-
talized costs incurred after the placed in
service date of qualified property to qual-
ify for the section 48D credit. Another
commenter requested that the final regu-
lations state that the basis of an item of
qualified property or properties placed in
service during the taxable year is the basis
on which the credit is claimed for each
year and provide examples illustrating this
rule in the context of multi-unit or multi-
phase manufacturing projects. The Trea-
sury Department and the IRS agree that a
revision is needed and have removed from
the final regulations the proposed require-
ment that basis is determined immediately
before the qualified property is placed in
service. The final regulations clarify that
with respect to any qualified property, the
term “basis” has the same meaning as pro-
vided in §1.46-3(c). Thus, if, for the first
taxable year in which property is placed
in service by the taxpayer, the property
meets the definition of qualified prop-

Bulletin No. 2024–51 1255 December 16, 2024
erty but the basis of the property does not
reflect its full cost for the reason that the
total amount to be paid or incurred by the
taxpayer for the property is indeterminate,
a credit will be allowed to the taxpayer for
such first taxable year with respect to so
much of the cost as is reflected in the basis
of the property as of the close of such tax-
able year, and a credit will be allowed to
the taxpayer for any subsequent taxable
year with respect to any additional cost
paid or incurred during such subsequent
taxable year and reflected in the basis of
the property as of the close of such subse-
quent taxable year. The basis of property
determined can include capital expendi-
tures, as defined in section 263 of the Code
and §§1.263(a)-1 through 1.263(f)-1,
with respect to the property. Additionally,
§1.48D-2(h) clarifies that the term “placed
in service” has the same meaning as pro-
vided in §1.46-3(d). Because the revision
made to the final regulations clarifies that
the term “basis” has the same meaning as
provided in §1.46-3(c), it is not necessary
to provide specific examples of this rule
as applied to qualified property placed in
service during a taxable year.
B. Foreign Entity of Concern and Owned
By, Controlled By, or Subject to the
Jurisdiction or Direction of
Proposed §1.48D-2 defined the terms
“foreign entity of concern” and “owned
by, controlled by, or subject to the juris-
diction or direction of” to have the same
meaning as those terms in the Commerce
Proposed Rule. The Commerce Final Rule
does not include a definition of “owned by,
controlled by, or subject to the jurisdiction
or direction of,” but includes a revised
definition of “foreign entity of concern.”
The Department of Commerce removed
the definition of “owned by, controlled by,
or subject to the jurisdiction or direction
of” from the Commerce Final Rule to pro-
vide greater specificity and incorporated
the definition of “owned by, controlled by,
or subject to the jurisdiction of” into the
definition of “foreign entity of concern”
to clarify that the scope of the terms are
limited to defining foreign entities of con-
cern. To address the concern that foreign
entities of concern could circumvent the
restrictions of the rules by establishing
entities for which multiple foreign entities
of concern each have ownership below
the 25 percent threshold, the Commerce
Final Rule clarifies that, where at least 25
percent of the person’s outstanding voting
interest is held directly or indirectly by
any combination of persons who would
otherwise be foreign entities of concern
themselves, that person is a foreign entity
of concern.
As stated in the Background section of
this preamble, consistent with the statutory
authority provided under sections 50(a)(3)
and (a)(6)(D)(i) and 7805(a), the Treasury
Department and the IRS, in coordination
with the Department of Commerce and the
Department of Defense, have incorporated
in the final regulations definitional concepts
as determined by the Secretary of Com-
merce, and contained in the Commerce
Final Rule, necessary for the determination
of applicable transactions under section
50(a)(3) and (a)(6)(D). Section 48D(c)(1)
defines the term “eligible taxpayer,” in part,
as any taxpayer that is not a foreign entity
of concern (as defined in section 9901(6) of
the William M. (Mac) Thornberry National
Defense Authorization Act for Fiscal Year
2021 (amending 15 U.S.C. 4651)). Section
50(a)(6)(D)(i) provides rules for when an
advanced manufacturing investment credit
allowable under section 48D is subject to
recapture and defines a foreign entity of
concern in the same manner as in section
48D(c)(1). Because section 48D(c)(1)
provides rules for when a taxpayer is eli-
gible to claim the advanced manufacturing
investment credit, and section 50(a)(6)(D)
(i) provides rules for when a taxpayer is
no longer eligible for the credit, the statute
requires the definition of “foreign entity
of concern” in both sections to be synony-
mous. For these reasons, removing the term
“owned by, controlled by, or subject to the
jurisdiction or direction of” from the final
regulations and defining the term “foreign
entity of concern” in the final regulations
as having the same meaning as that term as
defined in the Commerce Final Rule is con-
sistent with the language and purpose of
the statute. The final regulations are revised
accordingly.
C. Qualified Investment, Special Rules
for Partnerships
Commenters requested a modification
to §1.46-3(f) to permit a partner’s share of
the basis of qualified property to be deter-
mined independent of the ratio in which
the partners divide the general profits of
the partnership as required under §1.46-
3(f). One of the commenters noted that
section 48D is silent as to how a taxpayer’s
basis in qualified property should be allo-
cated in the context of passthrough enti-
ties. Section 48D is among the investment
credits listed under section 46. See section
46(6). The investment credit under section
46 is a business credit under section 38(b)
(1). Thus, property with respect to which a
section 48D credit is determined is section
38 property.
Section 1.704-1(b)(4)(ii), which
requires allocations with respect to the
investment credit provided by section
38(b)(1) to be made in accordance with
the partners’ interests in the partnership,
provides that allocations of cost or qual-
ified investment made in accordance
with §1.46-3(f) are deemed to be made
in accordance with the partners’ interests
in the partnership. Pursuant to §1.46-3(f)
(1), in the case of a partnership that owns
section 38 property, a partner in a part-
nership is treated as the taxpayer with
respect to the partner’s share of the basis
of partnership section 38 property. Section
1.46-3(f)(2)(i) provides that a partner’s
share of basis is determined in accordance
with the ratio in which the partners share
general profits. Pursuant to §1.46-3(f)(2)
(ii), if all related items of income, gain,
loss, and deduction with respect to any
item of partnership section 38 property
are specially allocated in the same manner
as if such special allocation is recognized
under section 704(a) and (b) and §1.704-
1(b), then each partner’s share of the basis
of such item of section 38 property is
determined by reference to such special
allocation effective for the date on which
the property is placed in service, rather
than in accordance with the ratio in which
the partners share general profits. Thus,
§1.46-3(f), as currently in effect already
permits special allocations of a partner’s
share of the basis of an item of section 38
property independent of the ratio in which
the partners divide the general profits of
the partnership if all requirements under
§1.46-3(f)(2)(ii) are met. Also, modifying
the regulations under §1.46-3(f) to allow
for allocations beyond what is already
permitted under §1.46-3(f), including

December 16, 2024 1256 Bulletin No. 2024–51
§1.46-3(f)(2)(ii), would have broad impli-
cations beyond the application of section
48D, and for that reason, such modifica-
tions would not be appropriate to include
in the final regulations. For the foregoing
reasons, the final regulations do not incor-
porate the commenters’ recommendations
regarding §1.46-3(f).
D. Qualified Progress Expenditures
Election
One commenter requested that the final
regulations clarify whether an election
for qualified progress expenditure can be
made for expenses paid or incurred after
August 9, 2022, through December 31,
2022. The Treasury Department and the
IRS have determined that no further clari-
fication is necessary concerning the avail-
ability of a progress expenditures election.
Section 48D(b)(5) applies rules similar to
the progress expenditures rules of section
46(c)(4) and (d) as in effect on the day
before the date of enactment of the Rev-
enue Reconciliation Act of 1990. Section
107(f)(1) of the CHIPS Act provides that
the section 48D credit can be claimed for
property placed in service after December
31, 2022, and for any property the con-
struction of which began prior to January
1, 2023, only to the extent of the basis
thereof attributable to the construction,
reconstruction or erection after the date
of enactment (August 9, 2022). Consis-
tent with the statute, §1.48D-2(j)(3)(i) of
the final regulations provides that the tax-
payer may elect, as provided in §1.46-5,
which provides the rules governing quali-
fied progress expenditures, to increase the
qualified investment with respect to an
advanced manufacturing facility of an eli-
gible taxpayer for the taxable year by any
qualified progress expenditures made after
August 9, 2022. Accordingly, an election
for qualified progress expenditures can be
made for expenses paid or incurred after
August 9, 2022, and on or before Decem-
ber 31, 2022. In addition, the final regula-
tions under §1.48D-2(j)(3)(ii) clarify that,
if progress expenditure property is being
constructed by or for a partnership or S
corporation, the rules of §1.46-5(o)(1) and
(p) do not prohibit a partnership or S cor-
poration from making a qualified progress
expenditure election under §1.46-5 if such
partnership or S corporation intends to
make an elective payment election under
section 48D(d) and §1.48D-6 with respect
to a section 48D credit determined with
respect to such qualified property.
One commenter requested that the final
regulations or other guidance provide
guidance on the definitions of “self-con-
structed” versus “non-self-constructed
property” and “integrated unit” for pur-
poses of determining the construction
period under §1.46-5. Pursuant to §1.46-
5(d), whether a property, including qual-
ified property under section 48D(b)(2)
and the section 48D regulations, is prog-
ress expenditure property is determined
based on the facts known at the close of
the first taxable year in which construction
begins, or if later, at the close of the first
taxable year to which a progress expendi-
tures election is made. Whether property
is “self-constructed” versus “non-self-
constructed property” or an “integrated
unit” pursuant to §1.46-5(k), (l) and (e)
(3), respectively, is also a factual determi-
nation. Additional guidance on the defini-
tions of “self-constructed” versus “non-
self-constructed property” and “integrated
unit,” would inject significant complexity
into the final regulations and likely cause
additional uncertainty regarding the scope
of those terms. Such guidance would
have implications for any investment tax
credit, including, for example, the reha-
bilitation credit under section 47 and the
energy credit under section 48, for which
a taxpayer can make a qualified progress
expenditures election. For these reasons,
such guidance is not appropriate to be
included in the final regulations. Accord-
ingly, the final regulations do not address
the modifications requested by the com-
menter.
One commenter requested that the
final regulations provide that the percent-
age of completion limitation for non-self-
constructed property under §1.46-5(j)(6)
does not apply or that it be amended to
allow for a greater percentage (up to 66
percent) of completion for semiconduc-
tor tooling equipment. The commenter
argued that some tooling equipment man-
ufacturers require a payment of as much
as 90 percent of the total contract price in
the first year the order is placed. Section
1.46-5(j)(6)(i) provides: (1) payments
made in any taxable year may be con-
sidered qualified progress expenditures
for non-self-constructed property only to
the extent they are attributable to prog-
ress made in construction (percentage of
completion limitation); (2) progress will
generally be measured in terms of the
manufacturer’s incurred cost as a fraction
of the anticipated cost (as adjusted from
year to year); and (3) progress is pre-
sumed to occur not more rapidly than rat-
ably over the normal construction period
but the taxpayer may rebut the presump-
tion by clear and convincing evidence
of a greater percentage of completion.
Section 1.46-5(j)(6)(i) provides sufficient
flexibility for taxpayers that intend to
claim a section 48D credit for qualified
progress expenditures. The commenter
requested a modification to the percent-
age of completion limitation for non-self-
constructed property under §1.46-5(j)(6)
for semiconductor tooling equipment
only; however, such modification would
require a careful examination of any
implications for all other investment tax
credits for which a taxpayer can make a
qualified progress expenditures election,
including, for example, the rehabilitation
credit under section 47 and the energy
credit under section 48. For these rea-
sons, the final regulations do not adopt
the commenter’s recommendations.
E. Definitions of Semiconductor and
Semiconductor Manufacturing
1. In General
Commenters requested that the final
regulations expand the definition of
“semiconductor” and “semiconductor
manufacturing” to encompass additional
products, substances, and processes. The
commenters requested that, among other
materials and substances, wafers, diamond
wafer substrates, ingots, boules, high-pu-
rity silicon, silicon carbide, polysilicon,
semiconductive substances, III-V com-
pounds, ceramics, lithographic materials,
specialty adhesives and cleaners, metals
and dielectrics, and quantum electronics
be included in the definition of “semicon-
ductor.” Commenters also requested that
the final regulations modify the definition
of “semiconductor manufacturing” if the
definition of “semiconductor” is expanded
to include additional products and sub-
stances.

Bulletin No. 2024–51 1257 December 16, 2024
Consistent with the statutory author-
ity provided under sections 50(a)(3) and
(a)(6)(D)(i) and 7805(a), the Treasury
Department and the IRS, in coordination
with the Department of Commerce and
the Department of Defense, have incor-
porated in the final regulations defini-
tional concepts that are consistent with
the Commerce Final Rule and necessary
for the determination of both eligibility
for the section 48D credit and applicable
transactions under section 50(a)(3) and
(a)(6)(D).
Accordingly, the final regulations pro-
vide that a taxpayer may claim a section
48D credit for qualified property placed
in service as part of an advanced manu-
facturing facility the primary purpose of
which is semiconductor manufacturing.
The final regulations define “semicon-
ductor manufacturing” as semiconductor
wafer production, semiconductor fabrica-
tion, and semiconductor packaging.
The remainder of this section III.E of
this Summary of Comments and Expla-
nation of Revisions discusses the defini-
tions adopted in the final regulations of the
terms “semiconductors,” “semiconductor
manufacturing,” “semiconductor wafer
production,” “semiconductor fabrication,”
and “semiconductor packaging.”
2. Semiconductors
The term “semiconductor” is among
those definitional concepts necessary for
the determination of whether a transac-
tion is a significant transaction involving
the material expansion of semiconductor
manufacturing capacity in a foreign coun-
try of concern (emphasis added). Because
the term “semiconductor” is also a defini-
tional concept necessary for the determi-
nation of when a taxpayer is eligible to
claim the advanced manufacturing invest-
ment credit, the statute requires the defi-
nition of “semiconductor” for purposes
of sections 48D and 50(a)(6)(D)(i) to be
synonymous. Moreover, failing to define
the term “semiconductor” for purposes
of the section 48D regulations would
contravene the statutory directive under
section 50(a)(6)(D)(i) to define what is a
“significant transaction” for the expansion
of semiconductor manufacturing capacity
other than with regard to certain “legacy
semiconductors.” In addition, section
9901(9) of the William M. (Mac) Thorn-
berry National Defense Authorization
Act, as redesignated by section 103(a)(2)
of the CHIPS Act, for Fiscal Year 2021
(15 U.S.C. 4651), provides that the term
“semiconductor” has the same mean-
ing given that term by the Secretary of
Commerce. For these reasons, the Trea-
sury Department and the IRS decline to
expand the definition of “semiconductor”
to include additional products and sub-
stances beyond what is provided in the
Commerce Final Rule, as suggested by
the commenters.
Consistent with the definition of
“semiconductor” in the Commerce Final
Rule (15 CFR 231.115), and pursuant to
the statutory authority provided under
sections 50(a)(3) and (a)(6)(D)(i) and
7805(a), the final regulations provide that
a semiconductor is an integrated elec-
tronic device or system most commonly
manufactured using materials such as, but
not limited to, silicon, silicon carbide, or
III-V compounds, and processes such as,
but not limited to, lithography, deposition,
and etching. Such devices and systems
include, but are not limited to, analog and
digital electronics, power electronics, and
photonics, for memory, processing, sens-
ing, actuation, and communications appli-
cations.
3. Definition of Semiconductor
Manufacturing
One commenter requested that the
final regulations expand the definition of
“semiconductor manufacturing” to cover
a broader space (aerospace) semiconduc-
tor manufacturing process. As noted in
section IV.E of this Summary of Com-
ments and Explanation of Revisions, sec-
tion 48D is silent on the topic of semicon-
ductor manufacturing in space or whether
semiconductor manufacturing can occur
in space. Whether semiconductor manu-
facturing can occur in space would require
a careful examination of all relevant facts
and circumstances, any applicable Code
provisions and Federal income tax princi-
ples apart from those found in section 48D
and the section 48D regulations. As such,
changing the definition of semiconductor
manufacturing to include an aerospace
semiconductor manufacturing process, as
requested by the commenter, is beyond the
scope of section 48D and the section 48D
regulations. Accordingly, the final regula-
tions do not adopt rules to address semi-
conductor manufacturing in space.
4. Semiconductor Wafer Production
As previously discussed, comment-
ers requested that the final regulations
modify the definition of “semiconductor
manufacturing” (and synonymously, the
term “manufacturing of semiconductors”)
if the definition of “semiconductor” is
expanded to include additional products
and substances. Although the final reg-
ulations do not expand the definition of
“semiconductor” beyond what is provided
in the Commerce Final Rule, the final
regulations clarify the definition of “semi-
conductor manufacturing” by specifying
that it includes “semiconductor wafer
production” but not further upstream pro-
duction processes, pursuant to the stat-
utory authority provided under sections
50(a)(3) and (a)(6)(D)(i) and 7805(a).
The clarification that “semiconductor
manufacturing” includes “semiconductor
wafer production” is consistent with the
definition of “semiconductor manufactur-
ing” in the Commerce Final Rule (15 CFR
231.116) issued pursuant to section 103(b)
of the CHIPS Act (15 USC 4652), which
provides that, for purposes of the Expan-
sion Clawback (described later), the term
“semiconductor manufacturing” has the
same meaning given that term by the Sec-
retary of Commerce, in consultation with
the Secretary of Defense and the Director
of National Intelligence.
However, the production of addi-
tional products and substances requested
by commenters to be included in “semi-
conductor manufacturing” would not be
appropriate as those are materials that are
consumed or substantially transformed
during the semiconductor manufacturing
processes, and not included in the defi-
nition of “semiconductor manufacturing”
in the Commerce Final Rule. For these
reasons, the final regulations clarify that
the definition of the term “manufactur-
ing of semiconductors” (and synony-
mously “semiconductor manufacturing”)
includes semiconductor wafer production
but excludes the production of precursor
materials such as polysilicon from the
scope of the definition.

December 16, 2024 1258 Bulletin No. 2024–51
The final regulations define the term
“semiconductor wafer production” to
include “the processes of growing sin-
gle-crystal ingots and boules, wafer
slicing, etching and polishing, bonding,
cleaning, epitaxial deposition, and metrol-
ogy” (emphasis added). The Commerce
Final Rule defines the term “semiconduc-
tor wafer production” to include the pro-
cesses of wafer slicing, polishing, clean-
ing, epitaxial deposition, and metrology.
The final regulations differ from the Com-
merce Final Rule by including “growing
single-crystal ingots and boules,” “etch-
ing,” and “bonding” in the definition
of “semiconductor wafer production”
because the purposes of the relevant pro-
visions in the Commerce Final Rule and
those in the section 48D regulations differ.
The CHIPS Act established the section
48D credit for the purpose of incentivizing
the manufacturing of semiconductors and
semiconductor manufacturing equipment
within the United States and amended
section 50(a) to provide for recapture of
the section 48D credit if an applicable
taxpayer engages in an applicable trans-
action. Thus, the section 48D regulations
include definitions and rules that apply for
determining who is an eligible taxpayer,
what qualifies as qualified property or
an advanced manufacturing facility, and
whether the beginning of construction
requirement is met.
However, the purposes of relevant
definitions and rules in the section 48D
regulations differ from the purpose of the
Commerce Final Rule, which relates to
implementing the CHIPS Act’s “Expan-
sion Clawback.” As a matter of United
States national security interests, a
funding recipient is required by stat-
ute to enter into an agreement with the
Department of Commerce restricting
engagement by the funding recipient or
its affiliates in any significant transac-
tion involving the material expansion of
semiconductor manufacturing capacity
in foreign countries of concern. Failure
by a funding recipient (or its affiliate) to
comply with the restriction on semicon-
ductor manufacturing capacity expan-
sion in foreign countries of concern may
cause the Expansion Clawback to apply,
resulting in recovery of the full amount
of Federal financial assistance provided
to the funding recipient.
The differences between the meaning
of “semiconductor wafer production”
in the Commerce Final Rule and in the
final regulations reflects the difference
between the purposes of the two rules as
intended by Congress. The Expansion
Clawback prohibits funding recipients
from knowingly engaging in a significant
transaction, and the section 48D credit
incentivizes taxpayers to engage in the
manufacturing of semiconductors and
semiconductor manufacturing equipment
in the United States, provided the appli-
cable taxpayer does not also engage in
an applicable transaction. For these rea-
sons, the Treasury Department and the
IRS, after consultation with the Depart-
ment of Commerce and the Department of
Defense pursuant to the statutory author-
ity provided under sections 50(a)(3) and
(a)(6)(D)(i) and 7805(a), have determined
that a clarification is necessary to con-
firm that for purposes of the section 48D
credit, “semiconductor wafer production”
includes growing single-crystal ingots
and boules, wafer slicing, etching and
polishing, bonding, cleaning, epitaxial
deposition, and metrology. The Treasury
Department and the IRS note that the term
“semiconductor wafer production” in the
final regulations also includes growing
single-crystal ingots and boules, wafer
slicing, etching and polishing, bonding,
cleaning, epitaxial deposition, and metrol-
ogy as applied to the production of solar
wafers. The Treasury Department and the
IRS note this after coordination with the
Department of Commerce and the Depart-
ment of Defense due to specific supply
chain and national security considerations
regarding the production of solar wafers
not present in the case of other related
products.
5. Semiconductor Fabrication
The final regulations provide that the
term “semiconductor fabrication” includes
“the process of forming devices such as
transistors, poly capacitors, non-metal
resistors, and diodes, as well as intercon-
nects between such devices, on a wafer
of semiconductor material” (emphasis
added). The Commerce Final Rule defines
the term “semiconductor fabrication” to
include the process of forming devices
such as transistors, poly capacitors, non-
metal resistors, and diodes on a wafer of
semiconductor material. The final regula-
tions differ from the Commerce final rule
by including “interconnects between such
devices.”
The difference between the defini-
tion of “semiconductor fabrication” in
the Commerce Final Rule and the final
regulations with respect to “intercon-
nects between such devices” reflects the
difference between the purpose of the
section 48D regulations and the Expan-
sion Clawback. As explained in section
III.E.4 of this Summary of Comments and
Explanation of Revisions, the Expansion
Clawback prohibits funding recipients
from knowingly engaging in a signifi-
cant transaction, whereas the section 48D
credit incentivizes taxpayers to engage in
the manufacturing of semiconductors and
semiconductor manufacturing equipment
in the United States, provided the appli-
cable taxpayer does not also engage in an
applicable transaction. For these reasons,
the Treasury Department and the IRS, in
coordination with the Department of Com-
merce and the Department of Defense,
and pursuant to the statutory authority
provided under sections 50(a)(3) and (a)
(6)(D)(i) and 7805(a), have determined
that a clarification is necessary to confirm
that for purposes of the section 48D credit,
“semiconductor fabrication” includes the
process of forming interconnects between
such devices.
6. Semiconductor Packaging
Several commenters requested that the
definition of “semiconductor manufac-
turing” be revised to include assembly
and testing within all stages of packag-
ing. Commenters also requested that the
final regulations provide definitions of the
terms “assembly” and “testing.” As previ-
ously noted, consistent with the statutory
authority provided under sections 50(a)(3)
and (a)(6)(D)(i) and 7805(a), the Treasury
Department and the IRS, in coordination
with the Department of Commerce and
the Department of Defense, have incorpo-
rated in the final regulations definitional
concepts as determined by the Secretary
of Commerce, and contained in the Com-
merce Final Rule necessary for the deter-
mination of applicable transactions under
section 50(a)(3) and (a)(6)(D). The pre-

Bulletin No. 2024–51 1259 December 16, 2024
amble to the Commerce Proposed Rule
clarifies that “semiconductor manufactur-
ing” includes both front-end fabrication as
well as back-end manufacturing including
assembly, testing, and packaging of semi-
conductors. Accordingly, revising the defi-
nition of “semiconductor manufacturing”
to include “assembly” and “testing” and
providing definitions of “assembly” and
“testing” is consistent with the purpose of
the section 48D credit to incentivize the
manufacture of semiconductors within the
United States. Accordingly, §1.48D-2(n)
of the final regulations provides that semi-
conductor packaging includes assembly
and testing. Section 1.48D-2(n)(4) and (5)
of the final regulations provide definitions
of “assembly” and “testing,” respectively.
One commenter requested that the final
regulations clarify that the term “semi-
conductor packaging” include the manu-
facturing of IC-substrates. As stated in
the Background section of this pream-
ble, consistent with the statutory author-
ity provided under sections 50(a)(3) and
(a)(6)(D)(i) and 7805(a), the Treasury
Department and the IRS, in coordination
with the Department of Commerce and
the Department of Defense, have incorpo-
rated in the final regulations definitional
concepts as determined by the Secretary
of Commerce, and contained in the Com-
merce Final Rule necessary for the deter-
mination of applicable transactions under
section 50(a)(3) and (a)(6)(D). Consistent
with the Commerce Final Rule, the final
regulations define the term “semiconduc-
tor packaging” as the process of enclosing
a semiconductor in a protective container
(package) and providing external connec-
tivity for the assembled integrated circuit.
The manufacturing of a substrate used
during the semiconductor packaging pro-
cess is not part of “semiconductor pack-
aging” as defined under the final regula-
tions. For the foregoing reason, the final
regulations do not adopt the commenter’s
recommendation.
F. Definitions of Semiconductor
Manufacturing Equipment, Subsystems,
and Manufacturing Semiconductor
Manufacturing Equipment
Commenters requested that the final
regulations modify the definition of “semi-
conductor manufacturing equipment” to
include direct and indirect materials inte-
gral to the semiconductor manufactur-
ing equipment, such as, electronic grade
isopropyl alcohol, precision bearings,
industrial gases including high purity
and general purpose nitrogen, chemicals
such as fluoropolymers peroxides and
fluorogases, lens and mirrors, and com-
ponents. Commenters requested that the
final regulations define the term “subsys-
tem” as highly engineered and specialty
equipment that is either sold directly to,
or primarily produced for, a semiconduc-
tor fabricator or a third-party equipment
manufacturer.
Among other requirements, section
48D(b)(2) and §1.48D-3(c) (referencing
§1.48-1(c) and (d)) require that prop-
erty be tangible depreciable property, for
example, production machinery, to meet
the definition of qualified property. Gases,
chemicals, and materials, such as IC-sub-
strates and diamond wafer substrates,
and semiconductive substances, that are
consumed, utilized, or substantially trans-
formed in a similar manner during the
manufacturing process does not meet the
threshold requirement of section 48D(b)
(2) and §1.48D-3(c) because they are not
tangible depreciable property for purposes
of the section 48D credit.
For the foregoing reason, the Treasury
Department and the IRS decline to adopt
the commenters’ requests to modify the
definition of “semiconductor manufactur-
ing equipment” to include such materials.
The final regulations clarify that “semi-
conductor manufacturing equipment”
means the highly engineered specialized
equipment used in the manufacturing of
semiconductors as defined in §1.48D-
2(g) and the subsystems that enable, or
are incorporated into, the manufacturing
equipment. This definition will elimi-
nate uncertainty in determining whether
property is semiconductor manufacturing
equipment, as opposed to consumable
materials, chemicals, or gases, that do not
meet the definition of semiconductor man-
ufacturing equipment.
The Treasury Department and the IRS
decline to adopt the commenters’ recom-
mendations to define the term “subsys-
tem” as highly engineered and specialty
equipment that is either sold directly to, or
is primarily produced for, a semiconduc-
tor fabricator or a third-party equipment
manufacturer. Providing such a definition
would inject significant complexity into
the final regulations. Consistent with the
definition of semiconductor manufactur-
ing equipment in the proposed regulations,
§1.48D-2(o) provides that the term “semi-
conductor manufacturing equipment”
includes the subsystems that enable, or
are incorporated into, the manufacturing
equipment. Additionally, property that
may be considered a subsystem must also
meet the requirements of section 48D and
the section 48D regulations.
Commenters also requested that the list
of examples of “semiconductor manufac-
turing equipment” be expanded to include
any property that is considered property
integral to the operation of an advanced
manufacturing facility under proposed
§1.48D-3(f)(1). The Treasury Department
and the IRS have determined that such a
rule is inconsistent with the purpose and
structure of the statute, which clearly con-
templates that not all property integral to
the operation of an advanced manufac-
turing facility be treated as semiconduc-
tor manufacturing equipment. Although
certain property, such as a gas handling
system, may be property integral to the
operation of an advanced manufacturing
facility under section 48D(b)(2)(A)(iv)
and proposed §1.48D-3(f), that property
does not, by application of the standard
in section 48D(b)(2)(A)(iv) and pro-
posed §1.48D-3(f), meet the definition of
semiconductor manufacturing equipment
under §1.48D-2(o) of the final regulations.
Commenters requested that the final
regulations clarify that the list of examples
of semiconductor manufacturing equip-
ment is non-exclusive and provide an
illustrative list of subsystems to include,
items such as specialty glass lenses, pho-
tomasks, lenses and mirrors like those
made of calcium fluoride or high-purity
fused silica, lens assemblies for wafer
defect inspection following wafer print-
ing, light sources or other major compo-
nents of photolithography systems, and
advanced ceramic products. The Treasury
Department and the IRS have determined
that such clarifications are appropriate for
defining “semiconductor manufacturing
equipment.” Accordingly, the final reg-
ulations clarify that the list of examples
of semiconductor manufacturing equip-
ment and subsystems is non-exclusive and

December 16, 2024 1260 Bulletin No. 2024–51
includes additional examples of property
that may qualify as semiconductor manu-
facturing equipment and subsystems. The
Treasury Department and the IRS again
note that property that may be considered
a subsystem must also meet the require-
ments of section 48D and the section 48D
regulations.
Commenters further requested that the
final regulations clarify that a component,
part or subsystem may be considered
semiconductor manufacturing equipment
on a case-by-case basis, and provide fac-
tors that are persuasive, including industry
definitions, CHIPS Act funding, complex-
ity of part, or other United States Govern-
ment Agency categorizations that define
it as semiconductor equipment. As stated
in the Background section of this pream-
ble, consistent with the authority granted
by sections 50(a)(3) and (a)(6)(D)(i) and
7805(a), the Treasury Department and
the IRS, in coordination with the Depart-
ment of Commerce and the Department
of Defense, have incorporated in the final
regulations definitional concepts as deter-
mined by the Secretary of Commerce, and
contained in the Commerce Final Rule
necessary for the determination of appli-
cable transactions under section 50(a)(3)
and (a)(6)(D). For this reason, the Trea-
sury Department and the IRS have deter-
mined that incorporating definitions from
other United States Government agencies
that define semiconductor equipment for
other purposes would not be appropriate.
The Treasury Department and the IRS
have further determined that including a
case-by-case facts and circumstances rule
as suggested by the commenters would
inject significant complexity into the
final regulations and likely cause addi-
tional uncertainty regarding the scope of
the term “semiconductor manufacturing
equipment” due to its inherently factual
nature. As a result, the final regulations do
not incorporate the commenters’ recom-
mendations.
The Treasury Department and the IRS
note that proposed §1.48D-2(n) would
define “manufacturing semiconductor
manufacturing equipment” as the physical
production of semiconductor manufactur-
ing equipment in a manufacturing facility.
As further described in section V.A. of this
Summary of Comments and Explanation
of Revisions, the final regulations mod-
ify the proposed definition of “advanced
manufacturing facility” by removing the
requirement that such a facility manu-
facture “finished” semiconductor manu-
facturing equipment. Consistent with the
modification, the final regulations define
the term “manufacturing of semiconductor
manufacturing equipment” to require that
that such semiconductor manufacturing
equipment be used by an advanced man-
ufacturing facility engaged in the manu-
facturing of semiconductors as defined in
§1.48D-2(g) of the final regulations.
IV. Comments on and Changes to
Proposed §1.48D-3
A. Part of an Advanced Manufacturing
Facility
Commenters requested clarifica-
tion that a taxpayer’s ownership of an
advanced manufacturing facility is not a
prerequisite for claiming the section 48D
credit when a taxpayer places in service
qualified property that is co-located on an
advanced manufacturing facility and oth-
erwise meets the requirements of section
48D and the final regulations. One com-
menter requested that the final regulations
provide that property that is physically
located or co-located on an advanced
manufacturing facility and integral to
the operation of the advanced manufac-
turing facility be considered part of the
advanced manufacturing facility. The
Treasury Department and the IRS agree
that neither section 48D(b)(1) and (2), nor
any other provision under section 48D,
require a taxpayer to own the advanced
manufacturing facility as a prerequisite to
determining a section 48D credit. Section
48D(b)(1) and (2) mandate that, among
other requirements, property be placed
in service as part of, and, integral to the
operation of an advanced manufacturing
facility to be “qualified property” for pur-
poses of the section 48D credit. Therefore,
the final regulations include a definition of
“part of an advanced manufacturing facil-
ity” to clarify that property is part of the
advanced manufacturing facility if the
property is physically located or co-lo-
cated either (1) at the advanced manu-
facturing facility, or (2) on a contiguous
piece of land to the advanced manufactur-
ing facility. The final regulations clarify
that parcels or tracts of land are consid-
ered contiguous if they possess common
boundaries and would be contiguous but
for the interposition of a road, street, rail-
road, public utility, stream or similar prop-
erty. Generally, property that is not physi-
cally located or co-located at the advanced
manufacturing facility or on a piece of
land contiguous to the advanced manufac-
turing facility is not part of an advanced
manufacturing facility.
The Treasury Department and the
IRS are aware that certain properties, for
example, a water or wastewater treatment
plant, may not be physically located or
co-located at an advanced manufacturing
facility or on a contiguous piece of land
to the advanced manufacturing facility,
but could be integral to the operation of
the advanced manufacturing facility. For
this reason, a rule allowing such prop-
erties in certain situations to be consid-
ered part of an advanced manufacturing
facility is appropriate for purposes of the
section 48D credit. Accordingly, the final
regulations provide that property that is
not located or co-located at an advanced
manufacturing facility or on a contiguous
piece of land to the advanced manufac-
turing facility may be considered part of
an advanced manufacturing facility if the
property is (1) owned by the same tax-
payer as the entire advanced manufactur-
ing facility, (2) connected to the advanced
manufacturing facility (for example, via
pipeline), and (3) the sole purpose, func-
tion, and output of the property is ded-
icated to the operation of the advanced
manufacturing facility. However, such
property must also meet the requirements
of section 48D and the section 48D regu-
lations. The final regulations include two
examples to illustrate the application of
section 48D(b) and §1.48D-3(f).
B. Buildings and Offices
Commenters requested that the final
regulations expand the definition of
“qualified property” to include an exist-
ing building that is purchased but not
reconditioned or re-built by the taxpayer.
It would be inconsistent with the statute
to allow a building that is purchased but
not reconstructed by the taxpayer to be
“qualified property” for purposes of the
section 48D credit. Section 48D(b)(2)(A)

Bulletin No. 2024–51 1261 December 16, 2024
(iii)(I) provides that the term “qualified
property” means property that is, among
meeting other requirements, “constructed,
reconstructed, or erected by the taxpayer.”
Therefore, the final regulations retain the
rule set forth in proposed §1.48D-3(b)(1).
Commenters requested that the final
regulations remove “offices” from the
exception to the definition of tangible
depreciable property in §1.48D-3(c)(2) in
order to allow certain office space within
an advanced manufacturing facility to
meet the definition of tangible deprecia-
ble property in §1.48D-3(c)(1). It would
be inconsistent with the statute to omit
“offices” from the exception to the defi-
nition of tangible depreciable property,
but further clarification is necessary con-
cerning the meaning of the term “office”.
Section 48D(b)(2)(B)(ii) excludes from
the definition of “qualified property” “a
building or portion of a building used for
offices, administrative services, or other
functions unrelated to manufacturing.”
Accordingly, the final regulations clarify
that the term “tangible depreciable prop-
erty” does not include a building and its
structural components used for offices.
But, in response to the comments received,
the final regulations also provide a list of
certain buildings or portions of a building
within an advanced manufacturing facility
that are considered related to manufactur-
ing and not considered offices. However,
whether a particular building or portion of
a building is used as an office, for admin-
istrative services, or is unrelated to manu-
facturing is a factual determination.
C. Certain Leasing Transactions and
Original Use
A commenter requested that the final
regulations clarify that a lessor election
under §1.48-4 to treat the lessee as hav-
ing acquired investment credit property is
permitted with respect to the section 48D
credit. The commenter also requested that
the final regulations address whether a les-
sor or lessee that purchases a previously
leased advanced manufacturing facility
and subsequently reconditions or rebuilds
the facility is eligible to claim a section
48D credit. The Treasury Department and
the IRS agree with the commenter that
a lessor election under §1.48-4 to treat
the lessee as having acquired investment
credit property is permitted by operation
of the statute. Section 48D is an investment
credit under section 46. Section 50(d)(5)
provides that, for purposes of computing
the investment credit, rules similar to the
rules of former section 48(d) (relating to
certain leased property) (as in effect on the
day before the date of the enactment of the
Revenue Reconciliation Act of 1990 (Pub-
lic Law 101-508, 104 Stat. 1388 (Novem-
ber 5, 1990)) apply. Section 1.48-4 pro-
vides the regulatory requirements for the
time and manner for making an election
to treat the lessee as having purchased
the property for purpose of the credit
allowed and the regulatory requirements,
including for original use, that must be
met and are applicable for purposes of the
election. The Treasury Department and
the IRS decline to address specific exam-
ples of leasing transactions in the final
regulations and note that the investment
credit recapture provisions under section
50(a) and regulations, including §§1.47-1
through 1.47-3 apply for purposes of the
section 48D credit.
Commenters also requested that the
definition of “original use” in proposed
§1.48D-3(e) be modified in the final reg-
ulations to include acquired property that
is reconditioned or rebuilt by a different
taxpayer. Section 48D(b)(2)(A)(iii)(I)
and (II) provide that “qualified property”
includes property that is constructed,
reconstructed, or erected by the taxpayer,
or acquired by the taxpayer if the “original
use” of such property begins with the tax-
payer. Thus, the taxpayer must reconstruct
or rebuild a property to meet the “original
use” requirement under section 48D(b)
(2)(A)(iii). Accordingly, the Treasury
Department and the IRS decline to adopt
this recommendation.
D. Property Integral to the Operation of
an Advanced Manufacturing Facility
One commenter requested that the
sentence in proposed §1.48D-3(f)(1) that
states, “Materials, supplies, and other
inventoriable items of property that are
transformed into a finished semiconductor
or into a finished unit of semiconductor
manufacturing equipment are not consid-
ered property integral to the operation of
manufacturing semiconductors or semi-
conductor manufacturing equipment” be
modified to provide that such materials are
integral to the operation of an advanced
manufacturing facility. The Treasury
Department and the IRS decline to adopt
this recommendation. As noted in sec-
tion III.F. of this Summary of Comments
and Explanation of Revisions, among
other requirements, section 48D(b)(2)
and §1.48D-3(c) (referencing §1.48-1(c)
and (d)) require that property be tangible
depreciable property, for example, pro-
duction machinery, to meet the definition
of qualified property. Gases, chemicals,
and materials, such as diamond wafer
substrates, and other semiconductive sub-
stances, that are consumed, utilized, or
substantially transformed during the man-
ufacturing process, or any other invento-
riable items of property do not meet the
threshold requirement of section 48D(b)
(2) and §1.48D-3(c) to be “qualified prop-
erty” because they are not tangible depre-
ciable property for purposes of the section
48D credit. Thus, such property would not
be property “integral to the operation of an
advanced manufacturing facility” under
the statute.
Another commenter requested that
the final regulations clarify that the term
“transformed” in proposed §1.48D-3(f)(1)
does not refer to the normal degradation of
components of semiconductor manufac-
turing equipment. However, a clarification
is appropriate for establishing whether
property is integral to the operation of an
advanced manufacturing facility. Accord-
ingly, §1.48D-3(g)(1) of the final regula-
tions clarifies that the term “transformed”
does not include the normal degradation
of components of semiconductor manu-
facturing equipment.
The final regulations include a special
rule for purposes of establishing whether
property is integral to the operation of a
vertically integrated manufacturing facil-
ity. As discussed in section III.E. of this
Summary of Comments and Explanation
of Revisions, the final regulations clarify
that the term “semiconductor manufactur-
ing” includes semiconductor packaging,
semiconductor fabrication, and semicon-
ductor wafer production but excludes
manufacturing processes related to pre-
cursor materials such as polysilicon. Con-
sistent with this modification, the final
regulations provide that, if an advanced
manufacturing facility that is engaged

December 16, 2024 1262 Bulletin No. 2024–51
in the manufacturing of semiconductors
within the meaning of §1.48D-2 also con-
ducts vertically integrated activities (for
example, producing raw materials and
manufacturing ingots, wafers, and semi-
conductors), then property integral to the
operation of such an advanced manufac-
turing facility includes only the property
used in the manufacturing of semiconduc-
tors within the meaning of §1.48D-2.
Commenters requested that exam-
ples of property that would normally be
integral to the operation of an advanced
manufacturing facility in proposed
§1.48D-3(f)(1) be modified to reflect any
modifications to the definitions of “semi-
conductor” and “semiconductor manufac-
turing equipment” in the final regulations.
Commenters also requested that the final
regulations include additions to the list of
specific property under §1.48D-3(f)(1) to
provide certainty to taxpayers. The com-
menters requested that the list include,
property such as electricity distribution
equipment, industrial automation and con-
trol equipment, communications devices,
lighting products, water management,
conservation, water treatment equipment,
materials, and technologies, and tooling
equipment. The Treasury Department and
the IRS have determined that adding to
the list of specified property that would
“normally be integral to the operation of
an advanced manufacturing facility” con-
sistent with the modification to the defi-
nitions of “semiconductor manufacturing”
and “semiconductor manufacturing equip-
ment” under §1.48D-2(n) and (o) of the
final regulations is appropriate for deter-
mining whether property is “integral to
the operation of an advanced manufactur-
ing facility.” Accordingly, §1.48D-3(g)(3)
of the final regulations includes additional
examples of such property.
One commenter requested that pro-
posed §1.48D-3(f)(2) be modified to
treat research facilities that do not man-
ufacture any type of semiconductor or
semiconductor manufacturing equipment
to qualify as integral to the operation of
an advanced manufacturing facility. The
commenter further stated that the restric-
tion in §1.48D-3(f)(2) of the March 2023
proposed regulations exceeds the statu-
tory exclusions in section 48D(b)(2)(B)
(ii) for a building or portion of a building
used for offices, administrative services,
or other functions unrelated to manufac-
turing. The statute is silent concerning
the treatment of research facilities, but
does require, pursuant to section 48D(b)
(2)(A)(iv), that property be integral to
the operation of an “advanced manufac-
turing facility” to meet the definition of
“qualified property.” As previously noted
in the Background section of this pream-
ble, the March 2023 proposed regulations
primarily applied long-established credit
mechanics and procedures common to all
investment tax credits previously set forth
in regulations and subregulatory guid-
ance. Those long-established mechan-
ics and procedures, including those set
forth in §1.48-1 generally require that a
research facility be used “in connection”
with the qualifying activity to be consid-
ered used as integral part of the activity.
Section 48D(b)(3) defines an “advanced
manufacturing facility” as a “facility for
which the primary purpose is the manu-
facturing of semiconductors or semicon-
ductor manufacturing equipment.” Under
both the March 2023 proposed regulations
and the final regulations, facilities built for
pre-pilot production lines and the manu-
facture of prototypes would be qualified
property integral to the operation of an
advanced manufacturing facility. Based
on the foregoing, a research facility that
does not manufacture semiconductors or
semiconductor manufacturing equipment
is not used “in connection” with the man-
ufacturing of semiconductors or semi-
conductor manufacturing equipment. For
these reasons, the final regulations do not
adopt the commenter’s recommendation.
E. Semiconductor Manufacturing in
Space
One commenter requested that the
final regulations clarify that section 48D
directly contemplates semiconductor
manufacturing work in space and explic-
itly confirm that qualifying advanced
manufacturing activity can occur in
space, and on a low-earth orbiter, in par-
ticular. More specifically, the commenter
requested that the final regulations: (1)
provide an exception to the definition of
buildings and structural components unre-
lated to manufacturing for functions that
are critical for human habitation in space;
and (2) expand the examples of property
integral to the operations of an advanced
manufacturing facility to include space
delivery vehicles, as all of the examples
currently describe either the facility itself
or related infrastructure for land-based
manufacturing (for example, docks, rail-
road tracks, and bridges).
Section 48D does not expressly address
semiconductor manufacturing in space, or
whether a “qualifying advanced manufac-
turing activity” can occur in space, and
on a low-earth orbiter, in particular. Sec-
tion 48D is among the investment cred-
its under section 46. Section 50(b)(1)(A)
makes ineligible for the investment credit
property that is used predominantly out-
side the United States. However, section
50(b)(1)(B) provides an exception for
property described in section 168(g)(4).
Section 168(g)(4)(L) includes an excep-
tion for any satellite (not described in sec-
tion 168(g)(4)(H), which applies to com-
munication satellites) or other spacecraft
(or any interest therein) held by a United
States person if such satellite or other
spacecraft was launched from within the
United States. Whether a low-earth orbiter
or property placed in service on a low-
earth orbiter is described in section 168(g)
(4)(L) would require a careful exam-
ination of all relevant facts and circum-
stances, any applicable Code sections and
Federal income tax principles apart from
those found in section 48D and the section
48D regulations. Whether “buildings” or
structural components that are critical for
human habitation in space are included
among the exception for a building or por-
tion of a building used for offices admin-
istrative services, or other functions unre-
lated to manufacturing pursuant to section
48D(b)(2)(B)(ii), also would require a
careful examination of all relevant facts
and circumstances, any applicable Code
sections, and Federal income tax princi-
ples apart from those found in section 48D
and the section 48D regulations. Similarly,
whether property integral to the operation
of an advanced manufacturing facility can
include space delivery vehicles requires a
careful examination of all relevant facts
and circumstances. For these reasons, the
issues addressed by the commenter are
beyond the scope of the final regulations.
Accordingly, the final regulations do not
adopt rules to address semiconductor
manufacturing in space.

Bulletin No. 2024–51 1263 December 16, 2024
V. Comments on and Changes to
Proposed §1.48D-4
A. Definition of Advanced Manufacturing
Facility
Section 1.48D-4(b) of the March 2023
proposed regulations would have provided
that the term “advanced manufacturing
facility” means a facility of an eligible tax-
payer for which the primary purpose is the
manufacturing of finished semiconductors
or the manufacturing of finished semicon-
ductor manufacturing equipment. Com-
menters requested that the final regulations
omit the term “finished” from the definition
of “advanced manufacturing facility,” or,
define the term “finished” if it is retained
in the final regulations. Commenters also
requested that conforming changes be
made to the definition of “advanced man-
ufacturing facility” if the definitions of
“semiconductor,” “semiconductor manu-
facturing equipment,” or “subsystems” are
modified by the final regulations.
The Treasury Department and the IRS
agree with the commenters that the term
“finished” should be removed from the
definition of “advanced manufacturing
facility” in the final regulations to reflect
industry practice and the modifications to
the definitions of “semiconductor manu-
facturing” and “semiconductor manufac-
turing equipment” under §1.48D-2(n) and
(o) of the final regulations. Accordingly,
the definition of “advanced manufactur-
ing facility” is revised in the final regu-
lations by removing the term “finished.”
Consistent with the revision to the defi-
nition of “advanced manufacturing facil-
ity,” the term “finished” is also removed
from §1.48D-4(b) and (c)(1) of the final
regulations, for purposes of determining
whether the primary purpose of a facility
is the manufacturing of semiconductors or
semiconductor manufacturing equipment.
Commenters requested that the defini-
tion of an advanced manufacturing facil-
ity be modified to ensure that industrial
gas and other equipment qualifies when
co-located on an advanced manufacturing
facility, and, similarly, clarify what consti-
tutes an advanced manufacturing facility
when multiple taxpayers place in service
qualified property at the same facility.
Commenters also requested that the final
regulations define the term “facility” as a
reasonably identifiable space, an amenity,
a piece of equipment, or an assembly line
that can be distinguished from an entire
campus or building where multiple activ-
ities are performed and would allow for
bifurcation of manufacturing campuses or
within buildings where certain facilities
may be leveraging the section 48D credit
while other facilities may be leveraging
a different tax incentive. One commenter
requested that the final regulations define
an advanced manufacturing facility con-
sistent with the definition of qualified
property integral to the operation of an
advanced manufacturing facility in pro-
posed §1.48D-3(f). Another commenter
requested that the final regulations provide
that the definition of an advanced manu-
facturing facility include design facilities
that are related to the semiconductor man-
ufacturing process.
The Treasury Department and the IRS
decline to adopt these recommendations
by further modifying the definition of
an “advanced manufacturing facility” or
defining “facility” in the final regulations.
Section 48D(b)(3) and §1.48D-4(b) of the
final regulations define an advanced man-
ufacturing facility as a facility for which
the primary purpose is the manufacturing
of semiconductors or the manufacturing
of semiconductor manufacturing equip-
ment within the meaning of §1.48D-2.
Section 1.48D-2 defines the terms semi-
conductor, semiconductor manufacturing,
semiconductor manufacturing equipment,
manufacturing of semiconductors, and
manufacturing of semiconductor manu-
facturing equipment. Taken together, the
statutory and regulatory provisions define
what constitutes an advanced manufac-
turing facility for purposes of the section
48D credit. For these reasons, the final
regulations do not include a separate defi-
nition of “facility” as requested by the
commenters. The treatment of co-located
property is addressed in section IV.A of
this Summary of Comments and Explana-
tion of Revisions.
B. Primary Purpose
Commenters requested that the final
regulations include a minimum threshold
that would satisfy the “primary purpose”
requirement. In proposed §1.48D-4(c)(3)
(i) (Example 1), a taxpayer manufactures
semiconductor manufacturing equipment
that represents approximately 75 percent
of the potential output of the taxpayer’s
facility by cost to produce such equip-
ment. Section 1.48D-4(c)(3)(i) (Example
1) shows that the taxpayer satisfied the
primary purpose test in proposed §1.48D-
4(c). Proposed §1.48D-4(c)(3)(ii) (Exam-
ple 2) reaches the same conclusion when
the taxpayer manufactures certain micro-
scopes for a semiconductor manufactur-
ing facility and such equipment represents
approximately 75 percent of the potential
output (by cost) of the taxpayer’s facility.
Commenters requested that the final reg-
ulations state the minimum threshold that
would satisfy the primary purpose test as
more than 50 percent. One commenter
requested that the final regulations spec-
ify the types of cost that should be con-
sidered in the output test and if research
costs in connection with manufacturing
semiconductor or semiconductor equip-
ment should be considered in the numera-
tor of output test. The commenter further
requested that the regulations should clar-
ify that the output capacity in the quanti-
tative test should be measured at full life
cycle instead of the year placed in service
when the credit is determined. The com-
menter also requested that the threshold
requirement rule be provided in the regu-
latory text. Another commenter requested
that the final regulations include an exam-
ple of a facility that does not meet the “pri-
mary purpose” requirement, especially for
facilities that do not meet the 75 percent
threshold.
The Treasury Department and the IRS
have determined that the final regulations
should include a minimum threshold
that would satisfy the “primary purpose”
requirement. Accordingly, §1.48D-4(c)(1)
of the final regulations provides that a min-
imum threshold of more than 50 percent
by cost of production, revenue received
in an arm’s length transaction, or units
produced satisfies the “primary purpose”
requirement. Section 1.48D-4(c)(3) of the
final regulations include examples illustrat-
ing the application of this rule, including
examples involving semiconductor wafer
production and a vertically integrated
manufacturer. However, property placed
in service in a taxable year must still meet
the definition of qualified property under
section 48D(b)(2) and §1.48D-3 for its

December 16, 2024 1264 Bulletin No. 2024–51
basis to be included as part of the qualified
investment in the advanced manufacturing
facility eligible for the section 48D credit.
Specifying the types of cost that should be
considered in the output test and the time
period for the measurement would require
a careful examination of all relevant facts
and circumstances, any applicable Code
sections and Federal income tax princi-
ples apart from those found in section 48D
and the section 48D regulations. For these
reasons, specifying the types of costs that
should be considered and the time period
for measurement is not appropriate for pur-
poses of the final regulations.
One commenter requested that the
words “grows” and “grow wafers” in pro-
posed §1.48D-4(c)(2) be removed in the
final regulations if the definition of “semi-
conductor” is revised in the final regulations
to include polysilicon, boules, wafers, and
similar materials with electronic properties
manufactured specifically for the purpose
of semiconductor manufacturing. Another
commenter requested that the final regu-
lations clarify that “primary purpose” can
include intermediate manufacturing steps
or production of components for finished
semiconductors. One commenter requested
that the final regulations provide that, in
the case of a vertically integrated company
that manufactures semiconductors, prop-
erty used in the crystal and boule growth be
treated as property integral to the operation
of an advanced manufacturing facility.
The Treasury Department and the IRS
agree, in part, with commenters and the
final regulations adopt, in part, the com-
menter’s request for a modification to
proposed §1.48D-4(c)(2) by removing
“grows” and “grow wafers” from the final
regulations, and providing that primary
purpose can include certain intermediate
manufacturing steps to conform with the
definition of “semiconductor manufactur-
ing” in §1.48D-2(n) of the final regula-
tions. As previously described in section
III.E. of this Summary of Comments and
Explanation of Revisions, semiconductor
wafer production includes the processes
of growing single-crystal ingots and
boules, as well as wafer slicing, bonding,
etching and polishing, cleaning, epitax-
ial deposition, and metrology. Including
property used in steps prior to growing
single-crystal ingots and boules in the
case of a vertically integrated semicon-
ductor manufacturer is not consistent with
the purpose and structure of the statute
because the primary purpose of such prop-
erty is not the manufacturing of semicon-
ductors (as defined in §1.48D-2(g) of the
final regulations) or the manufacturing of
semiconductor manufacturing equipment
(as defined in §1.48D-2(h) of the final
regulations). Accordingly, the final regu-
lations do not include such a rule for such
vertically integrated businesses.
The final regulations provide examples
to illustrate whether a facility has a primary
purpose of manufacturing of semiconduc-
tors or manufacturing of semiconductor
manufacturing equipment. The examples
address whether the facility meets the pri-
mary purpose test in the taxable year the
property is placed in service. Because the
section 48D is an investment tax credit,
and pursuant to §1.46-3(d)(4), the invest-
ment credit is allowed in the taxable year
the property is placed in service. In addi-
tion, the investment tax credit recapture
rules under section 50(a) apply to the sec-
tion 48D credit. If the property for which
the section 48D credit is claimed ceases to
be investment credit property (as defined
in section 50(a)(6)(A)) with respect to the
taxpayer before the close of the 5-year
recapture period, then all or a portion of the
section 48D credit is recaptured. If a tax-
payer fails to meet the primary purpose test
during any of the years during the 5-year
recapture period, then the facility is no lon-
ger an advanced manufacturing facility, as
defined in section 48D(b)(3) and the final
regulations. The property the taxpayer
placed in service to claim the section 48D
credit is no longer qualified property under
section 48D(b)(2)(A)(iv), because such
property is no longer integral to the opera-
tion of an advanced manufacturing facility.
Thus, the property has ceased to be invest-
ment credit property with respect to the
taxpayer and, pursuant to section 50(a)(1)
(A) and (B), all or a portion of the section
48D credit claimed is recaptured.
VI. Comments on and Changes to
Proposed §1.48D-5
A. Definition of Single Advanced
Manufacturing Facility Project
Commenters requested that the final
regulations expand the list of items of
property that may be treated as a single
item for purposes of the beginning of con-
struction rules to include “tooling equip-
ment” and “semiconductor manufacturing
equipment.” The list in proposed §1.48D-
5(a)(3) is non-exclusive. However, the
Treasury Department and the IRS have
determined that a clarification is appro-
priate to clarify that “tooling equipment”
and “semiconductor manufacturing equip-
ment” can be treated as a single item for
purposes of the beginning of construc-
tion. Accordingly, §1.48D-5(a)(3)(i) of
the final regulations is revised to include
“tooling equipment” and “semiconductor
manufacturing equipment.”
Commenters requested that the final
regulations establish a safe harbor for
satisfying the single advanced manufac-
turing facility project determination if a
taxpayer meets at least four of the factors
listed under proposed §1.48D-5(a)(3)(i).
As noted in the Background section of
this preamble, the final regulations pri-
marily apply credit mechanics and proce-
dures common to all investment credits.
It is therefore appropriate for purposes
of section 48D to provide a single project
test similar to the test provided in other
recent guidance applicable to investment
credits. Accordingly, §1.48D-5(a)(3)(i) of
the final regulations provides that multi-
ple properties or facilities will be treated
as a single project if, at any point during
construction of the multiple properties
or facilities, they are owned by a single
taxpayer (subject to the related taxpayer
rule discussed later in this section of this
Summary of Comments and Explanation
of Revisions), and any two or more of the
factors listed in §1.48D-5(a)(3)(i) are met.
Under §1.48D-5(a)(3)(ii) of the final regu-
lations, related taxpayers would be treated
as one taxpayer in determining whether
multiple facilities or properties are treated
as a single project. Related taxpayers
would be defined as members of a group
of trades or businesses that are under com-
mon control (as defined in §1.52-1(b)).
Commenters also requested that the
final regulations modify proposed §1.48D-
5(a)(3)(i)(F) by changing “single master
construction contract” to a “single master
construction plan,” and add a new factor
based on whether the properties or facili-
ties achieve efficiencies and economies of
scale through shared semiconductor man-

Bulletin No. 2024–51 1265 December 16, 2024
ufacturing resources. However, planning
and designing are generally regarded as
preliminary activities that would not sat-
isfy the Physical Work Test, and treating
multiple items of qualified property as a
single item based on a “construction plan”
as opposed to a “construction contract”
would not inform whether construction
has begun for purposes of section 48D.
Including a factor based on whether the
properties or facilities achieve efficiencies
and economies of scale through shared
semiconductor manufacturing resources
would inject significant complexity into
the final regulations and likely cause addi-
tional uncertainty regarding the scope of
the term “single advanced manufacturing
facility project” due to its inherently fac-
tual nature. Accordingly, the final regula-
tions do not incorporate the commenters’
recommendations.
One commenter requested that the final
regulations clarify the disaggregation of
a single advanced manufacturing facility
project under proposed §1.48D-5(a)(3)
(iv). The commenter requested that the
final regulations clarify that the relevant
facts and circumstances to satisfy the con-
tinuity requirement for disaggregated sep-
arate items of property or facilities should
be the facts and circumstances from the
time that the continuity safe harbor period
ends until the property is placed in ser-
vice. The Treasury Department and the
IRS decline to adopt the recommendation
because it would be inconsistent with the
continuity requirement. Those disaggre-
gated separate items of property or facili-
ties were not placed in service prior to the
continuity safe harbor deadline and there-
fore, the taxpayer is not deemed to satisfy
the continuity requirement with respect
to those items from the beginning of con-
struction date through the end of the con-
tinuity safe harbor period. Accordingly,
the final regulations do not incorporate the
commenter’s recommendation.
The commenter also requested that the
final regulations address the time period
for which the remaining disaggregated
separate items of property or facilities
may satisfy the continuity requirement
under a facts and circumstances determi-
nation, pursuant to proposed §1.48D-5(a)
(3)(iv). The commenter recommended
that the period start when physical work of
a significant nature begins with respect to
the disaggregated separate item of prop-
erty rather than when construction began
based on the single advanced manufac-
turing facility project. The commenter
recommended that, alternatively, a contin-
uous construction or continuous effort for
any one item of property within the single
advanced manufacturing facility project
be attributed to all properties within the
project to satisfy the continuity require-
ment. The Treasury Department and the
IRS have determined that the relevant
facts and circumstances determination in
proposed §1.48D-5(a)(3)(iv) is appropri-
ate for determining whether a disaggre-
gated separate item of property satisfies
the continuity requirement. Accordingly,
the final regulations do not incorporate the
commenter’s recommendation.
B. Beginning of Construction, In General
A commenter requested that the final
regulation clarify whether a taxpayer
applies the same test for all construction
in progress at one contiguous location to
determine whether construction began
before December 31, 2026. Proposed
§1.48D-5(b)(1) provides that a taxpayer
may establish that construction of an item
of property (defined as a single advanced
manufacturing facility project under pro-
posed §1.48D-5(a)(3), or an item of qual-
ified property under proposed §1.48D-
3(b)) of a taxpayer begins under either the
Physical Work Test or the Five Percent
Safe Harbor. Thus, whether a taxpayer
applies the same test for all construction
in progress at one contiguous location
depends on the unit of property being
measured. For this reason, the Treasury
Department and the IRS have determined
that a clarification is not necessary.
C. Physical Work Test
Commenters requested that the final
regulations include examples of on-site
and off-site physical work of a signifi-
cant nature specific to the semiconductor
industry. One commenter recommended,
at a minimum, including on-site activi-
ties such as excavation for the founda-
tion of a facility, pouring concrete into
a foundation of a facility, and installing
underground utilities, and including off-
site activities such as the acquisition of
key systems, manufacture of components,
mounting equipment, and constructing
support structures such as steel trusses.
The Treasury Department and the IRS
have determined that including certain
examples of on-site and off-site work to
provide additional certainty to taxpayers
is appropriate for determining whether
physical work of a significant nature has
occurred. Accordingly, §1.48D-5(c)(2) of
the final regulations includes a non-exclu-
sive list of examples of on-site and off-site
activities, consistent with IRS guidance
pertaining to beginning of construction.
D. Five Percent Safe Harbor
One commenter requested that a pay-
ment made by the taxpayer for property
that is manufactured, constructed, or pro-
duced for the taxpayer by another person
under a binding written contract but is not
yet provided to the taxpayer and is not yet
incurred by the other person is consid-
ered paid or incurred with respect to the
taxpayer for purposes of the Five Percent
Safe Harbor. As noted, the section 48D
regulations primarily apply long-estab-
lished credit mechanics and procedures
common to all investment credits, includ-
ing application of the principles of section
461. Therefore, the final regulations retain
the rule set forth in proposed §1.48D-5(d)
(2).
E. Continuity Requirement
Commenters requested that the final
regulations provide examples of the facts
and circumstances that would support
the conclusion that the taxpayer satisfied
the continuity requirement. The Treasury
Department and the IRS have determined
that including an example of facts and
circumstances that would support a par-
ticular factor being met under the con-
tinuity facts and circumstances test is
appropriate for clarifying the continuity
requirement in this context. Accordingly,
the final regulations clarify that a taxpayer
has met the factor of paying or incurring
additional amounts included in the total
cost of the property for a taxable year in
which it pays or incurs (within the mean-
ing of §1.461-1(a)(1) and (2)) five percent
or more of the total cost of the property
each calendar year after the calendar year

December 16, 2024 1266 Bulletin No. 2024–51
during which construction of the property
began for purposes of section 48D and the
section 48D regulations.
One commenter requested that the final
regulations include “industry downturns”
in the non-exclusive list of construction
disruptions under proposed §1.48D-5(e)
(4)(iii). The commenter explained that the
semiconductor industry is highly cycli-
cal in nature and semiconductor compa-
nies typically reduce capital expenditures
and delay on-going construction of new
semiconductor facilities during industry
downturns. The commenter recommended
defining “industry downturn” as a 20 per-
cent reduction to publicly traded stock
value during the preceding 12-month
period. The commenter also requested
that the final regulations include a provi-
sion that Treasury may exercise its author-
ity to identify per se construction disrup-
tions in future guidance. The Treasury
Department and the IRS decline to adopt
these recommendations, but will consider
whether future guidance, specific to any
market and construction disruptions, is
necessary, as needed.
A commenter requested that the final
regulations modify the continuity safe
harbor in proposed §1.48D-5(e)(6) by
creating a bright-line rule that all property
placed in service before December 31,
2036, will be deemed to satisfy the conti-
nuity safe harbor. The commenter argued
that the structure of a continuity safe har-
bor that measures from the beginning of
construction, in the context of semicon-
ductor manufacturing, creates an incen-
tive to intentionally delay the beginning
of construction date to as late in 2026 as
possible to more closely align the time
that construction begins to the beginning
of the tolling of the 10-year safe harbor
period. Section 48D(e) provides that a
section 48D credit may not be claimed for
property the construction of which begins
after December 31, 2026. The March
2023 proposed regulations provide that a
taxpayer can establish that construction
of property has begun by meeting either
the Physical Work Test or the Five Percent
Safe Harbor. Under either test, a taxpayer
must meet the Continuity Requirement by
demonstrating continuous construction or
continuous efforts based on the relevant
facts and circumstances. In lieu of demon-
strating continuous construction or con-
tinuous efforts, however, the taxpayer is
deemed to satisfy the continuity require-
ment, under the continuity safe harbor,
by placing the property in service within
ten calendar years after the date that the
Physical Work Test or the Five Percent
Safe Harbor is first satisfied. Taxpayers
are not obligated to satisfy the continuity
safe harbor to meet the continuity require-
ment. For these reasons, the Treasury
Department and the IRS decline to adopt
the commenter’s recommendation in the
final regulations.
A commenter requested that the final
regulations include a monetary safe har-
bor in which a taxpayer is deemed to
satisfy the continuous construction test
or continuous efforts test in the case an
advanced manufacturing facility project if
the taxpayer pays or incurs a certain dol-
lar amount of the total cost of the prop-
erty during each taxable year before the
property is placed in service. Paying or
incurring costs towards completion of a
project is one of many factors that may
indicate the continuity requirement is met.
As such, the Treasury Department and
the IRS decline to include an additional
safe harbor in the final regulations that is
solely dependent on the dollar amount of
monetary spend in a given taxable year.
However, as previously described, the
final regulations clarify that a taxpayer
has met the factor of paying or incurring
additional amounts included in the total
cost of the property for a taxable year in
which it pays or incurs (within the mean-
ing of §1.461-1(a)(1) and (2)) five percent
or more of the total cost of the property
each calendar year after the calendar year
during which construction of the property
began.
VII. Comments on and Changes to
Proposed §1.50-2
A. Applicable Transaction
One commenter requested clarification
of whether the term “applicable transac-
tion” includes the expansion of manu-
facturing semiconductor manufacturing
equipment in a foreign country of concern.
Section 50(a)(6)(D) provides that “appli-
cable transaction” means a “significant
transaction” involving the material expan-
sion of “semiconductor manufacturing
capacity” in a foreign country of concern.
Section 50(a)(6)(D) does not refer to man-
ufacturing semiconductor manufactur-
ing equipment. For that reason, the term
“applicable transaction” does not include
the expansion of manufacturing semi-
conductor manufacturing equipment in a
foreign country of concern. Section 50(a)
(6)(E), however, defines the term “appli-
cable taxpayer” as any taxpayer who has
been allowed a section 48D credit for any
prior taxable year. Thus, a taxpayer that
was allowed a section 48D credit for man-
ufacturing semiconductor manufactur-
ing equipment as defined in §1.48D-2(h)
of the final regulations is an “applicable
taxpayer” for purposes of section 50(a)
(3) and (a)(6)(D) and would be subject
to recapture under those provisions if the
taxpayer engaged in an “applicable trans-
action” involving the material expansion
of semiconductor manufacturing in a for-
eign country of concern.
Commenters suggested that the final
regulations provide that a transaction does
not trigger recapture under section 50(a)
(3) if such transaction does not trigger a
clawback under an entity’s required agree-
ment with the Department of Commerce.
Consistent with section 50(a)(6)(D), if a
taxpayer enters into a required agreement
with the Secretary of Commerce, the final
regulations define the term “significant
transaction” to have the same meaning
as provided in the required agreement for
purposes of section 48D and the section
48D regulations.
B. Definition of Applicable Taxpayer
Several commenters requested that the
final regulations treat only partners that
actually claim a section 48D credit as an
“applicable taxpayer,” as opposed to all
partners in the partnership as required
under proposed §1.50-2(b)(2)(i)(C). Two
of the commenters argued that activities
undertaken outside the partnership by one
partner should not trigger recapture of the
section 48D credit claimed by another
partner in the partnership. The Treasury
Department and the IRS have determined
that certain modifications are appropriate
for defining “applicable taxpayer” in the
context of qualified property owned by a
partnership or S corporation. Accordingly,
the final regulations retain the general

Bulletin No. 2024–51 1267 December 16, 2024
definition of “applicable taxpayer” from
proposed §1.50-2(b)(2)(i)(A) and include
special rules for partnerships and S corpo-
rations.
The final regulations clarify that in the
case of property placed in service by a part-
nership, the term “applicable taxpayer”
means any direct or indirect partner in a
partnership: (1) who was allowed a section
48D credit for such property for any tax-
able year prior to when such partnership
entered into an applicable transaction and
includes such partnership; (2) with respect
to the partner’s share of any section 48D
credit allowed for such property prior to
when such partner entered into an applica-
ble transaction; or (3) with respect to the
partner’s share of any tax-exempt income
from a partnership that made an election
under section 48D(d)(2) for any taxable
year prior to when such partner entered
into an applicable transaction. Consis-
tent with proposed §1.50-2(b)(2)(i)(B),
the final regulations provide that the term
“applicable taxpayer” means a partner-
ship that made an election under section
48D(d)(2) for any taxable year prior to
the taxable year in which the partnership
entered into an applicable transaction. The
final regulations include similar rules for
S corporations and shareholders. The final
regulations also include additional exam-
ples to clarify the application of the rules
regarding the term “applicable taxpayer.”
C. Significant Transactions in General
and Certain Required Agreements under
Section 103(b) of the CHIPS Act
Section 50(a)(6)(D) requires that the
meaning of the term “significant trans-
action” be determined by the Secretary
in coordination with the Secretary of
Commerce and the Secretary of Defense.
Accordingly, the March 2023 proposed
regulations defined the term “significant
transaction” to align and harmonize the
scope of applicable transactions under sec-
tion 50(a)(3) with the scope of prohibited
material expansion transactions within the
meaning of proposed 15 CFR 231.121
(relating to the Prohibition on Certain
Expansion Transactions) and included the
definition of “significant transaction” in
proposed 15 CFR 231.101 as contained in
the Commerce Proposed Rule. However,
unlike the Commerce Proposed Rule, the
Commerce Final Rule does not include
a definition of “significant transaction.”
Rather, pursuant to section 103(b) of the
CHIPS Act, what constitutes a “signif-
icant transaction” is to be defined in the
required agreement entered into between
a funding recipient and the Secretary of
Commerce. Accordingly, the Treasury
Department and the IRS (in coordination
with the Secretary of Commerce and the
Secretary of Defense) have determined
that, consistent with section 50(a)(6)(D),
the term “significant transaction” means
either a “significant transaction” as that
term is generally defined in §1.50-2(b)
(10)(i) of the final regulations, or, with
respect to a taxpayer that has entered into
a required agreement with the Secretary of
Commerce, as the term “significant trans-
action” is defined in §1.50-2(b)(10)(ii) of
the final regulations, in the required agree-
ment with the Department of Commerce.
Consistent with the definition of “signifi-
cant transaction” in §1.50-2(b)(10)(ii) of
the final regulations, the defined terms in
the required agreement with the Depart-
ment of Commerce control for purposes
of determining the meaning of the term
“significant transaction.”
One commenter requested that the
section 50(a)(3) and (a)(6)(D) recapture
provisions and the Department of Com-
merce’s award clawback rules should
align the set of restrictions on transactions
in foreign countries of concern to avoid
disrupting ordinary business activities at
existing legacy facilities, especially given
the length of time of the advanced man-
ufacturing investment credit recapture
period. The Treasury Department and the
IRS note that the final regulations harmo-
nize the restrictions to the extent provided
under the statute.
D. Definition of Significant Transaction
Several commenters requested mod-
ifications to the definition of “significant
transaction” in the March 2023 proposed
regulations. Some commenters requested
the final regulations increase the $100,000
threshold for determining whether a
transaction is a “significant transaction.”
Commenters also requested that the final
regulations explicitly state that transac-
tions with a principal purpose of funding
ordinary course operations (for example,
payroll, rent and utilities, marketing and
advertising, and similar items) are not
considered significant.
In response to comments, the Treasury
Department and the IRS are removing the
monetary threshold for “significant trans-
action”, and, instead, the revised defi-
nition focuses on the type of transaction
that could result in material expansion.
This approach is consistent with the intent
of the recapture rule in section 50(a)(3).
Accordingly, the definition of “significant
transaction” has been modified to include
(1) an investment, whether proposed,
pending, or completed, including any cap-
ital expenditure, loan, or gift; (2) the for-
mation of a subsidiary, whether classified
as a corporation or partnership for Federal
tax purposes; (3) a merger, acquisition, or
takeover, including (a) the acquisition of
a new or additional ownership interest in
an entity, (b) the acquisition of a material
portion of the assets of an entity, or (c) a
consolidation; (4) the formation of a joint
venture; or (5) a long-term lease or con-
cession arrangement under which a lessee
(or equivalent) makes substantially all
business decisions concerning the opera-
tion of a leased entity (or equivalent), as if
it were the owner. This definition, coupled
with the revision to the definition of mate-
rial expansion, would clarify that transac-
tions with a principal purpose of funding
ordinary course operations are not signifi-
cant transactions.
One commenter requested that the final
regulations eliminate the 85 percent rule
under proposed §1.50-2(b)(10)(iii) from
the definition of “significant transaction”
or replace it with a simpler metric based
on the ratio of units an entity manufac-
tures in a foreign country of concern to
the units shipped into a foreign country
of concern. Another commenter requested
that the Treasury Department and the IRS
coordinate with the Department of Com-
merce to finalize a single uniform stan-
dard to identify what is a “final product”
for purposes of proposed §1.50-2(b)(10)
(iii). The proposed definition of “signif-
icant transaction” was intended to align
and harmonize with the scope of certain
prohibited expansion transactions under
the Commerce Proposed Rule, pursuant
to the Secretary’s authority under sec-
tion 50(a)(6)(D)(i) to determine whether
transactions are significant transactions.

December 16, 2024 1268 Bulletin No. 2024–51
Accordingly, to maintain this alignment,
the final regulations retain the 85 percent
threshold in its consideration of whether
certain production of legacy semiconduc-
tors “predominately serves the market”
in a foreign country of concern. Because
the meaning of the term “predominately
serves the market” is intended to be con-
sistent with the Commerce Final Rule, the
Treasury Department and the IRS decline
to interpret “serves the market” to refer to
the location to which the semiconductors
are first shipped.
Two commenters requested that the
prohibition on technology licensing and
joint research be removed from the defini-
tion of significant transaction, noting that
the CHIPS Act does not refer to “technol-
ogy licensing.” Several commenters sug-
gested that the definition of “technology
licensing” in proposed §1.50-2(b)(11)
is overly broad and could include gen-
eral business operations, nondisclosure
agreements, the discussion of products or
technology, patents, trade secrets, know-
how, intraparty transfer agreements, or
arrangements operating under current
export control authorization. The com-
menters requested that the final regula-
tions narrow the definition to focus on
the actual licensing of the technology or
products that are subject to restrictions
rather than just the discussion of products
or technology. One commenter suggested
that taxpayers and their affiliate will be
required to review and possibly termi-
nate pre-existing agreements based on
the proposed definition.
Removing the prohibition on joint
research or technology licensing agree-
ments with a foreign entity of concern
would allow a taxpayer to circumvent
section 50(a)(3) and (a)(6)(D) through the
use of joint research or technology licens-
ing transactions. However, the Treasury
Department and the IRS agree with the
commenter’s suggestions concerning the
scope of the term “technology licensing”
in the March 2023 proposed regulations
given that the definition of “technology
licensing” in the Commerce Final Rule
was modified, consistent with these com-
ments. Accordingly, the final regulations
provide that the terms “joint research”
and “technology licensing” have the same
meaning as provided in 15 CFR 231.105
and 231.120, respectively.
One commenter stated that the affili-
ated group rule under proposed §1.50-2(b)
(10)(v) (establishing a 50 percent owner-
ship test) is inconsistent with the refer-
ence in 15 U.S.C. 4652(a)(6)(C)(iii) to
section 1504(a) of the Code. The Treasury
Department and the IRS agree that the
affiliated group rule is inconsistent with
the reference in 15 U.S.C. 4652(a)(6)(C)
(iii) to section 1504(a) and for that reason,
the affiliate group rule has been removed
from the final regulations.
E. Existing Facility
Commenters requested that the defini-
tion of an “existing facility” in proposed
§1.50-2(b)(5) be revised in the final regu-
lations to clarify whether the term includes
a facility undergoing production ramp-up
and thus, on the date on which quali-
fied property was placed in service, was
not operating at full production level for
which it was designed. One commenter
requested that the final regulations clarify
that upgrades and productivity improve-
ments made to a facility during the ordi-
nary course of business operations is not
considered a significant renovation and the
date for measuring semiconductor manu-
facturing capacity is the placed in service
date as intended by the statute. The Trea-
sury Department and the IRS have deter-
mined that only facilities built, equipped,
and operating prior to a taxpayer placing
in service qualified property as defined in
section 48D(b)(2) and §1.48D-3 are con-
sidered to be existing facilities. A facility
that undergoes significant renovations as
defined in §1.50-2(b)(9) of the final reg-
ulations would no longer qualify as an
existing facility. The final regulations do
not require the existing facility to be oper-
ating at the semiconductor manufacturing
capacity for which it was designed, as
required by the March 2023 proposed reg-
ulations. As noted in section VII.G of this
Summary of Comments and Explanation
of Revisions, the final regulations modify
the definition of a “significant renovation”
to mean building new cleanroom space or
adding a production line or other physi-
cal space to an existing facility, such that
upgrades and productivity improvements
made to a facility during the ordinary
course of business operations would not
be considered a significant renovation.
F. Material Expansion
Commenters requested that the defini-
tion of “material expansion” in proposed
§1.50-2(b)(7) be modified in the final reg-
ulations to allow for an increase of semi-
conductor manufacturing capacity greater
than 5 percent. One commenter requested
that the 5 percent increase in capacity
be measured on an average basis over
the course of a year. Commenters also
requested that the final regulations pro-
vide a finite list specifying business activi-
ties, products and processes that constitute
a material expansion of semiconductor
manufacturing. The Treasury Department
and the IRS have determined that raising
the five percent threshold for allowable
material expansions or measuring the five
percent increase capacity on average over
the course of a year would undermine the
objective of the recapture rule under sec-
tion 50(a)(3). The Treasury Department
and the IRS have further determined that
specifying business activities, products
and process that constitute a material
expansion of semiconductor manufactur-
ing is consistent with the statute. Accord-
ingly, the final regulations retain the five
percent threshold and clarify that the
increase in capacity is due to the addition
of a cleanroom, production line or other
physical space, or series of such additions
during the applicable period. The final
regulations clarify that the term “material
expansion” includes any construction of a
new facility for semiconductor manufac-
turing.
G. Significant Renovations and
Semiconductor Manufacturing Capacity
Several commenters requested that the
scope of the definition of “significant reno-
vation” in proposed §1.50-2(b)(9) be mod-
ified to encompass only new cleanroom
construction, production space, increase
in the square footage of an existing facility
by a specified percentage, or actual out-
put of the facility. The commenters argued
that the March 2023 proposed regulations
unnecessarily narrowed the scope of the
exemption for legacy semiconductors as
enacted, noting that the CHIPS Act does
not include the term “significant renova-
tion.” Some commenters also requested
that the ten percent ceiling for increasing

Bulletin No. 2024–51 1269 December 16, 2024
semiconductor manufacturing capacity
be increased to fifteen percent. The com-
menters further requested that the final
regulations clarify that an operating facil-
ity that has not yet reached its full capacity
will be considered an “existing facility.”
The Treasury Department and the IRS
have considered the commenters’ sugges-
tions and have determined that the “signif-
icant renovation” and ten percent thresh-
old provisions are necessary to prevent a
taxpayer from circumventing the recap-
ture provisions of section 50(a)(3)(A) by
engaging in a “significant renovation”
of an “existing facility.” However, the
Treasury Department and the IRS agree
with the commenters that clarification is
needed concerning what is the scope of a
“significant renovation.” Accordingly, the
final regulations retain the rules for a “sig-
nificant renovation” of an existing facility
but clarify that a “significant renovation”
means building new cleanroom space or
adding a production line or other physical
space to an existing facility that, in the
aggregate during the applicable period,
increases semiconductor manufacturing
capacity by 10 percent or more.
One commenter requested that the final
regulations clarify that, with respect to a
specific facility, a taxpayer’s semiconduc-
tor manufacturing capacity is measured by
taking into account both (i) the taxpayer’s
own semiconductor manufacturing capac-
ity in that facility, and (ii) any semicon-
ductor manufacturing capacity of another
party to the extent the other party’s oper-
ations are carried on for the benefit of the
taxpayer. The commenter noted that semi-
conductor fabrication companies com-
monly outsource assembly and test work
to third parties referred to as outsourced
semiconductor assembly and test provid-
ers, or “OSATs.” The commenter further
noted that semiconductor manufacturer
may lease a portion of a facility in a for-
eign country of concern to an OSAT that
performs assembly and test work for the
benefit of the taxpayer within the same
facility. One commenter, included as an
attachment to its comments on the March
2023 proposed regulations, a letter that
the commenter sent to the Department
of Commerce concerning the Commerce
Proposed Rule. The commenter requested
that the Commerce Final Rule provide
that semiconductor manufacturing capac-
ity be measured in wafer starts per year, as
opposed to wafer starts per month.
Consistent with the Commerce Final
Rule in 15 CFR 231.117, the final regula-
tions provide that semiconductor manufac-
turing capacity is appropriately measured in
wafer starts per month not including OSAT
production. Section 1.50-2(b)(8) of the final
regulations include a rule for determining
“semiconductor manufacturing capacity”
in the case of semiconductor wafer produc-
tion. The final regulations clarify that wafer
production is measured in starts per month
and in the case of a semiconductor wafer
production facility that includes the pro-
cesses of growing single-crystal ingots and
boules, wafer slicing, etching and polishing,
cleaning, epitaxial deposition, and metrol-
ogy, manufacturing capacity is measured in
wafer starts per month.
H. Technology or Product that Raises
National Security Concerns
One commenter requested that the
final regulations exclude from the defini-
tion of semiconductors critical to national
security, any semiconductors that reduce
carbon emissions because they enhance
rather than reduce U.S. national security
(specifically SiC power semiconductors).
The Treasury Department and the IRS
appreciate that the performance advan-
tages offered by compound semiconduc-
tors over silicon semiconductors, such as
wider bandgap, lower operating voltages,
and higher electron mobility, are vital to
many military applications. Moreover,
the governments of some foreign coun-
tries of concern have identified compound
semiconductors as a strategic emerg-
ing industry. They have set ambitious
goals for acquisition and development
of compound semiconductor technology
and strive to become global leaders in
the industry. However, while exports of
certain semiconductors are not subject
to national security or regional stability
export controls, joint research, or tech-
nology licensing involving these products
with foreign entities of concern can never-
theless pose a significant risk to national
security. Taxpayers that claim a section
48D credit should not further that risk. For
these reasons, the Treasury Department
and the IRS decline to adopt the comment-
er’s request.
I. Exception from the Definition
of Applicable Transaction for
the Manufacturing of Legacy
Semiconductors
Several commenters requested that
the final regulations specifically include
assembly test manufacturing (ATM) that
uses non-3D packaging in the definition
of legacy semiconductor. The comment-
ers argued that given that ATM is gener-
ally a back-end operation, with billions of
pre-existing investments, it is appropriate
for these operations to be viewed under
the definition of legacy unless they specif-
ically perform 3D integration. The Trea-
sury Department and the IRS agree with
the commenters’ suggestion. Accordingly,
the final regulations, consistent with 15
CFR 231.107, clarify that only semicon-
ductors utilizing advanced 3D integration
packaging such as by directly attaching
one or more die or wafer, through silicon
vias (TSV) or through mold vias (TMV),
or other advanced methods are not consid-
ered to be legacy semiconductors.
Commenters requested that the final
regulations conform the example of
memory semiconductor under proposed
§1.50-2(c)(2)(ii) to current export con-
trols. Section 50(a)(6)(D)(ii) provides
that the exception for legacy semiconduc-
tors applies as defined in section 9902(a)
(6) of the William M. (Mac) Thornberry
National Defense Authorization Act for
Fiscal Year 2021, as amended by section
103 of the CHIPS Act. The example of
a memory semiconductor in proposed
§1.50-2(c)(2)(ii) is consisted with the stat-
utory definition of a legacy semiconduc-
tor. Accordingly, the Treasury Department
and the IRS decline to revise the example
of a memory semiconductor in the final
regulations.
Commenters requested that what is
considered a leading or “legacy” semicon-
ductor should be adjusted over the course
of a 10-year period and should be con-
nected to authorization permitted under
export control licensing. Proposed §1.50-
2(c)(2)(iii) includes among the definition
of a “legacy semiconductor” a semicon-
ductor identified by the Secretary of Com-
merce in a public notice issued under 15
U.S.C. 4652(a)(6)(A)(ii). The Secretary
of Commerce is required, pursuant to 15
U.S.C. 4652(a)(6)(A)(ii), to update the

December 16, 2024 1270 Bulletin No. 2024–51
definition of “legacy semiconductor” on a
regular basis and at least every two years.
Thus, the definition of what is considered
a leading or legacy semiconductor will
be adjusted over the course of a 10-year
period, as the Secretary of Commerce
deems appropriate as reflected in §1.50-
2(c)(2) of the final regulation.
One commenter requested that the final
regulations provide that the exclusion of
any technology from the definition of “leg-
acy semiconductor” in the future pursuant
to 15 U.S.C. 4652(a)(6)(A)(ii) be applied
only prospectively and not to any trans-
actions previously entered into. Section
50(a)(6)(D)(ii) provides that the excep-
tion for legacy semiconductors applies
as defined in section 9902(a)(6) of the
William M. (Mac) Thornberry National
Defense Authorization Act for Fiscal Year
2021, as amended by section 103 of the
CHIPS Act. Section 103(b) of the CHIPS
Act added 15 U.S.C. 4652(a)(6)(A)(ii)
and requires the Secretary of Commerce,
after public notice and an opportunity for
comment and if applicable and neces-
sary, to issue a public notice identifying
any additional semiconductor technology
included in the meaning of the term “leg-
acy semiconductor” on a regular basis, and
at least every two years. The commenter’s
recommendation to apply only prospec-
tively any technology excluded from the
definition of “legacy semiconductor” by
the Secretary of Commerce pursuant to
15 U.S.C. 4652(a)(6)(A)(ii) is beyond
the application of sections 48D and 50
and the section 48D regulations. For that
reason, the Treasury Department and the
IRS decline to adopt the commenter’s rec-
ommendation. One commenter requested
that the final regulations modify the defi-
nition of legacy semiconductors that is of
28 nanometer generation or older under
proposed §1.50-2(c)(2)(i) by deleting the
reference to gate length and including
technologies using the planar transistor
architecture that should be considered the
same as 28 nanometer generation tech-
nology. The Treasury Department and the
IRS decline to adopt the commenter’s rec-
ommendation. The proposed definition of
legacy semiconductor with respect to 28
nanometer generation technology is con-
sistent with the CHIPS Act and accurately
captures the definition of legacy semicon-
ductors. The proposed definition also pre-
vents a company from using or creating a
derivation of their existing 28 nanometer
technology for use in a foreign country of
concern that is inconsistent with the kind
of material expansion of semiconductor
manufacturing the CHIPS Act seeks to
constrain.
Several commenters requested that
the final regulations narrow the excep-
tion under proposed §1.50-2(c)(3)(iii) to
“advanced” 3D packaging techniques, so
that TSV and TMV are excluded from
the definition of legacy semiconduc-
tor. In coordination with the Department
of Commerce and the Department of
Defense, the Treasury Department and
the IRS have incorporated this recommen-
dation in the final regulations. The Com-
merce Final Rule clarifies the meaning
of the term “legacy semiconductor” with
respect to a semiconductor wafer facil-
ity, a semiconductor fabrication facility,
and a semiconductor packaging facility.
Again, in coordination with the Depart-
ment of Commerce and the Department of
Defense, the Treasury Department and the
IRS have incorporated this clarification in
the final regulations.
The March 2023 proposed regulations
provided a definition of “legacy semicon-
ductor” that was identical to the definition
in Commerce Proposed Rule. Consistent
with section 50(a)(6)(D)(ii) of the Code
and section 9902(a)(6) of the William
M. (Mac) Thornberry National Defense
Authorization Act for Fiscal Year 2021,
as amended by section 103 of the CHIPS
Act, the final regulations define the term
“legacy semiconductor” as having the
same meaning as that term is defined in the
Commerce Final Rule, 15 CFR 231.107.
J. Standards for Determining the
Satisfaction of the Commissioner
Commenters requested that the final
regulations include standards for estab-
lishing what is considered to be to “the
satisfaction of the Secretary” or “the sat-
isfaction of the Commissioner” for pur-
poses of section 50(a)(3)(B) and proposed
§1.50-2(a)(2), respectively. Commenters
suggested that the final regulations address
how a taxpayer may demonstrate cessation
or abandonment of a project, and further
suggested that those actions could include
proof of cancelled contracts, the with-
drawal or cancellation of work permits, a
board resolution that expressly cancels the
applicable transaction, or the issuance of a
public statement that expressly cancels the
applicable transaction. Commenters also
suggested that final regulations include a
non-exhaustive list of documents that can
be used to establish cessation or abandon-
ment of a project. The Treasury Depart-
ment and the IRS have determined that
the rules suggested by the commenters,
as well as similar provisions, would likely
cause additional uncertainty regarding the
scope of the term “to the satisfaction of
the Commissioner” due to its inherently
factual nature. As a result, the final regu-
lations do not incorporate the commenters
recommendations.
K. Records Retention
The Treasury Department and the
IRS requested comments on the ability
of applicable taxpayers to comply with
potential record keeping requirements in
addition to those required by current law
and on what specific procedures should be
considered to ensure that the IRS has suf-
ficient information to determine whether
an applicable taxpayer engages in an
applicable transaction within the meaning
of section 50(a)(3) and proposed §1.50-
2. Several commenters suggested that
any record retention should be limited to
records obtained in the ordinary course of
business. Another commenter suggested
the IRS could include a form or attachment
to annual tax returns with basic questions
for the IRS to ascertain whether an appli-
cable taxpayer may have engaged in an
applicable transaction during the taxable
year. Section 50(a)(3)(C) provides that the
Secretary shall issue regulations or other
guidance as the Secretary determines
necessary or appropriate to carry out the
purposes of section 50(a)(3), including
regulations or other guidance which pro-
vides for requirements for recordkeeping
or information reporting for purposes of
administering the requirements of sec-
tion 50(a)(3). The Treasury Department
and the IRS have determined that records
retained in a taxpayer’s ordinary course
of business, and as required under current
applicable periods of limitations under
section 6501 of the Code on assessment
and collection of tax under chapter 1 with

Bulletin No. 2024–51 1271 December 16, 2024
respect to the applicable taxpayer’s return
filed for the taxable year that includes the
close of the 10-year period beginning on
the date such taxpayer placed in service
investment credit property that is eligible
for the section 48D credit, are sufficient.
Accordingly, the final regulations do not
incorporate any additional record keeping
requirements.
Some commenters requested that the
final regulations provide for more of
an alignment of the section 48D credit
requirements and the Department of
Commerce grant regulatory requirements
including standardizing the same 10-year
recapture or clawback period and stream-
line reporting and recordkeeping require-
ments. The commenters also requested
that responsibility for administering the
various overlapping rules and taxpayer
notification requirements be delegated to
a single agency or an interagency body.
Section 50(a)(3) provides for recapture
of the section 48D credit if there is an
applicable transaction by an applicable
taxpayer before the close of the ten-year
period beginning on the date such property
is placed in service. Pursuant to 15 USC
4652(a)(6)(C)(i), the Commerce Final
Rule, 15 CFR 231.202, provides that the
10-year period for the Expansion Claw-
back begins on the date of the award of
Federal financial assistance under 15 USC
4652. The preamble to the Commerce
Final Rule clarifies that the applicable
term for the technology clawback (15 CFR
231.203) is defined in the relevant award
documents. Pursuant to the relevant stat-
utes, the recapture period for a section 48D
credit begins on the date the qualified prop-
erty is placed in service, and the Expan-
sion Clawback and technology clawback
periods begin on the date of the award of
financial assistance and as defined in the
award documents, respectively. For this
reason, aligning the recapture period with
the clawback period would be inconsistent
with section 50(a)(3)(A).
Section 50(a)(6)(D)(i) requires that
the Secretary (in coordination with the
Secretary of Commerce and the Secretary
of Defense) define the term “significant
transaction” for purposes of section 50.
Consistent with the statutory directive in
section 50(a)(6)(D)(i), §1.50-2(b)(10) of
the final regulations defines the term “sig-
nificant transaction” as determined by the
Treasury Department and the IRS in coor-
dination with the Department of Com-
merce and the Department of Defense.
Treasury regulations that otherwise would
align or streamline the reporting and
recordkeeping requirements or delegate
the administrative functions to a single
agency or interagency body are beyond
the scope of the statute.
L. Private Letter Rulings
Commenters requested that the IRS
grant private letter rulings or other deter-
minations on the beginning of construc-
tion, effective date, costs, and or other
matters relevant to section 48D. Consis-
tent with guidance published in the Inter-
nal Revenue Bulletin, the IRS ordinarily
will not issue private letter rulings to a
taxpayer regarding the beginning of con-
struction requirement under section 48D
with respect to property placed in service
after these final regulations are published
in the Federal Register. In addition, the
IRS may decline to issue a letter ruling or
a determination letter when appropriate in
the interest of sound tax administration,
including due to resource constraints, or
on other grounds whenever warranted by
the facts or circumstances of a particular
case.
Applicability Date
The final regulations set forth in
§§1.48D-1 through 1.48D-5, and 1.50-2
apply to property that is placed in service
after December 31, 2022, and during a
taxable year ending on or after October
23, 2024.
Special Analyses
I. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management and
Budget (OMB) before collecting infor-
mation from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain a
benefit. A Federal agency may not conduct
or sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information dis-
plays a valid control number.
This regulation mentions elections
that are made in accordance with sec-
tion 48D(d)(1) and (d)(2) of the Code
and §1.46-5 of the Treasury Regulations.
These elections are made with Form 3468,
Investment Credit, which are already
approved by the OMB under 1545-0074
for individual/sole proprietor filers, 1545-
0123 for business filers, and 1545-0155
for trust and estate filers. This regulation is
not changing those election requirements;
and is not telling taxpayers to make these
elections but explaining their treatment
for the credit if they have made these elec-
tions.
This regulation also describes recapture
of the advanced manufacturing investment
credit in the case of certain expansions, as
detailed in §1.50-2(a). The reporting of the
recapture event will still be required to be
reported using Form 4255, Recapture of
Investment Credit. This form is approved
under OMB control numbers 1545–0074
for individuals/sole proprietors, 1545–
0123 for business entities, and 1545–0166
for trust and estate filers. The final regula-
tion is not changing or creating new collec-
tion requirements not already approved by
OMB on Form 4255.
This regulation includes recordkeep-
ing requirements outlined in §1.50-2 for
recording transactions, investments, facil-
ities information, and agreements with
the Department of Commerce. The IRS
expects that these records are usual and
customary business records; however, the
taxpayers will need to keep these records
as long as they are admissible by the stat-
ute, typically for 10 years. Therefore, the
IRS is considering these to be general tax
records under §1.6001-1. These records
are required for the IRS to validate that the
taxpayers have met the regulatory require-
ments; and are required as proof that the
taxpayer has not engaged in an applicable
transaction or that the taxpayer has ceased
or abandoned the applicable transaction
within 45 days of a determination and
notice by the Commissioner, pursuant to
section 50(a)(3). For PRA purposes, gen-
eral tax records are already approved by
OMB under 1545-0074 for individual/sole
proprietor filers, 1545-0123 for business
filers, and 1545-0092 for trust and estate
filers.

December 16, 2024 1272 Bulletin No. 2024–51
II. Regulatory Flexibility Act
The Treasury Department and the IRS
determined the rule will not have a sig-
nificant economic impact on a substantial
number of small entities. Although the rules
affect small entities, data are not readily
available about the number of taxpayers
affected. Section 48D affects the semicon-
ductor manufacturing industry, and specif-
ically, individuals and entities that make
qualified investments in facilities engaged
in the manufacturing of semiconductors and
semiconductor manufacturing equipment.
The economic impact of these regulations is
not likely to be significant, because the reg-
ulations substantially incorporate statutory
changes by the CHIPS Act in establishing
section 48D and amending section 50(a).
The regulations will also make it easier for
taxpayers to comply with section 48D and
the changes to section 50(a). Pursuant to
the RFA (5 U.S.C. chapter 6), the Secretary
hereby certifies that these regulations will
not have a significant economic impact on a
substantial number of small entities.
Pursuant to section 7805(f), the notice
of proposed rulemaking has been submit-
ted to the Chief Counsel for the Office of
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business. The Chief Counsel for the Office
of Advocacy of the SBA did not provide
any comments on the March 2023 pro-
posed regulations.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggre-
gate, or by the private sector, of $100 mil-
lion (updated annually for inflation). This
rule does not include any Federal mandate
that may result in expenditures by State,
local, or Tribal governments, or by the pri-
vate sector in excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. This rule does not have federalism
implications and does not impose substan-
tial direct compliance costs on State and
local governments or preempt State law
within the meaning of the Executive order.
V. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs has
designated this rule as a major rule as
defined by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal author of these final
regulations is Lani Sinfield, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries), IRS. However,
other personnel from the Treasury Depart-
ment and the IRS participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Amendments to the Regulations
Accordingly, the 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry,
in numerical order, for §1.50-2 to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.50-2 also issued under 26
U.S.C. 50(a)(3)(C), and 50(a)(6).
* * * * *
Par. 2. Section 1.48D-0 is revised to
read as follows:
§1.48D-0 Table of contents.
This section lists the table of contents
for §§1.48D-1 through 1.48D-6.
§1.48D-1 Advanced manufacturing
investment credit determined.
(a) Overview.
(b) Determination of credit.
(c) Coordination with section 47.
(1) In general.
(2) Example.
(d) Applicability date.
§1.48D-2 Definitions.
(a) In general.
(b) Applicable transaction.
(c) Basis.
(1) In general.
(2) Transition rule.
(d) Beginning of construction.
(e) Eligible taxpayer.
(f) Foreign entities.
(1) Foreign entity.
(2) Foreign entity of concern.
(g) Manufacturing of semiconductors.
(h) Manufacturing of semiconductor
manufacturing equipment.
(i) Placed in service.
(j) Qualified investment.
(1) In general.
(2) Special rules for certain passthrough
entities.
(i) Partnership.
(ii) S corporation.
(iii) Estate or trust.

Bulletin No. 2024–51 1273 December 16, 2024
(3) Qualified progress expenditures
election.
(i) In general.
(ii) Special rules for certain passthrough
entities.
(4) Examples.
(i) Example 1.
(ii) Example 2.
(k) Section 48D credit.
(l) Section 48D regulations.
(m) Semiconductor.
(n) Semiconductor manufacturing.
(1) Semiconductor wafer production.
(2) Semiconductor fabrication.
(3) Semiconductor packaging.
(4) Assembly.
(5) Testing.
(6) Advanced packaging.
(o) Semiconductor manufacturing
equipment.
(p) Statutory references.
(1) Chapter 1.
(2) Code.
(3) Subtitle A.
(q) Applicability date.
§1.48D-3 Qualified property.
(a) In general.
(b) Qualified property.
(c) Tangible depreciable property.
(1) In general.
(2) Exception.
(3) Buildings or portions of a building
not excluded by section 48D(b)(2)(B)(ii).
(d) Constructed, reconstructed, or
erected by the taxpayer.
(e) Original use.
(1) In general.
(2) Treatment of inventory.
(f) Part of an advanced manufacturing
facility.
(1) In general.
(2) Property that is not located or co-lo-
cated at an advanced manufacturing facil-
ity or on a contiguous piece of land to the
advanced manufacturing facility.
(g) Integral to the operation of an
advanced manufacturing facility.
(1) In general.
(2) Vertically integrated manufacturers.
(3) Specific examples of integral prop-
erty.
(4) Research or storage facilities.
(5) Examples.
(i) Example 1.
(ii) Example 2.
(h) Applicability date.
§1.48D-4 Advanced manufacturing
facility of an eligible taxpayer.
(a) In general.
(b) Advanced manufacturing facility.
(c) Primary purpose.
(1) In general.
(2) No primary purpose.
(3) Examples.
(i) Example 1: Primary purpose; in
general.
(ii) Example 2: Primary purpose; semi-
conductor wafer production.
(iii) Example 3: Primary purpose; ver-
tically integrated manufacturer.
(iv) Example 4: No primary purpose;
vertically integrated manufacturer.
(d) Applicability date.
§1.48D-5 Beginning of construction.
(a) Termination of credit.
(1) In general.
(2) Property.
(3) Single advanced manufacturing
facility project.
(i) In general.
(ii) Related taxpayers.
(A) Definition.
(B) Related taxpayer rule.
(iii) Example.
(iv) Timing of single advanced manu-
facturing facility project determination.
(v) Disaggregation.
(vi) Example.
(b) Beginning of construction.
(1) In general.
(2) Continuity requirement.
(c) Physical work test.
(1) In general.
(2) Physical work of significant nature.
(i) In general.
(ii) Exceptions.
(d) Five percent safe harbor.
(1) In general.
(2) Costs.
(3) Cost overruns.
(i) Single advanced manufacturing
facility project.
(ii) Example.
(iii) Single property.
(iv) Example.
(e) Continuity requirement.
(1) In general.
(2) Continuous construction.
(3) Continuous efforts.
(4) Excusable disruptions to continu-
ous construction and continuous efforts
tests.
(i) In general.
(ii) Effect of excusable disruptions on
continuity safe harbor.
(iii) Non-exclusive list of construction
disruptions.
(5) Timing of excusable disruption
determination.
(6) Continuity safe harbor.
(i) In general.
(ii) Example.
(f) Applicability date.
§1.48D-6 Elective payment election.
(a) Elective payment election.
(1) In general.
(2) Partnerships and S corporations.
(3) Irrevocable.
(b) Pre-filing registration required.
(1) In general.
(2) Manner of registration.
(3) Members of a consolidated group.
(4) Timing of pre-filing registration.
(5) Each qualified investment in an
advanced manufacturing facility must
have its own registration number.
(6) Information required to complete
the pre-filing registration process.
(7) Registration number.
(i) In general.
(ii) Registration number is only valid
for one year.
(iii) Renewing registration numbers.
(iv) Amendment of previously submit-
ted registration information if a change
occurs before the registration number is
used.
(v) Registration number is required to
be reported on the return for the taxable
year of the elective payment election.
(c) Time and manner of election.
(1) In general.
(2) Limitations.
(d) Special rules for partnerships and S
corporations.
(1) In general.
(2) Election.
(i) Time and manner of election.
(ii) Effect of election.
(iii) Coordination with sections 705
and 1366.
(iv) Partner’s distributive share.
(A) In general.

December 16, 2024 1274 Bulletin No. 2024–51
(B) Interim rule.
(C) Partnership requirements.
(v) S corporation shareholder’s pro-
rata share.
(vi) Timing of tax exempt income.
(3) Disregarded entity ownership.
(4) Electing partnerships in tiered
structures.
(i) In general.
(ii) Electing partnerships in tiered
structures; interim rule.
(5) Character of tax exempt income.
(6) Determination of amount of the
section 48D credit.
(i) In general.
(ii) Application of section 49 at-risk
rules to determination of section 48D
credit for partnerships and S corporations.
(iii) Changes in at-risk amounts under
section 49 at partner or shareholder level.
(7) Partnerships subject to subchapter
C of chapter 63 of the Code.
(8) Example.
(e) Denial of double benefit.
(1) In general.
(2) Application of the denial of double
benefit rule.
(3) Use of the section 48D credit for
other purposes.
(4) Examples.
(i) Example 1.
(ii) Example 2.
(iii) Example 3.
(iv) Example 4.
(f) Excessive payment.
(1) In general.
(2) Reasonable cause.
(3) Excessive payment defined.
(4) Example.
(g) Basis reduction and recapture.
(1) In general.
(2) Basis adjustment.
(i) In general.
(ii) Basis adjustment by partnership or
S corporation.
(iii) Basis adjustment of partners and S
corporation shareholders.
(3) Recapture reporting.
(h) Applicability dates.
(1) In general.
(2) Prior taxable years.
Par. 3. Sections 1.48D-1 through
1.48D-5 are added to read as follows:
Sec.
* * * * *
1.48D-1 Advanced manufacturing invest-
ment credit determined.
1.48D-2 Definitions.
1.48D-3 Qualified property.
1.48D-4 Advanced manufacturing facility
of an eligible taxpayer.
1.48D-5 Beginning of construction.
* * * * *
§1.48D-1 Advanced manufacturing
investment credit determined.
(a) Overview. For purposes of section
46 of the Code, the amount of the advanced
manufacturing investment credit under
section 48D of the Code determined for
any taxable year is the amount determined
under section 48D and this section and
§§1.48D-2 through 1.48D-6 and 1.50-2 (the
section 48D regulations) (subject to any
applicable provisions of the Code that may
limit the amount determined under section
48D), for such taxable year with respect
to any advanced manufacturing facility of
an eligible taxpayer. Paragraph (b) of this
section provides the general rules for deter-
mining the amount of a taxpayer’s section
48D credit for a taxable year. Paragraph (c)
of this section provides rules coordinating
the section 48D credit with the rules of sec-
tion 47 of the Code (relating to the reha-
bilitation credit). Section 1.48D-2 provides
definitions that apply for purposes of sec-
tion 48D and the section 48D regulations.
Section 1.48D-3 provides rules relating
to the definition of qualified property for
purposes of the section 48D credit. Sec-
tion 1.48D-4 provides rules relating to the
definition of an advanced manufacturing
facility of an eligible taxpayer for purposes
of the section 48D credit. Section 1.48D-5
provides rules regarding the beginning of
construction of property for purposes of
the section 48D credit. Section 1.48D-6
provides rules related to the elective pay-
ment election of the section 48D credit.
See §1.50-2 for additional rules under sec-
tion 50(a)(3) and (6) of the Code relating
to applicable transactions that result in the
recapture of section 48D credits.
(b) Determination of credit. Subject to
any applicable sections of the Code that
may limit the credit determined under sec-
tion 48D, the section 48D credit for any
taxable year of an eligible taxpayer with
respect to any advanced manufacturing
facility is an amount equal to 25 percent of
the taxpayer’s qualified investment for the
taxable year with respect to that advanced
manufacturing facility. A section 48D
credit is available only with respect to
qualified property that a taxpayer places
in service after December 31, 2022, and,
for any qualified property the construc-
tion of which began prior to January 1,
2023, only to the extent of the basis of that
property attributable to the construction,
reconstruction, or erection of that prop-
erty occurring after August 9, 2022. Under
section 48D(e), no section 48D credit is
allowed to a taxpayer for placing qualified
property in service in any taxable year
if the beginning of construction of that
qualified property as determined under
§1.48D-5 begins after December 31, 2026
(the date specified in section 48D(e)).
(c) Coordination with section 47—(1)
In general. The qualified investment with
respect to any advanced manufacturing
facility of an eligible taxpayer for any
taxable year does not include that portion
of the basis of any property that is attrib-
utable to qualified rehabilitation expendi-
tures, as defined in section 47(c)(2) and
§1.48-12(c), with respect to a qualified
rehabilitated building, as defined in sec-
tion 47(c)(1) and §1.48-12(b).
(2) Example: Coordination with section 47. X
Corp, a calendar-year C corporation, owns Building
A, a certified historic structure. X Corp’s adjusted
basis in Building A is $100,000. Between August 1,
2024, and October 31, 2024, X Corp incurs $1 mil-
lion to reconstruct, within the meaning of section
48D(b)(2)(A)(iii)(I) and §1.48-12(b)(2)(iv), Build-
ing A. X Corp places the reconstructed Building
A, a qualified rehabilitated building, in service on
November 15, 2024. Of the $1 million of capital-
ized expenditures incurred to reconstruct Building
A (all of which would meet the definition of quali-
fied investment), $250,000 also meets the definition
of qualified rehabilitation expenditures (QREs). As
such, X Corp’s qualified investment in Building A
is $750,000 ($1 million - $250,000). X Corp’s quali-
fied investment in Building A remains $750,000 even
if X Corp does not determine a rehabilitation credit
with respect to the $250,000 of QREs.
(d) Applicability date. This section
applies to property that is placed in ser-
vice after December 31, 2022, and during
a taxable year ending on or after October
23, 2024.
§1.48D-2 Definitions.
(a) In general. The definitions in para-
graphs (b) through (p) of this section

Bulletin No. 2024–51 1275 December 16, 2024
apply for purposes of sections 48D and 50
of the Code and §1.48D-1, this section and
§§1.48D-3 through 1.48D-6 and 1.50-2
(the section 48D regulations).
(b) Applicable transaction. The term
applicable transaction has the meaning
provided in section 50(a)(6) and §1.50-2.
(c) Basis—(1) In general. With respect
to any qualified property, the term basis
has the same meaning as provided in
§1.46-3(c). Thus, the basis of the qual-
ified property generally is determined in
accordance with the general rules of subti-
tle A for determining the basis of property
(see subtitle A, subchapter O, part II of
the Code). As such, the basis of qualified
property would generally be the cost of
that qualified property (see section 1012
of the Code) unreduced by any adjust-
ments to basis and would include all items
properly included by the taxpayer in the
depreciable basis of the qualified property.
(2) Transition rule. For property the
construction of which began prior to
January 1, 2023, and is placed in service
after December 31, 2022, the portion of
the basis of such property attributable to
construction, reconstruction, or erection
after August 9, 2022, must be allocated
using any reasonable method, including
by applying the principles of section 461
of the Code. Rules similar to the rules
in §§1.48-2(b)(2), 1.48-11(b)(5)(i), and
1.48-12(c)(1) are applicable.
(d) Beginning of construction. The
term beginning of construction has the
meaning provided in §1.48D-5.
(e) Eligible taxpayer. The term eligible
taxpayer means any taxpayer that—
(1) Is not a foreign entity of concern;
and
(2) Has not made an applicable transac-
tion during the taxable year.
(f) Foreign entities—(1) Foreign entity.
The term foreign entity has the same
meaning as provided in 15 CFR 231.103.
(2) Foreign entity of concern. The term
foreign entity of concern has the same
meaning as provided in 15 CFR 231.104.
(g) Manufacturing of semiconductors.
The term manufacturing of semiconduc-
tors and the term semiconductor manufac-
turing are synonymous.
(h) Manufacturing of semiconduc-
tor manufacturing equipment. The term
manufacturing of semiconductor manu-
facturing equipment means the physical
production (in a manufacturing facility) of
semiconductor manufacturing equipment,
which is used by an advanced manufactur-
ing facility engaged in the manufacturing
of semiconductors as defined in paragraph
(g) of this section.
(i) Placed in service. The term placed
in service has the same meaning as pro-
vided in §1.46-3(d).
(j) Qualified investment—(1) In gen-
eral. Except as provided in paragraph (j)
(2) and (3) of this section, the term quali-
fied investment with respect to an advanced
manufacturing facility means, for any tax-
able year, the basis of any qualified prop-
erty that is part of an advanced manufac-
turing facility and placed in service by the
taxpayer during the taxable year.
(2) Special rules for certain passthrough
entities. In the case of any qualified prop-
erty that is part of an advanced manufac-
turing facility of an eligible taxpayer and
placed in service by an entity described
in paragraphs (j)(2)(i) through (iii) of this
section during a taxable year, the rules of
this paragraph (j)(2) apply to determine
the qualified investment for the taxable
year with respect to the advanced manu-
facturing facility.
(i) Partnership. In the case of a partner-
ship that places in service qualified prop-
erty that is part of an advanced manufac-
turing facility of an eligible taxpayer, each
partner in the partnership must take into
account separately the partner’s share of
the basis of the qualified property placed
in service by the partnership during the
taxable year as provided in §1.46-3(f).
(ii) S corporation. The basis of quali-
fied property that is part of an advanced
manufacturing facility of an eligible tax-
payer and placed in service during the tax-
able year by an S corporation (as defined
in section 1361(a) of the Code) must be
apportioned pro rata among the S corpo-
ration’s shareholders on the last day of the
S corporation’s taxable year as provided
in section 1366.
(iii) Estate or trust. The basis of qual-
ified property that is part of an advanced
manufacturing facility of an eligible tax-
payer and placed in service during the
taxable year by an estate or trust must be
apportioned among the estate or trust and
its beneficiaries on the basis of the income
of the estate or trust allocable to each for
that taxable year.
(3) Qualified progress expenditures
election—(i) In general. A taxpayer may
elect, as provided in §1.46-5, to increase
the qualified investment with respect to
any advanced manufacturing facility of an
eligible taxpayer for the taxable year, by
any qualified progress expenditures made
after August 9, 2022.
(ii) Special rules for certain
passthrough entities. Notwithstanding the
provisions of §1.46-5, relating to elections
of progress expenditure property being
constructed by or for a partnership or S
corporation, the rules of §1.46-5(o)(1) and
(p) do not apply to prohibit a partnership
or S corporation from making a progress
expenditure election under §1.46-5 with
respect to qualified property if the part-
nership or S corporation intends to make
an elective payment election under sec-
tion 48D(d) and §1.48D-6 with respect
to a section 48D credit determined with
respect to such qualified property.
(4) Examples. The provisions of this
paragraph (j) are illustrated by the follow-
ing examples.
(i) Example 1: Advanced manufacturing invest-
ment credit: qualified investment in general. On
November 1, 2024, X, a calendar-year C corporation,
places in service qualified property with a basis of
$200,000, and on December 1, 2024, X places in ser-
vice qualified property with a basis of $300,000. X’s
qualified investment for the taxable year is $500,000
($200,000 + $300,000).
(ii) Example 2: Advanced manufacturing invest-
ment credit: qualified investment for partnerships. A,
B, C, and D, all calendar-year C corporations, are
partners in the ABCD partnership. Partners A, B, C,
and D share partnership profits equally. On Novem-
ber 1, 2024, the ABCD partnership placed in service
qualified property with a basis of $1 million. Each
partner’s share of the basis of the qualified property,
as determined in §1.46-3(f)(2), is $250,000 ($1m
x 0.25) and each partner’s qualified investment is
$250,000.
(k) Section 48D credit. The term sec-
tion 48D credit means the advanced man-
ufacturing investment credit determined
under section 48D and the section 48D
regulations.
(l) Section 48D regulations. The term
section 48D regulations means §§1.48D-1
through 1.48D-6 and 1.50-2.
(m) Semiconductor. The term semi-
conductor means, consistent with 15
CFR 231.115, an integrated electronic
device or system most commonly manu-
factured using materials such as, but not
limited to, silicon, silicon carbide, or III-V
compounds, and processes such as, but

December 16, 2024 1276 Bulletin No. 2024–51
not limited to, lithography, deposition,
and etching. Such devices and systems
include, but are not limited to, analog and
digital electronics, power electronics, and
photonics, for memory, processing, sens-
ing, actuation, and communications appli-
cations.
(n) Semiconductor manufacturing.
The term semiconductor manufacturing
and the term manufacturing of semicon-
ductors are synonymous and mean, con-
sistent with 15 CFR 231.116, semicon-
ductor wafer production, semiconductor
fabrication, or semiconductor packaging.
The following terms have the following
meanings in connection with semiconduc-
tor wafer production, semiconductor fab-
rication, and semiconductor packaging for
purposes of section 48D and the section
48D regulations:
(1) Semiconductor wafer produc-
tion includes the processes of growing
single-crystal ingots and boules, wafer
slicing, etching and polishing, bonding,
cleaning, epitaxial deposition, and metrol-
ogy.
(2) Semiconductor fabrication includes
the process of forming devices such as
transistors, poly capacitors, non-metal
resistors, and diodes, as well as intercon-
nects between such devices, on a wafer of
semiconductor material.
(3) Semiconductor packaging means
the process of enclosing a semiconduc-
tor in a protective container (package)
and providing external power and signal
connectivity for the assembled integrated
circuit and includes the process of assem-
bly and testing of semiconductors and
advanced packaging of semiconductors.
(4) Assembly includes, but is not lim-
ited to, wafer-dicing, die-bonding, wire
bonding, solder bumping, and encapsula-
tion.
(5) Testing includes, but is not limited
to, probing, screening, and burn-in work.
(6) Advanced packaging means a sub-
set of packaging technologies that uses
novel techniques and materials to increase
the performance, power, modularity, and/
or durability of an integrated circuit.
Advanced packaging technologies include
flip-chip, 2D, 2.5D, and 3D stacking, fan-
out and fan-in, and embedded die/sys-
tem-in-package (SiP).
(o) Semiconductor manufacturing
equipment. The term semiconductor man-
ufacturing equipment means the highly
engineered and specialized equipment
used in the manufacturing of semicon-
ductors as defined in paragraph (g) of this
section and the subsystems that enable or
are incorporated into the manufacturing
equipment. Specific examples of semi-
conductor manufacturing equipment and
subsystems that enable semiconductor
manufacturing equipment include but are
not limited to:
(1) Deposition equipment, including,
Chemical Vapor Deposition (CVD), Phys-
ical Vapor Deposition (PVD), Electrode-
position, and Atomic Layer Deposition
(ALD);
(2) Etching equipment (wet etch, dry
etch);
(3) Equipment for epitaxial growth of
transistor features;
(4) Chemical-mechanical polishing
equipment to planarize layers through the
semiconductor fabrication process;
(5) Lithography equipment (steppers
and scanners of various light wavelengths,
such as deep UV, extreme ultraviolet
(EUV), photoresist coating, and developer
tracks);
(6) Equipment for producing ingots
and boules, wafer growth equipment,
wafer slicing equipment, wafer dicing
equipment, and wire bonders;
(7) Inspection and measuring equip-
ment, including scanning electron micro-
scopes, atomic force microscopes, opti-
cal inspection systems, wafer probes and
optical scatterometer, EDS (Energy Dis-
persive Spectroscopy);
(8) Certain metrology and inspection
systems to measure critical dimensions
of the integrated circuit features through-
out the fabrication process, detection and
measurement of defects on the wafers
during the fabrication process;
(9) Ion implantation and diffusion/oxi-
dation furnaces;
(10) Specialty glass components
including EUV mirrors and optical path-
ways, lenses and mirrors used in inspec-
tion equipment and other fabrication
processes, and lens assemblies for wafer
defect inspection;
(11) Electrostatic chucks;
(12) High performance pumps;
(13) High purity quartz devices;
(14) Ultra-high vacuum chamber com-
ponents; and
(15) Photomasks and light sources
used in photolithography.
(p) Statutory references—(1) Chapter
1. The term chapter 1 means chapter 1 of
the Code.
(2) Code. The term Code means the
Internal Revenue Code.
(3) Subtitle A. The term subtitle A
means subtitle A of the Code.
(q) Applicability date. This section
applies to property that is placed in ser-
vice after December 31, 2022, and during
a taxable year ending on or after October
23, 2024.
§1.48D-3 Qualified property.
(a) In general. This section provides
definitions and rules relating to qualified
property for purposes of section 48D of
the Code and the section 48D regulations.
(b) Qualified property. The term qual-
ified property means tangible depreciable
property that is part of, and integral to, the
operation of an advanced manufacturing
facility and that is either—
(1) Constructed, reconstructed, or
erected by the taxpayer; or
(2) Acquired by the taxpayer if the
original use of such property commences
with the taxpayer.
(c) Tangible depreciable property—(1)
In general. The term tangible depreciable
property means tangible personal property
(as defined in §1.48-1(c)), other tangible
property (as defined in §1.48-1(d)), and
building and structural components (as
defined in §1.48-1(e), except as provided
in paragraphs (c)(2) and (3) of this sec-
tion) with respect to which depreciation
(or amortization in lieu of depreciation)
is allowable. The law of a State or local
jurisdiction is not controlling for purposes
of determining whether property is tangi-
ble property for purposes of section 48D
or the section 48D regulations.
(2) Exception. Pursuant to section
48D(b)(2)(B)(ii), except as provided in
paragraph (c)(3) of this section, the term
tangible depreciable property does not
include a building and its structural com-
ponents, or a portion thereof, used for—
(i) Offices;
(ii) Administrative services such as
human resources or personnel services,
payroll services, legal and accounting ser-
vices, and procurement services;

Bulletin No. 2024–51 1277 December 16, 2024
(iii) Sales or distribution functions;
(iv) Security services (not including
cybersecurity operations); or
(v) Any other functions unrelated to
manufacturing of semiconductors or semi-
conductor manufacturing equipment.
(3) Buildings or portions of a building
not excluded by section 48D(b)(2)(B)(ii).
Buildings or portions of a building not
treated as offices and that are considered
related to manufacturing of semiconduc-
tors or semiconductor manufacturing
equipment include buildings or portions
of a building used for:
(i) Gowning to enter to and from a
cleanroom environment;
(ii) Monitoring operations and remote
access of equipment;
(iii) Functions performed by unit pro-
cess engineers including developing,
monitoring, updating and overseeing indi-
vidual process recipes running on every
tool in the facility to manufacture, mea-
sure and test wafers including access to
relevant data, data analysis, modifications
and updates to the process recipes on the
tools;
(iv) Functions performed by equipment
engineers including overseeing tools to
ensure proper operation by accessing data
about the tool health and performance
remotely adjusting the tool at worksta-
tions, and issuing work orders to the
equipment and maintenance technicians
from the workstations;
(v) Functions performed by test engi-
neers including monitoring the electrical
test data being collected from the wafers
at certain points in their processing;
(vi) Functions performed by yield and
defect engineers including reviewing
inspection data collected from wafers;
(vii) Functions performed by metrol-
ogy engineers including reviewing phys-
ical measurement data collected from the
wafers;
(viii) Functions performed by integra-
tion engineers that are responsible for the
technology node and the end-to-end wafer
process;
(ix) Functions performed by facilities
engineers including monitoring and con-
trolling facilities systems; and
(x) Functions related to central utilities
buildings, material handling and ultrapure
water generation facilities, and computing
(data center).
(d) Constructed, reconstructed, or
erected by the taxpayer. Property is con-
sidered constructed, reconstructed, or
erected by the taxpayer if the work is done
for the benefit of the taxpayer in accor-
dance with the taxpayer’s specifications.
(e) Original use—(1) In general.
Except as provided in paragraph (e)(2) of
this section, the term original use means
with respect to any property the first use to
which the property is put by any taxpayer
in connection with a trade or business or
for the production of income. Additional
capital expenditures paid or incurred by a
taxpayer to recondition or rebuild property
acquired or owned by the taxpayer satisfy
the original use requirement to the extent
of the expenditures paid or incurred by a
taxpayer. However, a taxpayer’s cost to
acquire property reconditioned or rebuilt
by another taxpayer does not satisfy the
original use requirement. Whether prop-
erty is reconditioned or rebuilt property
will be determined based on the facts and
circumstances.
(2) Treatment of inventory. For pur-
poses of paragraph (e)(1) of this section,
if a taxpayer initially acquires new prop-
erty and holds the property primarily for
sale to customers in the ordinary course of
the taxpayer’s trade or business and sub-
sequently withdraws the property from
inventory and uses the property primar-
ily in the taxpayer’s trade or business or
primarily for the taxpayer’s production
of income, the taxpayer is considered the
original user of the property. If a person
initially acquires new property and holds
the property primarily for sale to custom-
ers in the ordinary course of the person’s
business and a taxpayer subsequently
acquires the property from the person for
use primarily in the taxpayer’s trade or
business or primarily for the taxpayer’s
production of income, the taxpayer is con-
sidered the original user of the property.
For purposes of this paragraph (e), the
original use of the property by the tax-
payer commences on the date on which
the taxpayer first uses the property pri-
marily in the taxpayer’s trade or business
or primarily for the taxpayer’s production
of income.
(f) Part of an advanced manufacturing
facility—(1) In general. To qualify for the
section 48D credit, property must be part
of the advanced manufacturing facility, as
provided in this paragraph (f). Property is
part of an advanced manufacturing facil-
ity if the property is physically located or
co-located either at the advanced man-
ufacturing facility, or on a contiguous
piece of land to the advanced manufactur-
ing facility. Parcels or tracts of land will
be considered contiguous if they possess
common boundaries, and would be con-
tiguous but for the interposition of a road,
street, railroad, public utility, stream or
similar property.
(2) Property that is not located or
co-located at an advanced manufacturing
facility or on a contiguous piece of land
to the advanced manufacturing facility.
Property that is not located or co-located
at an advanced manufacturing facility
or on a contiguous piece of land to the
advanced manufacturing facility may be
considered part of the advanced manufac-
turing facility if the property is owned by
the same taxpayer as the entire advanced
manufacturing facility, connected to the
advanced manufacturing facility (e.g., via
pipeline) and the sole purpose, function,
and output of the property is dedicated to
the operation of the advanced manufactur-
ing facility.
(g) Integral to the operation of an
advanced manufacturing facility—(1) In
general. To qualify for the section 48D
credit, property must be integral to the
operation of manufacturing of semicon-
ductors or manufacturing of semicon-
ductor manufacturing equipment, both as
provided in §1.48D-2. Property is integral
to the operation of manufacturing of semi-
conductors or manufacturing of semicon-
ductor manufacturing equipment if such
property is used directly in the manufac-
turing operation, is essential to the com-
pleteness of the manufacturing operation,
and is not transformed in any material
way as a result of the manufacturing
operation. Materials, supplies, and other
inventoriable items of property that are
transformed during the manufacturing of
semiconductors or into a unit of semicon-
ductor manufacturing equipment are not
considered property integral to the oper-
ation of an advanced manufacturing facil-
ity. For this purpose, the term transform
does not include the normal degradation
of components of semiconductor manu-
facturing equipment. In addition, property
such as pavements, parking areas, inher-

December 16, 2024 1278 Bulletin No. 2024–51
ently permanent advertising displays, or
inherently permanent outdoor lighting
facilities, although used in the operation
of a business, ordinarily are not integral
to the operation of an advanced manu-
facturing facility. Thus, for example, all
property used by the taxpayer to acquire
or transport materials or supplies to the
point where the actual manufacturing
activity commences (such as docks, rail-
road tracks, and bridges), or all property
(other than materials or supplies) used by
the taxpayer during the manufacturing of
semiconductors or during the manufac-
turing of semiconductor manufacturing
equipment within the meaning of §1.48D-
2, would be considered property integral
to the operation of an advanced manu-
facturing facility of an eligible taxpayer.
Property is considered integral to the
operation of an advanced manufacturing
facility of an eligible taxpayer if so used
either by the owner of the property or by a
lessee of the property.
(2) Vertically integrated manufactur-
ers. If an advanced manufacturing facil-
ity that is engaged in the manufacturing
of semiconductors within the meaning of
§1.48D-2 also conducts vertically inte-
grated activities (for example, producing
raw materials and manufacturing, ingots,
wafers, and semiconductors), then prop-
erty integral to the operation of such an
advanced manufacturing facility includes
only the property used in the manufactur-
ing of semiconductors within the meaning
of §1.48D-2.
(3) Specific examples of integral prop-
erty. Specific examples of property that
normally would be integral to the opera-
tion of the advanced manufacturing facil-
ity of an eligible taxpayer are:
(i) Equipment and tools used in the
processes of Chemical Vapor Deposition
(CVD), and Physical Vapor Deposition
(PVD), Atomic Layer deposition (ALD),
oxidation, annealing, and epitaxy. Such
equipment includes Deposition and thin-
film growth equipment, etching equip-
ment, and lithography equipment (includ-
ing Extreme Ultraviolet Lithography
(EUV));
(ii) Wet process tools, analytical tools,
E-Beam operation tools (to repair masks),
mask manufacturing equipment, chemical
mechanical polishing equipment, reticle
handlers, and stockers;
(iii) Inspection and metrology equip-
ment, including scanning electron micro-
scopes, atomic force microscopes, ion
milling tools, optical inspection systems,
wafer probes and optical scatterometer;
(iv) Clean room facilities, including
locker and gowning rooms, specialized
lighting systems, automated material
systems for wafer handling, specialized
recirculating air handlers, to maintain
the cleanroom free from particles, con-
trol temperature and humidity levels, and
specialized ceilings comprised of HEPA
filters;
(v) Cleanroom equipment (including
jogs, hand tools, calibration equipment,
and temperature pollution monitoring
tools) and specialty cleaning equipment;
(vi) Electrical power facilities, cooling
facilities, chemical supply systems, and
wastewater and wastewater treatment sys-
tems, including water management, water
conservation, and water treatment equip-
ment, materials and technologies;
(vii) Electricity distribution equipment
including connectors, capacitors, meters
and sockets, switchgear, surge arresters
and transformers;
(viii) Sub-fab levels containing pumps,
transformers, abatement systems, ultra-
pure water systems, uninterruptible power
supply, and boilers, pipes, storage sys-
tems, wafer routing systems and data-
bases, backup systems, quality assurance
equipment, and computer data centers;
(ix) Utility level equipment includ-
ing chillers, systems to handle nitrogen,
argon, and other gases, compressor sys-
tems, and pipes;
(x) Industrial automation and control
equipment (including, but not limited to,
programmable logic controllers, process
controllers, distributed control systems,
human machine interface and motor con-
trols and accessories);
(xi) Industrial automation communi-
cations devices, networks, and software
for industrial automation control products
and systems including automated material
handling systems (AMHS) and advance
wafer routing software systems and data-
bases;
(xii) Tooling equipment;
(xiii) Back-end manufacturing equip-
ment related to assembly, testing, and
packaging;
(xiv) Photolithography tools;
(xv) Photomasks, reticles, pellicle,
steppers, scanners, and photoresist related
equipment;
(xvi) Emulation tools;
(xvii) Rapid thermal processing tools
(annealing tubs and vacuum ovens),
melting laser annealing (MLA) equip-
ment, wafer bonding equipment, physical
removal processing tools (flycutter Die-
Saw and backgrind), and edge seal dis-
pense;
(xviii) Site infrastructure including
but limited to energy, water, natural gas,
backup power generators, transformers,
stormwater management and fire protec-
tion;
(xix) Equipment and installation (wipe-
film evaporators);
(xx) Chemical and gas delivery sys-
tems (piping, storage, and waste systems
including hazardous waste);
(xxi) Bulk chemical purification sys-
tems (Liquid N2, Ar, H2, etc.);
(xxii) HVAC air conditioning and air
handling systems, critical cooling water
systems and heating systems;
(xxiii) Wafer stockers with temperature
and air quality control;
(xxiv) Temperature control systems;
(xxv) Security and monitoring system
and devices;
(xxvi) Failure analysis labs and equip-
ment;
(xxvii) Quality assurance equipment
including incoming goods, in-process
inspection, and finished-good inspection;
(xxviii) Transportation, trolleys and
carts that are used to transport wafers or
overhead conveyer systems to move the
carts;
(xxxix) Lighting products;
(xxx) Industrial gas generation and/or
handling systems, such as air separation
units, including any associated backup
and storage equipment;
(xxxi) Input shaping tooling;
(xxxii) Crystal formation and coating
equipment;
(xxxiii) Mechanical equipment; and
(xxxiv) Polishing equipment.
(4) Research or storage facilities. If
property, including a building and its struc-
tural components, constitutes a research or
storage facility and is used in connection
with the manufacturing of semiconductors
or manufacturing of semiconductor man-
ufacturing equipment, the property may

Bulletin No. 2024–51 1279 December 16, 2024
qualify as integral to the operation of the
advanced manufacturing facility under
section 48D(b)(2)(A)(iv). Specific exam-
ples of research facilities include research
facilities that manufacture semiconduc-
tors in connection with research, such as
pre-pilot production lines and prototypes,
including semiconductor packaging. Spe-
cific examples of storage facilities are
mineral or chemical storage equipment,
gas storage tanks, including high pressure
cylinders or specially designed tanks and
drums, wastewater storage, and inven-
tory and finished goods warehouses. A
research facility that does not manufacture
any type of semiconductor, as provided in
§1.48D-2(m), or semiconductor manufac-
turing equipment, as provided in §1.48D-
2(o), does not qualify.
(5) Examples. The following examples
illustrate the rules of this paragraph (g):
(i) Example 1. X Corp, a calendar-year C cor-
poration, is a manufacturer of air separation units
that are designed to supply on demand nitrogen
to an advanced manufacturing facility. In January
2025, X Corp places in service an air separation
unit that is co-located at an advanced manufac-
turing facility on a contiguous piece of land to the
advanced manufacturing facility. The air separation
unit produces nitrogen on demand, and the nitro-
gen is used directly in the manufacturing of semi-
conductors. The air separation unit is part of the
advanced manufacturing facility within the mean-
ing of paragraph (f) of this section because the air
separation unit is located on a contiguous piece of
land to the advanced manufacturing facility. The air
separation unit is property integral to the operation
of an advanced manufacturing facility under this
paragraph (g) because it is used directly in, and is
essential to, the completeness of the semiconductor
manufacturing operation, and is not transformed in
any material way as a result of the semiconductor
manufacturing operation.
(ii) Example 2. Y Corp, a calendar-year C corpo-
ration, is a manufacturer of specialty chemicals that
are used in the manufacturing of semiconductors. In
2025, Y Corp places in service equipment at its facil-
ity that manufactures the specialty chemicals. The
equipment is located five miles from the advanced
manufacturing facility, but is not part of the advanced
manufacturing facility within the meaning of para-
graph (f) of this section because it is not located or
co-located at the advanced manufacturing facility,
or on a contiguous piece of land to the advanced
manufacturing facility, and it is not connected to
the advanced manufacturing facility. Also in 2025,
Y Corp places in service chemical storage tanks
that are part of the advanced manufacturing facility
within the meaning of paragraph (f) of this section
because the property is located on a contiguous piece
of land to the advanced manufacturing facility. The
chemical storage tanks are property integral to the
operation of the advanced manufacturing facility
pursuant to paragraph (g) of this section.
(h) Applicability date. This section
applies to property that is placed in ser-
vice after December 31, 2022, and during
a taxable year ending on or after October
23, 2024.
§1.48D-4 Advanced manufacturing
facility of an eligible taxpayer.
(a) In general. This section provides
definitions and rules relating to advanced
manufacturing facilities of eligible tax-
payers for purposes of section 48D of the
Code and the section 48D regulations.
(b) Advanced manufacturing facility.
For purposes of section 48D(b)(3) and this
section, the term advanced manufacturing
facility means a facility of an eligible tax-
payer for which the primary purpose, as
determined under paragraph (c)(1) of this
section, is the manufacturing of semicon-
ductors or the manufacturing of semicon-
ductor manufacturing equipment within
the meaning of §1.48D-2.
(c) Primary purpose—(1) In general.
The determination of the primary pur-
pose of a facility will be made based on
all the facts and circumstances surround-
ing the construction, reconstruction, or
erection of the advanced manufacturing
facility of an eligible taxpayer. Facts that
may indicate a facility has a primary pur-
pose of manufacturing of semiconduc-
tors or manufacturing of semiconductor
manufacturing equipment include plans
or other documents for the facility that
demonstrate that the facility is designed
for the manufacturing of semiconductors
or manufacturing of semiconductor man-
ufacturing equipment within the meaning
of §1.48D-2. Facts may also include the
possession of permits or licenses needed
for the manufacturing of semiconduc-
tors or manufacturing of semiconductor
manufacturing equipment; and executed
contracts to a customer to supply such
semiconductors or executed contracts to
an advanced manufacturing facility as
defined in paragraph (b) of this section to
supply such semiconductor manufacturing
equipment in place either before or within
6 months after the facility is placed in ser-
vice. A facility has the primary purpose of
manufacturing of semiconductors or man-
ufacturing of semiconductor manufactur-
ing equipment if more than 50 percent of
its potential output, as measured by cost
to produce, revenue received in an arm’s
length transaction, or units produced, con-
stitutes manufacturing of semiconductors
or manufacturing of semiconductor man-
ufacturing equipment within the meaning
of §1.48D-2. However, property placed in
service in a taxable year must still meet
the definition of qualified property under
section 48D(b)(2) and §1.48D-3 for its
basis to be included as part of the qualified
investment in the advanced manufacturing
facility eligible for the section 48D credit.
For example, property that is not integral
to the operation of an advanced manufac-
turing facility as provided in §1.48D-3(g)
may not be included as a qualified invest-
ment in an advanced manufacturing facil-
ity.
(2) No primary purpose. A facil-
ity for which the primary purpose is the
manufacturing, producing, growing, or
extracting of materials or chemicals that
are supplied to an advanced manufac-
turing facility is not a facility for which
the primary purpose is the manufacturing
of semiconductors or manufacturing of
semiconductor manufacturing equipment.
Thus, for example, facilities that exclu-
sively produce semiconductor-grade poly-
silicon, or produce gases, or that manufac-
ture components or parts, to supply to an
advanced manufacturing facility engaged
in the manufacturing of semiconductors
or manufacturing of semiconductor man-
ufacturing equipment are not facilities for
which the primary purpose is the manu-
facturing of semiconductors or the manu-
facturing of semiconductor manufacturing
equipment.
(3) Examples. The following examples
illustrate the rules of this paragraph (c):
(i) Example 1: Primary purpose; in general. In
January 2025, X Corp, a calendar-year C corpora-
tion, begins construction of a facility that will man-
ufacture semiconductor manufacturing equipment
that could be used in a facility that will engage in
semiconductor fabrication (semiconductor fabrica-
tion facility). A portion of the equipment produced,
however, could be used for manufacturing oper-
ations of a facility that is not engaged in semicon-
ductor manufacturing. X Corp enters into a contract
with Y Corp, which is building a semiconductor
fabrication facility to be placed in service in July
2026, to supply Y Corp with equipment that is inte-
gral to semiconductor fabrication. Such equipment
represents more than 50 percent of the potential
output of X Corp’s facility (by cost to produce such
equipment) of X Corp’s facility for the first year of
operations. X Corp’s facility will be considered as
having a primary purpose of manufacturing of semi-

December 16, 2024 1280 Bulletin No. 2024–51
conductor manufacturing equipment for the first year
of its operations.
(ii) Example 2: Primary purpose; semiconductor
wafer production. X Corp, a calendar-year C corpo-
ration, is engaged in the production of solar wafers
(that is, X Corp is engaged in semiconductor wafer
production). In January 2025, X Corp receives the
necessary permits to begin construction of a facility
designed for semiconductor wafer production within
the meaning of §1.48D-2. X Corp enters into a con-
tract to supply such wafers to an unrelated person.
Such contract represents more than 50 percent of X
Corp’s potential output (by revenue received) for the
tax year that the facility is placed in service. Because
the contract to sell wafers represents more than 50
percent of X Corp’s potential output (by revenue
received), X Corp’s facility will be considered as
having a primary purpose of semiconductor wafer
production within the meaning of paragraph (c)(1)
of this section.
(iii) Example 3: Primary purpose; vertically
integrated manufacturer. Z Corp, a C corporation,
is a vertically integrated manufacturer. In January
2025, Z Corp begins construction of a facility that
will produce raw materials and other consumables
for use in the manufacturing of semiconductors
and such facility will also engage in semiconductor
wafer production and semiconductor fabrication. Z
Corp enters into separate sales contracts to sell units
produced from the semiconductor fabrication with a
variety of unrelated companies that are engaged in
semiconductor packaging. Z Corp also enters into a
sales contract with A Corp to sell raw materials that
it produces at the facility to A Corp. Z Corp’s produc-
tion of units from its semiconductor fabrication sold
to companies engaged in semiconductor packaging
represents more than 50 percent of the potential out-
put (by cost) of Z Corp’s facility for the first year of
operations; therefore, Z Corp’s facility will be con-
sidered as having a primary purpose of manufactur-
ing of semiconductors.
(iv) Example 4: No primary purpose; vertically
integrated manufacturer. Assume the same facts as
in paragraph (c)(3)(iii) of this section (Example 3),
except that Z Corp’s production of such raw mate-
rials represents more than 50 percent of the poten-
tial output of Z Corp’s facility for the first year of
operations. Z Corp’s facility will not be considered
as having a primary purpose of manufacturing of
semiconductors.
(d) Applicability date. This section
applies to property that is placed in ser-
vice after December 31, 2022, and during
a taxable year ending on or October 23,
2024.
§1.48D-5 Beginning of construction.
(a) Termination of credit—(1) In gen-
eral. The credit allowed under section
48D of the Code and the section 48D reg-
ulations does not apply to property that is
part of an advanced manufacturing facility
of an eligible taxpayer if the beginning of
construction of the property, as defined in
paragraph (a)(2) of this section, begins
after December 31, 2026 (the date speci-
fied in section 48D(e)).
(2) Property. For purposes of determin-
ing beginning of construction of property
under this section, the unit of property
is—
(i) A single advanced manufacturing
facility project as described in paragraph
(a)(3) of this section; or
(ii) An item of qualified property (as
defined in §1.48D-3(b)).
(3) Single advanced manufacturing
facility project—(i) In general. Solely
for purposes of determining whether con-
struction of a qualified property has begun
for purposes of section 48D and the sec-
tion 48D regulations, multiple items of
qualified property or advanced manufac-
turing facilities that are operated as part of
a single advanced manufacturing facility
project (along with any items of property,
such as clean rooms, chemical delivery
systems, chemical storage facilities, tem-
perature control systems, robotic han-
dling systems, semiconductor manufac-
turing equipment, and tooling equipment
(such as for deposition and etching) that
are integral to the operation of the single
advanced manufacturing facility project)
will be treated as a single item of qualified
property. Multiple qualified properties or
advanced manufacturing facilities will
be treated as operated as part of a single
advanced manufacturing facility project,
if at any point during construction of the
multiple qualified properties or advanced
manufacturing facilities, they are owned
by a single taxpayer (subject to the related
taxpayer rule provided in paragraph (a)(3)
(ii) of this section) and any two or more of
the following factors are present—
(A) The properties or facilities are
owned by a single legal entity;
(B) The properties or facilities are con-
structed on contiguous pieces of land;
(C) The properties or facilities are
described in a common supply contract or
other type of relevant contract;
(D) The properties or facilities share a
common electricity and/or water supply;
(E) The properties or facilities are
described in one or more common envi-
ronmental or other regulatory permits;
(F) The properties or facilities were
constructed pursuant to a single master
construction contract; or
(G) The construction of the properties
or facilities was financed pursuant to the
same loan agreement or other financing
arrangement.
(ii) Related taxpayers—(A) Defini-
tion. For purposes of this section, the
term related taxpayers means members
of a group of trades or businesses that
are under common control (as defined in
§1.52-1(b)).
(B) Related taxpayer rule. For pur-
poses of this section, related taxpayers
are treated as one taxpayer in determin-
ing whether multiple qualified properties
or advanced manufacturing facilities will
be treated as operated as part of a single
advanced manufacturing facility project.
(iii) Example. A single taxpayer is
developing Project C, a project that will
consist of 3 advanced manufacturing
facilities constructed on the same campus.
Project C will share a common electric-
ity supply, and semiconductors manufac-
tured by Project C will be sold to Buyer
through a single supply contract. In 2023,
for 1 of the 3 advanced manufacturing
facilities, the taxpayer installs deposition
equipment. Thereafter, the taxpayer com-
pletes the construction of all 3 advanced
manufacturing facilities pursuant to a
continuous program of construction. For
purposes of the section 48D credit, Proj-
ect C is a single advanced manufacturing
facility project that will be treated as a sin-
gle property, and the taxpayer performed
physical work of a significant nature that
constitutes the beginning of construction
of Project C in 2023.
(iv) Timing of single advanced manu-
facturing facility project determination.
Whether multiple properties or advanced
manufacturing facilities are operated as
part of a single advanced manufacturing
facility project and are treated as a single
item of property for purposes of the begin-
ning of construction requirement of sec-
tion 48D and the section 48D regulations
is determined in the taxable year during
which the last of the multiple properties or
facilities is placed in service.
(v) Disaggregation. Multiple properties
or advanced manufacturing facilities that
are operated as part of a single advanced
manufacturing facility project and treated
as a single item of qualified property under
this paragraph (a)(3) for purposes of deter-
mining whether construction of a qualified

Bulletin No. 2024–51 1281 December 16, 2024
property or advanced manufacturing facil-
ity has begun may be disaggregated and
treated as separate items of qualified prop-
erty for purposes of determining whether
a separate advanced manufacturing facil-
ity or item of qualified property satisfies
the continuity safe harbor (as defined
in paragraph (e) of this section). Those
disaggregated separate advanced manu-
facturing facilities or items of qualified
property that are placed in service prior to
the continuity safe harbor deadline will be
eligible for the continuity safe harbor. The
remaining disaggregated separate items
of property or facilities may satisfy the
continuity requirement under a facts and
circumstances determination.
(vi) Example. A single taxpayer is
developing Project D, a project that will
consist of 4 separate properties. Project D
will use the same water supply and each
property within Project D will be con-
structed pursuant to a single master con-
struction contract. Under the single proj-
ect rule provided in this paragraph (a)(3),
Project D is a single project that will be
treated as a single property. In 2024, for 3
of the 4 separate properties, the taxpayer
installs property integral to the operation
of the advanced manufacturing facility.
Accordingly, the taxpayer has performed
physical work of a significant nature that
constitutes the beginning of construc-
tion of Project D for purposes of section
48D(e). Thereafter, on the last day of the
10-year continuity safe harbor period,
the taxpayer places in service only 3 of
the 4 separate properties within Project
D. The taxpayer disaggregates Project D
under paragraph (a)(3)(v) of this section
and accordingly, only 3 of the 4 separate
properties satisfy the continuity safe har-
bor. For the remaining 1 separate prop-
erty, the taxpayer may demonstrate that
it satisfies the continuity requirement
provided in paragraph (e) of this section
based on the facts and circumstances, to
enable the taxpayer to claim the section
48D credit.
(b) Beginning of construction—(1)
In general. For purposes of section 48D,
the section 48D regulations, and section
107(f)(1) of the CHIPS Act of 2022, Pub-
lic Law 117-167, div. A, 136 Stat. 1366,
1399 (August 9, 2022), a taxpayer may
establish that construction of an item of
property (as defined in paragraph (a)(2) of
this section) of the taxpayer begins under
either:
(i) The physical work test of paragraph
(c) of this section; or
(ii) The five percent safe harbor of
paragraph (d) of this section.
(2) Continuity requirement. See para-
graph (e) of this section for the continu-
ity requirement applicable for purposes
of the physical work test and the five per-
cent safe harbor, which must be demon-
strated either by maintaining continuous
construction (as defined in paragraph (e)
(2) of this section) or continuous efforts
(as defined in paragraph (e)(3) of this sec-
tion).
(c) Physical work test—(1) In general.
Under the physical work test, construc-
tion of an item of property begins when
physical work of a significant nature
begins, provided thereafter that the tax-
payer maintains continuous construction
or continuous efforts. This test focuses on
the nature of the work performed, not the
amount of the costs. Assuming the work
performed is of a significant nature, there
is no fixed minimum amount of work,
monetary or percentage threshold required
to satisfy the physical work test.
(2) Physical work of significant
nature—(i) In general. Work performed
by the taxpayer and work performed for
the taxpayer by other persons under a
binding written contract that is entered
into prior to the manufacture, construc-
tion, or production of the property for use
by the taxpayer in the taxpayer’s trade
or business of manufacturing semicon-
ductors or semiconductor manufacturing
equipment is taken into account in deter-
mining whether physical work of a sig-
nificant nature has begun. Both on-site
and off-site work (performed either by
the taxpayer or by another person under
a binding written contract) may be taken
into account for purposes of demonstrat-
ing that physical work of a significant
nature has begun. A written contract is
binding only if it is enforceable under
local law against the taxpayer or a pre-
decessor and does not limit damages to a
specified amount (for example, by use of
a liquidated damages provision). For this
purpose, a contractual provision that lim-
its damages to an amount equal to at least
five percent of the total contract price will
not be treated as limiting damages to a
specified amount. For additional guidance
regarding the definition of a binding writ-
ten contract, see §1.168(k)-1(b)(4)(ii)(A)
through (D). Specific examples of on-site
physical work of a significant nature
include the excavation for the foundation
and the pouring of the concrete pads of
the foundation. Specific examples of off-
site physical work of a significant nature
include the manufacture of semiconductor
manufacturing equipment but only if the
manufacturer’s work is done pursuant to
a binding written contract and the semi-
conductor manufacturing equipment is not
held in the manufacturer’s inventory.
(ii) Exceptions. Physical work of sig-
nificant nature does not include prelimi-
nary activities, including but not limited to
planning or designing, securing financing,
exploring, researching, obtaining permits,
licensing, conducting surveys, environ-
mental and engineering studies, or clear-
ing a site, even if the cost of those prelim-
inary activities is properly included in the
depreciable basis of the property. Physical
work of a significant nature also does not
include work (performed either by the tax-
payer or by another person under a bind-
ing written contract) to produce property
that is either in existing inventory or is
normally held in inventory by a vendor.
(d) Five percent safe harbor—(1) In
general. Construction of a property will
be considered as having begun if:
(i) A taxpayer pays or incurs (within
the meaning of §1.461-1(a)(1) and (2))
five percent or more of the total cost of the
property; and
(ii) Thereafter, the taxpayer maintains
continuous construction or continuous
efforts.
(2) Costs. All costs properly included
in the basis of the property are taken into
account to determine whether the five per-
cent safe harbor has been met. For prop-
erty that is manufactured, constructed, or
produced for the taxpayer by another per-
son under a binding written contract with
the taxpayer, costs incurred with respect
to the property by the other person before
the property is provided to the taxpayer
are deemed incurred by the taxpayer when
the costs are incurred by the other person
under the principles of section 461 of the
Code.
(3) Cost overruns—(i) Single
advanced manufacturing facility proj-

December 16, 2024 1282 Bulletin No. 2024–51
ect. If the total cost of a property that is
a single advanced manufacturing facility
project comprised of multiple properties
(as described in paragraph (a)(3) of this
section) exceeds its anticipated total cost
such that the amount the taxpayer actually
paid or incurred with respect to the single
advanced manufacturing facility project to
establish the beginning of its construction
under paragraph (b)(1)(ii) of this section
is less than five percent of the total cost
at the time it is placed in service, the five
percent safe harbor is not fully satisfied.
However, the five percent safe harbor will
be satisfied with respect to some, but not
all, of the separate properties or facilities
(as described in paragraph (a)(3) of this
section) comprising the single advanced
manufacturing facility project, as long as
the total aggregate cost of those properties
is not more than twenty times greater than
the amount the taxpayer paid or incurred.
(ii) Example. In 2023, taxpayer incurs
$300,000 in costs to construct Project A,
comprised of six advanced manufactur-
ing facilities that will be operated as a
single project. Taxpayer anticipates that
each advanced manufacturing facility will
cost $1,000,000 for a total cost for Proj-
ect A of $6,000,000. Thereafter, the tax-
payer makes continuous efforts to advance
towards completion of Project A. The tax-
payer timely places Project A in service in
2025. In 2025, the actual total cost of Proj-
ect A amounts to $7,500,000, with each
advanced manufacturing facility costing
$1,250,000. Although the taxpayer did not
pay or incur five percent of the actual total
cost of Project A in 2023, the taxpayer will
be treated as satisfying the Five Percent
Safe Harbor in 2023 with respect to four
of the advanced manufacturing facilities,
as their actual total cost of $5,000,000 is
not more than twenty times greater than
the $300,000 in costs incurred by the tax-
payer. The taxpayer will not be treated as
satisfying the five percent safe harbor in
2023 with respect to two of the properties.
Thus, the taxpayer may claim the section
48D credit based on $5,000,000, the cost
of four of the properties.
(iii) Single property. If the total cost
of a single property, which is not part of
a single advanced manufacturing facility
project comprised of multiple properties
or facilities (as described in paragraph (a)
(3) of this section) and cannot be sepa-
rated into multiple properties or facilities,
exceeds its anticipated total cost so that
the amount a taxpayer actually paid or
incurred with respect to the single prop-
erty as of an earlier year is less than five
percent of the total cost of the single prop-
erty at the time it is placed in service, then
the taxpayer will not satisfy the five per-
cent safe harbor with respect to any por-
tion of the single property in such earlier
year.
(iv) Example. In 2023, a taxpayer
incurs $250,000 in costs to construct
Project B, a single property. The taxpayer
anticipates that the total cost of Project B
will be $5,000,000. Thereafter, the tax-
payer makes continuous efforts to advance
towards completion of Project B. The
taxpayer places Project B in service in a
later year. At that time, its actual total cost
amounts to $6,000,000. Because Project
B is a single property that is not a single
project comprised of multiple properties,
the taxpayer will not satisfy the five per-
cent safe harbor as of 2023. However, if
the construction of Project B satisfies the
requirements of the physical work test by
also beginning physical work of a signif-
icant nature in 2024, the taxpayer may
be able to demonstrate that construction
began in 2024.
(e) Continuity requirement—(1) In
general. For purposes of the physical work
test and five percent safe harbor, taxpayers
must satisfy the continuity requirement by
demonstrating either continuous construc-
tion or continuous efforts regardless of
whether the physical work test or the five
percent safe harbor was used to establish
the beginning of construction. Whether a
taxpayer meets the continuity requirement
under either test is determined by the rel-
evant facts and circumstances. The Com-
missioner will closely scrutinize a prop-
erty and may determine that the beginning
of construction is not satisfied with respect
to a property if a taxpayer does not meet
the continuity requirement.
(2) Continuous construction. The term
continuous construction means a continu-
ous program of construction that involves
continuing physical work of a significant
nature. Whether a taxpayer maintains a
continuous program of construction to
satisfy the continuity requirement will be
determined based on all the relevant facts
and circumstances.
(3) Continuous efforts. The term con-
tinuous efforts means continuous efforts
to advance towards completion of a prop-
erty to satisfy the continuity requirement.
Whether a taxpayer makes continuous
efforts to advance towards completion
of a property will be determined by the
relevant facts and circumstances. Facts
and circumstances indicating continuous
efforts to advance towards completion of
a property may include:
(i) Paying or incurring additional
amounts included in the total cost of the
property. A taxpayer is considered to meet
this factor for a taxable year in which it
pays or incurs (within the meaning of
§1.461-1(a)(1) and (2)) five percent or
more of the total cost of the property
each calendar year after the calendar year
during which construction of the property
began for purposes of section 48D and the
section 48D regulations;
(ii) Entering into binding written con-
tracts for the manufacture, construction,
or production of the property or for future
work to construct the property;
(iii) Obtaining necessary permits; and
(iv) Performing physical work of a sig-
nificant nature.
(4) Excusable disruptions to continu-
ous construction and continuous efforts
tests—(i) In general. Certain disruptions
in a taxpayer’s continuous construction
or continuous efforts to advance towards
completion of a property that are beyond
the taxpayer’s control will not be consid-
ered as indicating that a taxpayer has failed
to satisfy the continuity requirement.
(ii) Effect of excusable disruptions on
continuity safe harbor. The excusable dis-
ruptions provided in this paragraph (e)(4)
will not extend the continuity safe harbor
deadline that is provided in paragraph (e)
(6) of this section.
(iii) Non-exclusive list of construction
disruptions. This paragraph (e)(4)(iii) pro-
vides a non-exclusive list of construction
disruptions that will not be considered as
indicating that a taxpayer has failed to sat-
isfy the continuity requirement:
(A) Delays due to severe weather con-
ditions.
(B) Delays due to natural disasters.
(C) Delays in obtaining permits or
licenses from Federal, Indian Tribal,
State, territorial, or local governments.
Such delays include delays in obtaining

Bulletin No. 2024–51 1283 December 16, 2024
air emissions, water discharge, or hazard-
ous waste management permits or chem-
ical handling licenses from the Envi-
ronmental Protection Agency (EPA) or
another environmental protection author-
ity. Such delays also include delays as a
result of the review process under State,
Tribal, local, or Federal environmental
laws, for example, a review under the
National Environmental Policy Act, as
well as delays in obtaining construction
permits.
(D) Delays at the written request of
a Federal, State, local, or Indian Tribal
government regarding matters of public
health, public safety, security, or similar
concerns, including hazardous chemical
transport.
(E) Delays related to electrical or water
supply, such as those relating to the com-
pletion of construction on a distribution
line or water supply line that may be asso-
ciated with a project’s electrical and water
needs, whether constructed by the eligible
taxpayer that is the owner of the advanced
manufacturing facility, a governmental
entity, or another person.
(F) Delays in the manufacture of cus-
tom components or equipment.
(G) Delays due to the inability to
obtain specialized equipment of limited
availability.
(H) Delays due to supply shortages.
(I) Delays due to the presence of endan-
gered species.
(J) Financing delays.
(K) Delays due to specialized labor
shortages or labor stoppages.
(5) Timing of excusable disruption
determination. In the case of a single
advanced manufacturing facility project
comprised of a single property, whether
an excusable disruption has occurred for
purposes of the beginning of construction
requirement of section 48D and the sec-
tion 48D regulations must be determined
in the taxable year during which the prop-
erty is placed in service. In the case of a
single advanced manufacturing facility
project comprised of multiple properties
or facilities, whether an excusable dis-
ruption has occurred for purposes of the
beginning of construction requirement of
section 48D and the section 48D regula-
tions must be determined in the taxable
year during which the last of multiple
properties or facilities is placed in service.
(6) Continuity safe harbor—(i) In gen-
eral. A taxpayer will be deemed to satisfy
the continuity requirement provided the
property is placed in service no more than
10 calendar years after the calendar year
during which construction of the property
began for purposes of section 48D and the
section 48D regulations.
(ii) Example. If construction begins on a
property on January 15, 2023, and the prop-
erty is placed in service by December 31,
2033, the property will be considered to sat-
isfy the continuity safe harbor. If the prop-
erty is not placed in service before January
1, 2034, whether the continuity requirement
was satisfied will be determined based on all
the relevant facts and circumstances.
(f) Applicability date. This section
applies to property that is placed in ser-
vice after December 31, 2022, and during
a taxable year ending on or after October
23, 2024.
Par. 4. Section 1.50-0 is added to read
as follows:
§1.50-0 Table of contents.
This section lists the table of contents
for §§1.50-1 and 1.50-2.
§1.50-1 Lessee’s income inclusion
following election of lessor of investment
credit property to treat lessee as acquirer.
(a) In general.
(b) Coordination with basis adjustment
rules.
(1) Basis adjustment.
(2) Amount of credit included ratably
in gross income.
(i) In general.
(ii) Special rule for the energy credit.
(3) Special rule for partnerships and S
corporations.
(i) In general.
(ii) Definition of ultimate credit claim-
ant.
(c) Coordination with the recapture
rules.
(1) In general.
(2) Income inclusion exceeds unrecap-
tured credit.
(3) Special rule for the energy credit.
(4) Timing of income inclusion or
reduction following recapture.
(d) Election to accelerate income inclu-
sion outside of the recapture period.
(1) In general.
(2) Exceptions.
(3) Manner and time for making elec-
tion.
(e) Examples.
(1) Example 1.
(2) Example 2.
(3) Example 3.
(4) Example 4.
(5) Example 5.
(6) Example 6.
(f) Applicability date.
§1.50-2 Recapture of the advanced
manufacturing investment credit in the
case of certain expansions.
(a) Recapture in connection with cer-
tain expansions.
(1) In general.
(2) Exception.
(3) Carrybacks and carryover adjusted.
(b) Definitions.
(1) Applicable period.
(2) Applicable taxpayer.
(i) In general.
(ii) Special rules for partnerships and S
corporations and their partners and share-
holders.
(iii) Examples.
(A) Example 1: Applicable taxpayer:
In general.
(B) Example 2: Applicable taxpayer: In
general.
(C) Example 3: Applicable taxpayer:
Special rules for partnerships and S cor-
porations and their partners and share-
holders.
(D) Example 4: Applicable taxpayer:
Special rules for partnerships and S cor-
porations and their partners and share-
holders.
(E) Example 5: Applicable taxpayer:
Special rules for partnerships and S cor-
porations and their partners and share-
holders.
(F) Example 6: Applicable taxpayer:
Special rules for partnerships and S cor-
porations and their partners and share-
holders.
(iv) Affiliated groups.
(3) Applicable transaction.
(4) Applicable transaction recapture
amount.
(5) Existing facility.
(6) Foreign country of concern.
(7) Material expansion.

December 16, 2024 1284 Bulletin No. 2024–51
(8) Semiconductor manufacturing
capacity.
(9) Significant renovations.
(10) Significant transaction.
(i) In general.
(ii) Required agreement.
(11) Technology licensing.
(12) Technology or product that raises
national security concerns.
(c) Exception from the definition of
applicable transaction for the manufactur-
ing of legacy semiconductors.
(1) In general.
(2) Legacy semiconductor.
(d) Example: Applicable transaction
credit claimed.
(e) Applicability date.
Par. 5. Section 1.50-2 is added to read
as follows:
§1.50-2 Recapture of the advanced
manufacturing investment credit in the
case of certain expansions.
(a) Recapture in connection with cer-
tain expansions—(1) In general. Except
as provided in section 50(a)(3)(B) of the
Code and paragraph (a)(2) of this section,
if an applicable taxpayer engages in an
applicable transaction before the close of
the applicable period, then the tax under
chapter 1 for the taxable year in which
such transaction occurs is increased by
100 percent of the applicable transaction
recapture amount. Any taxpayer, includ-
ing an applicable taxpayer, that engages in
an applicable transaction during a taxable
year does not meet the definition of an eli-
gible taxpayer under section 48D(c) and
the section 48D regulations and is ineligi-
ble for the section 48D credit for that tax-
able year. See paragraph (b) of this section
for definitions of terms used in section
50(a)(3) and this section.
(2) Exception. Section 50(a)(3)(A) and
paragraph (a)(1) of this section do not
apply if the applicable taxpayer demon-
strates to the satisfaction of the Com-
missioner that the applicable transaction
has been ceased or abandoned within 45
days of a determination and notice by the
Commissioner. A taxpayer that ceases or
abandons a particular applicable transac-
tion for a taxable year may still be treated
as engaging in a different applicable trans-
action for a taxable year. A taxpayer may
not circumvent the application of section
50(a)(3) and this section by engaging in a
series of applicable transactions, multiple
applicable transactions, or other similar
arrangements.
(3) Carrybacks and carryover adjusted.
In the case of any cessation described in
section 50(a)(1) or (2), or any applicable
transaction to which section 50(a)(3) and
paragraph (a)(1) of this section apply, any
carryback or carryover under section 39 of
the Code is appropriately adjusted by rea-
son of such cessation or applicable trans-
action.
(b) Definitions. The following defini-
tions apply for purposes of section 50(a)
(3) and this section.
(1) Applicable period. The term appli-
cable period means the 10-year period
beginning on the date that an applicable
taxpayer placed in service property that is
eligible for the section 48D credit.
(2) Applicable taxpayer—(i) In general.
Except as provided in paragraph (b)(2)(ii)
of this section, the term applicable taxpayer
means any taxpayer who was allowed a sec-
tion 48D credit or made an election under
section 48D(d)(1) with respect to such
credit, for any taxable year prior to the tax-
able year in which such taxpayer entered
into an applicable transaction.
(ii) Special rules for partnerships and
S corporations and their partners and
shareholders. In the case of qualified
property placed in service by a partner-
ship or an S corporation for which a sec-
tion 48D credit was determined, the term
applicable taxpayer also means—
(A) The partnership and the partners
of such partnership (directly or indirectly
through one or more tiered partnerships)
who were allowed a section 48D credit
for such property, or S corporation and the
shareholder(s) of such S corporation who
were allowed a section 48D credit for such
property, for any taxable year prior to the
taxable year in which such partnership or
S corporation entered into an applicable
transaction;
(B) Any partner in a partnership
(directly or indirectly through one or more
tiered partnerships) or any shareholder in
an S corporation with respect to the part-
ner’s or S corporation shareholder’s share
of any section 48D credit allowed for such
property for any taxable year prior to when
such partner or S corporation shareholder
entered into an applicable transaction;
(C) Any partnership or S corpora-
tion that made an election under section
48D(d)(2) with respect to a credit deter-
mined under section 48D(a)(1) for any
taxable year prior to the taxable year in
which such partnership or S corporation
entered into an applicable transaction; and
(D) Any partner in a partnership
(directly or indirectly through one or more
tiered partnerships) or shareholder in an S
corporation with respect to the partner’s or
S corporation shareholder’s share of any
tax-exempt income from the partnership or
S corporation that made an election under
section 48D(d)(2) for any taxable year
prior to when such partner or shareholder
entered into an applicable transaction.
(iii) Examples. The following exam-
ples illustrate the rules of this paragraph
(b)(2).
(A) Example 1: Applicable taxpayer: In general.
On July 1, 2026, X Corp, a calendar-year C corpora-
tion, entered into an applicable transaction. In 2025,
X Corp had placed in service qualified property that
is part of an advanced manufacturing facility and
was allowed a section 48D credit for its 2025 tax-
able year. X Corp is an applicable taxpayer when it
entered into the applicable transaction.
(B) Example 2: Applicable taxpayer: In general.
The facts are the same as in paragraph (b)(2)(iii)(A)
of this section (Example 1), except that X timely
filed its 2025 tax return properly making an election
under section 48D(d)(1) with respect to the section
48D credit. X Corp is an applicable taxpayer when it
entered into the applicable transaction.
(C) Example 3: Applicable taxpayer: Special
rules for partnerships and S corporations and their
partners and shareholders. A, B, C, and D, all calen-
dar-year C corporations, are partners in the ABCD
partnership. Partners A, B, C, and D share partner-
ship profits equally. On May 1, 2027, the ABCD
partnership engages in an applicable transaction.
On November 1, 2025, the ABCD partnership had
placed in service qualified property with a basis of
$1 million. Each partner’s share of the basis of the
qualified property, as determined in §1.46-3(f)(2), is
$250,000 ($1m x 0.25) and each partner’s qualified
investment is $250,000. A, B, C, and D each filed its
2025 tax return claiming a section 48D credit. The
ABCD partnership and A, B, C, and D each are an
applicable taxpayer when ABCD partnership enters
into the applicable transaction.
(D) Example 4: Applicable taxpayer: Special
rules for partnerships and S corporations and
their partners and shareholders. The facts are the
same as in paragraph (b)(2)(iii)(C) of this section
(Example 3), except that on May 1, 2027, A, and not
ABCD partnership, engages in an applicable trans-
action. A is an applicable taxpayer with respect to
A’s share of the section 48D credit when A enters
into the applicable transaction. Neither the ABCD
partnership nor partners B, C, nor D are an applica-
ble taxpayer with respect to the applicable transac-
tion entered into by A.

Bulletin No. 2024–51 1285 December 16, 2024
(E) Example 5: Applicable taxpayer: Special
rules for partnerships and S corporations and their
partners and shareholders. The facts are the same as
in paragraph (b)(2)(iii)(C) of this section (Example
3), except that A, B, C and D do not claim a sec-
tion 48D credit on their timely filed 2025 tax returns.
Instead, the ABCD partnership makes an election
pursuant to section 48D(d)(2) with respect to the
section 48D credit determined under section 48D(a)
(1). The ABCD partnership is an applicable taxpayer
with respect to the elective payment to the ABCD
partnership pursuant to section 48D(d)(2)(A)(i)(I).
(F) Example 6: Applicable taxpayer: Special
rules for partnerships and S corporations and their
partners and shareholders. The facts are the same as
in paragraph (b)(2)(iii)(E) of this section (Example
5), except that the ABCD partnership did not engage
in an applicable transaction. On May 1, 2027, A
engages in an applicable transaction. A is an applica-
ble taxpayer with respect to its share of tax-exempt
income allocated to A pursuant to section 48D(d)(2)
(A)(i)(II) and (IV). Neither the ABCD partnership
nor partners B, C, or D are an applicable taxpayer
with respect to the applicable transaction entered
into by A.
(iv) Affiliated groups. For purposes of
this paragraph (b)(2), all members of an
affiliated group under section 1504(a) of
the Code, determined without regard to
section 1504(b)(3), are treated as one tax-
payer.
(3) Applicable transaction. Except
as provided in section 50(a)(6)(D)(ii)
and paragraph (c)(1) of this section, the
term applicable transaction means, with
respect to any applicable taxpayer, any
significant transaction involving the mate-
rial expansion of semiconductor manu-
facturing capacity of such applicable tax-
payer in any foreign country of concern.
(4) Applicable transaction recapture
amount. The term applicable transaction
recapture amount means, with respect
to an applicable taxpayer, the aggregate
decrease in the credits allowed under sec-
tion 38 of the Code for all prior taxable
years that would have resulted solely from
reducing to zero any credit determined
under section 46 of the Code that is attrib-
utable to the advanced manufacturing
investment credit under section 48D(a),
with respect to property that has been
placed in service during the applicable
period.
(5) Existing facility. The term existing
facility means any facility built, equipped,
and operating prior to a taxpayer placing
in service qualified property as defined in
section 48D(b)(2) and §1.48D-3. Existing
facilities are defined by their semiconduc-
tor manufacturing capacity at the time the
qualified property is placed in service;
facilities that undergo significant renova-
tions, as defined in paragraph (b)(9) of this
section, will no longer qualify as existing
facilities within the meaning of this para-
graph (b)(5).
(6) Foreign country of concern. The
term foreign country of concern has the
same meaning as provided in 15 CFR
231.102.
(7) Material expansion. The term
material expansion means –
(i) With respect to an existing facility,
the increase of the semiconductor manu-
facturing capacity of that facility by more
than five percent during the applicable
period due to the addition of a cleanroom,
production line or other physical space, or
a series of such additions; or
(ii) Any construction of a new facility
for semiconductor manufacturing.
(8) Semiconductor manufacturing
capacity. The term semiconductor manu-
facturing capacity means, consistent with
15 CFR 231.117, the productive capacity
of a semiconductor facility. In the case of
a semiconductor wafer production facility
that includes the processes of growing sin-
gle-crystal ingots and boules, wafer slic-
ing, wafer bonding, etching and polishing,
cleaning, epitaxial deposition, and metrol-
ogy, semiconductor manufacturing capac-
ity is measured in wafer starts per month.
In the case of a semiconductor fabrication
facility, semiconductor manufacturing
capacity is measured in wafer starts per
year. In the case of a packaging facility,
semiconductor manufacturing capacity is
measured in packages per year.
(9) Significant renovations. The term
significant renovations means building
new cleanroom space or adding a pro-
duction line or other physical space to
an existing facility that, in the aggregate
during the applicable period, increases
semiconductor manufacturing capacity by
10 percent or more of the capacity.
(10) Significant transaction–(i) In gen-
eral. As determined in coordination with
the Secretary of Commerce and the Sec-
retary of Defense and except as provided
in paragraph (b)(10)(ii) of this section, the
term significant transaction means any of
the following:
(A) An investment, whether proposed,
pending, or completed, including any cap-
ital expenditure, loan, or gift;
(B) The formation of a subsidiary,
whether classified as a corporation or part-
nership for Federal tax purposes;
(C) A merger, acquisition, or takeover,
including—
(1) The acquisition of a new or addi-
tional ownership interest in an entity;
(2) The acquisition of a material por-
tion of the assets of an entity; or
(3) A consolidation;
(D) The formation of a joint venture; or
(E) A long-term lease or concession
arrangement under which a lessee (or
equivalent) makes substantially all busi-
ness decisions concerning the operation of
a leased entity (or equivalent), as if it were
the owner.
(F) A transaction that involves the
expansion of manufacturing capacity for
legacy semiconductors (other than with
respect to an existing facility or equip-
ment of an applicable taxpayer for man-
ufacturing legacy semiconductors) if
less than 85 percent of the output of the
semiconductor manufacturing facility (for
example, wafers, semiconductor devices,
or packages) by value, is incorporated into
final products (that is, not an intermediate
product that is used as factory inputs for
producing other goods) that are used or
consumed in the market of a foreign coun-
try of concern; or
(G) A transaction during the applicable
period in which an applicable taxpayer
knowingly (within the meaning of 15 CFR
231.106) engages in any joint research, as
defined in 15 CFR 231.105, or technol-
ogy licensing effort with a foreign entity
of concern that relates to a technology or
product that raises national security con-
cerns.
(ii) Required agreement. If a taxpayer
enters into a required agreement with
the Secretary of Commerce pursuant to
15 U.S.C. 4652(a)(6)(C) and 15 CFR
231.112, then the term significant trans-
action for purposes of section 48D and
the section 48D regulations has the mean-
ing provided in the required agreement.
Defined terms in the required agreement
control only for purposes of determining
the meaning of the term significant trans-
action. Thus, the effect of a significant
transaction is determined under section
50(a)(3) and (6) during the applicable
term defined under paragraph (b)(1) of
this section.

December 16, 2024 1286 Bulletin No. 2024–51
(11) Technology licensing. The term
technology licensing has the same mean-
ing as provided in 15 CFR 231.120.
(12) Technology or product that raises
national security concerns. The term tech-
nology or product that raises national
security concerns has the same meaning
as provided in 15 CFR 231.121.
(c) Exception from the definition of
applicable transaction for the manufac-
turing of legacy semiconductors—(1)
In general. The term applicable trans-
action, as defined in section 50(a)(6)(D)
and paragraph (b)(3) of this section, does
not include a transaction that primarily
involves the expansion of manufacturing
capacity for legacy semiconductors, but
only to the extent not described in para-
graph (b)(10)(i)(F) of this section.
(2) Legacy semiconductor. The term
legacy semiconductor has the same mean-
ing as provided in 15 CFR 231.107.
(d) Example: Applicable transaction
credit claimed. On January 15, 2025,
X Corp, a C corporation that is a calen-
dar-year taxpayer, placed in service Prop-
erty A, qualified property with a basis of
$1 million. X Corp’s qualified investment,
as determined in §1.46-3(c), for the tax-
able year is $1 million. X Corp’s advanced
manufacturing investment credit for the
taxable year is $250,000 ($1 million x
0.25) and, assume that X Corp’s income
tax liability is $400,000. X Corp does not
determine any other credits in 2025. X
claims an advanced manufacturing invest-
ment credit of $250,000 for its 2025 tax-
able year. On December 15, 2026, X Corp
engages in an applicable transaction, as
defined in section 50(a)(6)(D) and para-
graph (b)(3) of this section and did not
cease or abandon the transaction within 45
days of a determination and notice by the
Commissioner. X Corp has not determined
or claimed any general business credits
since its 2025 taxable year. The aggregate
decrease in credits allowed under sec-
tion 38 for all prior years resulting from
reducing to zero any credit determined
under section 46 that is attributable to the
advanced manufacturing investment credit
is $250,000 ($250,000 (credit allowed) -
$0 (credit that would have been allowed)).
X Corp’s tax under chapter 1 is increased
by $250,000 (1.0 x $250,000) for the 2026
taxable year. Pursuant to section 48D(c),
for the 2026 taxable year, X Corp is not an
eligible taxpayer and is ineligible to claim
or carryforward the advanced manufactur-
ing investment credit.
(e) Applicability date. This section
applies to property that is placed in ser-
vice after December 31, 2022, and during
a taxable year ending on or after October
23, 2024.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: October 8, 2024.
Aviva R. Aron-Dine,
Deputy Assistant Secretary of the Trea-
sury (Tax Policy).
(Filed by the Office of the Federal Register October
22, 2024, 8:45 a.m., and published in the issue of the
Federal Register for October 23, 2024, 89 FR 84732)
26 CFR 1.45X-1 through 1.45X-4
TD 10010
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Advanced Manufacturing
Production Credit
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document sets forth
final regulations regarding the advanced
manufacturing production credit estab-
lished by the Inflation Reduction Act of
2022 to incentivize the production of
eligible components within the United
States. Eligible components include
certain solar energy components, wind
energy components, inverters, qualifying
battery components, and applicable criti-
cal minerals. These final regulations also
address specific recordkeeping and report-
ing requirements. These final regulations
affect eligible taxpayers who produce and
sell eligible components and intend to
claim the benefit of an advanced manu-
facturing production credit, including by
making elective payment or credit transfer
elections.
DATES: Effective date: These regulations
are effective December 27, 2024.
Applicability date: For date of appli-
cability, see §§1.45X-1(j), 1.45X-2(f),
1.45X-3(g), and 1.45X-4(d).
FOR FURTHER INFORMATION
CONTACT: Mindy Chou, John
Deininger, Derek Gimbel, or Alexander
Scott at (202) 317-6853 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Authority
This document contains final regula-
tions (final regulations) that amend the
Income Tax Regulations (26 CFR part 1)
to implement the statutory provisions of
section 45X of the Internal Revenue Code
(Code). The final regulations are issued
by the Secretary of the Treasury or her
delegate (Secretary) under the authority
granted under sections 45X(a)(3)(B)(i)
and (ii), 1502, 6001, 6417(h), 6418(h),
and 7805(a) of the Code.
Section 45X(a)(3)(B)(i) of the Code
provides a specific delegation of author-
ity to the Secretary to prescribe the form
and manner for a taxpayer to make an
election such that “a sale of components
by such taxpayer to a related person shall
be deemed to have been made to an unre-
lated person.” Section 45X(a)(3)(B)(ii)
provides a specific delegation of authority
to the Secretary, “[a]s a condition of, and
prior to, any election described in [section
45X(a)(3)(B)(i)],” to “require such infor-
mation or registration as the Secretary
deems necessary for purposes of prevent-
ing duplication, fraud, or any improper or
excessive amount determined under [sec-
tion 45X(a)(1)].”
Section 1502 of the Code requires the
Secretary to “prescribe such regulations
as he may deem necessary in order that
the tax liability of any affiliated group of
corporations making a consolidated return
and of each corporation in the group, both
during and after the period of affiliation,

Bulletin No. 2024–51 1287 December 16, 2024
may be returned, determined, computed,
assessed, collected, and adjusted, in such
manner as clearly to reflect the income-tax
liability and the various factors necessary
for the determination of such liability, and
in order to prevent avoidance of such tax
liability.” Section 1502 of the Code also
provides that the Secretary “may prescribe
rules that are different from the provisions
of chapter 1 that would apply if such cor-
porations filed separate returns.”
Section 6001 of the Code provides
an express delegation of authority to the
Secretary, stating that, “[e]very person
liable for any tax imposed by this title,
or for the collection thereof, shall keep
such records, render such statements,
make such returns, and comply with such
rules and regulations as the Secretary
may from time to time prescribe. When-
ever in the judgment of the Secretary it is
necessary, [s]he may require any person,
by notice served upon such person or by
regulations, to make such returns, render
such statements, or keep such records, as
the Secretary deems sufficient to show
whether or not such person is liable for
tax under this title.”
Sections 6417(h) and 6418(h) of the
Code direct the Secretary to issue such
regulations or other guidance as may be
necessary to carry out the purposes of
each section, respectively.
Finally, section 7805(a) of the Code
authorizes the Secretary “to prescribe
all needful rules and regulations for the
enforcement of [the Code], including all
rules and regulations as may be necessary
by reason of any alteration of law in rela-
tion to internal revenue.”
Background
I. Overview of Section 45X
Section 45X was added to the Code
by section 13502(a) of Public Law 117-
169, 136 Stat. 1818, 1971 (August 16,
2022), commonly known as the Inflation
Reduction Act of 2022 (IRA). In general,
for purposes of the general business credit
under section 38 of the Code, section 45X
provides for the advanced manufacturing
production credit (section 45X credit)
with respect to eligible components pro-
duced by the taxpayer and sold during the
taxable year to an unrelated person. Sec-
tion 45X applies to eligible components
produced and sold after December 31,
2022.
Under section 45X(a)(1), the total sec-
tion 45X credit amount for the taxable year
equals the sum of the credit amounts deter-
mined under section 45X(b) with respect
to each eligible component (as defined in
section 45X(c)(1)). Under section 45X(a)
(2), any eligible component produced and
sold by the taxpayer is taken into account
only if the production and sale is in a trade
or business of the taxpayer.
Section 45X(a)(3) generally provides
rules regarding the sale of eligible com-
ponents to an unrelated person. However,
section 45X(a)(3)(B) provides a special
rule whereby if a taxpayer makes an elec-
tion in the form and manner prescribed by
the Secretary, a sale of eligible components
by the taxpayer to a related person will be
treated as if made to an unrelated person,
referred to in these final regulations as the
related person election (Related Person
Election). As a condition of, and prior to, a
taxpayer making the Related Person Elec-
tion, the Secretary may require such infor-
mation or registration as the Secretary
deems necessary for purposes of prevent-
ing duplication, fraud, or any improper or
excessive credit amount.
II. Credit Amounts for Eligible
Components
Section 45X(b)(1) generally provides
the credit amount determined with respect
to any eligible component, including any
other eligible component it incorporates,
subject to the credit phase out rules pro-
vided at section 45X(b)(3). Section 45X(b)
(1)(A) through (M) and section 45X(b)(2)
set forth the credit amounts for each type
of eligible component. The credit amounts
are generally subject to phase out rules
under section 45X(b)(3), but the phase
out rules do not apply to any applicable
critical mineral. For any eligible compo-
nent (except applicable critical minerals)
sold after December 31, 2029, the credit
amount for such component equals the
product of the amount determined under
section 45X(b)(1) for such component
multiplied by the applicable phase out
percentage under section 45X(b)(3)(B)
(i) through (iv). In the case of an eligi-
ble component sold during calendar year
2030, 2031, and 2032, the phase out per-
centages are 75 percent, 50 percent, and
25 percent, respectively. For any eligible
component sold after December 31, 2032,
the phase out percentage is zero percent,
and no section 45X credit is allowed other
than for applicable critical minerals.
Section 45X(b)(4) provides capacity
limitations used to compute the credit
amount for battery cells under section
45X(b)(1)(K)(ii) and battery modules
under section 45(b)(1)(L)(ii). Section
45X(b)(4)(A) provides that the capac-
ity determined with respect to a battery
cell or battery module must not exceed a
capacity-to-power-ratio of 100:1. Section
45X(b)(4)(B) defines “capacity-to-pow-
er-ratio” as the ratio of the capacity of a
battery cell or battery module to the max-
imum discharge amount of such cell or
module.
III. Eligible Components
Section 45X(c)(1)(A) defines an eligi-
ble component to mean any solar energy
component, any wind energy component,
any inverter described in section 45X(c)
(2)(B) through (G), any qualifying battery
component, and any applicable critical
mineral. Section 45X(c)(1)(B) clarifies
that eligible components do not include
any property that is produced at a facility
if the basis of any property that is part of
such facility is taken into account for pur-
poses of the qualifying advanced energy
project credit allowed under section 48C
after August 16, 2022 (the date of enact-
ment of the IRA).
Section 45X(c)(2)(A) generally defines
an inverter as an end product that is suit-
able to convert direct current (DC) elec-
tricity from one or more solar modules or
certified distributed wind energy systems
into alternating current (AC) electricity.
Section 45X(c)(2)(B) through (G) defines
the following different types of eligible
inverters: central inverter, commercial
inverter, distributed wind inverter, micro-
inverter, residential inverter, and utility
inverter.
Section 45X(c)(3)(A) defines a solar
energy component as a solar module, pho-
tovoltaic cell, photovoltaic wafer, solar
grade polysilicon, torque tube, structural
fastener, or polymeric backsheet. Section
45X(c)(3)(B) defines these different types

December 16, 2024 1288 Bulletin No. 2024–51
of eligible solar energy components as
well as a solar tracker.
Section 45X(c)(4)(A) defines a wind
energy component as blades, nacelles,
towers, offshore wind foundations, and
related offshore wind vessels. Section
45X(c)(4)(B) defines these different types
of eligible wind energy components.
Section 45X(c)(5)(A) defines a qual-
ifying battery component as electrode
active materials, battery cells, and battery
modules. Section 45X(c)(5)(B) defines
these different types of qualifying battery
components.
Section 45X(c)(6) defines applicable
critical minerals. The following minerals
are eligible for the section 45X credit if
converted or purified to specified puri-
ties or forms: aluminum, antimony, arse-
nic, barite, beryllium, bismuth, cerium,
cesium, chromium, cobalt, dysprosium,
erbium, europium, fluorspar, gadolinium,
gallium, germanium, graphite, hafnium,
holmium, indium, iridium, lanthanum,
lithium, lutetium, magnesium, manga-
nese, neodymium, nickel, niobium, palla-
dium, platinum, praseodymium, rhodium,
rubidium, ruthenium, samarium, scan-
dium, tantalum, tellurium, terbium, thu-
lium, tin, titanium, tungsten, vanadium,
ytterbium, yttrium, zinc, and zirconium.
IV. Special Rules
Section 45X(d)(1) provides that per-
sons are related to each other for purposes
of the section 45X credit if they would be
treated as a single employer under section
52(b) of the Code and §1.52-1(b). Section
52(b) and §1.52-1(b) generally provide
that trades or businesses that are partner-
ships, trusts, estates, corporations, or sole
proprietorships under common control
are members of a controlled group and
are treated as a single employer. Section
52(b) requires the regulations under sec-
tion 52(b) to be based on principles simi-
lar to the principles that apply under sec-
tion 52(a), which generally provide that
corporations that are members of a con-
trolled group of corporations are treated as
a single employer. Section 52(a) provides
that a controlled group of corporations is
defined with reference to section 1563(a)
of the Code. Section 52(b) and §1.52-1
provide rules based on principles similar
to those under section 52(a), but with cer-
tain modifications to account for different
types of ownership interests.
Section 45X(d)(2) provides that sales
of eligible components are taken into
account under section 45X only for eligi-
ble components that are produced within
the United States (including continental
shelf areas described in section 638(1) of
the Code), or a U.S. territory (including
continental shelf areas described in sec-
tion 638(2)).
1
Section 45X(d)(3) directs the Secretary
to promulgate regulations adopting rules
similar to the rules of section 52(d) to
apportion credit amounts between estates
or trusts and their beneficiaries on the
basis of the income of the estates or trusts
allocable to each, and to pass-thru any
apportioned credit amounts to the benefi-
ciaries.
Section 45X(d)(4) provides that a per-
son is treated as having sold an eligible
component to an unrelated person if such
component is integrated, incorporated, or
assembled into another eligible compo-
nent that is sold to an unrelated person.
V. Prior Guidance
On October 24, 2022, the Department
of the Treasury (Treasury Department)
and the IRS published Notice 2022-47,
2022-43 IRB 312, requesting comments
on issues arising under section 45X that
may require guidance. On December 15,
2023, after full consideration of all the
stakeholder input received in response to
Notice 2022-47, the Treasury Department
and the IRS published a notice of proposed
rulemaking and a notice of public hearing
(REG-107423-23) in the Federal Regis-
ter (88 FR 86844) to provide guidance
on the advanced manufacturing produc-
tion credit under section 45X (Proposed
Regulations). While the Proposed Regu-
lations are summarized in the Summary
of Contents and Explanation of Revisions
portion of this preamble, the provisions of
the Proposed Regulations are explained in
greater detail in the preamble to the Pro-
posed Regulations.
On March 6, 2023, the Treasury
Department and the IRS published Notice
2023-18, 2023-10 IRB 508, establishing
the qualifying advanced energy project
allocation program (section 48C(e) pro-
gram). On June 20, 2023, the Treasury
Department and the IRS published Notice
2023-44, 2023-25 IRB 924, providing
additional guidance on the section 48C(e)
program, including rules for the interac-
tion between sections 45X and 48C. The
rules regarding the interaction between
sections 45X and 48C provided in Notices
2023-18 and 2023-44 were addressed in
the Proposed Regulations and have been
incorporated into these final regulations.
Section 5.05(2) of Notice 2023-18 and
section 3 of Notice 2023-44 are super-
seded by these final regulations.
Summary of Comments and
Explanation of Revisions
I. Overview
This Summary of Comments and
Explanation of Revisions summarizes
the Proposed Regulations, all substan-
tive comments submitted in response to
the Proposed Regulations, and revisions
adopted by these final regulations. The
Treasury Department and the IRS received
194 written comments in response to the
Proposed Regulations. The comments are
available for public inspection at https://
www.regulations.gov or upon request.
A public hearing was held in person and
telephonically on February 22, 2024. After
full consideration of the comments and
testimony, these final regulations adopt
the Proposed Regulations with modifi-
cations in response to the comments and
testimony as described in this Summary of
Comments and Explanation of Revisions.
Comments merely summarizing the
statute or the Proposed Regulations, rec-
ommending statutory revisions to sec-
tion 45X or other statutes, and address-
ing issues that are outside the scope of
this rulemaking (such as revising other
Federal regulations and recommending
changes to IRS forms) are generally not
addressed in this Summary of Comments
and Explanation of Revisions or adopted
1
The preamble to these section 45X final regulations refers to U.S. territory to mean a possession as defined in section 638(2).

Bulletin No. 2024–51 1289 December 16, 2024
in these final regulations. Some comment-
ers requested additional time to submit
comments. The Proposed Regulations
required all comments to be received by
February 13, 2024; however, comments
received later but before these final regu-
lations were substantially developed were
carefully considered in drafting these final
regulations. The final regulations retain
the same basic structure as the Proposed
Regulations with certain revisions.
II. General rules applicable to the
advanced manufacturing production
credit
A. In General
Proposed §1.45X-1 would have pro-
vided general rules regarding the section
45X credit including generally applicable
definitions, rules regarding the computa-
tion of the credit amount, the definition of
“produced by the taxpayer,” the require-
ment to produce eligible components in
the United States, the production and sale
in a trade or business requirement, the sale
of integrated components, the interaction
between sections 45X and 48C, and an
anti-abuse rule. Commenters addressed
certain aspects of these proposed rules,
as described in Part II. of this Summary
of Comments and Explanation of Revi-
sions. These final regulations generally
adopt proposed §1.45X-1, with the mod-
ifications described in this Part II. of the
Summary of Comments and Explanations
of Revisions.
B. Definition of produced by the taxpayer
1. In General
Section 45X(a)(1) allows a section
45X credit with respect to each eligible
component which is produced by the
taxpayer and sold to an unrelated per-
son during the taxable year. Proposed
§1.45X-1(c)(1) would have defined “pro-
duced by the taxpayer” to mean a process
conducted by the taxpayer that substan-
tially transforms constituent elements,
materials, or subcomponents into a com-
plete and distinct eligible component that
is functionally different from that which
would result from mere assembly or
superficial modification of the elements,
materials, or subcomponents. Proposed
§1.45X-1(c)(1)(i) would have provided
that “produced by the taxpayer” does
not include partial transformation that
does not result in substantial transforma-
tion of constituent elements, materials,
and subcomponents into a complete and
distinct eligible component as described
in proposed §1.45X-1(c)(1). Proposed
§1.45X-1(c)(1)(ii) would have provided
that “produced by the taxpayer” does not
include minor assembly of two or more
constituent elements, materials, or sub-
components, or superficial modification
of the final eligible component, if the tax-
payer does not also engage in the process
resulting in a substantial transformation
described in proposed §1.45X-1(c)(1).
Proposed §1.45X-1(c)(1)(iii) would have
provided examples illustrating the defini-
tion of “produced by the taxpayer.”
Several commenters requested that the
final regulations specifically state that tax-
payers may produce eligible components
using recycled materials. While the pre-
amble to the Proposed Regulations stated
that primary and secondary production are
included in the definition of “produced by
the taxpayer,” that issue was not addressed
in the text of the Proposed Regulations.
The preamble to the Proposed Regulations
further stated that primary production
involves producing an eligible component
using non-recycled materials while sec-
ondary production involves producing an
eligible component using recycled mate-
rials.
The Treasury Department and the IRS
agree with the request to clarify the gen-
eral rule that production includes primary
and secondary production, and these final
regulations revise proposed §1.45X-1(c)
(1) and (2) to add secondary production to
the definition of produced by the taxpayer.
A few commenters stated the definition
of “produced by the taxpayer” should be
defined consistently with section 263A
of the Code to the extent possible and
expressed concern that using different
definitions will cause “increased technical
uncertainty, additional compliance bur-
den, especially for small business taxpay-
ers, and unnecessary litigation and con-
troversy.” Another commenter stated that
the Proposed Regulations introduced new
definitions, such as “substantial transfor-
mation” as production qualifiers, “raising
concerns about its apparent conflict with
the enacted statutes.”
The term “produced by the taxpayer” is
not defined in section 45X, nor is there any
indication in section 45X suggesting that
Congress intended the use of any existing
statutory definition, such as the standard
in section 263A. Section 45X provides a
credit based on the production of numer-
ous eligible components and a variety of
production processes are utilized by man-
ufacturers in the production of these eligi-
ble components.
Given the variety of production pro-
cesses and the highly technical nature of
production, the Treasury Department and
the IRS, in close coordination with the
Department of Energy, proposed a defini-
tion that would apply broadly to eligible
components. In addition, the proposed
definition of “produced by the taxpayer”
focused on requiring production of a com-
plete and distinct eligible component and,
accordingly, introduces a substantial trans-
formation requirement to distinguish pro-
duction from partial transformation, mere
assembly, and superficial modification.
The proposed definition of “produced by
the taxpayer” along with the amendment
clarifying that production includes second-
ary production is the appropriate standard
to implement the section 45X credit. The
definition provides the necessary flexibility
to account for the highly technical nature
of the production processes associated
with eligible components. This standard
also ensures that the section 45X credit is
claimed by the taxpayer responsible for the
key production activity and that such activ-
ity occurs in the United States or a United
States territory. In contrast to section 45X,
section 263A is designed to ensure that
taxpayers capture the direct and indirect
costs associated with producing invento-
riable goods for capitalization purposes.
Moreover, in section 263A, the definition
of production applies to a broad range of
produced items, whereas the definition in
section 45X applies to a limited number
of statutorily enumerated eligible com-
ponents. For these reasons, the Treasury
Department and the IRS have concluded
that the definition of “produced by the tax-
payer” in the Proposed Regulations with the
clarifying amendment addressing second-
ary production appropriately implements
section 45X(a)(1)(A), and thus decline to

December 16, 2024 1290 Bulletin No. 2024–51
accept the commenter’s recommendation
to define “produced by the taxpayer” for
purposes of section 45X consistent with the
similar term under section 263A.
Several commenters requested that the
final regulations provide more specific
guidance for certain eligible components
to illustrate whether certain activities or
processes result in substantial transforma-
tion versus partial transformation, mere
assembly, or superficial modification.
One commenter, for example, requested
that the final rules confirm that the term
“produced” in the phrase “produced by
the taxpayer” is applied within the context
of the standard production process of each
eligible component, such that the standard
production process for each eligible com-
ponent is deemed to be “substantial trans-
formation” that meets the requirements of
proposed §1.45X-1(c)(1). The commenter
provided an example of the production of
a solar module, which “involves the final
assembly of the other solar components,
many of which separately qualify for their
own section 45X credit, into the overall
module.” The Treasury Department and
the IRS recognize that certain eligible
components, such as solar modules and
battery modules using battery cells, are
produced primarily by assembling other
components. In these limited cases, the
substantial transformation requirement is
met by the taxpayer that assembles the con-
stituent components to produce the solar
module or battery module using battery
cells. Because assembly is the activity that
primarily produces these eligible compo-
nents, the assembly necessary to achieve
production of a solar module or battery
module using battery cells should not gen-
erally be viewed as disqualifying “minor
assembly.” The Treasury Department and
the IRS also recognize that certain eligible
components, such as nacelles, that have
undergone substantial transformation to
be considered “produced by the taxpayer”
may be produced and sold to a third party
in a manner in which only minor assembly
remains left to complete. In these cases,
provided all other requirements of sec-
tion 45X are met, the party that produces
and sells the eligible components in such
manner is not precluded from claiming
the section 45X credit. The third party that
completes the eligible component by per-
forming minor assembly is not entitled to
the section 45X credit because that third
party is not considered to have produced
the eligible component. For these reasons,
and for clarity and consistency, the final
regulations replace each instance of “mere
assembly” in the Proposed Regulations,
with “minor assembly.”
A commenter suggested adding an addi-
tional example to proposed §1.45X‐1(c)
(1)(iii) to clarify whether the integration
of electrical subcomponents and software
necessary to enable the functionality of an
inverter is disqualifying minor assembly,
and another commenter requested clarifi-
cation on whether the coating of a battery
separator is “superficial modification” or
“substantial transformation.” A few com-
menters also requested that the final rules
further clarify “substantial transforma-
tion” to ensure manufacturers claiming
section 45X credits are actually producing
an eligible component in the United States
and suggested using examples to differen-
tiate between substantial and partial trans-
formation for specific components, such
as inverters for solar energy.
As previously discussed, section 45X
provides a credit based on the production
of numerous eligible components and a
variety of production processes are uti-
lized by manufacturers in the production
of these eligible components. Thus, list-
ing specific production processes for each
eligible component is not practicable and
could also imply that other variations of
production processes do not qualify as
production. The Treasury Department and
the IRS have determined that the inquiry
into whether production activities or pro-
cesses result in substantial transforma-
tion for a specific eligible component is
highly fact dependent and conclude that
the examples in proposed §1.45X‐1(c)(1)
(iii), which are included in the final reg-
ulations, provide sufficient guidance to
determine what types of activities or pro-
duction steps do not qualify as substantial
transformation.
2. Special Rule for Production of Certain
Eligible Components
Proposed §1.45X-1(c)(2) would have
provided that for solar grade polysilicon,
electrode active materials, and applica-
ble critical minerals, “produced by the
taxpayer” means processing, conver-
sion, refinement, or purification of source
materials, such as brines, ores, or waste
streams, to derive a distinct eligible com-
ponent. Several commenters requested
that in addition to processing, conversion,
refinement, and purification, the final reg-
ulations clarify that the production process
includes extraction, while others requested
maintaining the position in the Proposed
Regulations to exclude costs of extraction.
The Treasury Department and the IRS
decline to amend the final regulations to
expressly include the term “extraction,”
as the action of extraction alone does not
produce an eligible component. For the dis-
cussion and analysis of whether extraction
costs are includible as production costs in
the production of electrode active materi-
als or applicable critical minerals, see Part
IV.E.1.e. of this Summary of Comments
and Explanation of Revisions.
Another commenter asked whether
recycling aluminum transformer wire
(cleaning, melting, and bailing it) to send
to an aluminum smelter constitutes “sec-
ondary aluminum production.” The Trea-
sury Department and the IRS note that
under both proposed §1.45X-1(c)(2) and
§1.45X-1(c)(2) of these final regulations,
substantial transformation for an appli-
cable critical mineral requires that the
applicable critical mineral be “processed,
converted, refined, or purified to derive a
distinct eligible component.” Because a
taxpayer in these circumstances would not
derive a distinct eligible component, this
would not be an eligible component pro-
duced by the taxpayer within the meaning
of section 45X(a)(1)(A).
These final regulations make a clarify-
ing revision to the definition of produced
by the taxpayer under proposed §1.45X-
1(c)(2) so that it references substantial
transformation. While no comments
were received on this issue, this revision
is needed to appropriately align the defi-
nition of “produced by the taxpayer” in
§1.45X-1(c)(2) with the requirements to
qualify as an eligible taxpayer in §1.45X-
1(c)(3).
3. Eligible Taxpayer
a. In general
Proposed §1.45X-1(c)(3)(i) would
have provided that the taxpayer claiming

Bulletin No. 2024–51 1291 December 16, 2024
a section 45X credit with respect to an eli-
gible component must be the person that
performs the actual production activities
that bring about a substantial transforma-
tion resulting in the eligible component
and that sells such eligible component to
an unrelated person.
b. Contract manufacturing arrangement
Proposed §1.45X-1(c)(3)(ii)(A) would
have provided that, if the production of an
eligible component is performed in whole
or in part subject to a contract that is a
contract manufacturing arrangement, then
the party to such contract that may claim
the section 45X credit with respect to such
eligible component, provided all other
requirements in section 45X are met, is the
taxpayer that performs the actual produc-
tion activities that bring about a substan-
tial transformation resulting in the eligible
component. The preamble to the Proposed
Regulations stated that this proposed rule
was intended to provide an administrable
rule that provides clarity and certainty in
determining which taxpayer may claim
the section 45X credit in a contract manu-
facturing arrangement.
c. Contract manufacturing defined
Proposed §1.45X-1(c)(3)(ii)(B) would
have defined the term “contract manufac-
turing arrangement” to mean any agree-
ment providing for the production of
an eligible component if the agreement
is entered into before the production of
the eligible component to be delivered
under the contract is completed. Proposed
§1.45X-1(c)(3)(ii)(B) would have further
provided that a routine purchase order for
off-the-shelf property is not treated as a
contract manufacturing arrangement. Pro-
posed §1.45X-1(c)(3)(ii)(B) also would
have provided that an agreement will be
treated as a routine purchase order for
off-the-shelf property if the contractor is
required to make no more than de mini-
mis modifications to the property to tailor
it to the customer’s specific needs, or if at
the time the agreement is entered into, the
contractor knows or has reason to know
that the contractor can satisfy the agree-
ment out of existing stocks or normal pro-
duction of finished goods. This definition
of the term “routine purchase order” is
based on the definition found in §1.263A-
2(a)(1)(ii)(B)(2)(ii). The Treasury Depart-
ment and the IRS requested comments in
the preamble to the Proposed Regulations
on whether this definition should be fur-
ther clarified or modified. Comments on
the definition of manufacturing arrange-
ments are discussed in Part II.B.3.d. of
this Summary of Comments and Explana-
tion of Revisions.
d. Special rule for contract manufacturing
arrangements
Proposed §1.45X-1(c)(3)(iii) would
have explained the special rule allow-
ing parties to a contract manufacturing
arrangement to agree on which party to the
contract will claim the section 45X credit
for eligible components produced subject
to such contract. Proposed §1.45X-1(c)
(3)(iv) would have explained the certifi-
cation requirements for the special rule.
Several commenters expressed support
for the contract manufacturing rules, but
one commenter expressed concern about
the treatment of contract manufacturing
arrangements in effect prior to the appli-
cability date of the Proposed Regulations.
This commenter recommended that the
final regulations adopt a safe harbor rule
that would function as an exception to the
general rule and provide that when one
party is contractually entitled to purchase
all or substantially all (for example, at
least 90 percent) of the output of the fab-
ricator’s production of a given component
for the taxable year, the purchaser would
be treated as the producer for purposes of
section 45X. The Treasury Department
and the IRS decline to adopt the com-
menter’s request to add a safe harbor for
contract manufacturing arrangements in
place before the applicability date of the
Proposed Regulations, but note that a tax-
payer may still have the option of apply-
ing the special rule in §1.45X-1(c)(3)
(iii) of these final regulations for contract
manufacturing arrangements entered into
before the applicability date, provided all
requirements of the special rule are met.
The preamble to the Proposed Regula-
tions stated that the Treasury Department
and the IRS intend for the production cost
incurred rules in proposed §1.45X–3(e)(2)
to apply to a credit claimant in a contract
manufacturing arrangement. The Trea-
sury Department and the IRS requested
comments on whether the proposed rules
need further clarification or modifica-
tion as applied to contract manufacturing
arrangements. One commenter requested
allowing taxpayers that extract and recy-
cle raw materials and taxpayers that pro-
cess such materials and incorporate them
into applicable critical minerals to apply
the contract manufacturing arrangement
provisions, in the event that costs of
extraction and direct and indirect material
costs are not includible in the eligible pro-
duction costs of producing an applicable
critical mineral. The Treasury Department
and the IRS think that the clarification
requested by this commenter is no longer
necessary because these final regulations
permit the inclusion of extraction and cer-
tain material costs in the cost of producing
an applicable critical mineral if certain
requirements are met. See Parts IV.E.1.e.
and V.C. of this Summary of Comments
and Explanation of Revisions for further
discussion.
Proposed §1.45X-1(c)(3)(v) would
have provided examples illustrating the
application of the special rule. One com-
menter requested that proposed §1.45X-
1(c)(3)(v)(C) (Example 3) specifically
state that the domestic production require-
ment requires that each wind tower sec-
tion must be produced in the United
States. Proposed §1.45X-(1)(c)(3)(v)(C)
(Example 3) states that a taxpayer could
claim a credit for a tower for which it had
three different producers each produce
one section, provided that the parties all
agree that the taxpayer is the sole party
that can claim the credit and “all other
requirements of section 45X are met.” The
Treasury Department and the IRS have
determined that the domestic production
requirement is already included by this
language and thus, additional clarification
is not necessary.
Another commenter questioned
whether, in proposed §1.45X-1(c)(3)(v)
(C) (Example 3), V must sell the completed
wind tower to Z for the special rule in pro-
posed §1.45X-1(c)(3)(iii) to apply. In the
example, V enters into a contract manu-
facturing arrangement with W, X, and Y
to make the wind tower, which V sells to
Z. All parties to the contract manufactur-
ing arrangement and Z are unrelated. The
commenter stated that if V, W, X, and Y

December 16, 2024 1292 Bulletin No. 2024–51
sign a certification statement and Y claims
the section 45X credit, Y could claim the
section 45X credit in 2025 because that is
when it sold the eligible component to V.
Contrary to the commenter’s conclusion
with respect to Y’s ability to claim a sec-
tion 45X credit in 2025, Y is not eligible
for the section 45X credit until the eligible
component, which is the wind tower com-
prised of all three wind tower sections, is
produced and then sold to an unrelated
person (in this case Z). Under the contract
manufacturing arrangement, W, X, and Y
are collectively viewed as producing the
entire eligible component (wind tower)
because all three sections together result
in a single eligible component. Along with
the production of the entire wind tower, V
has to sell the completed wind tower to
an unrelated person before the designated
party is eligible for a section 45X credit.
A commenter suggested revisions to
the proposed rules to allow an allocation
of any portion of the credit to parties who
extract the mineral and perform initial
refining processes, rather than allowing
a credit to the taxpayer that purifies the
critical mineral to the statutory minimum.
Section 45X(c)(6) defines a list of appli-
cable critical minerals with specific mini-
mum purity levels which must be met for
the taxpayer to have produced an eligible
component. The Treasury Department and
the IRS do not have the authority to mod-
ify these statutory requirements. However,
the Treasury Department and the IRS seek
to clarify that a taxpayer who performs
extracting and refining activities may
benefit from the contract manufacturing
provisions described in this section. The
final regulations accordingly add §1.45X-
1(c)(3)(v)(D) (Example 4) to demonstrate
how the contract manufacturing provi-
sions may apply in the situation described
by the commenter.
4. Timing of Production and Sale
Proposed §1.45X-1(c)(4)(i) would
have provided that production of eligi-
ble components for which a taxpayer is
claiming a section 45X credit may begin
before December 31, 2022, but produc-
tion of eligible components must be com-
pleted, and the eligible components must
be sold, after December 31, 2022. Pro-
posed §1.45X-1(c)(4)(ii) would have pro-
vided an example illustrating the timing of
the production and sale rule in proposed
§1.45X-1(c)(4)(i).
Some commenters requested further
clarity on when production and sale of an
eligible component may take place. One
commenter requested that the final rules
provide that a specific minimum percent-
age of production of an eligible compo-
nent must occur after 2022 and that no
sale of the eligible component be reported
by the taxpayer before 2023. The Treasury
Department and the IRS decline to adopt
these percentage test suggestions because
Congress clearly recognized that some
production could occur prior to 2023 but
did not specify an exact amount of pro-
duction that must occur in taxable years
either before or after 2023. Moreover, if a
sale occurred before 2023, which requires
a facts and circumstances analysis based
in part on contractual terms, the compo-
nent sold is not eligible for the section
45X credit. Accordingly, the final regu-
lations adopt proposed §1.45X-1(c)(4)(i)
and the example in proposed §1.45X-1(c)
(4)(ii) without modification.
Another commenter stated that the Pro-
posed Regulations do not specify whether
production activities that qualify for the
section 45X credit have to occur after the
effective date of the rule or whether the
activities can be retroactive. The com-
menter suggests the final rule specify
the applicable period for the production
activities and provide a reasonable tran-
sition rule for taxpayers who produce
eligible components before the effective
date of the final regulations. The Treasury
Department and the IRS have determined
that the Proposed Regulations and these
final regulations are clear as to the tim-
ing of production and sale requirements
under section 45X. For clarification, and
as described earlier, section 13502(c) of
the IRA provides that section 45X applies
to components produced and sold after
December 31, 2022. The preamble to the
Proposed Regulations clarified the appli-
cation of the section 45X effective date,
stating that each of proposed §§1.45X-1
through 1.45X-4 would have applied to
eligible components for which produc-
tion is “completed” and sales occur after
December 31, 2022, and during taxable
years ending on or after the date of publi-
cation of these final regulations. Proposed
§1.45X-1(c)(4)(i) would have provided
that production of eligible components
may begin before December 31, 2022,
and only required production of eligi-
ble components be completed, and sales
must occur, after December 31, 2022.
Proposed §1.45X-1(c)(4)(ii) would have
provided an example illustrating proposed
§1.45X-1(c)(4)(i). These final regulations
adopt these proposed rules. The Treasury
Department and the IRS do not have the
statutory authority to provide for a section
45X credit in a situation in which produc-
tion was completed on or before Decem-
ber 31, 2022.
C. Produced in the United States
Consistent with section 45X(d)(2),
proposed §1.45X-1(d)(1) would have pro-
vided that sales are taken into account for
purposes of the section 45X credit only
for eligible components that are produced
within the United States, including con-
tinental shelf areas as defined in section
638(1) of the Code, or a United States
territory. Proposed §1.45X-1(d)(2) would
have clarified that constituent elements,
materials, and subcomponents used in
the production of eligible components
are not subject to the domestic produc-
tion requirement provided in proposed
§1.45X-1(d)(1). Thus, while the eligible
component must be produced domesti-
cally, its constituent elements, materials,
and subcomponents need not be.
2
Some commenters agreed with this
approach in the Proposed Regulations.
According to these commenters, the Pro-
posed Regulations appropriately allowed
the credit for eligible components pro-
duced in the United States provided that
the activities necessary to transform them
into eligible components are conducted
in the United States. Furthermore, these
2
See Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 117th Congress, JCS-1-23 (December 21, 2023) at 267 (“The credit only applies to sales where the
eligible components are produced within the United States or U.S. territories. This requirement is not intended to apply to subcomponents or materials used to produce eligible components.”).

Bulletin No. 2024–51 1293 December 16, 2024
commenters expressed concern that a con-
trary rule ignores the reality that some con-
stituent elements, materials, and subcom-
ponents cannot be sourced in the United
States and would discourage investment
in production activities that rely on for-
eign-sourced constituent elements, mate-
rials, and subcomponents. However, other
commenters disagreed with the proposed
approach, suggesting that allowing eli-
gible components to be produced using
foreign subcomponents is inconsistent
with the section 45X credit’s objective of
incentivizing domestic production of eli-
gible components.
The Treasury Department and the IRS
note that, while section 45X specifically
requires domestic production of an eligible
component for credit eligibility, it is silent
regarding the location of production or
sourcing of constituent elements, materials,
and subcomponents. Accordingly, impos-
ing a domestic production requirement for
constituent elements, materials, and sub-
components is not supported by the stat-
utory language of section 45X. For these
reasons, the Treasury Department and the
IRS decline to adopt these suggestions and
adopt the proposed rule without change.
Beyond agreement or disagreement
with this proposed rule, some commenters
inquired about its scope. One commenter
asked whether the domestic production
rule applicable to eligible components also
applies to eligible components that are
both an eligible component and a “constit-
uent element, material or subcomponent”
of another eligible component. Another
commenter asked whether raw materials
and intermediate products used to produce
eligible components are included in the
definition of “constituent elements, mate-
rials or subcomponents.”
The Treasury Department and the IRS
confirm that all three of these categories
of items are included in the definition
of “constituent elements, materials, and
subcomponents.” An eligible component
that is a “constituent element, material
or subcomponent” of another eligible
component is not subject to the domestic
production rule, and thus, an eligible com-
ponent may incorporate another eligible
component that is also a foreign-sourced
“constituent element, material or subcom-
ponent” and still be eligible for a section
45X credit. In addition, raw materials and
intermediate products generally qualify as
constituent elements, materials, or sub-
components.
A commenter also requested confirma-
tion in the final regulations that there is
no requirement that eligible components
be used in the United States for section
45X credit eligibility. Consistent with sec-
tion 45X(d)(2), proposed §1.45X-1(d)(1)
would have provided that sales are taken
into account for purposes of the section
45X credit only for eligible components
that are produced within the United States
(or a United States territory). Thus, the Pro-
posed Regulations specify only the location
of production of the eligible component,
and not the location of the sale or the use of
such eligible component. Accordingly, the
Treasury Department and the IRS conclude
that the additional confirmation requested
by the commenter is unnecessary, as there
would be no statutory basis for requiring
domestic sale or use.
D. Production and sale in a trade or
business
Proposed §1.45X-1(e) would have
stated that an eligible component must be
produced and sold in a trade or business of
the taxpayer, with the term “trade or busi-
ness” defined as a trade or business within
the meaning of section 162 of the Code.
A commenter requested that proposed
§1.45X-1(e) expressly include eligible
components that are produced and then
used to replace defective units pursuant to
a contractual obligation entered into at the
time of the original sale. The commenter
stated that these warranty transactions
do not appear to violate any of the anti-
abuse provisions at proposed §1.45X-1(i).
If an eligible component is produced and
sold to an unrelated person in the normal
course of a trade or business, and the eli-
gible component is then replaced with a
new eligible component produced by the
same taxpayer, there is no new sale to an
unrelated person for the replacement eli-
gible component, but the replacement eli-
gible component relates back to the orig-
inal sales transaction. The precise issue
is whether section 45X should be read to
effectively incentivize the production of
two eligible components where each is
related to a single sales transaction. The
Treasury Department and the IRS decline
to adopt this suggestion because only one
credit may be claimed with respect to the
sale of an eligible component.
E. Sale of integrated components
1. In General
Section 45X(d)(4) provides that, for
purposes of section 45X, a person is
treated as having sold an eligible com-
ponent to an unrelated person if such
component is integrated, incorporated, or
assembled into another eligible compo-
nent which is sold to an unrelated person.
Proposed §1.45X-1(f)(1) was intended to
be consistent with section 45X(d)(4), and
thus would have provided that a taxpayer
is treated as having produced and sold an
eligible component to an unrelated person
if such component is integrated, incorpo-
rated, or assembled into another eligible
component that is then sold to an unre-
lated person.
Although no comments were received
regarding this general rule in the Proposed
Regulations, the Treasury Department
and the IRS want to clarify that section
45X(d)(4) provides only for deemed sale
treatment and not deemed production. A
taxpayer must produce (rather than merely
purchase or acquire) an eligible compo-
nent that is integrated, incorporated, or
assembled into another eligible compo-
nent that is then sold to an unrelated per-
son in order for the deemed sale rule to
apply. Thus, these final regulations clarify
that a taxpayer is “treated as having sold”
an eligible component to an unrelated per-
son if the taxpayer produced such com-
ponent and the component is integrated,
incorporated, or assembled into another
eligible component that is then sold to
an unrelated person, rather than “treated
as having produced and sold” an eligible
component that the taxpayer did not itself
produce that is then integrated, incorpo-
rated, or assembled into another eligible
component and then sold to an unrelated
person. Proposed §1.45X-1(f)(1) is clari-
fied accordingly in these final regulations.
2. Application of Section 45X(d)(4) to
Produced Products
Proposed §1.45X-1(f)(2)(i) would
have clarified that a taxpayer may claim a

December 16, 2024 1294 Bulletin No. 2024–51
section 45X credit for each eligible com-
ponent that the taxpayer produces and
sells to an unrelated person, including any
eligible component the taxpayer produces
that was used as an element, material, or
subcomponent and integrated, incorpo-
rated, or assembled into another complete
and distinct eligible component or another
complete and distinct product (that is not
itself an eligible component) that the tax-
payer also produces and sells to an unre-
lated person. Proposed §1.45X-1(f)(2)
(ii) would have provided an example of
the credit eligibility of a sale of a product
with incorporated eligible components to
a related person.
Commenters expressed agreement
with proposed §1.45X-1(f)(2)(i). One
commenter stated that the clarification in
§1.45X-1(f)(2)(i) avoids the need for some
vertically integrated producers of eligible
components that incorporate the eligible
components into another product that is
not an eligible component to artificially
restructure in order to create an intercom-
pany sale. Another commenter requested a
flexible interpretation of section 45X(d)(4)
that would apply the section 45X credit as
an additive credit across the supply chain
to the final assembler. The commenter
stated such an interpretation is consistent
with the language in section 45X(b)(1),
which provides that the section 45X credit
amount is determined with respect to any
eligible component, including any eligible
component it incorporates. For example,
in the commenter’s view, a taxpayer that
produces a structural fastener would be
eligible to receive a credit for its produc-
tion of an eligible component as would
the integrator, incorporator, assembler of
the structural fastener into another eligi-
ble component. Although the Treasury
Department and the IRS agree that section
45X(b)(1) provides that the credit amount
is determined with respect to any eligi-
ble component produced by the taxpayer,
including any eligible component the tax-
payer incorporates that was also produced
by the taxpayer, the Treasury Department
and the IRS disagree with the implication
that the calculation of the section 45X
credit should be additive based on the
number of eligible components used to
produce an item in a case in which each
eligible component is not produced by the
taxpayer. Only the producer of an eligible
component would be eligible for a section
45X credit. Proposed §1.45X-1(f)(1) and
(2) are finalized with no modifications
because the Treasury Department and the
IRS conclude the rules provide clarity as
currently written.
F. Interaction between sections 45X and
48C
1. In General
Consistent with section 45X(c)(1)(B),
proposed §1.45X-1(g)(1) would have pro-
vided that, for purposes of section 45X, an
eligible component must be produced at a
section 45X facility and does not include
any property (produced property) that is
produced at a facility if the basis of any
property that is part of the production unit
that produces the produced property is eli-
gible property that is included in a section
48C facility and is taken into account for
purposes of a credit allowed under section
48C (section 48C credit) after August 16,
2022.
Proposed §1.45X-1(g)(2)(i) would
have provided that a section 45X facility
includes all tangible property that com-
prises an independently functioning pro-
duction unit that produces one or more eli-
gible components. Proposed §1.45X-1(g)
(2)(ii) would have provided that a produc-
tion unit is comprised of the tangible prop-
erty that substantially transforms material
inputs to complete the production process
of an eligible component.
Proposed §1.45X-1(g)(3)(i) would
have provided that a section 48C facility
includes all eligible property included in
a qualifying advanced energy project for
which a taxpayer receives an allocation
of section 48C credits and claims such
credits after August 16, 2022. Proposed
§1.45X-1(g)(3)(ii) would have defined
eligible property that is included in a sec-
tion 48C facility.
With respect to the proposed rules on
the interaction between sections 45X and
48C various comments were received. A
commenter requested that the final rules
not apply section 45X(c)(1)(B) to disal-
low the section 45X credit in the event
that the taxpayer claiming the section 45X
credit incorporates into its eligible compo-
nent a subcomponent that was produced
by a section 48C facility, as long as that
same taxpayer was not eligible for the sec-
tion 48C credit with respect to the section
48C facility that produced the subcompo-
nent. Revisions were made to these final
regulations to clarify that the only equip-
ment, or other tangible property, that must
be included in the section 45X facility is
the equipment used by the taxpayer that
is necessary to be considered the producer
of the potential eligible component. As
further explained later, if production of a
subcomponent (or like property) is not a
requirement to be considered the producer
under section 45X, then the equipment
that is part of that section 48C facility
used to produce the subcomponent is not
part of the section 45X facility. As a result,
it is possible that the same taxpayer could
receive a section 48C credit on equipment
used to produce a subcomponent (or like
property), and a section 45X credit on the
production of an eligible component.
One commenter requested an exam-
ple to help determine whether an eligible
component produced at a facility located
“adjacent” to a section 48C facility that
received a section 48C credit impacts
eligibility for the section 45X credit.
The physical proximity of a section 45X
facility to a section 48C facility does not
determine whether a product may be an
eligible component and revisions to these
final regulations were made to clarify that
point.
Another commenter requested more
clarity to determine whether a facility
that shares upstream raw materials and
processes as a section 48C facility is
still eligible for a section 45X credit and
requested examples of upstream supply
chains and processes that are eligible and
ineligible for both sections 48C and 45X.
Several commenters requested additional
clarity regarding the meaning and extent
of the term “production unit.”
Based on the comments and further
consideration of the Proposed Regulations,
revisions were made in these final regula-
tions to simplify the rules and examples
in proposed §1.45X-1(g)(1) through (4).
Specifically, these final regulations make
clear that the general rule is that property
that would otherwise qualify as an eligible
component (otherwise qualified property)
is only an eligible component if the prop-
erty is produced at a section 45X facility
and no part of that section 45X facility is

Bulletin No. 2024–51 1295 December 16, 2024
also a section 48C facility. These final reg-
ulations also revise the definition of sec-
tion 45X facility, clarifying that a section
45X facility is the independently function-
ing tangible property used by the taxpayer
that is necessary to be considered the pro-
ducer of the otherwise qualified property
within the meaning of §1.45X-1(c)(1) or
(2), as applicable. The Proposed Regula-
tions would have relied on the concept of
a “production unit” to define the scope of a
section 45X facility, but there was overlap
between the term production unit as pro-
posed and the definition of a section 45X
facility. After careful consideration, the
Treasury Department and the IRS deter-
mined that the proposed term “production
unit” introduced unnecessary complexity,
particularly in light of the revisions to the
definition of section 45X facility in these
final regulations. Accordingly, these final
regulations do not use the term production
unit.
The definition of section 45X facility
in these final regulations includes inde-
pendently functioning tangible property
that is used and that is necessary for the
otherwise qualified property to be con-
sidered produced by the taxpayer within
the meaning of §1.45X-1(c)(1) or (2), as
applicable. Accordingly, tangible property
used to produce a subcomponent or other
property which is later integrated, incor-
porated, or assembled into a distinct and
final eligible component is not part of the
section 45X facility. This rule, however,
does not apply if the other property is of a
type that the taxpayer must produce for the
resulting eligible component to be consid-
ered produced by the taxpayer. This anal-
ysis can depend on the definition of the
eligible component being ultimately pro-
duced. For example, section 45X(c)(3)(B)
(ii)(I)(bb) requires a single manufacturer
to produce a photovoltaic wafer through
formation of an ingot from polysilicon and
subsequent slicing. Thus, the section 45X
facility with respect to the photovoltaic
wafers would include any equipment that
is tangible property that is used to produce
the ingot and any equipment that is tan-
gible property that is used to perform the
subsequent slicing. In contrast, equipment
used to produce front glass of a solar mod-
ule under section 45X(c)(3)(B)(v) could
be excluded from a section 45X facility
because it is not necessary to use the front
glass equipment to be considered the pro-
ducer of the solar module for section 45X.
This rule may benefit a taxpayer that pro-
duces a subcomponent or other property
of an eligible component using equipment
that is also eligible property for purposes
of the section 48C credit, but uses other
equipment not related to the section 48C
credit to produce the eligible component.
Lastly, these final regulations add a
specific rule for contract manufacturing
arrangements in §1.45X-1(g)(2)(ii) to
address any uncertainty with respect to
how to determine a section 45X facility
in that situation. This rule clarifies that
the tangible property used to produce the
otherwise qualified property (regardless of
who claims the credit) must be considered.
4. Examples of Sections 45X and 48C
Interaction
Proposed §1.45X-1(g)(4)(i) through
(v) would have provided examples to
illustrate the application of these rules. A
few commenters requested that, contrary
to proposed §1.45X-1(g)(4)(ii) (Example
2), ingot and wafer production should be
treated as two separate manufacturing
activities so that an ingot facility is eli-
gible for the section 48C credit while a
wafer facility is eligible for the section
45X credit. As required by section 45X(c)
(3)(B)(ii)(I)(bb), however, a photovol-
taic wafer must be produced by a single
manufacturer either by forming an ingot
from molten polysilicon (for example,
Czochralski method) and then subse-
quently slicing it into wafers, or by form-
ing molten or evaporated solar grade poly-
silicon or deposition into a sheet or layer
(that is, thin-film deposition). As the stat-
ute requires production of a photovoltaic
wafer by a single manufacturer that both
forms an ingot and slices it into wafers, it
is not appropriate to treat ingot and wafer
production as two separate manufactur-
ing activities. Rather, as both activities
are necessary, it follows that the tangible
property used to complete each activity
must be within a single section 45X facil-
ity with respect to the eligible component
produced. No comments were received on
the other examples in proposed §1.45X-
1(g)(4)(i) through (v). However, all of the
examples in proposed §1.45X-1(g)(4)(i)
through (v) were modified consistent with
the revisions in §1.45X-1(g)(1) through
(3).
A few commenters suggested that par-
ties in a contract manufacturing arrange-
ment under proposed §1.45X-1(c)(3)(iii)
could circumvent the prohibition under
section 45X(c)(1)(B) that disallows a
section 45X credit for items produced at
a section 48C facility. More specifically,
commenters suggested that a taxpayer
could enter into a contract manufacturing
arrangement under proposed §1.45X-1(c)
(3)(iii) to produce photovoltaic wafers
that are then used to manufacture photo-
voltaic cells. If the taxpayer itself inte-
grated, incorporated, or assembled the
photovoltaic cells into solar modules,
the taxpayer might claim a section 45X
credit for all three products upon their
sale, even though the photovoltaic wafers
were manufactured by the contract manu-
facturer at a section 48C facility while the
photovoltaic cells were manufactured at a
section 45X facility, if the taxpayer was
unaware that the contract manufacturer
manufactured the photovoltaic wafers at
a section 48C facility. The Proposed Reg-
ulations did not allow this, and the final
regulations would continue to disallow
a section 45X credit for the photovoltaic
wafers in this scenario. To the extent that
the photovoltaic wafers were produced
at a section 48C facility, the photovoltaic
wafers would not qualify as an eligible
component to any party to the contract
manufacturing arrangement. As described
earlier, these final regulations add a rule in
§1.45X-1(g)(2)(ii) to clarify the rules in a
contract manufacturing arrangement situ-
ation, and the examples in §1.45X-1(g)(4)
have also been modified.
G. Anti-abuse rule
As explained in the preamble to the
Proposed Regulations, proposed §1.45X-
1(i)(1) would have provided a general
anti-abuse rule that would make the sec-
tion 45X credit unavailable in extraordi-
nary circumstances in which, based on a
consideration of all the facts and circum-
stances, the primary purpose of the pro-
duction and sale of an eligible component
is to obtain the benefit of the section 45X
credit in a manner that is wasteful, such
as discarding, disposing of, or destroying
the eligible component without putting it

December 16, 2024 1296 Bulletin No. 2024–51
to a productive use. Proposed §1.45X-1(i)
(1) would have provided that the rules of
section 45X and the section 45X regula-
tions must be applied in a manner con-
sistent with the purposes of section 45X
and the section 45X regulations (and the
regulations in this chapter under sections
6417 and 6418 related to the section 45X
credit). A purpose of section 45X and the
section 45X regulations (and the regula-
tions in this chapter under sections 6417
and 6418 related to the section 45X credit)
is to provide taxpayers an incentive to pro-
duce eligible components in a manner that
contributes to the development of secure
and resilient supply chains. Accordingly,
the section 45X credit is not allowable
if the primary purpose of the produc-
tion and sale of an eligible component is
to obtain the benefit of the section 45X
credit in a manner that is wasteful, such
as discarding, disposing of, or destroying
the eligible component without putting it
to a productive use. A determination of
whether the production and sale of an eli-
gible component is inconsistent with the
purposes of section 45X and the section
45X regulations (and the regulations in
this chapter under sections 6417 and 6418
related to the section 45X credit) is based
on all facts and circumstances. Proposed
§1.45X-1(i)(2) would have provided an
example illustrating this anti-abuse rule.
One commenter suggested that, in
applying the anti-abuse rule, the taxpayer
claiming a section 45X credit should not
be held responsible for the activities of
the customer after a sale has occurred
(unless the customer is a related entity);
the determination of whether a component
is defective should be made at the factory
gate; and “productive use” should include
the sale of an eligible component to an
entity engaged in the business of directly
(such as a utility) or indirectly (such as a
project developer) deploying the eligible
components. Proposed §1.45X-1(i)(1)
provides that a determination of whether
the production and sale of an eligible com-
ponent is inconsistent with the purposes of
section 45X and the section 45X regula-
tions (and the regulations under sections
6417 and 6418 related to the section 45X
credit) is based on all the facts and circum-
stances. Under a facts and circumstances
analysis, no single factor is determina-
tive, and the considerations listed by the
commenter would have to be evaluated in
the context of all other facts and circum-
stances. The Treasury Department and the
IRS thus decline to list specific parameters
that automatically result in a finding of a
favorable or unfavorable primary purpose.
Another commenter suggested adding
additional examples to proposed §1.45X-
1(i) to make clear that the section 45X
credit is never allowable with respect to
any cost the primary purpose of which is
to increase the amount of the section 45X
credit. While the examples offered by
the commenter involve possible abuses,
the anti-abuse rule is intended to cover a
broad range of abuses. Proposed §1.45X-
1(i) would have provided that a determi-
nation of whether the production and sale
of an eligible component is inconsistent
with the purposes of section 45X and the
section 45X regulations is based on all
facts and circumstances, and no single
factor is determinative. Accordingly, the
Treasury Department and the IRS decline
to adopt the commenter’s suggestion.
III. Sale to unrelated person
A. In general
Proposed §1.45X-2(a) would have
stated that the amount of the section 45X
credit for any taxable year is equal to the
sum of the credit amounts determined
under section 45X(b) (and described in
proposed §§1.45X-3 and 1.45X-4) with
respect to each eligible component that
is produced by the taxpayer and, during
the taxable year, sold by the taxpayer to
an unrelated person. Applicable Federal
income tax principles apply to determine
whether a transaction is in substance a
sale (or the provision of a service, or some
other disposition). Proposed §1.45X-2(a)
also would have cross-referenced proposed
§1.45X-1(d) and (e) for additional require-
ments relating to sales. Section 45X(d)(1)
provides that persons are treated as related
to each other if such persons would be
treated as a single employer under the regu-
lations prescribed under section 52(b). Pro-
posed §1.45X-2(b) would have provided
definitions of the terms “person,” “related
person,” and “unrelated person” for pur-
poses of the section 45X credit.
A few commenters requested additional
clarity in the final rules on how a sale is
defined and when a sale is determined for
the purpose of section 45X. One com-
menter recommended that a sale be defined
for 45X as the point when a taxpayer signs a
binding contractual agreement with a buyer
in the taxpayer’s trade or business for the
purchase of an eligible component. Section
45X provides special rules addressing sales
of eligible components to related persons
that may be treated as sales to unrelated
persons, and a general rule that an eligi-
ble component produced and sold by the
taxpayer is only taken into account if such
production and sale is in a trade or business
of the taxpayer, but otherwise does not pro-
vide any specific rules regarding whether
and when a sale have occurred. Proposed
§1.45X-2(a) would have provided that
applicable Federal income tax principles
apply to determine whether a transaction
is in substance a sale (or the provision of
a service, or some other disposition), and
those same principles apply in determining
when a transaction is a sale. More specific
rules on the determination of whether and
when a sale occurs is beyond the scope of
these final regulations. Accordingly, the
Treasury Department and the IRS maintain
the standard in proposed §1.45X-2(a) and
finalize the proposed rule without modifi-
cation.
Another commenter requested fur-
ther clarification on the sale of eligible
components in two scenarios. In the first
scenario, Company A is a U.S. based
company producing eligible components
that it sells to Company B, which is not
directly using the eligible components but
resells to Company C to use in a manufac-
turing process or otherwise in its trade or
business. For this first scenario, the com-
menter requested clarification on whether
Company A is eligible to claim the section
45X credit for the domestic production
and sale of the eligible components. In the
second scenario, the commenter assumed
the same facts as in the first scenario,
but Company B or Company C is using
Company A’s eligible component outside
the United Sates. In this second scenario,
the commenter requested clarification
on whether Company A remains eligible
to claim the section 45X credit for the
domestic production and sale of the eligi-
ble components.
In both scenarios under the Proposed
Regulations, Company A is eligible

Bulletin No. 2024–51 1297 December 16, 2024
to claim the section 45X credit for the
domestic production and sale of the eligi-
ble components if the production and sale
is in a trade or business of Company A,
regardless of whether the first purchaser
is using the eligible component in its
trade or business or sells to a subsequent
purchaser for use in the subsequent pur-
chaser’s trade or business, and regardless
of whether the purchaser or subsequent
purchaser uses the eligible component in
the United States. Because the Proposed
Regulations clearly provide this result,
no further revision is necessary in these
final regulations.
B. Special rules for sales to a related
person
Consistent with section 45X(a)(3)(A),
proposed §1.45X-2(c)(1) would have pro-
vided a special rule that, for purposes of
section 45X(a), a taxpayer is treated as
selling an eligible component to an unre-
lated person if such component is sold to
such person by a person who is related
to the taxpayer. Proposed §1.45X-2(c)(2)
would have provided an example to illus-
trate this special rule.
Given the importance of whether par-
ties are related persons or unrelated per-
sons, a commenter proposed a particular
fact pattern and requested clarification on
who the purchaser is and whether they
were related or unrelated to the producer
and seller. In general, section 45X(d)(1)
and proposed §1.45X-2(b)(2) provides
that persons are treated as related to each
other if such persons would be treated as
a single employer under the regulations
prescribed under section 52(b). A request
for application of the section 52(b) regula-
tions by the Treasury Department and the
IRS to a particular fact pattern requiring a
facts and circumstances analysis is outside
the scope of these final regulations.
Another commenter requested that the
final rules clarify whether a Related Per-
son Election is necessary when eligible
components are sold by the producer to an
unrelated person, who subsequently sells
them to a person related to the producer of
such eligible components. The commenter
proposes amending proposed §1.45X-2(c)
to clarify that direct or indirect sales to
a related person qualify if the producer
knows or has reason to know the unre-
lated person is intending to sell the same
eligible components to a person related
to the producer. To provide assurance to
commenter, a Related Person Election is
not necessary in this situation because the
first sale was to an unrelated party, but the
Treasury Department and the IRS have
determined that the rules as set out by pro-
posed §1.45X-2(c) do not require further
clarification on this point. In addition, if
there are circumstances in which pur-
ported sales are made to unrelated persons
to circumvent the requirements of section
45X, proposed §1.45X-2(a) provides that
applicable Federal income tax principles
apply to determine whether a transaction
will be respected as a sale. Accordingly,
the Treasury Department and the IRS
decline to adopt the commenter’s sugges-
tion and finalize the proposed rule without
modification.
C. Related Person Election
1. Availability of Election—In General
Proposed §1.45X-2(d)(1)(i) would
have provided that a taxpayer may make
a Related Person Election under section
45X(a)(3)(B) to treat a sale of eligible
components by such taxpayer to a related
person as if made to an unrelated person.
As a condition of, and prior to, a taxpayer
making a Related Person Election, the
Secretary may require such information
or registration as the Secretary deems nec-
essary for purposes of preventing duplica-
tion, fraud, or any improper or excessive
credit amount determined under section
45X(a)(1). Proposed §1.45X-2(d)(1)(ii)
would have provided the rules regarding
the Related Person Election for members
of a consolidated group (as defined in
§1.1502-1(h)).
One commenter requested that tax-
payers be allowed to exercise the Related
Person Election in situations where it is
difficult for the taxpayer to determine
whether two entities are related under the
section 52(b) regulations. Allowing the
exercise of the Related Person Election as
the commenter requested would conflict
with the language in section 45X(d)(1),
which requires the parties be treated as a
single employer under the section 52(b)
regulations, not just that it be difficult to
determine the status. Therefore, these final
regulations do not adopt the commenter’s
request.
2. Anti-Abuse Rule
Proposed §1.45X-2(d)(4) would have
provided an anti-abuse rule for the Related
Person Election consistent with section
45X(a)(3)(B)(ii) for preventing dupli-
cation, fraud, or any improper or exces-
sive amount of the section 45X credit.
Proposed §1.45X-2(d)(4)(i) would have
provided that a Related Person Election
may not be made if the taxpayer fails to
provide the information required by pro-
posed §1.45X-2(d)(2) with respect to the
relevant eligible components, the taxpayer
provides information that shows such
components were put to an improper use
as defined in proposed §1.45X-2(d)(4)(ii)
or were defective as defined in proposed
§1.45X-2(d)(4)(iii), or such components
were actually put to an improper use or
were defective.
Proposed §1.45X-2(d)(4)(ii) would
have provided that an eligible component
is put to an improper use if it is so used
by the related person to which the eligible
component is sold. The term improper use
would mean a use that is wasteful, such
as discarding, disposing of, or destroying
the eligible component without putting it
to a productive use. The Treasury Depart-
ment and the IRS requested comments in
the preamble to the Proposed Regulations
on the definition of the term improper use
and whether any clarifications to its scope
are necessary.
Proposed §1.45X-2(d)(4)(iii) would
have provided that a defective component
means a component that does not meet
the requirements of section 45X and the
section 45X regulations. The Treasury
Department and the IRS requested com-
ments in the preamble to the Proposed
Regulations on the definition of defective
components and whether clarifications to
its scope are necessary.
In response to the Treasury Department
and the IRS’s request for comments, one
commenter requested additional guidance
regarding when an eligible component
can be deemed defective under section
45X. The commenter recommended clar-
ification that an eligible component can
be deemed defective and therefore inel-
igible for a tax credit under section 45X

December 16, 2024 1298 Bulletin No. 2024–51
“up until the point of sale of the eligible
component to an unrelated party.” How-
ever, in circumstances where a taxpayer
has made a valid Related Person Election,
a sale of eligible components to a related
person is treated as if made to an unrelated
person, thus making a sale to an unrelated
person not relevant for section 45X credit
determination purposes. The preamble to
the Proposed Regulations stated that the
Treasury Department and the IRS are con-
cerned that the Related Person Election
may be used by taxpayers to claim a credit
for eligible components that are defective,
not capable of being used for its intended
purpose, do not meet the requirements
for the section 45X credit, and there-
fore are not eligible for the section 45X
credit. The Treasury Department and the
IRS agree that if an eligible component is
not defective at the time of sale, defects
arising after the point of sale may occur
in the ordinary course of a business and
do not generally raise the improper claim
concerns regarding defective components
described in the Preamble to the Proposed
Regulations. Accordingly, the final rules
modify proposed §1.45X-2(d)(4)(iii) to
clarify that components with respect to
which defects arise after the deemed sale
are not considered defective components
for purposes of the anti-abuse rule.
Another commenter suggested that the
definitions of improper use and defective
components should provide an exception
for a defective component that can be sold
or given to a related or unrelated person
conducting legitimate recycling opera-
tions and allowing defective components
to earn a section 45X credit provided
they are properly recycled in the United
States. The Treasury Department and the
IRS decline to adopt this request because
section 45X does not authorize allowing a
section 45X credit for a defective compo-
nent that does not meet the definition of an
eligible component and is not capable of
being used for its intended purpose with-
out further substantial modification.
D. Sales of integrated components to a
related person
1. In General
Section 45X(d)(4) provides that for
purposes of section 45X, a person is
treated as having sold an eligible compo-
nent to an unrelated person if such compo-
nent is integrated, incorporated, or assem-
bled into another eligible component that
is sold to an unrelated person. See Part
II.E. of this Summary of Comments and
Explanation of Revisions for rules appli-
cable to eligible components that are inte-
grated, incorporated, or assembled into
other eligible components and sold to an
unrelated person.
Proposed §1.45X-2(e)(1) would have
provided that, for purposes of section 45X
and the section 45X regulations (and the
regulations in this chapter under sections
6417 and 6418 related to the section 45X
credit), a taxpayer that produces and sells
an eligible component to a related per-
son who then integrates, incorporates, or
assembles the taxpayer’s eligible compo-
nent into another complete and distinct
eligible component that is subsequently
sold to an unrelated person may claim a
section 45X credit in the taxable year of
the sale to the unrelated person.
Proposed §1.45X-2(e)(2) would have
provided examples to illustrate the treat-
ment of sales of multiple incorporated eli-
gible components to related and unrelated
persons. One commenter questioned the
practical application of the requirements
in proposed §1.45X-2(e)(2)(i) (Example
1) and expressed concern that although
Company X and Y are related, the proposed
rule would require a significant amount of
coordination of information. This coordi-
nation would be necessary for the credit to
be claimed in the proper tax year in which
the ultimate product (photovoltaic cells
produced by Y using photovoltaic wafers
produced by X and purchased by Y) was
sold to Company Z. Proposed §1.45X-
2(e)(2)(i) (Example 1) illustrates the rule
in section 45X(d)(4) requiring an ultimate
actual sale to an unrelated person of an eli-
gible component. Because section 45X(d)
(4) expressly conditions the deemed sale
on an actual subsequent sale to an unre-
lated person by the related person, the
Treasury Department and the IRS do not
have the authority to change this statuto-
rily imposed conditional timing require-
ment despite any practical difficulties
taxpayers may experience in obtaining
such information. Taxpayers may, how-
ever, make a Related Person Election as
illustrated in the example in §1.45X-2(e)
(3)(ii) and claim the section 45X credit
upon the sale to the related person. This
would obviate the need for such taxpayer
to know when the related person actually
makes the subsequent sale to an unrelated
person. For these reasons, the final regu-
lations adopt proposed §1.45X-2(e)(2)(i)
(Example 1) without modification.
2. Special Rules Applicable to Related
Person Election
Proposed §1.45X-2(e)(3) would have
provided that if a taxpayer makes a valid
Related Person Election under section
45X(a)(3)(B)(i) and proposed §1.45X-
2(d)(1), and the taxpayer produces and
then sells an eligible component to a
related person, who then integrates, incor-
porates, or assembles the taxpayer’s eligi-
ble component into another complete and
distinct eligible component that is subse-
quently sold to an unrelated person, the
taxpayer’s sale of the eligible component
to the related person is treated (solely for
purposes of the section 45X credit and the
section 45X regulations, and the regula-
tions in this chapter under sections 6417
and 6418 related to the section 45X credit)
as if made to an unrelated person in the
taxable year in which the sale to the related
person occurs. One commenter expressed
support for this proposed rule, as it applies
thoughtfully to vertically integrated elec-
tric vehicle manufacturers engaging in
sales of multiple integrated eligible com-
ponents to related and unrelated persons
(with a Related Person Election). No other
comments were received on this special
rule, so it is adopted in these final regula-
tions without revision.
IV. Eligible components
A. In general
Proposed §1.45X-3(a) would have
defined the term “eligible component” as
any solar energy component, any wind
energy component, any inverter, any
qualifying battery component, and any
applicable critical mineral, as each is
respectively defined in the Proposed Reg-
ulations. For solar energy components,
wind energy components, inverters, and
qualifying battery components, proposed
§1.45X-3(b) through (e) would have pro-

Bulletin No. 2024–51 1299 December 16, 2024
vided definitions, rules for determining
the credit amount, and documentation
requirements. Proposed §1.45X-3(f)
would also have provided rules for apply-
ing the phase out of the section 45X credit.
Proposed §1.45X-4 would have provided
such information for applicable critical
minerals (other than rules for applying the
phase out, which does not apply to appli-
cable critical minerals).
Commenters addressed certain aspects
of these proposed rules, as described in
this Part IV. of the Summary of Comments
and Explanation of Revisions. These final
regulations generally adopt the rules as
proposed in §1.45X-3, with the modifi-
cations described in this Part IV. of the
Summary of Comments and Explanation
of Revisions.
B. Solar energy components—in general
Consistent with section 45X(c)(3),
proposed §1.45X-3(b) would have pro-
vided that solar energy component means
a solar module, photovoltaic cell, pho-
tovoltaic wafer, solar grade polysilicon,
torque tube, structural fastener, or poly-
meric backsheet. Several commenters
requested that the final regulations add
other non-listed solar energy components
(or alternatively, to provide a safe harbor)
to allow for section 45X credit eligibility.
Examples of other non-listed solar energy
components commenters raised include
the encapsulant used to protect the pho-
tovoltaic cells and hold the entire system
together; charge transport materials used
in photovoltaic cells; photovoltaic wire;
solar mirror facets; and solar thermal
receivers. A commenter also suggested
adopting a functionally interdependent
and integral part test analogous to section
48 of the Code to include additional solar
energy components.
Section 45X(c)(3) expressly identifies
the qualifying solar energy components
that are eligible for the section 45X credit.
The Treasury Department and the IRS do
not have the authority to add to the set of
solar energy components that are identi-
fied by statute, for example, by applying
a functional interdependence or integral
part test. For this reason, the Treasury
Department and the IRS decline to adopt
the commenters’ requests in these final
regulations.
1. Photovoltaic Cell
Proposed §1.45X-3(b)(1)(ii) would
have provided that the credit amount for
a photovoltaic cell is equal to the product
of 4 cents multiplied by the capacity of
such photovoltaic cell. The proposed rule
provided that the capacity of each photo-
voltaic cell is expressed on a direct current
watt basis and capacity is the nameplate
capacity in direct current watts using Stan-
dard Test Conditions (STC), as defined by
the International Electrotechnical Com-
mission (IEC). The proposed rule further
provided that in the case of a tandem tech-
nology produced in serial fashion, such as
a monolithic multijunction cell composed
of two or more sub-cells, capacity must be
measured at the point of sale at the end of
the single cell production unit; and, in the
case of a four-terminal tandem technol-
ogy produced by mechanically stacking
two distinct cells or interconnected layers,
capacity must be measured for each cell at
each point of sale.
A few commenters expressed concern
that the proposed rule treats two-termi-
nal and four-terminal tandem technol-
ogies differently, and that by labeling a
monolithic two-terminal configuration
as composed of sub-cells, the proposed
rule would require this technology to be
measured as a single cell rather than two
distinct tandem cells. In contrast, pro-
posed §1.45X-3(b)(1)(ii) provides that
mechanically stacked four-terminal tan-
dem technology consists of “two distinct
cells.” In the commenters’ view, the pro-
posed rule would allow four-terminal cells
to be measured before they are combined,
while two-terminal cells would be mea-
sured after they are combined, resulting in
higher capacity for four-terminal cells and
increased credit amounts for four-terminal
cells. A commenter also suggested that
proposed §1.45X–3(b)(1)(ii) is currently
problematic for future tandem technology
cell production and, perhaps unintention-
ally, directs the development of certain
tandem technologies.
The Treasury Department and the IRS
agree with the commenters’ concerns
regarding disparate treatment between
four-terminal and two-terminal cells and
capacity and credit amounts. Accordingly,
these final regulations revise proposed
§1.45X-3(b)(1)(ii) to add additional text
at the end as follows: “Where that cell is
sold to a customer who will use it as the
bottom cell in a tandem module, its capac-
ity should be measured with the custom-
er’s intended top cell placed between the
bottom cell and the one-sun light source.”
2. Photovoltaic Wafer
Consistent with section 45X(c)(3)(B)
(ii), proposed §1.45X-3(b)(2)(i) would
have defined a photovoltaic wafer to
mean a thin slice, sheet, or layer of semi-
conductor material of at least 240 square
centimeters that comprises the substrate
or absorber layer of one or more photo-
voltaic cells. A photovoltaic wafer must
be produced by a single manufacturer by
forming an ingot from molten polysilicon
(for example, Czochralski method) and
then subsequently slicing it into wafers,
forming molten or evaporated polysilicon
into a sheet or layer, or depositing a thin-
film semiconductor photon absorber into
a sheet or layer (that is, thin-film deposi-
tion).
Some commenters suggested revisions
to the definition of a photovoltaic wafer
to include non-traditional methods of
producing wafers. For example, a com-
menter requested expanding the defini-
tion to include wafers produced by any of
the emerging ‘kerfless’ or ‘direct’ wafer
technologies, as well as the polysilicon
used by these technologies. The Treasury
Department and the IRS have determined
that direct wafer technologies fall within
the statutory definition of photovoltaic
wafers, provided that they are produced
directly from evaporated solar grade
polysilicon, but disagree that any further
clarification is needed in these final reg-
ulations.
A commenter requested that the final
regulations clarify that ingots must be pro-
duced within the United States for solar
wafers to be eligible for the section 45X
credit. As required by section 45X(c)(3)
(B)(ii)(I)(bb), to qualify for a section 45X
credit, a photovoltaic wafer must be pro-
duced by a single manufacturer either by
forming an ingot and then subsequently
slicing it into wafers, or by forming mol-
ten or evaporated solar grade polysilicon
or deposition into a sheet or layer. Thus,
to qualify for a section 45X credit, both
the ingot and the wafer must be produced

December 16, 2024 1300 Bulletin No. 2024–51
domestically in accordance with sec-
tion 45X(d)(2). Proposed §1.45X-1(d)
(2) would have clarified that constituent
elements, materials, and subcomponents
used in the production of eligible com-
ponents are not subject to the domestic
production requirement provided in pro-
posed §1.45X-1(d)(1). Because the ingot
production is part of the wafer production,
ingots are not constituent elements, mate-
rials, or subcomponents. The Treasury
Department and the IRS have determined
it is unnecessary to specify that the ingot
must be domestically produced as sec-
tion 45X and proposed §1.45X-3(b)(2)
(i) require the wafer to be domestically
produced, which includes production
of the ingot. See also Part II.F.2. of this
Summary of Comments and Explanation
of Revisions for a discussion of proposed
§1.45X-1(g)(4)(ii) (Example 2) concern-
ing the production of ingots and wafers.
3. Polymeric Backsheet
Consistent with section 45X(c)(3)(B)
(iii), proposed §1.45X-3(b)(3) would have
defined polymeric backsheet to mean a
sheet on the back of a solar module that
acts as an electric insulator and protects
the inner components of such module
from the surrounding environment.
Certain commenters recommended that
the term be considered to include a prod-
uct that qualifies solely based on the prop-
erty’s functionality and not the property’s
composition, in order for backsheets made
of glass to be eligible components. One
commenter stated that its product is used
in solar panels and therefore its request is
consistent with Congressional intent of
expediting the transition to clean energy,
the underlying intent of section 45X to
create parity among technologies, and
incentivizing the creation of a U.S.-based
supply chain for current and future solar
technologies. The commenter thought that
other energy components were defined
based on their function, not their “compo-
sition” (for example, inverter, photovol-
taic cell, and solar module) and believes
that glass performs the same function as
a backsheet made of plastic. The com-
menter suggested that clarity on whether
a backsheet made of glass is part of the
definition of “polymeric backsheet” is
important because it will help with deci-
sions on pursuing a section 48C credit and
for avoiding penalties under section 6694
of the Code (preparer penalty) or section
6662 of the Code (substantial understate-
ment). Another commenter recommended
adding back glass as a solar energy com-
ponent because it is better for the environ-
ment in that a domestic facility that uses
recycled glass from retired solar modules
is “cleaner” than an overseas facility.
In considering these comments, the
Treasury Department and the IRS deter-
mined that the best reading of the statute
is that the term “polymeric backsheet” is
limited to backsheets made of polymeric
materials that also meet the functional
definition provided in section 45X(c)(3)
(B)(iii). This excludes most glass back-
sheets because they are typically not
composed of a polymer, but of soda-lime
glass. The final regulations add the word
“polymeric” into the definition as a clarifi-
cation. In reaching this determination, the
Treasury Department and the IRS consid-
ered that when drafting the statute, Con-
gress affirmatively included “polymeric”
in the term and this inclusion should be
given effect. Thus, the final regulations
clarify that the definition is limited to a
sheet on the back of solar modules com-
posed, at least in part, of a polymer, that
acts as an electric insulator and protects
the inner components of such module
from the surrounding environment.
4. Solar Grade Polysilicon
Consistent with section 45X(c)(3)(B)
(iv), proposed §1.45X-3(b)(4) would have
defined solar grade polysilicon to mean
silicon that is suitable for use in photo-
voltaic manufacturing and purified to a
minimum purity of 99.999999 percent
silicon by mass. A commenter requested
that the final rules state that the produc-
tion of the silicon gas that is used for
direct wafer production may receive the
section 45X credit for polysilicon for the
mass of silicon in the gas. The Treasury
Department and the IRS have determined,
in close consultation with the Department
of Energy, that gas used for direct wafer
production includes molecules of sili-
con contained within another substance.
Accordingly, such gas is not a complete
and distinct eligible component within the
meaning of proposed § 1.45X-1(c)(1)(i).
For this reason, the Treasury Department
and the IRS decline to adopt this request
in these final regulations.
A few commenters requested guidance
on how the purity level for solar grade
polysilicon should be determined. One
commenter requested that the final rules
clarify that only impurities that are “mate-
rial to the industry” should be counted in
determining whether the minimum purity
level is met. Because these final regu-
lations add the purity standard in SEMI
Specification PV17-1012 Category 1 to
proposed §1.45X-3(b)(4), which distin-
guishes between material and immaterial
impurities, the Treasury Department and
the IRS decline to adopt the commenter’s
suggestion of clarifying that the statutory
purity level refers only to impurity levels
that are “material to the industry.”
A commenter recommended adopting
the standards for polysilicon feedstock
in SEMI Specification PV17-1012. The
Treasury Department and the IRS, in
close consultation with the Department of
Energy, have determined that SEMI Spec-
ification PV17-1012 Category 1 meets
the purity standard of 99.999999 percent,
while Categories 2 through 5 do not. The
Treasury Department and the IRS thus
agree with this request but only for Cate-
gory 1, and these final regulations accord-
ingly revise proposed §1.45X-3(b)(4) to
add the purity standard in SEMI Specifi-
cation PV17-1012 Category 1.
5. Solar Module
Proposed §1.45X-3(b)(5)(ii) would
have stated that the credit amount for a
solar module is equal to the product of 7
cents multiplied by the capacity of such
module. The proposed rule also provided
that the capacity of each solar module is
expressed on a direct current watt basis,
and that capacity is the nameplate capac-
ity in direct current watts using STC,
as defined by the IEC. A commenter
requested producers be required to use
“flash” values to determine the value of
the tax credit for modules. The preamble
to the Proposed Regulations explained
that nameplate capacity is an appropriate,
accurate, and consistent standard for the
measurement of solar module capacity
that can be used to measure the capac-
ity of other eligible components. Using

Bulletin No. 2024–51 1301 December 16, 2024
an industry standard such as nameplate
capacity that is widely applicable to var-
ious eligible components provides greater
taxpayer certainty, reduces taxpayer com-
pliance burdens, and aids IRS adminis-
tration. For these reasons, the Treasury
Department and the IRS have determined
that the best application of the statute is
to require the use of nameplate capacity
to measure the capacity of a solar mod-
ule. The Treasury Department and the IRS
therefore decline to adopt this suggestion
to permit the use of “flash” value capacity
measurements in these final regulations.
6. Solar Tracker
Consistent with section 45X(c)(3)
(B)(vi), proposed §1.45X-3(b)(6) would
have provided that a solar tracker means
a mechanical system that moves solar
modules according to the position of the
sun and to increase energy output. Section
45X(c)(3)(B)(vii) provides that torque
tubes (as defined in proposed §1.45X-3(b)
(7)) or structural fasteners (as defined in
proposed §1.45X-3(b)(8)) are solar tracker
components that are eligible components
for purposes of the section 45X credit.
Commenters requested that the defi-
nition of a solar tracker (not an eligible
component) in section 45X(c)(3)(B)(vi)
be modified to allow solar thermal col-
lectors, heliostats, and fixed tilt systems
(additional items) to be solar tracker
components as defined in section 45X(c)
(3)(B)(vii). A solar tracker is defined in
45X(c)(3)(B)(vi) as a “mechanical system
that moves solar modules according to the
position of the sun to increase energy out-
put.” To be a solar tracker, a device must
be a mechanical system that moves a solar
module. The Treasury Department and
the IRS do not have authority to expand
the definition of solar tracker to include
additional items such as the ones sug-
gested that increase energy output without
moving solar modules. Moreover, modifi-
cation of the definition of a solar tracker
in the manner the commenter requested
would not result in such additional items
qualifying as eligible components because
a solar tracker is not a solar energy com-
ponent that is an eligible component under
section 45X(c)(1)(A)(i). Section 45X(c)
(3)(B)(vii) provides that torque tubes
and structural fasteners are the only two
solar tracker components that may qual-
ify as eligible components. The Treasury
Department and the IRS do not have
authority to expand the categories of eli-
gible solar tracker components. For these
reasons, the Treasury Department and the
IRS decline to adopt this request in the
final regulations.
7. Torque Tube
Consistent with section 45X(c)(3)(B)
(vii)(I), proposed §1.45X-3(b)(7)(i) would
have provided that torque tube means a
structural steel support element (includ-
ing longitudinal purlins) that: (i) is part
of a solar tracker; (ii) is of any cross-sec-
tional shape; (iii) may be assembled from
individually manufactured segments; (iv)
spans longitudinally between foundation
posts; (v) supports solar panels and is con-
nected to a mounting attachment for solar
panels (with or without separate mod-
ule interface rails); and (vi) is rotated by
means of a drive system.
Commenters suggested various statu-
tory revisions to the definition of torque
tube in section 45X(c)(3)(B)(vii)(I). A
commenter recommended replacing the
definition with a more generalized term
such as “Tracker Structural Frame” to
allow for other common solar collec-
tor morphologies. Another commenter
requested removing or revising section
45X(c)(3)(B)(vii)(I)(dd) to include single
foundation mounted structures or ground-
mounted carousel structures. One com-
menter proposed clarifying that aluminum
bearings, steel damper arms, steel saddle
brackets, and steel bottom brackets are
included in the definition of torque tubes
or structural fasteners. Alternatively, the
commenter suggested providing either:
(i) a non-exclusive list of items that are
included in the definition of torque tube or
structural fasteners, or (ii) a test similar to
the functionally interdependent or integral
part tests under proposed §1.48-9(f)(2)(ii)
and (f)(3) to determine when a component
is included in the definition of a torque
tube or structural fastener.
Because section 45X(c)(3)(B)(vii)(I)
specifically defines torque tube for pur-
poses of section 45X, the Treasury Depart-
ment and the IRS do not have the author-
ity to expand the definition of torque tubes
and solar tracker components in the final
regulations to include additional solar
energy components. As previously dis-
cussed, the Treasury Department and the
IRS also lack authority to incorporate a
functional interdependence or integral
part tests that would allow other compo-
nents not specified in the statute to qual-
ify for the section 45X credit. For these
reasons, the Treasury Department and the
IRS decline to adopt these comments in
the final regulations.
8. Structural Fastener
Consistent with section 45X(c)(3)
(B)(vii)(II), proposed §1.45X-3(b)(8)(i)
would have defined a structural fastener
to mean a component that is used: (i) to
connect the mechanical and drive system
components of a solar tracker to the foun-
dation of such solar tracker; (ii) to connect
torque tubes to drive assemblies; or (iii) to
connect segments of torque tubes to one
another.
Several commenters requested revi-
sions to the definition of structural fastener
in proposed §1.45X-3(b)(8)(i). For exam-
ple, commenters requested that the defi-
nition of structural fastener be extended
“beyond steel and iron torque tubes to spe-
cifically allow for innovations made from
other materials,” such as durable plastic;
that solar frames made from greenhouse
gas reducing steel and roll-form fabricated
frames (as opposed to the current indus-
try standard, imported extruded aluminum
frames) qualify as structural fasteners,
solar modules, or torque tubes; and that
the definition of structural fasteners be
expanded to include those that secure the
photovoltaic module to the torque tube
or module interface rails. The Treasury
Department and the IRS do not have the
authority to expand the definition of struc-
tural fasteners and solar tracker compo-
nents in the final regulations to include
additional solar energy components.
However, the Treasury Department and
the IRS note that a component that is used
for any of the functions described in sec-
tion 45X(c)(3)(B)(vii)(II) would be con-
sidered a structural fastener for purposes
of section 45X. The Treasury Department
and the IRS think that proposed §1.45X-
3(b)(8)(i) and the statutory definition of
a structural fastener is sufficiently clear
to address the requested clarifications.

December 16, 2024 1302 Bulletin No. 2024–51
Proposed §1.45X-3(b)(8)(i) is therefore
adopted in these final regulations without
revision.
Proposed §1.45X-3(b)(8)(iii) would
have required that, for substantiation pur-
poses, a taxpayer must document that a
structural fastener is used in a manner
described in proposed § 1.45X-3(b)(8)
(i)(A), (B), or (C), with a bill of sale or
other similar documentation that explicitly
describes such use. One commenter specif-
ically supported the substantiation require-
ment for structural fasteners in proposed
§1.45X-3(b)(8)(iii). Another commenter
requested the final rules require taxpayers
to substantiate that the structural fasteners
for which they are claiming the section
45X credit include only the manufactured
component (bolt or rivet) itself. The Trea-
sury Department and the IRS have deter-
mined there is no need for further clarifi-
cation of the substantiation requirement
for structural fasteners in addition to the
specific requirements relating to use in pro-
posed §1.45X-3(b)(8)(iii) and the general
substantiation requirements in section 6001
of the Code. For this reason, the Treasury
Department and the IRS decline to adopt
this comment in the final regulations.
C. Wind energy components
1. In General
Consistent with section 45X(c)(4), pro-
posed §1.45X-3(c) would have provided
that a wind energy component means a
blade, nacelle, tower, offshore wind foun-
dation, or related offshore wind vessel.
Commenters generally requested expand-
ing proposed §1.45X-3(c) to include other
non-listed wind energy components such
as structural fasteners. Section 45X(c)(4)
specifically provides a list of qualifying
wind energy eligible components. The
Treasury Department and the IRS do not
have the authority to expand the statuto-
rily enumerated list of wind energy com-
ponents eligible for a section 45X credit.
For this reason, the Treasury Department
and the IRS decline to adopt the comment-
ers request in these final regulations.
2. Nacelle
Consistent with section 45X(c)(4)(B)
(iii), proposed §1.45-3(c)(3)(i) would
have defined a nacelle to mean the assem-
bly of the drivetrain and other tower-top
components of a wind turbine (with the
exception of the blades and the hub)
within their cover housing.
A commenter stated that guidance
should distinguish between manufactur-
ing of eligible wind energy components
(for example, in a manufacturing facil-
ity) from the installation of wind energy
components at the relevant project site,
as the latter does not constitute manufac-
turing or production of eligible compo-
nents. The Treasury Department and the
IRS have determined that the definition
of “produced by the taxpayer” provided
in proposed §1.45X-1(c)(1) is sufficient to
clarify that production of an eligible com-
ponent requires substantially transforming
constituent elements, materials, or sub-
components into a complete and distinct
eligible component that is functionally
different from that which would result
from disqualifying minor assembly or
superficial modification of the elements,
materials or subcomponents.
Another commenter requested that the
final regulations recognize that, where a
new drivetrain and associated equipment
(the pitch bearing, pitch system, main
shaft, main bearing, gearbox, flex cou-
pling, and slip ring) are produced for use
in repowering of existing wind turbines
and installed into an existing nacelle cover
housing with certain other used equipment
(including yaw bearing and baseplate),
the nacelle is eligible for the section 45X
credit. Under this commenter’s approach,
the drivetrain of the nacelle must be new
to be eligible for the section 45X credit.
Another commenter also suggests inclu-
sion of a “reasonable computation” of the
section 45X credit for repowered eligible
components.
The Treasury Department and the IRS
note that repowering is a form of onsite
re-manufacturing that is typically accom-
plished through a hybrid of primary and
secondary production that utilizes a mix
of existing and new components. To pro-
duce a nacelle within the definition of
proposed §1.45X-3(c)(3)(i), the taxpayer
would need to meet the requirements of
the definition of “produced by the tax-
payer” provided in proposed §1.45X-1(c)
(1), including by substantially transform-
ing the combination of existing and new
subcomponents into a new nacelle that is
distinct from the original nacelle. In some
circumstances, nacelle repowering may
constitute production of an eligible com-
ponent. For example, a taxpayer that man-
ufactures and installs a new drivetrain and
associated subcomponents within housing
atop a wind tower will be considered to
have substantially transformed the com-
bination of new and existing subcompo-
nents, so that taxpayer will have produced
an eligible nacelle. In contrast, a taxpayer
that merely replaces the controller in a
nacelle with a new one will not have sub-
stantially transformed the combination of
new and existing subcomponents, so that
taxpayer will not have produced an eligi-
ble nacelle. Routine maintenance or part
replacement would fall under the defini-
tion of disqualifying minor assembly or
“superficial modification.”
3. Related Offshore Wind Vessel
Consistent with section 45X(c)(4)(B)
(iv), proposed §1.45X-3(c)(4)(i) would
have defined related offshore wind vessel
to mean any vessel that is purpose-built
or retrofitted for purposes of the devel-
opment, transport, installation, operation,
or maintenance of offshore wind energy
components. Proposed §1.45X-3(c)(4)
(i) would have clarified that a vessel is
purpose-built for development, transport,
installation, operation, or maintenance
of offshore wind energy components if it
is built to be capable of performing such
functions and it is of a type that is com-
monly used in the offshore wind industry.
Proposed §1.45X-3(c)(4)(i) would have
further clarified that a vessel is retrofitted
for development, transport, installation,
operation, or maintenance of offshore
wind energy components if such vessel
was incapable of performing such func-
tions prior to being retrofitted, the retrofit
causes the vessel to be capable of per-
forming such functions, and the retrofitted
vessel is of a type that is commonly used
in the offshore wind industry.
Under proposed §1.45X-3(c)(4)(ii),
consistent with section 45X(b)(1)(F)(i),
the credit amount for a related offshore
wind vessel would have been equal to 10
percent of the sales price of the vessel.
Under the Proposed Regulations the sales
price of the vessel does not include the

Bulletin No. 2024–51 1303 December 16, 2024
price of maintenance, services, or other
similar items that may be sold with the
vessel. For a related offshore wind ves-
sel with respect to which a Related Per-
son Election under section 45X(a)(3)(B)
(i) has been made, the election would not
cause the sale price of such vessel to be
treated as having been determined with
respect to a transaction between uncon-
trolled taxpayers for purposes of section
482 of the Code and the regulations there-
under.
One commenter requested clarification
on the valuation of retrofitted offshore
wind vessels and requested guidance on
whether the section 45X credit applies to
the cost of the retrofit itself, the value-add
of the retrofit, the cost of the final sale of
a retrofitted vessel, or some other amount.
The Treasury Department and the IRS
confirm that the credit amount specified
in section 45X(b)(1)(F)(i)—ten percent
of the sales price of such vessel—specif-
ically applies to any related offshore wind
vessel which is purpose-built or retrofitted
as provided in section 45X(c)(4)(B)(iv).
A commenter stated that the definition
of an offshore wind vessel is too narrow
and that more standard vessel types (for
example, tugboats and barges) that are
capable of doing offshore wind work
should also be eligible for the section
45X credit if they are being constructed
or retrofitted for the purpose of offshore
wind work. The Treasury Department
and the IRS note that section 45X(c)(4)
(B)(iv) and proposed §1.45X-3(c)(4)(i)
would have defined a related offshore
wind vessel to mean “any vessel” that is
purpose-built or retrofitted for purposes
of the development, transport, installa-
tion, operation, or maintenance of off-
shore wind energy components. Proposed
§1.45X-3(c)(4)(i) would have clarified
that a vessel is purpose-built for devel-
opment, transport, installation, operation,
or maintenance of offshore wind energy
components if it is built to be capable of
performing such functions and it is of a
type that is commonly used in the offshore
wind industry. Proposed §1.45X-3(c)(4)(i)
would have further clarified that a vessel
is retrofitted for development, transport,
installation, operation, or maintenance of
offshore wind energy components if such
vessel was incapable of performing such
functions prior to being retrofitted, the
retrofit causes the vessel to be capable of
performing such functions, and the retro-
fitted vessel is of a type that is commonly
used in the offshore wind industry. Thus,
if a vessel meets the definition of a related
offshore wind vessel in proposed §1.45X-
3(c)(4)(i), there are no limitations as to
the type of vessel that may be an eligible
component.
The commenter’s requested clarifica-
tion would require an application of the
standard in proposed §1.45X-3(c)(4)(i)
to specific cases for which a categorical
determination of eligibility for additional
vessel types would not be appropriate
in these final regulations because such a
determination would depend on the spe-
cific facts of each case.
Although no comments were received
on proposed §1.45X-3(c)(4)(i), the Trea-
sury Department and the IRS revise pro-
posed §1.45X-3(c)(4)(i) in these final reg-
ulations to clarify that Federal income tax
principles apply in determining the accu-
racy of the sales price used to calculate the
section 45X credit. This revision provides
greater certainty as to what principles apply
for purposes of the section 45X credit and
is in addition to the specific exclusions
from a vessel’s sales price in proposed
§1.45X-3(c)(4)(i), which included mainte-
nance, services, or other similar items that
may be sold with the vessel.
4. Total Rated Capacity of the Completed
Wind Turbine
Proposed §1.45X-3(c)(6) would have
provided that, for purposes of proposed
§1.45X-3(c), the total rated capacity of
the completed wind turbine means, for
the completed wind turbine for which a
blade, nacelle, offshore wind foundation,
or tower was manufactured and sold, the
nameplate capacity at the time of sale as
certified to the relevant national or inter-
national standards, such as IEC 61400,
or American National Standards Institute
(ANSI)/American Clean Power Asso-
ciation (ACP) 101–1–2021, the Small
Wind Turbine Standard. Under proposed
§1.45X-3(c)(6), certification of the turbine
to such standards must be documented by
a certificate issued by an accredited certi-
fication body and the total rated capacity
of a wind turbine must be expressed in
watts.
One commenter expressed support for
the proposal requiring that qualifying wind
turbine components must be made and sold
for use on certified wind turbines. Another
commenter recommended including
both American Wind Energy Association
(AWEA) 9.1-2009 and ANSI/ACP 101-1-
2021 as acceptable wind turbine certifica-
tion standards. The commenter explained
that ANSI/ACP 101-1-2021 is a revision
of the AWEA standard (the original small
wind certification standard, and all currently
certified small wind systems are certified to
this standard) that streamlines the certifica-
tion process, but there is no requirement that
turbines with the original certification must
recertify to the new ANSI/ACP standard.
Thus, the commenter states that including
both standards in the final rules will allow
currently certified turbines made in the
United States to earn section 45X credits as
well as new turbines currently in the certifi-
cation process following the newer standard.
The Treasury Department and the IRS agree
with this request and these final regulations
revise proposed §1.45X-3(c)(6) to add both
AWEA 9.1-2009 and ANSI/ACP 101-1-
2021 as acceptable wind turbine certifica-
tion standards.
A commenter sought clarification as to
whether a wind tower producer may rely on
a certification of the total rated capacity of
the turbine obtained from the original equip-
ment manufacturer (OEM) that produces the
completed wind turbine in which the wind
tower is incorporated, provided the certif-
icate was issued by an accredited certifica-
tion body. The commenter noted that requir-
ing wind tower producers to independently
verify the capacity of the completed turbine
would cause “undue expense and delay.” To
provide assurance to the commenter, a wind
tower producer may rely on an OEM’s cer-
tification of the total rated capacity of the
completed wind turbine in which the tower
was incorporated, but the Treasury Depart-
ment and the IRS have determined that the
rules as set out by proposed §1.45X-3(c)(6)
and (7) do not require further clarification on
this point.
D. Inverters
1. In General
Consistent with section 45X(c)(2),
proposed §1.45X-3(d) would define an

December 16, 2024 1304 Bulletin No. 2024–51
inverter as an end product that is suitable
to convert direct current (DC) electricity
from one or more solar modules or cer-
tified distributed wind energy systems
into alternating current (AC) electric-
ity. Proposed §1.45X-3(d) would have
further provided that an end product is
suitable to convert DC electricity from
one or more solar modules or certified
distributed wind energy systems into
AC electricity if, in the form sold by the
manufacturer, it is able to connect with
such modules or systems and convert
DC electricity to AC electricity from
such connected source. For purposes of
section 45X, the term inverter includes
a central inverter, commercial inverter,
distributed wind inverter, microinverter,
or residential inverter. Proposed §1.45X-
3(d) would have clarified the definition of
each of these types of inverters, including
the required rated outputs.
The preamble to the Proposed Regula-
tions stated that section 45X(c)(2) requires
certain types of inverters be “suitable to”
or “suitable for” a statutorily required use
or application to be considered an eligible
component. Proposed §1.45X-3(d) would
also have provided the calculation of the
credit amount for each type of inverter. In
general, the credit amount for each type
of inverter would be equal to the product
of the inverter’s total rated capacity and
the amount prescribed in section 45X(b)
(2)(B) for such inverter.
One commenter requested the final
rules provide a credit for utility-scale
power converters and that a “utility-scale
power converter” be defined in a manner
consistent with section 2.1.9 of Underwrit-
ers Laboratories Standard 1741 (2002).
Specifically, the commenter requested
modifying the final rules to provide a
credit for products that only convert direct
current to direct current or alternating
current to direct current. Because section
45X(c)(2)(A) specifically defines the term
inverter to mean “an end product which is
suitable to convert direct current electric-
ity . . . into alternating current electricity,”
the Treasury Department and the IRS do
not have the authority to expand the defi-
nition of inverter in the final regulations to
include these additional products. For this
reason, the Treasury Department and the
IRS decline to adopt this comment in the
final regulations.
Another commenter requested that,
for each type of inverter provided for
under section 45X(c)(2), the rated output
of alternating current power be defined
as “the maximum continuous grid-tied
power rating the inverter is capable of
handling.” The commenter asserts that the
suggested change will “ensure consistent
interpretation across technologies despite
consumer-driven decisions impacting
output.” Section 45X(c)(2) uses the term
“rated output” to define, in part, a com-
mercial inverter, distributed wind inverter,
microinverter, residential inverter, or util-
ity inverter. The Treasury Department and
the IRS decline to adopt this comment
in the final regulations because the term
rated output is in the statutory definition
for these inverters.
Several commenters requested that the
final rules provide a section 45X credit for
inverters that convert direct current from
sources other than solar modules or cer-
tified distributed wind energy systems as
long as these inverters meet the technical
requirements of an inverter defined under
section 45X(c)(2). Section 45X(c)(2)(A)
specifically defines the term inverter to
mean “an end product which is suitable to
convert direct current electricity from one
or more solar modules or certified distrib-
uted wind energy systems into alternating
current electricity.” Other types of invert-
ers such as bidirectional electric vehicle
inverters or utility and commercial invert-
ers that are in practice used with battery
modules can meet the existing suitability
standard within the definition without
additional clarification required. For this
reason, the Treasury Department and the
IRS decline to adopt this comment in the
final regulations.
2. Central Inverter
Consistent with section 45X(c)(2)(B),
proposed §1.45X-3(d)(2)(i) would have
defined a central inverter as an inverter
that is suitable for large utility-scale sys-
tems and has a capacity that is greater than
1,000 kilowatts, expressed on an alternat-
ing current watt basis. Proposed §1.45X-
3(d)(2)(i) would have further clarified
that an inverter is suitable for large utili-
ty-scale systems if, in the form sold by the
manufacturer, it is capable of serving as
a component in a large utility-scale sys-
tem and meets the core engineering spec-
ifications for such application. Proposed
§1.45X-3(d)(2)(ii) would have provided a
credit equal to the product of 0.25 cents
multiplied by the total rated capacity of
the central inverter where the total rated
capacity is expressed on an alternating
current watt basis.
One commenter requested the credit
amount available for a central inverter be
changed to match the credit available for
utility inverters because utility inverters
are eligible for a credit that is six times
higher than central inverters. Because
section 45X(b)(2)(B) provides the credit
amounts available for central inverters
and utility inverters, the Treasury Depart-
ment and the IRS do not have the author-
ity to make the requested change. For this
reason, the Treasury Department and the
IRS decline to adopt this comment in the
final regulations.
3. Commercial Inverter
a. Definition
Consistent with section 45X(c)(2)(C),
proposed §1.45X-3(d)(3)(i) would have
provided that a commercial inverter means
an inverter that is suitable for commercial
or utility-scale applications, has a rated
output of 208, 480, 600 or 800 volt three-
phase power, and has a capacity expressed
on an alternating current watt basis that is
not less than 20 kilowatts and not greater
than 125 kilowatts.
One commenter requested the defini-
tion of a commercial inverter be changed
to provide a credit for inverters with a
rated output greater than 800 volt three-
phase power. Section 45X(c)(2)(C)(ii)
defines a commercial inverter, in part, as
having “a rated output of 208, 480, 600,
or 800 volt three-phase power.” The Trea-
sury Department and the IRS do not have
the authority to expand the definition of
a commercial inverter in the final regula-
tions to those with a rated output greater
than 800 volt three-phase power. For this
reason, the Treasury Department and the
IRS decline to adopt this comment in the
final regulations.
A few commenters requested that the
final rules modify the definition of a com-
mercial inverter to include a DC opti-
mized commercial inverter system, and

Bulletin No. 2024–51 1305 December 16, 2024
that, when DC optimizers are paired with
a commercial inverter, the credit amount
available for commercial inverters should
be determined in a manner similar to the
credit computation for direct current opti-
mized inverter systems (DC optimized
inverter systems, as the term would have
been defined in Proposed §1.45X-3(d)(5)
(iii)(B) and discussed in Part IV.D.3.a. of
this Summary of Comments and Explana-
tion of Revisions). Generally, these com-
menters requested that, with the modified
definition of commercial inverter, the
available credit be computed as a product
of $0.02 multiplied by the lesser of the
sum of the alternating current capacity
of each DC optimizer when paired with
the inverter in the DC optimized inverter
system or the alternating current capac-
ity of the inverter in the DC optimized
inverter system. No language in the stat-
utory text or proposed rules prohibits the
use of direct current optimizers with com-
mercial inverters. Thus, it is unnecessary
to modify the final rules to state that DC
optimizers may be used with a commer-
cial inverter.
Section 45X(b)(1)(I) provides that the
amount of the section 45X credit for an
inverter is equal to the applicable amount
with respect to each type of inverter mul-
tiplied by the capacity of such inverter
(expressed on a per alternating current
watt basis). The Treasury Department and
the IRS do not have the authority to change
the method for computing the credit for
commercial inverters. In contrast, lan-
guage that appears only in the definition
of “microinverter” in section 45X(c)(2)
(E) (‘suitable to connect to one solar mod-
ule’) does require clarification about how
to apply the definition to DC optimized
systems and multi-module microinverters.
Because this language does not appear in
the definition of “commercial inverter” in
section 45X(c)(2)(C), there is no analo-
gous need to clarify the application of the
definition or credit calculation. For this
reason, the Treasury Department and the
IRS decline to adopt these requests per-
taining to commercial inverters in the final
regulations.
b. Credit amount
Proposed §1.45X-3(d)(3)(iii) would
have provided a credit equal to the prod-
uct of 2 cents multiplied by the total rated
capacity of the commercial inverter where
the total rated capacity is expressed on an
alternating current watt basis.
Commenters requested that DC opti-
mizers be allowed to be paired with com-
mercial or utility scale system configura-
tions, like microinverters. This comment
is not adopted for the reasons provided in
Part IV.D.3.a. of this Summary of Com-
ments and Explanation of Revisions.
4. Microinverters
a. Definition
Consistent with section 45X(c)(2)(E),
proposed §1.45X-3(d)(5)(i) would have
defined a microinverter as an inverter that
is suitable to connect with one solar mod-
ule; has a rated output of 120 or 240 volt
single-phase power, or 208 or 480 volt
three-phase power; and has a capacity,
expressed on an AC watt basis, that is not
greater than 650 watts. One commenter
requested the final rules change the max-
imum capacity limit for the microinverter
from 650 watts to 700 watts to accommo-
date future technological advancements.
Because section 45X(c)(2)(E)(iii) pro-
vides the maximum capacity of a micro-
inverter, the Treasury Department and the
IRS do not have the authority to make
the requested change. For this reason, the
Treasury Department and the IRS decline
to adopt this comment in the final regula-
tions.
b. Suitable to connect to one solar
module—in general
Proposed §1.45X-3(d)(5)(iii)(A)
would have clarified that an inverter is
suitable to connect to one solar module if,
in the form sold by the manufacturer, it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity.
Proposed §1.45X-3(d)(5)(iii)(B) would
have clarified that a DC optimized inverter
system may qualify as a microinverter. Pro-
posed §1.45X-3(d)(5)(iii)(B) would have
defined a DC optimized inverter system
to mean an inverter that is comprised of
an inverter connected to multiple DC opti-
mizers that are each designed to connect
to one solar module. Proposed §1.45X-
3(d)(5)(iii)(B) would have provided that a
DC optimized inverter system is suitable
to connect with one solar module if, in the
form sold by the manufacturer, it is capa-
ble of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity. Proposed §1.45X-
3(d)(5)(iv)(B) would have provided that
a DC optimized inverter system qualifies
as a microinverter if each DC optimizer
paired with the inverter in a DC optimized
inverter system meets the requirements of
section 45X(c)(2)(E) and a taxpayer must
produce and sell the inverter and the DC
optimizers in the DC optimized inverter
system together as a combined end prod-
uct.
Several commenters agreed with the
proposed rule permitting DC optimiz-
ers paired with an inverter to qualify as
microinverters and receive the corre-
sponding credit amount. One commenter
suggested revising the definition of a DC
optimized inverter systems to more clearly
define the qualifying system components
of a DC optimized inverter system. This
commenter proposed that qualifying sys-
tem components include items that con-
trol the DC output of one or more solar
modules and are integral to the function
of the inverter and modules. The Treasury
Department and the IRS, in consultation
with the Department of Energy, conclude
that the additional confirmation the com-
menter is requesting is not necessary as it
would not provide additional clarity. For
this reason, the Treasury Department and
the IRS decline to adopt this suggestion in
the final regulations.
Several commenters requested that
the final rules remove the requirement
that a taxpayer produce and sell both the
inverter and the DC optimizers in the DC
optimized inverter system as a combined
end product. One commenter expressed
the view that the requirement distorts
the market, provides an unfair advantage
to companies that already manufacture
both items, and requires companies to
seek out partnerships solely for the pur-
pose of obtaining the section 45X credit.
Other commenters that manufacture both
products state that the proposed require-

December 16, 2024 1306 Bulletin No. 2024–51
ment is inconsistent with standard indus-
try practices where a manufacturer sells
the items separately. In contrast, one
commenter supported the “combined end
product” requirement and suggested it
also be applied to multi-module inverters
to prevent multiple entities from claiming
section 45X credits for the same system.
Section 45X(c)(2)(A) defines an inverter
as an end product that is suitable to con-
vert DC electricity from one or more solar
modules or certified distributed wind
energy systems into AC electricity. For
each type of inverter listed under section
45X(c)(2), section 45X(b)(1)(I) provides
the applicable credit is determined as
an amount equal to the product of each
inverter’s applicable amount multiplied
by the capacity of such inverter. The sec-
tion 45X credit is separately computed for
each inverter. The Treasury Department
and the IRS do not have the authority to
allow a credit solely for a DC optimizer,
because it does not convert DC electric-
ity into AC electricity as the definition
of inverter in section 45X(c)(2) requires.
The Treasury Department and the IRS
also do not have the authority to change
the number of inverter units used to com-
pute the available credit amount. For these
reasons, the Treasury Department and the
IRS decline to adopt these comments in
these final regulations. However, while
proposed §1.45X-3(d)(5)(iv)(B) requires
that the inverter and DC optimizer in
the DC optimized inverter system must
be produced and sold as a combined end
product, the Treasury Department and the
IRS clarify that the inverter and the DC
optimizer do not need to be physically
packaged together at sale, and the inverter
and DC optimizer do not need to be fully
interconnected and assembled at the time
of sale.
Proposed §1.45X-3(d)(5) would have
clarified that a multi-module inverter
may also qualify as a microinverter. Pro-
posed §1.45X-3(d)(5)(iii)(C) would have
defined a multi-module inverter to mean
an inverter that is comprised of an inverter
with independent connections and DC
optimizing components for two or more
modules. Proposed §1.45X-3(d)(5)(iii)
(C) would have further provided that a
multi-module microinverter is suitable
to connect with one solar module if it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity. Proposed §1.45X-
3(d)(5)(iv)(C) would have provided that
multimodule inverter qualifies as a micro-
inverter if it meets the requirements of
section 45X(c)(2)(E).
One commenter suggested revising the
definition of a multi-module inverter to
more clearly define the qualifying system
components of a multi-module inverter.
The commenter suggested that qualify-
ing system components should be those
items that control the DC output of one or
more solar modules and are integral to the
function of the inverter and modules. The
same commenter also suggested revising
the definition of a multi-module inverter
to clarify that for a multi-module inverter
to qualify as a microinverter, a taxpayer
must produce and sell the inverter and the
DC optimizers together as a combined end
product. A different commenter agreed
with this suggestion.
A few commenters suggested revising
the definition of a multi-module inverter
to provide that a multi-module inverter
includes a DC optimized inverter system
such that each DC optimizer may connect
with more than one solar module and the
credit amount in such a system is com-
puted similarly to a DC optimized inverter
system, except that the DC optimizers are
not required to be sold with the inverter
as a “combined end product.” Other com-
menters disagreed with this suggestion
and support the proposed rule that would
not have allowed solar modules to share
a connection to a multi-module inverter.
The reasons provided for retaining the
rule for DC optimized inverter systems
also apply to adopting the requirement
for multi-module inverters. The Trea-
sury Department and the IRS think that
requiring taxpayers to produce and sell the
inverter and the DC optimizers together as
a combined end product will create parity
with DC optimized inverter systems and
avoid potential abuse. For these reasons,
the Treasury Department and the IRS adopt
these comments in the final regulations.
c. Credit amount
Proposed §1.45X-3(d)(5)(iv)(A) would
have provided that, generally, the credit
amount for a microinverter is equal to the
product of 11 cents multiplied by the total
rated capacity of the microinverter where
the total rated capacity is expressed on an
alternating current watt basis.
Proposed §1.45X-3(d)(5)(iv)(B) would
have clarified how to determine the credit
amount for a DC optimized inverter sys-
tem that qualifies as a microinverter. Pro-
posed §1.45X-3(d)(5)(iv)(B) would have
provided that the credit amount for a DC
optimized inverter system that qualifies
as a microinverter is equal to the product
of 11 cents multiplied by the lesser of the
sum of the alternating current capacity of
each DC optimizer when paired with the
inverter in the DC optimized inverter sys-
tem or the alternating current capacity of
the inverter in the DC optimized inverter
system where capacity is measured in
watts of alternating current converted
from DC electricity by the inverter in a
DC optimized inverter system.
One commenter requested that the
alternating current capacity of each DC
optimizer when paired with the inverter
in the DC optimized inverter system be
calculated as the product of the optimiz-
er’s rated input power capacity, the opti-
mizer’s DC-to-DC conversion efficiency
percentage, and the inverter’s DC-to-AC
conversion efficiency percentage. Sec-
tion 45X(b)(1)(I) provides the applicable
credit is determined as an amount equal
to the product of each inverter’s applica-
ble amount multiplied by the capacity of
such inverter (expressed on a per alternat-
ing current watt basis). The requirement
that capacity is “expressed on an alter-
nating current watt basis” already factors
in any DC-to-DC conversion efficiency
upstream of the DC-to-AC conversion,
and the inverter’s DC-to-AC conversion
efficiency percentage is accounted for
by the use of “capacity of such inverter”
(expressed on a per alternating current
watt basis). Therefore, these requirements
are duplicative of rules contained in the
statutory text. For this reason, the Trea-
sury Department and the IRS decline to
adopt this suggestion in the final regula-
tions.
5. Utility Inverter
Consistent with section 45X(c)(2)(G),
proposed §1.45X–3(d)(7)(i) would have

Bulletin No. 2024–51 1307 December 16, 2024
defined a utility inverter as an inverter
that is suitable for commercial or utili-
ty-scale systems, has a rated output of not
less than 600 volt three-phase power, and
has a capacity expressed on an alternating
current watt basis that is greater than 125
kilowatts and not greater than 1000 kilo-
watts.
One commenter requested reducing the
required rated output from “not less than
600 volt three-phase power” to “not less
than 480 volt three-phase power.” Section
45X(c)(2)(G)(ii) defines a utility inverter,
in part, as having “a rated output of not
less than 600 volt three-phase power.” The
Treasury Department and the IRS decline
to adopt the commenter’s request because
defining a utility inverter to include those
with a rated output of not less than 480
volt three-phase power would be inconsis-
tent with the statute.
E. Qualifying battery components
Proposed §1.45X-3(e)(1) would define
a qualifying battery component as an elec-
trode active material, a battery cell, or a
battery module.
1. Electrode Active Materials
a. In general
Proposed §1.45X-3(e)(2)(i)(A) would
have defined electrode active materials
to include cathode electrode materials,
anode electrode materials, and electro-
chemically active materials that con-
tribute to the electrochemical processes
necessary for energy storage. In general,
electrode active materials are materials
that are capable of being used within a
battery for energy storage. Proposed
§1.45X-3(e)(2)(i)(A) would also have
provided that the following materials in
a battery or vehicle would not qualify
for the section 45X credit as an electrode
active material: battery management
systems, terminal assemblies, cell con-
tainments, gas release valves, module
containments, module connectors, com-
pression plates, straps, pack terminals,
bus bars, thermal management systems,
and pack jackets. Proposed §1.45X-3(e)
(2)(v) would have clarified that a tax-
payer may claim only one section 45X
credit with respect to a material that qual-
ifies as both an electrode active material
and an applicable critical mineral.
Some commenters recommended alter-
ing the definition of electrode active mate-
rials as defined in section 45X(c)(5)(B)(i)
and in proposed §1.45X-3(e)(2)(i)(A). The
Treasury Department and the IRS do not
have the authority to alter the definition of
electrode active materials as provided by the
statute. For this reason, the Treasury Depart-
ment and the IRS decline to adopt these rec-
ommendations in the final regulations.
One commenter raised a concern that
certain definitions in the Proposed Regula-
tions applicable to electrode active materi-
als would inadvertently exclude separators
from being treated as an eligible component
because those definitions do not include
language specific to the separator produc-
tion process. As proposed §1.45X-3(e)(2)
(i)(D) specifically included separators in
the definition of electrochemically active
materials, such changes to definitions are
unnecessary, and the Treasury Department
and the IRS decline to adopt the comment-
er’s recommendation.
b. Cathode Electrode Materials and
Anode Electrode Materials
Proposed §1.45X-3(e)(2)(i)(B) would
have defined “cathode electrode materials”
to mean the materials that comprise the
cathode of a commercial battery technology,
such as binders, and current collectors (that
is, cathode foils). Proposed §1.45X-3(e)(2)
(i)(C) would have defined “anode electrode
materials” to mean the materials that com-
prise the anode of a commercial battery
technology, including anode foils.
A commenter recommended that the
definition of cathode electrode materi-
als in proposed §1.45-3(e)(2)(i)(B) and
of anode electrode materials in proposed
§1.45-3(e)(2)(i)(C) be clarified to spec-
ify that the materials be “battery-grade”
so the precursor materials are eligible for
the section 45X credit. Because these pro-
posed definitions would require that the
materials comprise the cathode or anode
of a commercial battery technology, the
Treasury Department and the IRS con-
clude that specifying that such materials
be “battery-grade” would be redundant.
For this reason, the Treasury Department
and the IRS decline to adopt these recom-
mendations in the final regulations.
Another commenter recommended that
the definition of cathode electrode materials
be clarified to address its concern that the
qualifier “commercial battery technology”
excludes hydrogen fuel cells contrary to the
definition of the term in the statute, which
contains no such qualifier. The Treasury
Department and the IRS do not have the
authority to alter the definition of electrode
active materials as battery components as
provided by the statute. For this reason, the
Treasury Department and the IRS decline
to adopt this recommendation in the final
regulations. The Treasury Department and
the IRS note, however, that although elec-
trode active materials in general must be
capable of being used within a battery for
energy storage, such materials would still
be eligible for the section 45X credit if
they are also capable of being used in other
applications, such as hydrogen fuel cells.
c. Electrochemically active materials
Proposed §1.45X-3(e)(2)(i)(D) would
define “electrochemically active materi-
als that contribute to the electrochemical
processes necessary for energy storage”
to mean the battery-grade materials that
enable the electrochemical storage within
a commercial battery technology. In addi-
tion to the list of electrochemically active
materials provided in section 45X(c)(5)
(B)(i) (that is, solvents, additives, and
electrolytic salts), these may include elec-
trolytes, catholytes, anolytes, separators,
and metal salts and oxides.
One commenter requested the defini-
tion of electrochemically active materials
explicitly include solid-state electrolytes.
Solid-state electrolytes are included in
the definition of electrochemically active
materials because Proposed §1.45X 3(e)
(2)(i)(D) includes “electrolytes,” with no
particular form required. The Treasury
Department and the IRS conclude that
specifying that such materials are included
in this definition would be redundant. For
this reason, the Treasury Department and
the IRS decline to adopt these recommen-
dations in the final regulations.
d. Battery grade materials
Proposed §1.45X-3(e)(2)(i)(F) would
have defined “battery-grade materials” to
mean the processed materials found in a

December 16, 2024 1308 Bulletin No. 2024–51
final battery cell or an analogous unit, or
the direct battery-grade precursors to those
processed materials. A few commenters
requested the final rules clarify the mean-
ing of direct battery-grade precursors.
Commenters also requested the final rules
provide that silane gas, ultra-high molec-
ular weight polyethylene, and needle coke
meet the definition of electrochemically
active materials as direct battery-grade
precursors. While the Treasury Depart-
ment and the IRS understand the desire
for assurance, listing specific precursors
that qualify as electrochemically active
materials would not be possible or advis-
able because it could imply that unlisted
materials do not qualify as electrochemi-
cally active materials, particularly as bat-
tery technologies may evolve over time.
For this reason, the Treasury Department
and the IRS decline to adopt these recom-
mendations in these final regulations.
e. Production costs incurred
Proposed § 1.45X-3(e)(2)(iv) would
have provided that costs incurred for pur-
poses of determining the credit amount
includes costs as defined in §1.263A-
1(e) that are paid or incurred within the
meaning of section 461 of the Code by
the taxpayer for the production of an elec-
trode active material only. Thus, under the
Proposed Regulations, production costs
with respect to an electrode active mate-
rial would not include any costs incurred
after the production of the electrode active
material.
The Proposed Regulations would not
have allowed direct material costs as
defined in §1.263A-1(e)(2)(i)(A), indi-
rect material costs as defined in §1.263A-
1(e)(3)(ii)(E), or any costs related to the
extraction or acquisition of raw materials
to be taken into account as production
costs. This limitation disallowed, for pur-
poses of calculating the credit: the inclu-
sion of the cost of acquiring the raw mate-
rial used to produce the electrode active
materials; the cost of materials used for
conversion, purification, or recycling of
the raw material; and other material costs
related to the production of electrode
active materials. The Proposed Regula-
tions applied section 263A and the regu-
lations under section 263A (section 263A
regulations) solely to identify the types
of costs that are includible in production
costs incurred for the purpose of comput-
ing the amount of the section 45X credit.
The Proposed Regulations did not apply
section 263A or the section 263A regu-
lations for any other purposes, such as to
determine whether a taxpayer is engaged
in production activities.
The preamble to the Proposed Regula-
tions explained that the rationale for the
proposed rule was that the credit for the
production of electrode active materials
provides incentives for taxpayers to con-
duct activities that add value to the produc-
tion of electrode active materials. Merely
purchasing raw materials may enable a
taxpayer to produce an electrode active
material but it is not by itself an activity
that adds value. In addition, excluding the
costs of acquiring electrode active mate-
rials mitigates the risk of crediting the
production costs for the same underlying
material more than once as that material
is used in various stages of the production
process. For these reasons, material costs
were not creditable costs under the Pro-
posed Regulations.
The Treasury Department and the IRS
requested comments on the proposed
rule for determining the costs incurred
with respect to the production of elec-
trode active materials. Specifically, com-
ments were sought as to whether and how
extraction and other similar value-added
activities in the production of raw mate-
rials used in electrode active materials
should be taken into account and how
extraction should be defined, including
whether the term should be defined consis-
tent with proposed §1.30D-3(c)(8). Com-
ments were also requested with respect
to applicable critical minerals, which are
summarized in Part V.C. of this Summary
of Comments and Explanation of Revi-
sions. Many of these comments had sim-
ilarities, and the reasoning and revisions
in these final regulations are described
in this Part IV.E.1.e. of this Summary of
Comments and Explanation of Revisions
and are adopted for both electrode active
materials and applicable critical minerals.
Approximately 72 of the comments
received addressed the definition and
scope of production costs generally. Many
commenters recommended that, contrary
to the Proposed Regulations, all costs
with respect to the production of electrode
active materials be included in production
costs for purpose of determining the credit,
including direct material costs as defined
in §1.263A-1(e)(2)(i)(A), indirect mate-
rial costs as defined in §1.263A-1(e)(3)(ii)
(E), and costs related to the extraction of
raw materials.
A significant number of commenters
focused their recommendations on mate-
rial costs or the costs of extraction, but
there was agreement among many of them
that “costs of production” should be inter-
preted broadly to include all costs. In sup-
port of this position, commenters asserted
that section 45X(b)(1)(J) and (M) do not
place limits or otherwise qualify produc-
tion costs eligible for the credit and that
the regulations should not impose limita-
tions not explicitly present in the Code
itself. Some of these commenters also
argued that, because the costs excluded
from production costs in the Proposed
Regulations are often a substantial or pre-
dominant portion of the total costs of pro-
ducing some electrode active materials,
substantial limitations on the inclusion of
these costs would contradict Congress’s
goal of incentivizing the production of
electrode active materials. Commenters
also disputed that direct and indirect costs
are not incurred in value-adding activities.
Some commenters also disagreed that
the potential for over crediting (that is,
crediting the same production costs mul-
tiple times) justifies denying a credit for
these costs. A subset of these commenters
disagreed that over crediting was a legiti-
mate concern, arguing instead that section
45X provides a credit for costs incurred
at different stages of production attribut-
able to the same underlying material. Oth-
ers agreed that over crediting might not
be permissible but that the concern was
insufficient to deny entirely credits for all
costs that might be impermissibly claimed
more than once for the same underlying
material. In the view of these comment-
ers, prohibiting crediting these same pro-
duction costs multiple times would be
the proper approach rather than entirely
denying all credits for these costs. Some
commenters noted that, in the case of cer-
tain specifically identified electrode active
materials, there was no risk of crediting
the same production costs multiple times
and thus direct and indirect costs should
be included in the costs of production for

Bulletin No. 2024–51 1309 December 16, 2024
these electrode active materials. A third set
of commenters argued that credits should
be permissible once under section 45X(b)
(1)(M) for applicable critical minerals and
again under section 45X(b)(1)(J) for elec-
trode active materials.
In the case of electrode active materi-
als that are precursors for the production
of other electrode active materials, one
commenter recommended that the cost of
the precursor electrode active materials
only be included in the cost of production
for which a credit may be claimed if the
precursor electrode active materials are
completely consumed in the production
process and are not used for any other
commercial purpose.
A number of commenters proposed
solutions to the problem of potentially
crediting the same production costs mul-
tiple times. One solution commenters pro-
posed was to reduce the basis of property
for which a credit has been claimed by
an upstream producer. Commenters also
proposed a system under which a tax-
payer would only be eligible for a credit
on costs of material for which no other
taxpayer had previously claimed a credit.
This arrangement could be administered
through a system of certifications in which
taxpayers would be required to verify that
its suppliers had not previously claimed
credits for costs associated with the same
materials for which the taxpayer is claim-
ing credits. A commenter also urged that
producers of electrode active materials be
able to claim a credit if they can establish
that the acquired electrode active materi-
als and applicable critical minerals used in
the production of electrode active materi-
als were acquired from extraction or pro-
duction outside the United States and thus
were previously ineligible for a section
45X credit.
In addition to general comments
regarding the inclusion of direct, indi-
rect, and extraction costs, commenters
recommended clarification about more
specific costs, including costs associated
with transportation. Another commenter
requested the final rules be modified to
include costs of the production of anodes
used in the aluminum production to con-
vert alumina into aluminum. Other com-
menters asserted that the costs of process-
ing and purification of materials in the
production of electrode active materials
add value and should, on that basis, be
included in the scope of the credit.
Several commenters recommended
that the direct and indirect costs of the
production of electrode active materials
from recycled feedstock should be classi-
fied as production costs for purposes of the
credit. According to one commenter, recy-
cling processes begin with waste products
at what is essentially a new supply chain.
A commenter supported the Proposed
Regulations’ exclusion of direct material,
indirect material, and extraction costs
from production costs eligible for the
credit. This commenter was concerned
that a contrary rule would invite fraud,
waste, and abuse and that, in the case
of extraction costs, would be difficult to
administer without the creation of a trac-
ing system.
With respect to costs related to
extraction, the Proposed Regulations
would have excluded extraction costs
because extraction could be far removed,
particularly in the case of electrode active
materials, in the supply chain from the
ultimate production of the eligible compo-
nent. However, commenters highlighted
the critical importance of extraction to
the production of both applicable critical
minerals and electrode active materials as
well as the close connection these costs
often have to the final production of these
materials.
The Treasury Department and the
IRS have reconsidered the treatment
of extraction costs in these final regu-
lations for taxpayers that extract raw
materials domestically and for taxpay-
ers that acquire either domestically or
foreign-sourced extracted raw materi-
als. For both electrode active materials
and applicable critical minerals, the final
regulations in §§1.45X-3(e)(2)(iv) and
1.45X-4(c)(3), respectively, allow tax-
payers to include extraction costs related
to the extraction of raw materials in the
United States or a United States territory,
but only if those costs are paid or incurred
by the taxpayer that claims the section
45X credit with respect to the relevant
electrode active material or applicable
critical mineral. The Treasury Depart-
ment and the IRS note that the section
45X credit is available only to taxpayers
that produce and sell an eligible compo-
nent. Thus, the final regulations provide
that extraction costs may be included in
production costs consistent with the rules
provided under section 263A only if such
costs are incurred by the taxpayer that
claims the section 45X credit with respect
to the relevant applicable critical mineral
or electrode active material. The Treasury
Department and the IRS have determined
that this inclusion of extraction costs
incurred by the taxpayer most accurately
captures the meaning “the costs incurred
by the taxpayer with respect to the produc-
tion of” applicable critical minerals and
electrode active materials under section
45X(b)(1)(J) and (M). If, however, a tax-
payer acquires extracted raw material as a
direct (or indirect) material cost, the mate-
rial costs may be included as production
costs consistent with the rules provided
under section 263A regardless of whether
the extracted material is domestically- or
foreign-sourced.
With respect to direct and indirect
material costs, the Proposed Regulations
would have excluded direct and indirect
material costs from production costs for
both applicable critical minerals and elec-
trode active materials. The Proposed Reg-
ulations excluded material costs from pro-
duction costs based on an interpretation of
the term “costs incurred by the taxpayer
with respect to production” in section
45X(b)(1)(J) and (M) as being limited to
value-added activities in the production
process. Electrode active materials and
applicable critical minerals differ from
all other eligible components described in
section 45X because their credit amounts
are calculated as a percentage of produc-
tion costs rather than specifying a fixed
dollar amount or rate. The preamble to
the Proposed Regulations stated that the
mere purchase of materials does not itself
add value in a production process despite
being a necessary part of such process.
Furthermore, it is unlikely that Congress
intended to allow production costs asso-
ciated with applicable critical minerals or
electrode active materials to be credited
multiple times, due to the high risk of
fraud, waste, and abuse; the administra-
tive burden of preventing these outcomes;
and the limited effectiveness in support-
ing domestic production of new eligible
components. The exclusion of direct and
indirect material costs addressed these
concerns.

December 16, 2024 1310 Bulletin No. 2024–51
Numerous commenters highlighted the
importance and appropriateness of includ-
ing material costs in production costs.
There was, however, disagreement as to
whether and to what extent the costs of
non-U.S. produced constituent elements,
materials, and subcomponents used in the
production of electrode active materials
should be included in production costs.
Some commenters recommended that the
costs of all materials be included while
others urged limitations to only credit
materials produced domestically. One
commenter proposed that the final regu-
lations modify the proposed rule regard-
ing constituent elements, materials, and
subcomponents used in the production
of applicable critical minerals to distin-
guish between imports of materials other-
wise available from domestic sources and
imported materials that are not available
from domestic sources.
The Treasury Department and the IRS,
after consultation with the Department of
Energy, have reconsidered the proposed
exclusion of all material costs based on
these comments. The final regulations
adopt a rule allowing taxpayers that pro-
duce applicable critical minerals and elec-
trode active materials as specified in the
statute to include direct and indirect mate-
rials costs (as described in the referenced
section 263A regulations) in production
costs if certain conditions are met, but only
if those direct or indirect material costs do
not relate to the purchase of materials that
are an eligible component at the time of
acquisition (such as an electrode active
material or applicable critical mineral).
In addition, two examples illustrating the
revised production costs rule are included
in §1.45X-3(e)(2)(iv)(A)(2).
In finalizing this rule, the Treasury
Department and the IRS considered the
provisions of section 45X and determined
this final rule appropriately implements
the statute as a whole. Section 45X(a)
(1) and (2) limit the section 45X credit to
the sum of the credit amounts determined
under section 45X(b) with respect to each
eligible component that is produced by
the taxpayer and, during such taxable
year, sold to an unrelated person in the
taxpayer’s trade or business. The statute
allows a section 45X credit for the sale of
an applicable critical mineral or electrode
active material produced and sold by the
taxpayer in its business. The section 45X
credit for an applicable critical mineral or
electrode active material is equal to 10 per-
cent of the costs incurred by the taxpayer
with respect to production, under section
45X(b)(1)(M) and (J), respectively.
In calculating a taxpayer’s costs
incurred in the production of applica-
ble critical minerals and electrode active
materials, it is necessary to consider situ-
ations involving the integration of eligible
components (whether directly made by
the taxpayer or purchased from another
taxpayer) in the course of producing an
applicable critical mineral or electrode
active material. Generally, integrating
one eligible component into another pro-
duced eligible component results in two
credits pursuant to section 45X(d)(4) if
the taxpayer produced both, while inte-
grating a purchased eligible component
into another produced eligible component
will only result in a credit for the eligible
component produced by the taxpayer. In
the case of an applicable critical mineral
or electrode active material, however, the
section 45X credit calculation differs from
the other eligible components. Thus, fur-
ther examination was needed to determine
how a credit should be calculated in such
a case.
The Treasury Department and the IRS
considered the treatment of a vertically
integrated taxpayer. For example, assume
a taxpayer produced an applicable criti-
cal mineral or electrode active material
and incurred $50X of costs with respect
thereto (EC 1) and integrated EC 1 into
a separate applicable critical mineral or
electrode active material (EC 2), incurring
an additional $100X of costs with respect
to the production of EC 2 (total produc-
tion costs of $150X), with EC 2 ultimately
being sold by the taxpayer to an unre-
lated person. In calculating the section
45X credit, pursuant to section 45X(d)
(4), taxpayer is treated as having sold an
eligible component to an unrelated person
if such component is integrated, incorpo-
rated, or assembled into another eligible
component which is sold to an unrelated
person. It is important to note that sec-
tion 45X makes no distinction between
integrated eligible components that were
purchased or produced by the taxpayer. As
section 45X(d)(4) directs the taxpayer to
treat itself as selling both EC 1 and EC 2
to the unrelated person, it is necessary to
determine a credit for each EC 1 and EC 2
when both were produced by the taxpayer.
In this example, the $50X of produc-
tion costs attributable to EC 1 were not
incurred with respect to the production of
EC 2, since the production of EC 2 – in
other words, the substantial transforma-
tion of EC 1 into EC 2 – does not include
the production of EC 1. Thus, the taxpayer
would be eligible for a total section 45X
credit of $15X: $5X (10% of $50X) for
EC 1 and $10X (10% of $100X) for EC
2. If the $50X of production costs attrib-
utable to EC 1 were included for both EC
1 and EC 2, then the same costs would be
double credited. Double crediting would
result in the taxpayer generating a $20X
credit from the sale of EC 1 and EC2,
which would provide an increased credit
amount as compared to the credit amount
that should result from the $150X of actual
production costs incurred (or, stated differ-
ently, a section 45X credit that was 13.33
percent of the taxpayer’s actual $150X of
production costs in the example). The cor-
rect result is taxpayer should be viewed as
having incurred $50X of production costs
for EC 1 and $100X of production costs
for EC 2, resulting in a $15X credit, which
also matches 10 percent of the taxpayer’s
actual production costs ($150X) and does
not create a double crediting of costs.
Alternatively, consider a taxpayer that,
instead of producing EC 1, purchases EC
1 for $60X. The taxpayer then spends
another $100X producing EC 2, using EC
1. Similar to the vertically integrated tax-
payer, when the taxpayer sells EC 2, pur-
suant to section 45X(d)(4), the taxpayer is
treated as having sold EC 1 and EC 2 to
an unrelated person. The difference is that
in this case the taxpayer did not produce
EC 1, and therefore the taxpayer does not
satisfy section 45X(a)(1)(A) for a section
45X credit for the sale of EC 1. If the tax-
payer were permitted to include the costs
for EC 1 ($60X) in calculating the credit
for EC 2, then the taxpayer would receive
a larger credit for producing EC 2 than
if the taxpayer had produced both EC 1
and EC 2. Without a clearer indication
in the statute that Congress intended to
treat these two fact patterns differently, in
a way that disadvantages vertically inte-
grated production, the statute as a whole
is appropriately implemented when the

Bulletin No. 2024–51 1311 December 16, 2024
result is the same credit amount for EC 2
($10X in these examples) whether the tax-
payer purchases or produces EC 1.
In comparing the two results of these
examples under the final rule, the ver-
tically integrated taxpayer gets a larger
total section 45X credit by directly engag-
ing in more credit generating activities,
while the non-vertically integrated tax-
payer receives a section 45X credit com-
mensurate with its activities of producing
EC 2, but no credit for integrated eligible
components that it did not produce. These
results are consistent with the general rule
of section 45X(a)(1) and (2) and avoid
allowing taxpayers to use the same cost in
multiple credit calculations.
Section 45X(d)(2) provides that only
sales of eligible components produced
within the United States, or a United
States territory, are taken into account for
purposes of section 45X and is additional
support for the rule that does not include
foreign applicable critical minerals or
electrode active materials in production
costs, regardless of whether purchased or
produced by the taxpayer. Allowing a for-
eign produced applicable critical mineral
or electrode active material to increase the
section 45X credit conflicts with section
45X(d)(2), particularly when considered
with the rule under section 45X(d)(4).
The Treasury Department and the IRS
also note that section 45X(d)(2) confirms
that treatment as an “eligible component”
is not dependent on where production
occurred, and so a foreign applicable crit-
ical mineral or electrode active material is
an eligible component subject to the rule
in section 45X(d)(4).
The final rule is also consistent with
the overall purpose of section 45X and
addresses the concerns described in the
preamble of the Proposed Regulations.
While the final rule adopts certain com-
menters’ position that incurring material
costs is necessary and may add value to a
production process, the Treasury Depart-
ment and IRS maintain that the inclusion
of material costs must be balanced against
the risk of multiple crediting of the same
costs and the creation of incentives that
are contrary to the purpose of section 45X.
The final rule accomplishes this balance.
Further, although applicable critical min-
erals and electrode active materials, or
any other eligible component, produced
outside the United States do not pose a
risk of multiple crediting, permitting the
production costs of a non-U.S. produced
applicable critical mineral or electrode
active material to be included in produc-
tion costs would provide an incentive for
the purchase of electrode active materials
or applicable critical minerals produced
abroad, which is inconsistent with the
overall statutory scheme and purpose of
section 45X (that is, to encourage domestic
production of eligible components). Thus,
excluding all costs of acquiring materials
that are eligible components (for example,
an applicable critical mineral or electrode
active material at the time of acquisition)
as a direct or indirect material cost with
respect to the production of another appli-
cable critical mineral or electrode active
material appropriately implements the
statute. It is also appropriate to have the
same rules for applicable critical minerals
and electrode active materials with respect
to production costs, as the statutory lan-
guage regarding calculation of the credit
for applicable critical minerals and elec-
trode active materials is the same.
These final regulations also include
certain substantiation requirements for a
taxpayer that is claiming a section 45X
credit with respect to an applicable crit-
ical mineral or electrode active material.
The preamble to the Proposed Regula-
tions supported not including all direct
and indirect material costs by referenc-
ing the possibility that the same produc-
tion costs may be credited multiple times
and the potential for increased fraud and
abuse related to claiming the section 45X
credit. Proposed §1.45X-4(c)(4) would
have required the taxpayer to document
that their product meets the criteria for an
applicable critical mineral as described
in section 45X(c)(6) with a certificate of
analysis (COA) provided by the taxpayer
to the person to which the taxpayer sold
the applicable critical mineral. The Trea-
sury Department and the IRS requested
comments on this substantiation require-
ment, including whether a similar require-
ment should be applied to electrode active
materials.
Based on a review of the comments,
including comments specifically suggest-
ing certification statements, and the need
to balance the expansion of costs included
as production costs with respect to the
Proposed Regulations while mitigating
the risk of fraud, waste and abuse, these
final regulations revise the substantia-
tion rules in proposed §1.45X-4(c)(4) for
applicable critical minerals and added
substantiation rules for electrode active
materials in §1.45X-3(e)(2)(iv)(C). In
order to include direct or indirect materi-
als costs as defined in §1.263A-1(e)(2)(i)
(A) and (e)(3)(ii)(E) as production costs
when calculating a section 45X credit
for the production and sale of an appli-
cable critical mineral or electrode active
material, a taxpayer must include, as an
attachment to the return on which the sec-
tion 45X credit is claimed, certifications
from any supplier, including the suppli-
er’s employer identification number and
that is signed under penalties of perjury,
from which the taxpayer purchased any
constituent elements, materials, or sub-
components of the taxpayer’s eligible
component, stating that the supplier is
not claiming the section 45X credit with
respect to any of the material acquired by
the taxpayer, nor is the supplier aware that
any prior supplier in the chain of produc-
tion of that material claimed a section 45X
credit for the material. A taxpayer must
also prepare the following information,
and maintain that information in the tax-
payer’s books and records: (1) a document
that provides an analysis of any constitu-
ent elements, materials, or subcomponents
that concludes the material did not meet
the definition of an eligible component
(for example, did not meet the definition
of applicable critical mineral or electrode
active material) at the time of acquisition
by the taxpayer (the document may be
prepared by the taxpayer or ideally by an
independent third-party); (2) a list of all
direct and indirect material costs and the
amount of such costs that were included
within the taxpayer’s total production
cost for each electrode active material or
applicable critical mineral, as applicable;
and (3) a document related to the taxpay-
er’s production activities with respect to
the direct and indirect material costs that
establishes the materials were used in the
production of the electrode active material
or applicable critical mineral, as applica-
ble (the document may be prepared by
the taxpayer or ideally by an independent
third-party). Finally, the taxpayer must
provide any other information related to

December 16, 2024 1312 Bulletin No. 2024–51
the direct or indirect materials specified in
guidance and comply with the directions
for providing such information as specified
in guidance. Failure to provide this docu-
mentation with the return filing, or provid-
ing a “available upon request” statement,
will constitute a failure to substantiate
the claim. The Treasury Department and
the IRS have determined, in consultation
with the Department of Energy, that these
revisions to the Proposed Regulations are
necessary in order to properly substantiate
credit amounts claimed under section 45X
for applicable critical minerals and elec-
trode active materials.
2. Battery Cells—Definition
a. In general
Consistent with section 45X(c)(5)(B)
(ii), proposed §1.45X-3(e)(3)(i) would
have defined the term battery cell as an
electrochemical cell comprised of one or
more positive electrodes and one or more
negative electrodes, with an energy den-
sity of not less than 100 watt-hours per
liter, and capable of storing at least 12
watt-hours of energy.
Commenters asked for additional guid-
ance clarifying the volumetric energy
density calculation methodology given
the variety of battery shapes, sizes, and
construction methodologies that exist in
the market. The Treasury Department and
the IRS understand these comments to be
made with respect to calculating energy
density under proposed §1.45X-3(e)(3)(i)
(B) and agree that clarification would be
helpful. Energy density can refer to vol-
umetric energy density but is commonly
used to refer to gravimetric (mass-based)
energy density. These final regulations
clarify that energy density is referring to
volumetric energy density in §1.45X-3(e)
(3)(i)(B).
One commenter asked that the final
rules provide that hydrogen fuel cells be
included under the definition of battery
cells by amending the definition of a bat-
tery cell to waive the requirement that a
battery cell be capable of storing at least
12 watt-hours of energy and permitting
this requirement to be met by “a large
hydrogen storage tank.” The Treasury
Department and the IRS do not have the
authority to amend the definition of a
battery cell in the final regulations or to
waive the requirement that it be capable
of storing at least 12 watt-hours of energy.
For this reason, the Treasury Department
and the IRS decline to adopt this comment
in the final regulations.
At least one commenter raised a matter
involving a vertically integrated manu-
facturer of electric vehicles that, together
with a related person, operates a battery
cell production facility. According to the
commenter, the commenter purchases
battery cells from this production facility
and assembles, integrates, and incorpo-
rates them into battery modules at battery
assembly facilities located in other States.
Modules produced at these assembly facil-
ities are then shipped to various electric
vehicle production facilities. As described
by the commenter, the process of taking
completed battery cells and integrating,
incorporating, and assembling them into
completed battery packs happens across
several different facilities, all of which are
operated by the commenter and its affili-
ates that are separate legal entities. Each
facility is neither solely a battery module
facility nor solely a battery pack facility.
The commenter requested that the final
regulations allow a vertically integrated
manufacturer and related parties to elect
which facility will receive the credit in
situations where the manufacturer and
related parties complete all stages of the
production process and can substantiate
that the corresponding credit will not be
duplicated. The Treasury Department and
the IRS appreciate the complex operations
that may be inherent in battery production.
However, the statute requires a determina-
tion of the taxpayer that produces an eligi-
ble component and does not authorize the
relief requested by the commenter.
b. Capacity measurement
Proposed §1.45X-3(e)(3)(ii) would
have provided that taxpayers must measure
the capacity of a battery cell in accordance
with a national or international standard,
such as IEC 60086-1 (Primary Batteries),
or an equivalent standard. Taxpayers can
reference the United States Advanced Bat-
tery Consortium (USABC) Battery Test
Manual for additional guidance.
Several commenters agreed with the
proposed definition because it provided
taxpayers the ability and needed flexibil-
ity to determine the appropriate standard,
but others recommended additional guid-
ance or information be included in these
final regulations. A commenter requested
that the final regulations “retain the crite-
ria that the standard used by the taxpayer
must be one issued by a recognized stan-
dards setting body.” While not specifically
using that language, these final regulations
do maintain that concept by continuing to
require measurement in accordance with a
national or international standard.
Another commenter requested that the
final regulations eliminate the reference to
“an equivalent standard” to IEC 60068-1
because “IEC 60086-1 is not applicable
to rechargeable battery chemistries, and
it is unknown therefore what an equiva-
lent standard would be.” The Treasury
Department and the IRS have determined
that this clarification is unnecessary
because the reference to IEC 60068-1 or
“an equivalent standard” merely provides
a non-exclusive example of an accept-
able national or international standard for
capacity measurement. These final regula-
tions therefore do not adopt the comment-
er’s suggestion.
Other commenters suggested the addi-
tion of various specific national or interna-
tional standards to the language provided
in proposed §1.45X-3(e)(3)(ii) regard-
ing the standards to be used for battery
cell capacity measurement. The Treasury
Department and the IRS understand the
desire for assurance but have determined
that these proposed additions, if included
as examples, will not add further clarity to
the final regulations. The Treasury Depart-
ment and the IRS further do not think that
there is a basis to include any of these
proposed additions as the exclusive stan-
dard or standards for capacity measure-
ment. The final regulations therefore do
not adopt these commenters’ suggestions
regarding particular national or interna-
tional standards to be used for capacity
measurement in §1.45X-3(e)(3)(ii).
Another commenter recommended that
the final regulations require that battery
cell “capacity” must be mathematically
normalized to a 100-hour discharge time,
regardless of the time otherwise dictated
by the appropriate national or interna-
tional standard. The Treasury Department
and the IRS do not think there is a basis

Bulletin No. 2024–51 1313 December 16, 2024
to adopt this requirement, as this would
displace other national or international
standards with a new requirement that is
not in the statute. Therefore, the Treasury
Department and the IRS decline to adopt
additional specific standards in these final
regulations beyond those provided in the
Proposed Regulations.
Some commenters noted that the
USABC Battery Test Manual, which pro-
posed §1.45X-3(e)(3)(ii) states may be
used for additional guidance regarding
measurement of the capacity of a battery
cell, is not applicable to all battery cell
applications and technologies that may
be eligible for the section 45X credit. One
commenter suggested removing the refer-
ence to the USABC Battery Test Manual
for this reason. Because the inclusion of
this reference is intended to inform tax-
payers of a resource that may be helpful in
some cases, even if it may not be applica-
ble in all cases, the Treasury Department
and the IRS decline to adopt this sugges-
tion.
Another commenter suggested an addi-
tional requirement to conduct a perfor-
mance test in a certified laboratory once
every three years to verify the capacity of
the battery cell. It was unclear from the
comment when this performance testing
would be required. Section 45X requires
the production and sale of eligible com-
ponents. Because an eligible component
must meet the requirements under section
45X at the time of sale, it would be inap-
propriate to verify capacity once every
three years. Thus, the Treasury Depart-
ment and the IRS decline to adopt this
additional capacity measurement require-
ment in the final regulations.
3. Battery Modules—Definition
Under section 45X(c)(5)(B)(iii), the
term battery module, in the case of a
module using battery cells, is a mod-
ule with two or more battery cells which
are configured electrically, in series or
parallel, to create voltage or current, as
appropriate, to a specified end use, with
an aggregate capacity of not less than 7
kilowatt-hours (or, in the case of a module
for a hydrogen fuel cell vehicle, not less
than 1 kilowatt-hour). Similarly, under
section 45X(c)(5)(B)(iii), a battery mod-
ule with no cells means a module with an
aggregate capacity of not less than 7 kilo-
watt-hours (or, in the case of a module for
a hydrogen fuel cell vehicle, not less than
1 kilowatt-hour). Consistent with section
45X(c)(5)(B)(iii), proposed §1.45X-3(e)
(4)(i) would have defined battery module
to mean a module described in proposed
§1.45X-3(e)(4)(i)(A) (with cells) or (B)
(without cells) with an aggregate capacity
of not less than 7 kilowatt-hours (or, in the
case of a module for a hydrogen fuel cell
vehicle, not less than 1 kilowatt-hour).
Some commenters suggested lowering
the aggregate capacity limitation to incen-
tivize domestic production of all battery
types used in various industrial applica-
tions. One commenter recommended elim-
inating the capacity thresholds entirely for
battery modules when used in medical or
military applications. While the Treasury
Department and the IRS appreciate com-
menters’ desire to incentivize domestic
battery manufacturing, section 45X(c)(5)
(B)(iii)(II) provides the aggregate capac-
ity thresholds that battery modules must
meet in order to be eligible components.
The Treasury Department and the IRS
decline to adopt the commenters’ request
to alter or eliminate the aggregate capac-
ity requirements for battery modules as
such revisions would be inconsistent with
the statute. Thus, these final regulations
adopt proposed §1.45X-3(e)(4)(i) without
change.
a. Modules using battery cells
Proposed §1.45X-3(e)(4)(i)(A) would
have defined a module using battery
cells as a module with two or more bat-
tery cells that are configured electrically,
in series or parallel, to create voltage or
current (as appropriate), to a specified end
use, meaning an end-use configuration of
battery technologies. Under the proposed
rule, an end-use configuration is the prod-
uct that ultimately serves a specified end
use. It is the collection of interconnected
cells, configured to that specific end-use
and interconnected with the necessary
hardware and software required to deliver
the required energy and power (voltage
and current) for that use. The preamble to
the Proposed Regulations explained that,
as applied to batteries commonly used in
electric vehicles, proposed §1.45X-3(e)
(4)(i)(A) would have permitted a credit
for the production and sale of the battery
pack in an electric vehicle, but it would
not have permitted a credit for the produc-
tion of a module that is not the end-use
configuration. The Treasury Department
and the IRS requested comments on this
proposed interpretation of the phrase “to
a specified end use” in section 45X(c)(5)
(B)(iii)(I)(aa).
Many commenters raised concerns
with the interpretation of the phrase “to
a specified end use” in proposed §1.45X-
3(e)(4)(i)(A). Some commenters asserted
that requiring that modules be in an end-
use configuration would be overly restric-
tive for certain product categories. For
example, certain types of modules may be
transported to the end-use site only par-
tially assembled due to safety consider-
ations, with final assembly performed by
the battery manufacturer, the customer, or
a third-party contractor.
Similarly, a few commenters expressed
concern that no taxpayer may be eligible
for the battery module credit in certain
cases. One commenter suggested that this
result might occur if module manufacturers
do not manufacture a pack in its end-use
configuration. Further, those who purchase
such items and convert them to their end-
use configuration may struggle to demon-
strate their activities amount to substantial
transformation. One commenter suggested
changing proposed §1.45X-3(e)(4)(i)(A) to
provide that “an end-use configuration is
the product that ultimately serves a spec-
ified end use – whether delivered pre-as-
sembled or assembled on-site.” Further, the
commenter recommended an additional
sentence at the end of proposed §1.45X-
3(e)(4)(i)(A) to identify the section 45X
claimant in cases where assembly occurs
by someone other than the taxpayer.
Several commenters stated that pro-
posed §1.45X-3(e)(4)(i)(A) created con-
fusion because the definition of battery
module could, in some circumstances,
include the items that are referred to in
industry as “battery packs.” One com-
menter noted that while battery cells and
modules predominantly originate from
battery manufacturers, battery packs are
assembled by electric vehicle manufac-
turers before being installed in electric
vehicles.
Some commenters requested that, if the
definition of battery modules includes bat-

December 16, 2024 1314 Bulletin No. 2024–51
tery packs in the case of electric vehicle
battery modules, the process to transform
what is colloquially referred to in industry
as a battery module into what is known as
a “battery pack” be clarified in the final
regulations to constitute disqualifying
minor assembly or “partial transforma-
tion.” Another commenter requested that
the final regulations state that the rules are
agnostic as to the form or manner in which
a battery module with cells is incorporated
into the electric vehicle.
Other commenters supported the pro-
posed definition of battery module with
cells, stating that this definition appropri-
ately captures the intention of the section
45X credit. One commenter asserted that
the battery pack production covered by
the proposed definition is a more valuable
activity than the production of a single
battery module and is the activity closer to
the downstream consumer.
The Treasury Department and the IRS
appreciate the comments received regard-
ing battery modules and have determined,
in close consultation with the Department
of Energy, that additional clarification is
needed. Section 45X(c)(5)(B)(iii)(I)(aa)
defines battery module using battery cells
as “a module using battery cells, with two
or more battery cells which are configured
electrically, in series or parallel, to create
voltage or current, as appropriate, to a
specified end use[...].” Section 45X(c)(5)
(B)(iii)(II) provides a capacity threshold
limitation of “[an] aggregate capacity of
not less than 7 kilowatt-hours (or, in the
case of a module for a hydrogen fuel cell
vehicle, not less than 1 kilowatt-hour)”
that such battery module using battery
cells (as defined in section 45X(c)(5)(B)
(iii)(I)(aa)) must meet.
In reviewing comments, the Treasury
Department and the IRS understand that
the explanation in the preamble of the Pro-
posed Regulations regarding application
to electric vehicles may not have aligned
with industry understanding and the stat-
utory text. Upon review of the comments
received, the Treasury Department and
the IRS wish to restate that the require-
ment found in section 45X(c)(5)(B)(iii)
(I)(aa), that battery modules using battery
cells that contain battery cells configured
to a specified end use, applies regardless
whether the items are typically called “bat-
tery modules” or “battery packs” in indus-
try practice. These final regulations are
therefore clarified to provide that a battery
module using battery cells becomes an
eligible component upon first meeting the
requirements of section 45X(c)(5)(B)(iii)
(I)(aa) and (c)(5)(B)(iii)(II), notwithstand-
ing when this transformation may occur in
a manufacturing production chain.
At least one commenter requested a
rule allowing the entity that assembles
the pack to assign tax credits to the joint
venture that manufactured the module.
Alternatively, if the definition of specified
end use is not adopted with respect to joint
ventures, the regulations should instead
allow for joint venture partners to assign
battery-related section 45X credits to the
joint venture as the parties see fit, or in
cases where the parties do not choose to
assign the credits to one of the parents, the
joint venture itself. This comment is not
adopted as issues specific to joint ventures
are outside the scope of these final regula-
tions. For discussion of “produced by the
taxpayer” and the associated rules for who
may claim the section 45X credit, see Part
II.B. of this Summary of Comments and
Explanation of Revisions.
b. Modules with no battery cells
Proposed §1.45X-3(e)(4)(i)(B) would
have defined the term “module with no
battery cells” as a product with a standard-
ized manufacturing process and form that
is capable of storing and dispatching use-
ful energy; that contains an energy storage
medium that remains in the module (for
example, it is not consumed through com-
bustion); and that is not a custom-built
electricity generation or storage facility.
This proposed definition would allow
battery technologies, such as flow batter-
ies and thermal batteries, to be eligible
for the section 45X credit, but would not
permit technologies that do not meet this
definition, such as standalone fuel storage
tanks or fuel tanks connected to engines or
generation systems, to qualify as a module
with no battery cells.
Several commenters supported the
proposed definition of a battery module,
and specifically the inclusion of thermal
batteries. Commenters also asked for
clarification regarding a technology-neu-
tral application of the proposed definition
of a battery module. Other commenters
suggested specific clarifications to the
final regulations regarding certain types
of thermal battery systems, such as ther-
mal ice storage or thermal bricks. Some
commenters requested that the final regu-
lations incorporate similar language used
in the section 48 proposed regulations to
facilitate this technology-neutral treat-
ment. For example, these commenters
suggested that the final regulations should
adopt the language in proposed §1.48-9(e)
(10)(ii) by specifically stating that “batter-
ies of all types (such as lithium ion, vana-
dium flow, sodium sulfur, and lead-acid)”
are eligible components. Commenters
asserted that there is symmetry between
the investment tax credits for energy stor-
age property and advanced manufacturing
credits for energy storage products. Addi-
tionally, commenters raised that technol-
ogy-neutral treatment aligns with Con-
gressional intent to establish eligibility
criteria based on performance thresholds,
not technology.
The Treasury Department and the IRS,
in close consultation with the Department
of Energy, agree with commenters that a
battery module with no battery cells does
not require a specific storage medium nor
are there chemistry-based requirements
for qualifying battery modules. However,
the Treasury Department and the IRS
decline to include specific language as a
non-exhaustive list of possible storage
mediums. Including a non-exhaustive list
of current storage mediums on an indus-
try-by-industry basis is not practical and
may inadvertently create confusion for
other emerging technologies on whether
those mediums would qualify for the sec-
tion 45X credit.
Some commenters disagreed with the
requirement in proposed §1.45X-3(e)(4)
(i)(B) that the storage medium remain in
the module, asserting that the requirement
“may inadvertently exclude technologies”
such as compressed air “that can deliver
on the intent of the regulations.” The Trea-
sury Department and the IRS decline to
amend proposed §1.45X-3(e)(4)(i)(B) in
response to this comment. The Treasury
Department and the IRS, in consultation
with the Department of Energy, have deter-
mined that the proposed rule appropri-
ately implements the statute. The require-
ment that the storage medium remain in
the module gives meaning to both “bat-

Bulletin No. 2024–51 1315 December 16, 2024
tery” and to “module.” For batteries, this
requirement describes a feature common
to electrochemical and more nascent types
of batteries and distinguishes batteries
from technologies that rely on fuel. For
modules, this requirement helps segre-
gate qualifying technologies from those
that are self-contained and not merely one
component of a larger system.
Manufacturing the constituent com-
ponents of battery modules without man-
ufacturing the entire energy storage sys-
tem does not result in the production of
a module with no battery cells under the
final regulations. For example, in thermal
energy storage applications, the taxpayer
must produce and sell the entire system
and not just the storage medium. A manu-
facturer that only produces a thermal stor-
age medium (for example, molten salt) in
a thermal energy storage system would
not be eligible for the credit. Requiring
the production of the entire energy storage
system from “energy in” through “energy
out” provides similar treatment for pur-
poses of the section 45X credit to the pro-
duction of a battery module using battery
cells.
Numerous comments requested addi-
tional clarification of “custom-built elec-
tricity...storage facility.” Commenters
noted that the definition in proposed
§1.45X-3(e)(4)(i)(B) creates ambiguity
as to which modifications made in order
to meet site or use specifications would
trigger the “custom-built” disqualifier.
Several commenters asserted that the Pro-
posed Regulations create additional lim-
itations on battery modules without cells
that do not apply to the other eligible com-
ponents. Commenters contended that the
terms in the Proposed Regulations, such
as “manufacturing,” “standardized,” and
“not custom-built,” do not appear in the
statutory text and diverge from the general
approach taken by the Proposed Regula-
tions with respect to other eligible com-
ponents. Some commenters asserted that
nearly all thermal battery implementations
are associated with custom-built genera-
tion and storage facilities.
These commenters requested that the
final regulations clarify that the eligible
components may be assembled with other
property to comprise a functioning energy
generation or storage facility. Commenters
also suggested additional clarity regarding
the physical boundaries of a battery mod-
ule and thought that using the proposed
definition of “produced by the taxpayer”
would allow for an eligible component
to be assembled on-site, such as battery
modules with no battery cells that are too
heavy and large to transport fully assem-
bled. Commenters asserted that most or
all batteries will require some amount of
on-site installation. Commenters gener-
ally requested that the final regulations
provide a clear and principled definition
of “custom-built” that continues to sup-
port a technology-neutral and inclusive
implementation of section 45X.
Commenters provided various alter-
natives to further clarify the definition
of “custom-built” in the Proposed Reg-
ulations. One commenter recommended
clarifying the definition of “a custom-built
electricity storage facility” as “a facil-
ity (1) that contains an energy storage
medium and (2) of which all, or substan-
tially all, of the integral components are
designed specifically for the facility and
are not interchangeable with components
of other facilities that utilize the same or
similar electricity storage technology.”
Another commenter asked that the final
regulations clarify that a module with no
battery cells is not treated as custom-built
if modules are produced by the taxpayer
using the same or similar components or
property generally used by the taxpayer
to produce such modules but in different
configurations or amounts to accommo-
date the storage needs or the site layout
applicable to the storage asset. A com-
menter recommended clarifying the defi-
nition that a module with modular compo-
nents manufactured offsite may undergo
final assembly at its installation site
without being considered a custom-built
facility and include an example regarding
final assembly on site. Another suggestion
included clarifying that modules with no
cells are items of property that must be
combined with other tangible personal
property to store energy.
Separately, a commenter noted that for
contract manufacturing arrangements, “a
routine order for off-the-shelf-property”
is not eligible for the section 45X credit.
The commenter suggested the final reg-
ulations provide that an agreement will
be treated as a routine purchase order for
off-the-shelf property if the contractor is
required to make no more than de minimis
modifications to the property to tailor it to
the customer’s specific needs. However,
if the manufacturer does make more than
de minimis modifications, the module may
be custom-built. The commenter asserted
that the proposed rule sets up a compli-
cated dichotomy under which manufactur-
ers of modules with no battery cells who
enter into contract manufacturing arrange-
ments will have to establish an undefined
standard that are neither off the shelf nor
custom-built.
Commenters also provided specific
examples regarding whether certain tech-
nologies or configurations would be con-
sidered custom-built. For example, phys-
ical site conditions at a customer’s site
may require that the same components
used for one pumped heat energy stor-
age (PHES) are differently arranged for
another PHES. The use of the PHES by
a customer may require modified storage
durations (for example, 20 hours versus
10 hours), which would require addi-
tional storage media and vessels. The
commenter asserted that this should not
be considered custom-built. Commenters
also noted that, for closed-loop pumped
storage hydropower systems, pipes and
other related components are otherwise
produced in a standardized process, and
neither resemble nor are functionally
equivalent to standalone fuel storage
tanks or fuel tanks connected to engines
or generation systems custom-built elec-
tricity generation or storage facility. Com-
menters also raised that these differences
are based on the topography of the site
where the system is located and not on the
intended function of these components or
the system as a whole.
One commenter requested that the
Treasury Department and the IRS
include hydrogen fuel cell systems under
the definition of a battery module using
battery cells. Proposed § 1.45X-3(e)(4)
(i)(B) would define the term “module
with no battery cells” as a product with a
standardized manufacturing process and
form that is capable of storing and dis-
patching useful energy, that contains an
energy storage medium that remains in
the module (for example, it is not con-
sumed through combustion), and that is
not a custom-built electricity generation
or storage facility.

December 16, 2024 1316 Bulletin No. 2024–51
In general, the Treasury Department
and the IRS appreciate the complexity of
the issues raised by commenters. Given
the myriad of technologies, industry-spe-
cific applications, and customary business
practices, the final regulations provide
additional clarifications. The Treasury
Department and the IRS understand the
need for clear, administrable rules for both
taxpayers and the IRS. The comments also
illustrate the impracticality of providing
rules to specifically address all situations.
The Treasury Department and the IRS, in
close consultation with the Department
of Energy, have determined that the defi-
nition provided in proposed §1.45X-3(e)
(4)(i)(B) strikes the appropriate balance
between bright-line rules and the neces-
sary flexibility for evolving industries.
The Treasury Department and the IRS
therefore decline to adopt suggested revi-
sions to the definition of “module with no
battery cells” in the final regulations.
The Treasury Department and the IRS,
in close consultation with the Depart-
ment of Energy, also have determined
that requiring battery modules be modular
in the sense that they are both self-con-
tained and not highly customized appro-
priately implements the statutory defi-
nition provided in section 45X(c)(5)(B)
(iii). Because of this, the preamble to the
Proposed Regulations further clarified
that this proposed definition would allow
battery technologies such as flow batter-
ies and thermal batteries to be eligible for
the section 45X credit, but it would not
permit technologies that do not meet this
definition such as standalone fuel storage
tanks or fuel tanks connected to engines or
generation systems to qualify as a module
with no battery cells. For these reasons,
the Treasury Department and the IRS
decline to adopt this comment in the final
regulations.
One commenter recommended adopt-
ing the definition of modules using battery
cells for the definition of modules with
no battery cells, with the addition that the
module should receive, store, and deliver
energy for conversion to electricity. How-
ever, adopting the commenter’s recom-
mended definition would not be appro-
priate for modules with no battery cells
because the definition of modules using
battery cells requires the inclusion of bat-
tery cells in the module. Accordingly, The
Treasury Department and the IRS decline
to adopt the commenter’s recommenda-
tion.
The Treasury Department and the IRS
agree with commenters who suggest that
the examples illustrating the contrast
between “substantial transformation” and
disqualifying minor assembly, explained
in Part II.B. of this Summary of Com-
ments and Explanation of Revisions pro-
vide useful guidelines for taxpayers and
the IRS in determining what is a standard-
ized manufacturing process and not a cus-
tom-built electricity generation or storage
facility. Thus, incidental onsite assembly
of prefabricated modular components
for final assembly that are generally pro-
duced in the ordinary course of a taxpay-
er’s trade or business would constitute a
standardized manufacturing process for
purposes of §1.45X-3(e)(4)(i)(B). Battery
modules with no battery cells that undergo
a substantial transformation onsite or are
specially manufactured for a single cus-
tomer would constitute a custom-built
electricity generation or storage facility.
The Treasury Department and the IRS
decline to provide a de minimis threshold
which would exclude certain manufactur-
ing or configurations that would otherwise
qualify for the section 45X credit using
the principles described in Part II.B. of
this Summary of Comments and Explana-
tion of Revisions.
c. Capacity measurement
Proposed §1.45X-3(e)(4)(ii)(A) would
have provided that, for modules using
battery cells, taxpayers must measure the
capacity of a module with a testing pro-
cedure that complies with a national or
international standard published by a rec-
ognized standard setting organization. The
capacity of a battery module using battery
cells may not exceed the total capacity of
the battery cells in the module. Proposed
§1.45X-3(e)(4)(ii)(B) would have pro-
vided that, for modules with no battery
cells, taxpayers must measure the capac-
ity using a testing procedure that complies
with a national or international standard
published by a recognized standard setting
organization. If no such standard applies
to a type of module with no battery cells,
taxpayers must measure the capacity of
such module as the Secretary may pre-
scribe in regulations or other guidance.
The Treasury Department and the IRS
requested comments on what recognized
national or international standards are cur-
rently available for measuring capacity of
modules with no battery cells and whether
further guidance may be required.
One commenter suggested that the
aggregate capacity measurement out-
lined in section 45X and the Proposed
Regulations for battery modules is chal-
lenging to apply in the context of thermal
battery modules with no cells. Another
commenter explained that battery capac-
ity measurements are subject to vari-
ations contingent upon environmental
conditions during measurement and that
capacity assessment for both battery cells
and battery modules must occur within a
standard testing environment. Some com-
menters agreed with the approach in the
Proposed Regulations of allowing taxpay-
ers to determine the appropriate national
or international standards because taxpay-
ers are in a better position to determine
the appropriate standard. Moreover, this
approach provides the flexibility neces-
sary for emerging technologies to qualify
for the credit. Such commenters requested
that the final regulations retain the criteria
that the taxpayer must use a testing pro-
cedure issued by a recognized standards
setting body.
Other commenters explained that the
Treasury Department and the IRS should
prescribe a flexible approach to capacity
measurement for battery modules with
no battery cells such that different tech-
nologies are appropriately measured and
provide alternative testing procedures that
complies with a national or international
standard published by a recognized stan-
dard setting organization that is relevant
and applicable for the varying technol-
ogies. One commenter asserted that, in
their view, such standards may include
American Society of Mechanical Engi-
neers (ASME) or International Standards
Organization (ISO), but specifically rec-
ommended that capacity should be mea-
sured based on nameplate capacity as pro-
vided in 40 CFR 96.202 in the absence of
a bright-line standard. Another commenter
supported this approach because of alleged
difficulties in determining the minimum
capacity of battery modules with no cells
before they are placed in service. Other

Bulletin No. 2024–51 1317 December 16, 2024
commenters suggested various standards,
including ASME PTC 53; ANSI/ Ameri-
can Society of Heating, Refrigerating and
Air-Conditioning Engineers (ASHRAE)
Standard 94.2-2010; and ASHRAE 94
testing methods (specifically, 94.1,94.2,
and 94.3). Another commenter recom-
mended that the final regulations require
use of a conversion factor of 1.16RT/kW
= 14/12 and recommended that the regula-
tions provide a capacity measure if there is
no national or international standard for a
given technology.
A different commenter raised concerns
regarding capacity measurement for bat-
tery modules with no battery cells and
suggested adding to proposed §1.45X-
3(e)(4)(iii)(B), “... The capacity of each
battery module is expressed on a kilo-
watt-hour basis in the actual useful energy
unit that is specific to the battery module
without cells. For example, both thermal
and thermochemical battery modules
have their capacity expressed on a kilo-
watt-hour-thermal basis.”
The Treasury Department and the
IRS, after consultation with the Depart-
ment of Energy, have determined that
taxpayers producing thermal and thermo-
chemical battery modules with no battery
cells must convert the energy storage to
a kilowatt-hour basis and provide both
methodology and testing regarding this
conversion. Taxpayers must maintain this
testing and methodology as part of books
and records under section 6001. How-
ever, the kilowatt-hour conversion cannot
exceed the direct conversion of the total
nameplate capacity of the thermal battery
module to kilowatt-hours (the capacity
that is sold to the consumer). The taxpayer
claiming the section 45X credit must use
the same methodology consistently, sub-
ject to any updated standard of the same
methodology and testing, for battery mod-
ules (with or without cells) sold in the tax-
payer’s trade or business. The final regu-
lations incorporate these clarifications in
§1.45X-3(e)(4)(ii) regarding testing and
methodology with respect to battery mod-
ules.
One commenter requested the final
rules remove the requirement that the
capacity of a battery module not exceed
the total capacity of the battery cells in the
module because the different structures of
each eligible component may affect the
capacity measurement of the module. The
Treasury Department and the IRS, in con-
sultation with the Department of Energy,
have determined that this rule serves an
important function in reducing the poten-
tial to manipulate testing conditions in the
measurement of capacity and in encour-
aging the application of reliable measure-
ment standards for battery cells. The Trea-
sury Department and the IRS therefore
decline to remove the requirement that the
capacity of a battery module not exceed
the total capacity of the battery cells in the
module.
Another commenter requested that the
final regulations provide that the entity
that manufactures a battery module that
exceeds the statutory 7 kilowatt-hours
threshold limitation in section 45X(c)(5)
(B)(iii)(II) receives the $10/kWh module
credit. As discussed in Part IV.E.3.a. of this
Summary of Comments and Explanation
of Revisions, the taxpayer that produces
and sells the eligible component (when a
battery module first becomes the eligible
component) may claim the section 45X
credit. Whether an eligible component
is produced by the taxpayer is generally
discussed in Part II.B. of this Summary of
Comments and Explanation of Revisions.
A commenter noted that proposed
§1.45X–3(e)(4)(i), which provides the
definition for battery modules “with an
aggregate capacity of not less than 7 kilo-
watt-hours,” aligns with section 30D. The
language in section 30D is based on the
capacity of the complete battery installed
on the vehicle. The commenter asserted
that the parallel language describing the
capacity threshold in section 45X and
in section 30D indicates that the eligible
component for the section 45X credit
for battery modules are the items com-
monly referred to in industry as “battery
packs.” This comment is not adopted. As
explained in Part IV.E.3.a. of this Sum-
mary of Comments and Explanation of
Revisions, a battery module (within the
meaning of section 45X) is an eligible
component, regardless of whether indus-
try nomenclature would describe that
module as a “battery pack.”
Proposed §1.45X-3(e)(5)(i) would
have provided a special rule where the
capacity determined with respect to a
battery cell or battery module must not
exceed a capacity-to-power ratio of 100:1.
At least one commenter requested clari-
fication on the definition of “capacity to
power ratio.” The commenter noted that
term could mean either the maximum
energy that the battery cell and module
can hold or the maximum output that the
battery cell and module can release instan-
taneously. The final regulations retain the
proposed rule defining “capacity to power
ratio” in §1.45X-3(e)(5). The Treasury
Department and the IRS confirm that the
rule, with respect to a battery cell or bat-
tery module, the capacity-to-power ratio
refers to both the power and the capacity
as a cap on the section 45X credit amount,
rather than an eligibility criterion. Power
is the battery cell’s maximum rate of dis-
charge; capacity is the maximum amount
of energy the component can store.
F. Phase-out rule
Consistent with section 45X(b)(3),
proposed §1.45X-3(f)(1) would have
provided that, in the case of any eligible
component sold after December 31, 2029,
the amount of the section 45X credit
determined with respect to such eligi-
ble component is equal to the product of
the amount determined under proposed
§1.45X-3(b) through (e) with respect to
such eligible component, multiplied by
the phase out percentage under proposed
§1.45X-3(f)(2). Consistent with section
45X(b)(3)(C), proposed §1.45X-3(f)(3)
would have provided that the phase out
rules described in proposed §1.45X-3(f)
(1) and (2) apply to all eligible compo-
nents except applicable critical minerals.
Proposed §1.45X-3(f)(2) would have pro-
vided the phase out percentage is equal to
75 percent for eligible components sold
during calendar year 2030; 50 percent for
eligible components sold during calendar
year 2031; 25 percent for eligible compo-
nents sold during calendar year 2032, and
zero percent for eligible components sold
after calendar year 2032.
A commenter expressed concern that
the phase out rules create disparate treat-
ment of an applicable critical mineral pro-
duced by a taxpayer that with further val-
ue-added processing would result in the
production of an electrode active material
and provided the example of the produc-
tion of natural graphite active anode mate-
rials. The commenter stated that if the

December 16, 2024 1318 Bulletin No. 2024–51
production of the applicable critical min-
eral and production of the electrode active
material occurs in a vertically integrated
company, the taxpayer may only claim
a section 45X credit for one component.
Thus, the commenter requests the phase
out rule be modified to not apply to elec-
trode active materials.
The Treasury Department and the IRS
decline to adopt the commenter’s request.
The Treasury Department and the IRS do
not have the authority to allow a section
45X credit for the production of an elec-
trode active material in amounts in excess
of what is permitted under section 45X(b)
(3).
For these reasons, these final regula-
tions adopt proposed §1.45X-3(f) without
modification.
V. Applicable critical minerals
Proposed §1.45X-4 would have pro-
vided definitions for the listed applica-
ble critical minerals (generally in accor-
dance with section 45X(c)(6)), the credit
amounts, and rules regarding production
costs for purposes of determining credit
amounts. Commenters addressed cer-
tain aspects of these proposed rules, as
described in this Part V. of the Summary
of Comments and Explanation of Revi-
sions. These final regulations generally
adopt the rules as proposed in §1.45X-4,
with the modifications described in this
Part V. of the Summary of Comments and
Explanation of Revisions.
A. In general
Section 45X(c)(6) defines applicable
critical minerals that are eligible com-
ponents for purposes of the section 45X
credit. Consistent with section 45X(c)(6),
proposed §1.45X-4 provides that an appli-
cable critical mineral means any of the
minerals that are listed in section 45X(c)
(6) and defined in proposed §1.45X-4(b).
Several commenters requested that the
final rules generally clarify and expand
the eligibility of metals and metal alloys
(including alloys made from primary and
secondary metal production) under the
purity requirements. Section 45X gen-
erally provides specific minimum purity
requirements or forms for applicable criti-
cal minerals. Metals or metal alloys under
the specified purity requirements that do
not meet specified forms do not qualify
for the section 45X credit. Thus, the Trea-
sury Department and the IRS do not have
the statutory authority to add additional
metals and alloys to the list of applicable
critical minerals in these final regulations.
B. Definitions
1. Aluminum
Section 45X(c)(6)(A) provides that
aluminum that is converted from baux-
ite to a minimum purity of 99 percent
alumina by mass or purified to a min-
imum purity of 99.9 percent aluminum
by mass qualifies as an applicable crit-
ical mineral. Proposed §1.45X-4(b)(1)
would have defined aluminum to mean
aluminum that is converted from baux-
ite to a minimum purity of 99 percent
alumina by mass or purified to a min-
imum purity of 99.9 percent aluminum
by mass. The preamble to the Proposed
Regulations stated that section 45X(c)
(6)(A) should be interpreted in light of
the dynamics of the aluminum industry
and the role that critical materials like
aluminum play in the renewable energy
and energy storage industry. Proposed
§1.45X-4(b)(1) would have interpreted
section 45X(c)(6)(A) to mean alumi-
num, including commodity-grade alu-
minum, described in section 45X(c)(6)
(A)(i) and (ii). Proposed §1.45X-4(b)(1)
would have defined “commodity-grade
aluminum” as aluminum that has been
produced directly from aluminum that
is described in proposed §1.45X-4(b)
(1)(i) or (ii), is limited to primary pro-
duction of unwrought forms, and is in a
form that is sold on international com-
modity exchanges, which would include
commercial grade aluminum that is 99.7
percent aluminum by mass.
A commenter expressed support for the
definition of aluminum in the proposed
rule, and stated that the statutory defini-
tion could be read to apply only to the
refining of alumina and, as a result, not
benefit domestic primary aluminum pro-
ducers, nor achieve the spirit of the legis-
lation to increase domestic manufacturing.
The commenter noted confusion with the
statutory definition, which stated in part,
that aluminum “which is converted from
bauxite to a minimum purity of 99 percent
alumina by mass” meets the definition
of aluminum—however, alumina is con-
verted from bauxite, not aluminum. Thus,
the commenter noted that the proposed
rule correctly states the primary aluminum
production process and will help United
States primary aluminum producers bol-
ster domestic operations and strengthen
global competitiveness.
A commenter requested that the final
regulations provide that aluminum oxide
(alumina) is a form of aluminum for the
purposes of section 45X(c)(6)(A)(i). The
Treasury Department and the IRS note
that section 45X(c)(6)(A)(i) provides eli-
gibility for the credit for aluminum that
is converted from bauxite to a minimum
purity of 99 percent alumina by mass. One
commenter requested that the definition of
primary aluminum include molten metal.
The Treasury Department and the IRS
note that section 45X(c)(6)(A)(ii) does not
restrict the form of aluminum purified to
a minimum purity of 99.9 percent alumi-
num by mass. One commenter proposed
lowering the eligible purity for aluminum
to 96 percent. The Treasury Department
and the IRS view this request as inconsis-
tent with the statute.
A few commenters requested the defi-
nition of primary aluminum include all
unwrought primary aluminum smelted
from aluminum oxide (that is, alumina).
One commenter requested that the final
rules clarify that aluminum produced
through secondary production is eligible
for the section 45X credit. The pream-
ble to the Proposed Regulations stated
that proposed §1.45X-4(b)(1) clarifies
that the term “commodity-grade alumi-
num” is limited to primary production of
unwrought forms by specifying that com-
modity-grade aluminum must be “pro-
duced directly” from certain forms of alu-
minum. The Treasury Department and the
IRS understand that the ability to ascertain
and substantiate the process or processes
used at an earlier point in the lifecycle of
feedstock aluminum for secondary pro-
duction is limited. The Treasury Depart-
ment and the IRS are concerned that such
limitations would pose significant sub-
stantiation and administrability issues if
secondary production were permitted for
commodity-grade aluminum under pro-
posed §1.45X-4(b)(1).

Bulletin No. 2024–51 1319 December 16, 2024
A few commenters requested that
the final rules replace the requirement
that commodity-grade aluminum be “in
a form sold on international commodity
exchanges” with the requirement that
such aluminum “has the ability to meet
the chemical specifications of alumi-
num sold on international commodity
exchanges,” because not all aluminum
sold to third-party customers is traded
through the London Metal Exchange,
which imposes the shape requirements.
The commenters state that commercial
grade aluminum is made into products
that are alloyed to different specifications
and shapes that are not traded through
commodity markets, and the final rules
should not distinguish among the end
markets. Although the Treasury Depart-
ment and the IRS view the requirement
that commodity-grade aluminum be “in
a form sold on international commodity
exchanges” as providing important clar-
ity and certainty for taxpayers and the
IRS, as well as an objective and observ-
able standard to determine eligibility, the
Treasury Department and the IRS will
continue to consider these comments as
they work to finalize proposed §1.45X-
4(b)(1).
One commenter requested the final
regulations clarify “aluminum that is
converted from alumina with a minimum
purity of 99 percent on a fired basis should
qualify as an applicable critical mineral.”
The Treasury Department and the IRS
think that the additional language speci-
fying whether the purity is measured on
a fired basis or dried basis is not neces-
sary due to the specific purity standards
already listed in section 45X and the pro-
posed rules. In addition, although these
terms are often included on a Certificate of
Analysis (COA), the Treasury Department
and IRS anticipate that using these terms
may cause confusion in circumstances in
which these terms are not included on a
COA.
With respect to all of the comments
related to the definition of aluminum, the
Treasury Department and the IRS have
determined that additional consideration
is necessary prior to finalizing proposed
§1.45X-4(b)(1), which the Treasury
Department and the IRS intend to do at a
later date. For that reason, §1.45X-4(b)(1)
is reserved in these final regulations.
2. Neodymium
Consistent with section 45X(c)(6)(R),
proposed §1.45X-4(b)(18) would have
provided that the term neodymium means
neodymium that is converted to neodym-
ium-praseodymium oxide that is purified
to a minimum purity of 99 percent neo-
dymium-praseodymium oxide by mass;
converted to neodymium oxide that is
purified to a minimum purity of 99.5 per-
cent neodymium oxide by mass; or puri-
fied to a minimum purity of 99.9 percent
neodymium by mass.
One commenter requested that the
final rules provide that the following are
eligible for the section 45X credit: (1)
neodymium if purified to the industry
standard minimum purity of 99.0 percent
neodymium by mass; (2) neodymium con-
verted to neodymium-praseodymium and
purified to a minimum purity of 99.0 per-
cent neodymium-praseodymium by mass;
(3) neodymium-praseodymium that is
purified to a minimum purity of 99.0 per-
cent neodymium-praseodymium by mass;
and (4) neodymium-iron-boron alloy or
neodymium-praseodymium-iron-boron
alloy purified to 99.0 percent by mass.
The Treasury Department and the IRS do
not have the statutory authority to modify
the definition of neodymium or to modify
purity percentages in proposed §1.45X-
4(b)(18) and these final regulations adopt
this proposed rule without change.
3. Vanadium
Consistent with section 45X(c)(6)(X),
proposed §1.45X-4(b)(24) would have
provided that the term vanadium means
vanadium that is converted to ferrovana-
dium or vanadium pentoxide. One com-
menter requested that the definition of
vanadium includes vanadium when it is
purified to a minimum purity of 99 percent
vanadium by mass. The Treasury Depart-
ment and the IRS do not have the statutory
authority to modify the definition of vana-
dium to include purity percentages, and
these final regulations adopt this proposed
rule without change.
4. Magnesium
Consistent with section 45X(c)(6)(Z)
(x), proposed §1.45X-4(b)(26)(x) would
have provided that the term magnesium
means magnesium purified to a minimum
purity of 99 percent by mass. One com-
menter requested that the definition of
magnesium be expanded to include mag-
nesium oxide and magnesium hydroxide
at purity levels that range from 90-98 per-
cent. The Treasury Department and the
IRS do not have the statutory authority
to modify the definition of magnesium or
to modify purity percentages in proposed
§1.45X-4(b)(26)(x), and these final regu-
lations adopt this proposed rule without
change.
C. Credit amount—in general
Section 45X(b)(1) generally provides
the credit amount determined with respect
to any eligible component, including any
eligible component it incorporates, sub-
ject to the credit phase out provided at
section 45X(b)(3). Section 45X(b)(3)(C)
provides that the credit phase out does not
apply with respect to any applicable criti-
cal mineral.
Section 45X(b)(1)(M) provides that, in
the case of any applicable critical mineral,
the credit amount is an amount equal to 10
percent of the costs incurred by the tax-
payer with respect to production of such
mineral. Proposed § 1.45X-4(c)(3) would
have provided that the costs incurred for
purposes of determining the credit amount
includes costs as defined in §1.263A-1(e)
that are paid or incurred within the mean-
ing of section 461 of the Code by the tax-
payer for the production of an applicable
critical mineral only. As explained in the
preamble to the Proposed Regulations,
this rule has the effect of excluding any
costs incurred after the production of the
applicable critical mineral. The Proposed
Regulations applied section 263A and the
section 263A regulations solely to iden-
tify the types of costs that are includible
in production costs incurred for purposes
of computing the credit amount. The Pro-
posed Regulations did not apply section
263A or the section 263A regulations for
any other purposes, such as to determine
whether a taxpayer is engaged in produc-
tion activities.
Under the Proposed Regulations, direct
or indirect materials costs, as defined in
§1.263A-1(e)(2)(i)(A) and (e)(3)(ii)(E),
respectively, and any costs related to the

December 16, 2024 1320 Bulletin No. 2024–51
extraction or acquisition of raw materials
would not be taken into account as pro-
duction costs. The Proposed Regulations
would have attributed a wide range of costs
to the production of an applicable critical
mineral as costs incurred in producing the
applicable critical mineral, including, but
not limited to, labor, electricity used in the
production of the applicable critical min-
eral, storage costs, depreciation or amorti-
zation, recycling, and overhead. However,
the cost of acquiring the raw material used
to produce the applicable critical mineral;
the cost of materials used for conversion,
purification, or recycling of the raw mate-
rial; and other material costs related to the
production of the applicable critical min-
eral were not taken into account.
The Proposed Regulations provided a
credit for the costs associated with produc-
tion activities that add value to the appli-
cable critical mineral and are conducted
by the taxpayer that produces the appli-
cable critical mineral. Because purchas-
ing raw materials may enable a taxpayer
to produce an applicable critical mineral
but it is not by itself an activity that adds
value, the Proposed Regulations excluded
material costs from creditable costs. This
exclusion of material costs mitigates the
risk of crediting the same costs multiple
times.
Many commenters made similar argu-
ments with respect applicable critical min-
erals and the inclusion of direct material
costs as defined in §1.263A-1(e)(2)(i)
(A), indirect material costs as defined in
§1.263A-1(e)(3)(ii)(E), and costs related
to the extraction of raw materials in their
production costs for purposes of determin-
ing the credit. Commenters argued that
there was insufficient textual support for a
limitation, and any such limitation would
work against the purposes of the credit. As
with electrode active materials, comment-
ers asserted that direct costs were often a
substantial or predominant cost of produc-
ing applicable critical minerals. Denying
credits for these costs would, in the opin-
ion of commenters, be contrary to the goal
of incentivizing extraction and production
of applicable critical minerals. Comment-
ers also disputed that direct and indirect
costs are not incurred in value-adding
activities.
A number of commenters also disputed
that a credit should only be available once
for the same material. Several comment-
ers argued that the statutory language and
structure did, at a minimum, give taxpay-
ers credits for production of applicable
critical minerals and, when those appli-
cable critical minerals were used to pro-
duce electrode active materials, additional
credits for the production of the electrode
active materials. According to these com-
menters, the dual credits reflect the fact
that these are separate productive activities
for which section 45X provides separate
credits. A commenter also urged that pro-
ducers of applicable critical minerals be
able to claim a credit if they can establish
that the applicable critical minerals used
in the production were acquired from pro-
duction or extraction outside the United
States and thus were previously ineligible
for a section 45X credit. For applicable
critical minerals that are produced using
other precursor applicable critical miner-
als, a commenter recommended that the
cost of the precursor applicable critical
minerals be excluded from the cost of pro-
ducing the applicable critical minerals.
A number of commenters proposed
solutions to the problem of crediting the
same production costs multiple times.
One solution commenters proposed was
to reduce the basis of property for which
a credit has been claimed by an upstream
producer. Commenters also proposed a
system under which a taxpayer would
only be eligible for a credit on costs of
material for which no other taxpayer had
previously claimed a credit. This arrange-
ment could be administered through a
system of certification or tracing in which
taxpayers would be required to verify that
its suppliers had not claimed previously
claimed credits for costs associated with
the same materials for which the taxpayer
is claiming credits. Commenters generally
agreed that producers should not need to
be vertically integrated to claim credits.
Instead, these commenters argued that
each producer in the supply chain should
be eligible to claim credits for, at a min-
imum, their addition to the value of the
applicable critical minerals produced.
Some commenters addressed the
requirement in section 45X(d)(2) that
extraction or production of applicable
critical minerals occur within the United
States or a possession of the United States.
A commenter urged that only the cost of
extraction of applicable critical minerals
occurring in the geology of the United
States or its possessions should qualify
for the section 45X credit in calculating
the cost of production of such mineral.
Other commenters urged that credits be
permitted to taxpayers that process appli-
cable critical minerals extracted outside
the United States provided that the pro-
cessing occurs within the United States or
its possessions. One commenter proposed
that the final regulations modify the pro-
posed rule regarding constituent elements,
materials, and subcomponents used in the
production of applicable critical minerals
to distinguish between imports of mate-
rials otherwise available from domes-
tic sources and imported materials that
are not available from domestic sources.
Although this suggested proposal deviates
from the Proposed Regulations, it would
still allow for credits associated with costs
of foreign-sourced constituent elements,
materials, and subcomponents but only
where domestic alternatives are not avail-
able.
Three commenters supported the Pro-
posed Regulations’ exclusion of direct,
indirect, and extraction costs from produc-
tion costs eligible for the credit. One com-
menter was concerned that a contrary rule
would invite fraud, waste, and abuse and
that, in the case of extraction costs, would
be difficult to administer without the cre-
ation of a tracing system. Two comment-
ers specifically identified extraction costs
as something that should be excluded
from the costs of production for the credit.
One recommended more explicit clarifica-
tion that the cost of the extraction of raw
materials is excluded from creditable pro-
duction costs.
With respect to these comments, refer
to Part IV.E.1.e. of this Summary of Com-
ments and Explanation of Revisions,
which describes the revisions to the pro-
posed rules for production costs of both
electrode active materials and applicable
critical minerals that are in these final reg-
ulations.
Proposed §1.45X-4(c)(4) would have
required the taxpayer to document that
their product meets the criteria for an
applicable critical mineral as described
in section 45X(c)(6) with a certificate of
analysis provided by the taxpayer to the
person to which the taxpayer sold the

Bulletin No. 2024–51 1321 December 16, 2024
applicable critical mineral. The Treasury
Department and the IRS requested com-
ments on this substantiation requirement,
including whether a similar requirement
should be applied to electrode active
materials. With respect to this proposed
rule, refer to Part IV.E.1.e. of this Sum-
mary of Comments and Explanation of
Revisions, which describes the revisions
to the proposed rules for substantiation of
both electrode active materials and appli-
cable critical minerals that are in these
final regulations.
VI. Other Comments Received Regarding
Ancillary Issues
In response to the Proposed Regula-
tions, certain commenters responded con-
cerning the application of sections 6417
and 6418. A commenter noted that the
Proposed Regulations do not explain the
process for making a section 6417 elective
pay election for a section 45X credit and
recommends the final regulations provide
more details and guidance on the payment
amount and potential considerations.
Another commenter requested additional
clarification on application procedures,
methods, reporting items, refund/transfer
periods, and other supplementary proce-
dures relevant to the provisions of section
6417. Similar comments were received
with respect to the transferability provi-
sions of section 6418 that may apply to the
section 45X credit. A separate commenter
requested clarification regarding a transfer
of tax credits from vessel manufacturer
(shipyard) to vessel owner, and the possi-
ble effects of different ownership arrange-
ments of related offshore wind vessels.
The comments related to sections 6417
and 6418 are outside the scope of these
final regulations under section 45X, as the
comments relate to rules under sections
6417 and 6418. Final regulations under
sections 6417, 89 FR 17546 (March 11,
2024), corrected in 89 FR 26786 (April
16, 2024), and corrected in 89 FR 66562
(August 16, 2024) and 6418, 89 FR 34770
(April 30, 2024), corrected in 89 FR
67859 (August 22, 2024), are available
and provide relevant information on the
elective payment election under section
6417, making a transfer election under
section 6418, and the impacts of various
ownership structures on the ability and
requirements when making an election
under either section 6417 or section 6418.
A commenter suggested that the Pro-
posed Regulations should have addressed
whether the section 45X credit can be car-
ried back to offset prior year tax liabilities
or whether it can be transferred to other
taxpayers. The commenter suggested that
the final regulations allow the credit to
be carried back for a reasonable period
of time or to be transferred to other eli-
gible taxpayers under certain conditions
and limitations. This request is outside
the scope of these final regulations, but
as a clarification, section 39 of the Code
describes rules related to the carryback
and carryforward of unused credits,
including section 39(a)(4) which provides
a 3-year carryback period for any applica-
ble credit (as defined in section 6417(b)).
Section 1.6418-5(h) also provides a rule
clarifying that a transferee of a specified
credit portion under section 6418 can
apply section 39(a)(4) to the extent the
specified credit portion is described in
section 6417(b) (list of applicable credits,
taking into account any placed in service
requirements in section 6417(b)(2), (3),
and (5)).
A commenter requested that the final
regulations define what constitutes a
disposition or a cessation of eligibility
for the purpose of recapturing the credit
within five years of being placed in ser-
vice. According to the commenter, the
final rules should define the terms “dispo-
sition” and “cessation of eligibility” and
provide examples and exceptions. As a
clarification, the section 45X credit is not
subject to the recapture provisions of sec-
tion 50 of the Code because it is not an
investment credit under section 46 of the
Code. Further, there is no statutory author-
ity under the provisions of section 45X to
require recapture of the credit. Thus, these
final regulations do not include any rules
related to recapture.
A commenter noted that the Proposed
Regulations do not address whether the
section 45X credit can be specially allo-
cated to certain partners or whether the
credit can be modified by a partnership
agreement for partnerships that produce
and sell eligible components, possibly
“creating inconsistencies or unfairness
for some partners who may have different
interests or expectations.” The commenter
requested that the final regulations include
a rule allowing the section 45X credit to be
specially allocated or modified by a part-
nership agreement. Because the comment-
er’s request is addressed under section 704
and §1.704-1(b)(4)(ii) and does not relate
to credit eligibility under section 45X, the
Treasury Department and IRS decline to
adopt a rule addressing partnership alloca-
tions in these final regulations.
VII. Severability
If any provision in this rulemaking
is held to be invalid or unenforceable
facially, or as applied to any person or
circumstance, it shall be severable from
the remainder of this rulemaking, and
shall not affect the remainder thereof, or
the application of the provision to other
persons not similarly situated or to other
dissimilar circumstances.
Applicability Dates
These regulations apply to eligible
components for which production is com-
pleted and sales occur after December 31,
2022, and during taxable years ending on
or after October 28, 2024. Taxpayers may
choose to apply these regulations to eligi-
ble components for which production is
completed and sales occur after December
31, 2022, and during taxable years ending
before October 28, 2024, provided that
taxpayers follow these regulations in their
entirety and in a consistent manner.
Effect on Other Documents
Section 5.05(2) of Notice 2023-18
and section 3 of Notice 2023-44, which
relate to the interaction between sections
45X and 48C, are superseded for eligible
components for which production is com-
pleted and sales occur after October 28,
2024.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of Agree-
ment, Review of Treasury Regulations
under Executive Order 12866 (June 9,
2023), tax regulatory actions issued by the
IRS are not subject to the requirements of

December 16, 2024 1322 Bulletin No. 2024–51
section 6(b) of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management and
Budget (OMB) before collecting infor-
mation from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit.
The collections of information in
these final regulations contain reporting
and recordkeeping requirements that are
required to validate eligibility to claim a
section 45X credit. These collections of
information would generally be used by
the IRS for tax compliance purposes and
by taxpayers to facilitate proper reporting
and compliance. The general recordkeep-
ing requirements mentioned within these
final regulations are considered general tax
records under §1.6001-1(e). Specific cer-
tification statements under §1.45X-1(c)(3)
and statements required in §§1.45X-3(e)
(2)(iv)(C) and 1.45X-4(c)(4) are consid-
ered general tax records and are required
for the IRS to validate the taxpayer that
may claim a section 45X credit. For PRA
purposes, general tax records are already
approved by OMB under 1545-0074 for
individuals, 1545-0123 for business enti-
ties, and under 1545-0092 for trust and
estate filers.
These final regulations also provide
reporting requirements related to making
the Related Person Election as described
in §1.45X-2(d) and calculating the sec-
tion 45X credit amount as described in
§1.45X-1. The Related Person Election
will be made by taxpayers with Forms
1040, 1041, 1120-S, 1065, and 1120,
on Form 7207, Advanced Manufactur-
ing Production Credit (or any successor
forms); and credit calculations will be
made on Form 3800 and supporting forms
including Form 7207 (and any successor
forms). These forms are approved under
1545-0074 for individuals, 1545-0123 for
business entities, 1545-2306 for trust and
estate filers of Form 7207, and 1545-0895
for trust and estate filers of Form 3800.
These final regulations are not changing
or creating new collection requirements
not already approved by OMB or will be
approved under 5 CFR 1320.10 by OMB.
No public comments were received by
the IRS directed specifically at the PRA
or on the collection requirements, but
commenters generally articulated the bur-
dens associated with the documentation
requirements contained in the Proposed
Regulations. As described in the relevant
portions of this preamble, the Treasury
Department and the IRS have determined
that the documentation requirements are
necessary to administer the provisions of
section 45X.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes certain
requirements with respect to Federal rules
that are subject to the notice and comment
requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) and that are likely to have a
significant economic impact on a sub-
stantial number of small entities. Unless
an agency determines that a proposal is
not likely to have a significant economic
impact on a substantial number of small
entities, section 603 of the RFA requires
the agency to present a final regulatory
flexibility analysis (FRFA) of the final
regulations. The Treasury Department and
the IRS have not determined whether the
final regulations will likely have a signif-
icant economic impact on a substantial
number of small entities. This determina-
tion requires further study. Because there
is a possibility of significant economic
impact on a substantial number of small
entities, a FRFA is provided in these final
regulations.
Pursuant to section 7805(f) of the Code,
the Proposed Regulations were submit-
ted to the Chief Counsel of the Office of
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business, and no comments were received.
A. Need for and objectives of the rule
The final regulations provide greater
clarity to taxpayers that intend to claim a
section 45X credit. The final regulations
provide necessary definitions, the time
and manner to make the Related Person
Election and rules regarding the determi-
nation of credit amounts. The Treasury
Department and the IRS intend and expect
that giving taxpayers guidance that allows
them to claim the section 45X credit will
beneficially impact various industries. In
particular, the section 45X credit encour-
ages the domestic production of eligible
components and incentivizes taxpayers to
invest in clean energy projects that gener-
ate eligible credits.
B. Affected small entities
The RFA directs agencies to provide
a description of, and if feasible, an esti-
mate of, the number of small entities that
may be affected by the proposed rules, if
adopted. The Small Business Administra-
tion Office of Advocacy (SBA) estimates
in its 2023 Frequently Asked Questions
that 99.9 percent of American businesses
meet its definition of a small business.
The applicability of these final regulations
does not depend on the size of the busi-
ness, as defined by the SBA.
As described more fully in the pre-
amble to this final regulation and in
this initial regulatory flexibility analysis
(IRFA), section 45X and these final reg-
ulations may affect a variety of different
entities across several different clean
energy industries as multiple types of eli-
gible components are provided for under
the statute and manufacturers may pro-
duce more than one type. Although there
is uncertainty as to the exact number of
small businesses within this group, the
current estimated number of respondents
to these final rules is 13,450 taxpayers.
The estimated total annual reporting bur-
den and estimated average annual burden
per respondent will be computed when
Form 7207 and the instructions to Form
7207 are updated to reflect these final
regulations.
The Treasury Department and the IRS
utilize tax data as the basis for its RFA
analysis. Tax entities supply informa-
tion on tax forms, which information is
processed and recorded by the IRS. This
data is then available to the IRS office
of Research, Applied Analytics and Sta-
tistics and to the Treasury Department’s
Office of Tax Policy for use in estimat-
ing the impact of tax regulation on busi-
nesses. Tax data is the more appropriate

Bulletin No. 2024–51 1323 December 16, 2024
data as it provides nearly universal cov-
erage of the entities that are affected by
these tax regulations. All taxpayers and
many potential taxpayers are represented
in the universe of tax data. Second, the
tax data more accurately reflect the level
of organization to which tax regulations
are applicable because tax data is col-
lected on the entity rather than the enter-
prise level. Overwhelmingly, business
tax regulations apply to the entity level
making tax data a natural fit for the anal-
ysis of regulatory impact. Further, with
limited exceptions, tax regulations apply
to all entities organized in a particular
manner regardless of industry or size.
Finally, analysis of the implications of tax
regulations for the purposes of the PRA
and any Special Analyses, including the
Regulatory Impact Analysis, are carried
out using tax data. Generally, restricting
analysis for the RFA to tax data prevents
difficulties in reconciling the different
analyses within a given regulation.
Reliance on tax data has some draw-
backs. In general, tax forms do not collect
information unless it is directly relevant to
the calculation of tax liability. The North-
ern American Industry Classification Sys-
tem (NAICS) codes referenced by the
Office of Advocacy of the Small Business
Administration are included on tax forms
for informational purposes and may not
be reliable. For example, past the first
two-digits of the NAICS code, economic
sector level, entries may be left blank in
the raw data. In addition, for a tax entity
that is comprised of multiple different
enterprises that each operate in a different
industry, the NAICS code reported on a
tax form may not reflect the appropriate
industry for the regulation under analysis.
Furthermore, most tax returns have no
independent verification of the accuracy
of NAICS codes. Notwithstanding this
concern, tax data remains the most appro-
priate data for analysis of the implications
of tax regulations.
The Treasury Department and the IRS
have considered other data alternatives
including Census data sources, such as
the Statistics of U.S. Businesses (SUSB)
suggested by SBA’s Office of Advocacy.
The 2020 SUSB includes only six million
firms and eight million establishments
while the proposed tax data includes
approximately 18 million business enti-
ties. Unlike the SUSB data, the tax data
includes more small businesses, not only
ones with at least one employee. Tax data
provides a more inclusive estimate of
businesses affected by tax regulations. In
conclusion, while tax data is an appropri-
ate resource for evaluating the impact of
tax regulations, this data does not permit
some of the usual analysis presented to
the SBA. Furthermore, since the NAICS
codes reported on the tax return may not
accurately reflect the industry of the entity,
applying separate standards by industry is
inadvisable.
Thus, the Treasury Department and
the IRS have determined that reliance
on NAICS codes would not accurately
reflect the entities affected by these regu-
lations. Further, the Treasury Department
and the IRS currently do not have useable
tax data that reflects the entities that will
be affected by these regulations. While
there is uncertainty as to the exact num-
ber of small businesses within this group,
the Treasury Department and the IRS
continue to estimate that approximately
13,450 taxpayers will be impacted.
The Treasury Department and the IRS
expect to receive more information on the
impact on small businesses after taxpayers
start to claim the section 45X credit using
the guidance and procedures provided in
these final regulations.
C. Impact of the rules
The final regulations provide rules for
how taxpayers can claim the section 45X
credit. Taxpayers that claim the section
45X credit will have administrative costs
related to reading and understanding the
rules as well as recordkeeping and report-
ing requirements because of the Related
Person Election, computation of the sec-
tion 45X credit and tax return require-
ments. The costs will vary across differ-
ent-sized entities and across the type of
production activities in which such enti-
ties are engaged.
The Related Person Election allows
a taxpayer to make an irrevocable elec-
tion annually with their Federal income
tax return by providing the information
required on Form 7207 (or any successor
form), including, for example, the name,
EIN of the taxpayer; a description of the
taxpayer’s trade or business; the name,
address and EINs of all related persons;
a list of the eligible components that are
sold, and the intended purpose of the eligi-
ble components sold by the related person.
To make the Related Person Election and
claim the section 45X credit, the taxpayer
must file an annual Federal income tax
return. The reporting and recordkeeping
requirements for that Federal income tax
return would be required for any taxpayer
that is claiming a general business credit,
regardless of whether the taxpayer was
making a Related Person Election under
section 45X.
D. Alternatives considered
The Treasury Department and the
IRS considered alternatives to these
final regulations. For example, the Trea-
sury Department and the IRS considered
whether to impose certain pre-return filing
requirements as a condition of making
the Related Person Election as authorized
in section 45X(a)(3)(B)(ii) to prevent
duplication, fraud, or improper or exces-
sive credits. These final regulations were
designed to minimize burdens for taxpay-
ers while ensuring that the IRS has suffi-
cient information to determine eligibility
for the section 45X credit. The Treasury
Department and the IRS determined that
requiring registration before a taxpayer
makes the Related Person Election is
unnecessary at this time. These final regu-
lations would allow taxpayers to make an
irrevocable Related Person Election annu-
ally with their Federal income tax return
by providing the information required on
Form 7207 (or any successor form), which
would provide the IRS with sufficient
information to assist in preventing dupli-
cation, fraud, or the claiming of improper
or excessive credits if eligible components
are produced and then sold to related per-
sons.
E. Duplicative, overlapping, or
conflicting Federal rules
The final rule would not duplicate,
overlap, or conflict with any relevant Fed-
eral rules. As discussed previously, the
final rule would merely provide proce-
dures and definitions to allow taxpayers to
claim the section 45X credit. The Treasury
Department and the IRS invite input from

December 16, 2024 1324 Bulletin No. 2024–51
interested members of the public about
identifying and avoiding overlapping,
duplicative, or conflicting requirements.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in
any one year by a State, local, or Tribal
government, in the aggregate, or by the
private sector, of $100 million (updated
annually for inflation). These final regula-
tions do not include any Federal mandate
that may result in expenditures by State,
local, or Tribal governments, or by the pri-
vate sector in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications and do not impose
substantial direct compliance costs on
State and local governments or preempt
State law within the meaning of the Exec-
utive order.
VI. Executive Order 13175: Consultation
and Coordination with Indian Tribal
governments
Executive Order 13175 (Consultation
and Coordination with Indian Tribal gov-
ernments) prohibits an agency from pub-
lishing any rule that has Tribal implica-
tions if the rule either imposes substantial,
direct compliance costs on Indian Tribal
governments, and is not required by stat-
ute, or preempts Tribal law, unless the
agency meets the consultation and fund-
ing requirements of section 5 of the Exec-
utive order. This final rule does not have
substantial direct effects on one or more
federally recognized Indian tribes and
does not impose substantial direct compli-
ance costs on Indian Tribal governments
within the meaning of the Executive order.
VII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs desig-
nated this rule as a major rule as defined
by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
IRS notices and other guidance cited in
this preamble are published in the Internal
Revenue Bulletin (or Cumulative Bulletin)
and are available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal authors of these final reg-
ulations are Mindy Chou, John Deininger,
Derek Gimbel, John Lovelace, and Alex-
ander Scott. However, other personnel
from the Office of Chief Counsel, the
Treasury Department, and the IRS partic-
ipated in the development of these regu-
lations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS amend 26 CFR part 1 as fol-
lows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
in numerical order for §§1.45X-1 through
1.45X-4 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.45X-1 also issued under 26
U.S.C. 45X, 6001, 6417(h) and 6418(h).
Section 1.45X-2 also issued under 26
U.S.C. 45X and 1502.
Section 1.45X-3 also issued under 26
U.S.C. 6001.
Section 1.45X-4 also issued under 26
U.S.C. 6001.
* * * * *
Par. 2. Sections 1.45X-0 through
1.45X-4 are added to read as follows:
Sec.
* * * * *
1.45X-0 Table of contents.
1.45X-1 General rules applicable to the
advanced manufacturing production
credit.
1.45X-2 Sale to unrelated person.
1.45X-3 Eligible components.
1.45X-4 Applicable critical minerals.
* * * * *
§1.45X-0 Table of contents.
This section lists the major captions
contained in §§1.45X-1 through 1.45X-4.
§1.45X-1 General rules applicable to
the advanced manufacturing production
credit.
(a) Overview.
(b) Credit amount.
(c) Definition of produced by the tax-
payer.
(d) Produced in the United States.
(e) Production and sale in a trade or
business.
(f) Sale of integrated components.
(g) Interaction between sections 45X
and 48C.
(h) [Reserved]
(i) Anti-abuse rule.
(j) Applicability date.
§1.45X-2 Sale to unrelated person.
(a) In general.
(b) Definitions.
(c) Special rule for sale to related per-
son.
(d) Related person election.
(e) Sales of integrated components to
related person.
(f) Applicability date.
§1.45X-3 Eligible components.
(a) In general.
(b) Solar energy components.

Bulletin No. 2024–51 1325 December 16, 2024
(c) Wind energy components.
(d) Inverters.
(e) Qualifying battery component.
(f) Phase out rule.
(g) Applicability date.
§1.45X-4 Applicable critical minerals.
(a) In general.
(b) Definitions.
(c) Credit amount.
(d) Applicability date.
§1.45X-1 General rules applicable
to the advanced manufacturing
production credit.
(a) Overview—(1) In general. This
section provides general rules regarding
the advanced manufacturing production
credit determined under section 45X of
the Code (section 45X credit). Paragraph
(a)(2) of this section provides definitions
of certain terms that apply for purposes
of section 45X and the section 45X reg-
ulations (as defined in paragraph (a)
(2)(xv) of this section). Paragraphs (b)
through (j) of this section provide the
basic rules regarding the section 45X
credit, including the definition of the
term produced by the taxpayer, and rules
to determine the taxpayer that produces
an eligible component and whether such
taxpayer is entitled to claim a section
45X credit in contract manufacturing
arrangements; where the production of
eligible components must occur; the
treatment of integrated, incorporated
or assembled eligible components; and
the interaction between sections 45X
and 48C of the Code. See §1.45X-2 for
rules regarding sales to unrelated per-
sons, sales to related persons, and the
related person election (Related Person
Election), including rules regarding the
time, place, and manner of making the
Related Person Election. See §1.45X-3
for the definitions of all eligible com-
ponents (except applicable critical min-
erals) and the credit amounts available
for each of these eligible components,
including certain phase-out percent-
ages. See §1.45X-4 for the definitions
of applicable critical minerals and the
rules regarding the determination of
the credit amount for applicable critical
minerals.
(2) Generally applicable definitions.
This paragraph (a)(2) provides definitions
of terms that apply for purposes of section
45X and the section 45X regulations.
(i) Applicable critical mineral. The
term applicable critical mineral means
any of the minerals that are listed in sec-
tion 45X(c)(6) and defined in §1.45X-
4(b).
(ii) Code. The term Code means the
Internal Revenue Code.
(iii) Contract manufacturing arrange-
ment. The term contract manufacturing
arrangement is defined in paragraph (c)
(3)(ii)(B) of this section.
(iv) Electrode active materials. The
term electrode active materials is defined
in section 45X(c)(5)(B)(i) and described
in §1.45X-3(e)(2).
(v) Eligible component. The term eli-
gible component is defined in section
45X(c)(1)(A) and described in §§1.45X-3
and 1.45X-4.
(vi) Eligible taxpayer. The term eligi-
ble taxpayer is defined in paragraph (c)(3)
of this section.
(vii) Extraction. The term extraction is
defined in §1.45X-3(e)(2)(iv)(B).
(viii) Guidance. The term guidance
means guidance published in the Federal
Register or Internal Revenue Bulletin, as
well as administrative guidance such as
forms, instructions, publications, or other
guidance on the IRS.gov website. See
§§ 601.601 and 601.602 of this chapter.
(ix) IRA. The term IRA means Public
Law 117-169, commonly known as the
Inflation Reduction Act of 2022.
(x) IRS. The term IRS means the Inter-
nal Revenue Service.
(xi) Produced by the taxpayer. The
term produced by the taxpayer is defined
in paragraph (c) of this section.
(xii) Related person. The term related
person is defined in §1.45X-2(b)(2).
(xiii) Related Person Election. The
term Related Person Election is defined in
§1.45X-2(d)(1).
(xiv) Secretary. The term Secretary
means the Secretary of the Treasury or her
delegate.
(xv) Section 45X regulations. The term
section 45X regulations means the provi-
sions of this section, §§1.45X-2 through
1.45X-4, and the regulations in this chap-
ter under sections 6417 and 6418 of the
Code that relate to the section 45X credit.
(xvi) Unrelated person. The term unre-
lated person is defined in section 45X(a)
(3) and described in §1.45X-2(b)(3).
(b) Credit amount. Except as other-
wise provided in section 45X(b)(3) and
§1.45X-3(f), for purposes of section 38
of the Code, the amount of the section
45X credit for any taxable year is equal
to the sum of the credit amounts provided
under section 45X(b) and described in
§§1.45X-3 and 1.45X-4 with respect to
each eligible component that is produced
by the taxpayer and, within the taxable
year, sold by the taxpayer to an unrelated
person. See §1.45X-2 for rules regarding
sales of eligible components to related
persons that may be treated as if sold to
unrelated persons for purposes of section
45X(a).
(c) Definition of produced by the tax-
payer—(1) In general. The term produced
by the taxpayer means a process con-
ducted by the taxpayer that substantially
transforms constituent elements, materi-
als, or subcomponents into a complete and
distinct eligible component that is func-
tionally different from that which would
result from minor assembly or superficial
modification of the elements, materials,
or subcomponents, and includes both pri-
mary and secondary production. Primary
production involves producing an eligible
component using non-recycled materials
while secondary production involves pro-
ducing an eligible component using recy-
cled materials.
(i) Partial transformation. The term
produced by the taxpayer does not include
partial transformation that does not result
in substantial transformation of constitu-
ent elements, materials, or subcomponents
into a complete and distinct eligible com-
ponent as described in this paragraph (c)
(1).
(ii) Minor assembly or superficial mod-
ification. The term produced by the tax-
payer does not include minor assembly of
two or more constituent elements, materi-
als, or subcomponents, or superficial mod-
ification of the final eligible component, if
the taxpayer does not also engage in the
process resulting in a substantial transfor-
mation described in paragraph (c)(1) or
(2) of this section.
(iii) Examples. The following exam-
ples illustrate the application of this para-
graph (c)(1).

December 16, 2024 1326 Bulletin No. 2024–51
(A) Example 1. Taxpayers X, Y, and Z each
produce one of three sections of a wind tower that
together make up the wind tower. No taxpayer has
produced an eligible component within the meaning
of section 45X(a)(1)(A) because no taxpayer has
produced all sections of the wind tower.
(B) Example 2. Same facts as paragraph (c)(1)
(iii)(A) of this section (Example 1), but taxpayers X,
Y, and Z instead form Partnership XYZ. Partnership
XYZ produces all three sections of the wind tower.
Partnership XYZ has produced an eligible compo-
nent within the meaning of section 45X(a)(1)(A).
(C) Example 3. Taxpayer V puts the external
casing on a battery module (within the meaning of
§1.45X-3(e)(4)(i)(A)) that already had cells, bat-
tery management systems, and other components
integrated into it. Taxpayer V has engaged in minor
assembly and has not produced an eligible compo-
nent within the meaning of section 45X(a)(1)(A).
(D) Example 4. Taxpayer U purchases two fin-
ished halves of a wind turbine nacelle and combines
them into a single nacelle. Taxpayer U has engaged
in minor assembly and has not produced an eligible
component within the meaning of section 45X(a)(1)
(A).
(E) Example 5. Taxpayer T purchases a dry cell
battery and fills the electrolyte of the battery. Tax-
payer T has engaged in minor assembly and has not
produced an eligible component within the meaning
of section 45X(a)(1)(A).
(F) Example 6. Taxpayer W purchases a prefab-
ricated wind turbine blade and applies paint and fin-
ishes. Taxpayer W has engaged in superficial modifi-
cation of the blade and has not produced an eligible
component within the meaning of section 45X(a)(1)
(A).
(2) Special rule for certain eligible
components—(i) In general. For solar
grade polysilicon, electrode active mate-
rials, and applicable critical minerals, the
term produced by the taxpayer means
processing, converting, refining, or puri-
fying source materials, such as brines,
ores, or waste streams, to substantially
transform the source materials to derive a
distinct eligible component, and includes
both primary and secondary production.
For the production process for electrode
active materials and applicable critical
minerals, the term conversion is defined
in §1.45X-3(e)(2)(iii)(A) or §1.45X-4(c)
(2)(i), respectively, and the term purifica-
tion is defined in §1.45X-3(e)(2)(iii)(B) or
§1.45X-4(c)(2)(ii), respectively.
(ii) Example. Taxpayers X, Y and Z are
unrelated C corporations that have calen-
dar year taxable years. In 2024, X extracts
raw lithium from natural mineral deposits
and purifies the extracted material to 90%
lithium by mass. X subsequently hires Y
to further purify the lithium material fur-
nished by X to a purity of no less than
99.9% lithium by mass as required by
section 45X(c)(6)(P)(ii) and §1.45X-4(b)
(16)(ii). In 2025, Y purifies the material
to 99.9% lithium by mass (qualifying lith-
ium). X subsequently sells the qualifying
lithium to Z in 2026. X may not claim
a section 45X credit for the qualifying
lithium sold to Z because the qualifying
lithium was not produced by X within the
meaning of this paragraph (c)(2) of this
section, given that X did not transform the
lithium material to derive a distinct eligi-
ble component (i.e., lithium which satis-
fies the minimum purity of 99.9% lithium
by mass prescribed by section 45X(c)(6)
(P)(ii)).
(3) Eligible taxpayer—(i) In general.
Except as otherwise provided in para-
graph (c)(3)(iii) of this section, a taxpayer
claiming a section 45X credit with respect
to an eligible component must be the tax-
payer that directly performs the produc-
tion activities that bring about a substan-
tial transformation resulting in the eligible
component and must sell such eligible
component to an unrelated person.
(ii) Contract manufacturing arrange-
ment—(A) In general. If the production
of an eligible component is performed in
whole or in part pursuant to a contract that
is a contract manufacturing arrangement,
then, provided the other requirements of
section 45X are met, the party to such con-
tract that may claim the section 45X credit
with respect to such eligible component is
the party that performs the actual produc-
tion activities that bring about a substan-
tial transformation resulting in the eligible
component.
(B) Contract manufacturing arrange-
ment defined. The term contract manufac-
turing arrangement means any agreement
(or agreements) providing for the produc-
tion of an eligible component if the agree-
ment is entered into before the production
of the eligible component to be delivered
under the contract is completed. A routine
purchase order for off-the-shelf property
is not treated as a contract manufacturing
arrangement for purposes of this para-
graph (c)(3). An agreement will be treated
as a routine purchase order for off-the-
shelf property if the contractor is required
to make no more than de minimis modi-
fications to the property to tailor it to the
customer’s specific needs, or if at the time
the agreement is entered into, the contrac-
tor knows or has reason to know that the
contractor can satisfy the agreement out
of existing stocks or normal production of
finished goods.
(iii) Special rule for contract manufac-
turing arrangements. If an eligible com-
ponent is produced by a taxpayer pursuant
to a contract manufacturing arrangement,
the parties to such agreement may deter-
mine by agreement the party that may
claim the section 45X credit. If a tax-
payer enters into contract manufacturing
arrangements with multiple fabricators to
produce an eligible component, the par-
ties to such agreements may determine
by agreement the party that may claim the
section 45X credit. The IRS will not chal-
lenge the agreement of the parties pro-
vided all the parties submit signed certi-
fication statements in the manner required
in Form 7207, Advanced Manufacturing
Production Credit, or its instructions (as
described in paragraph (c)(3)(iv) of this
section) indicating that all parties agree
as to the party that may claim the section
45X credit.
(iv) Certification statement require-
ments. A certification statement indicating
that all parties to a contract manufactur-
ing arrangement agree as to the party that
will claim the section 45X credit must
include—
(A) All required information set forth
in guidance; and
(B) A properly signed penalty of per-
jury statement that includes the following:
under penalties of perjury, I declare that
I have examined this statement, includ-
ing accompanying documents, and to the
best of my knowledge and belief, the facts
presented in support of this statement are
true, correct, and complete.
(v) Examples. The following examples
illustrate the application of this paragraph
(c)(3).
(A) Example 1: Contract manufacturing with
sale. Taxpayers X, Y and Z are unrelated C corpora-
tions that have calendar year taxable years. In 2024,
pursuant to a contract manufacturing arrangement as
described in paragraph (c)(3)(ii)(B) of this section, X
hires Y to produce a solar module. The contract is a
tolling arrangement and provides that Y will produce
the solar module according to X’s designs and speci-
fications and using the materials and subcomponents
that X provides. X and Y enter an agreement provid-
ing that X is the sole party that may claim a section
45X credit for the production and sale of the solar
module, and X and Y each sign a certification state-
ment as described in paragraph (c)(3)(iv) of this sec-
tion reflecting this agreement. In 2025, Y produces
and delivers the solar module to X, and in 2026, X

Bulletin No. 2024–51 1327 December 16, 2024
sells the solar module to Z. X may claim a section
45X credit in taxable year 2026 for the solar module
it sold to Z provided all other requirements of section
45X are met and the certification statements signed
by X and Y meet the requirements described in para-
graph (c)(3)(iv) of this section and are properly sub-
mitted by X. Y could claim a section 45X credit if the
agreement between X and Y had designated Y as the
sole party that could claim a section 45X credit for
the production and sale of the solar module provided
all other requirements of section 45X are met and
the certification statements signed by X and Y meet
the requirements described in paragraph (c)(3)(iv) of
this section and are properly submitted by Y.
(B) Example 2: Contract manufacturing with no
sale. Assume the facts are the same as in paragraph
(c)(3)(v)(A) of this section (Example 1), except that
X does not sell the solar module and instead X uses
it to generate electricity for use in X’s trade or busi-
ness. Because there has been no sale, neither X nor Y
may claim a section 45X credit for the solar module
regardless of whether X and Y submit signed certi-
fication statements described in paragraph (c)(3)(iv)
of this section.
(C) Example 3: Multiple contract manufactur-
ing arrangements. Taxpayers V, W, X, Y, and Z are
unrelated C corporations that have calendar year
taxable years. In 2024, pursuant to three separate
contract manufacturing arrangements as described
in paragraph (c)(3)(ii)(B) of this section, V hires
W, X, and Y to produce the bottom, middle and top
segments, respectively, of a single wind tower that
V designed. W, X, Y, and V enter into an agreement
providing that V is the sole party that may claim a
section 45X credit for the production and sale of the
wind tower, and W, X, Y, and V each sign a certifi-
cation statement as described in paragraph (c)(3)(iv)
of this section reflecting this agreement. In 2024, W
and X both produce and deliver their respective wind
tower segments to the installation site, and in 2025,
Y produces and delivers its wind tower segment to
the installation site. In 2026, V sells the completed
wind tower to Z. V may claim a section 45X credit in
taxable year 2026 for the wind tower it sold to Z pro-
vided all other requirements of section 45X are met
and the certification statements signed by V, W, X,
and Y meet the requirements described in paragraph
(c)(3)(iv) of this section and are properly submit-
ted by V. W or X or Y could be the party that could
claim a section 45X credit if the agreement between
V, W, X and Y had designated W or X or Y as the
sole party that could claim a section 45X credit for
the production and sale of the wind tower provided
all other requirements of section 45X are met and
the certification statements signed by V, W, X, and Y
meet the requirements described in paragraph (c)(3)
(iv) of this section and are properly submitted by the
party designated as the sole party that could claim a
section 45X credit.
(D) Example 4: Applicable Critical Mineral Pro-
cessing with Certification. Taxpayers X, Y, and Z
are unrelated C corporations that have calendar year
taxable years. In 2024, X extracts raw lithium from
natural mineral deposits and purifies the extracted
material to 90% lithium by mass. X subsequently
hires Y to further process the lithium material pur-
suant to a contract manufacturing arrangement as
described in paragraph (c)(3)(ii)(B) of this section.
Specifically, the contract is a tolling arrangement
and provides that X remains the owner for Federal
income tax purposes throughout the purification pro-
cess and that Y will further purify the lithium mate-
rial furnished by X to a purity of no less than 99.9%
lithium by mass as required by section 45X(c)(6)(P)
and §1.45X-4(b)(16)(ii). X and Y enter an agreement
providing that X is the sole party that may claim a
section 45X credit for the production and sale of the
applicable critical mineral, and X and Y each sign
a certification statement as described in paragraph
(c)(3)(iv) of this section reflecting this agreement.
In 2025, Y purifies the material to 99.9% lithium by
mass (qualifying lithium) and delivers it to X. X sub-
sequently sells the qualifying lithium to Z in 2026. X
may claim a section 45X credit in taxable year 2026
for the qualifying lithium sold to Z, provided that
all other requirements of section 45X are met, and
the certification statements signed by X and Y meet
the requirements described in paragraph (c)(3)(iv) of
this section and are properly submitted by X. Y could
claim a section 45X credit if the agreement between
X and Y had designated Y as the sole party that could
claim a section 45X credit for the qualifying lithium,
provided that all other requirements of section 45X
are met, and the certification statements signed by X
and Y meet the requirements described in paragraph
(c)(3)(iv) of this section and are properly submitted
by Y. Neither X nor Y could claim a section 45X
credit in the absence of a designating agreement and
certification statement (described in paragraphs (c)
(3)(iii) and (iv) of this section, respectively) for the
reasons stated in paragraph (c)(3)(i) of this section.
(4) Timing of production and sale—(i)
In general. Production of eligible com-
ponents for which a taxpayer is claiming
a section 45X credit may begin before
December 31, 2022. Production of eligi-
ble components must be completed, and
sales of eligible components must occur,
after December 31, 2022.
(ii) Example. Taxpayer X has a calen-
dar year taxable year. Taxpayer X begins
production of a related offshore wind ves-
sel (as defined in section 45X(c)(4)(B)
(iv) and described in §1.45X-3(c)(4)) in
January 2022. Production is completed in
December 2024 and the sale to an unre-
lated person occurs in 2025. Taxpayer X
is eligible to claim the section 45X credit
in 2025, assuming that all other require-
ments of section 45X are met.
(d) Produced in the United States—(1)
In general. Sales are taken into account
for purposes of the section 45X credit only
for eligible components that are produced
within the United States, as defined in sec-
tion 638(1) of the Code, or a United States
territory, which for purposes of section
45X and the section 45X regulations has
the meaning of the term possession pro-
vided in section 638(2).
(2) Subcomponents. Constituent ele-
ments, materials, and subcomponents used
in the production of eligible components
are not subject to the domestic production
requirement provided in paragraph (d)(1)
of this section.
(e) Production and sale in a trade or
business. An eligible component produced
and sold by the taxpayer is taken into
account for purposes of the section 45X
credit only if the production and sale are in
a trade or business (within the meaning of
section 162 of the Code) of the taxpayer.
(f) Sale of integrated components—(1)
In general. For purposes of the section
45X credit, section 45X(d)(4) provides
that a taxpayer that produces an eligible
component is treated as having sold such
eligible component to an unrelated person
if such component is integrated, incorpo-
rated, or assembled into another eligible
component that is then sold to an unre-
lated person.
(i) Integrated, incorporated, or assem-
bled. The term integrated, incorporated,
or assembled means the production activ-
ities by which an eligible component that
is a constituent element, material, or sub-
component is substantially transformed
into another complete and distinct eligible
component that is not solar grade polysil-
icon, an electrode active material, or an
applicable critical mineral. The term inte-
grated, incorporated, or assembled does
not mean the minor assembly or superfi-
cial modification of an eligible component
used as an element, material, or subcom-
ponent and other elements, materials, or
subcomponents that results in a distinct
product.
(ii) Special rule for eligible compo-
nents resulting in solar grade polysili-
con, electrode active materials, or appli-
cable critical minerals. For solar grade
polysilicon, electrode active materials,
and applicable critical minerals, the term
integrated, incorporated, or assembled
means the production activities in which
an eligible component is processed, con-
verted, refined, or purified to derive a dis-
tinct eligible component that is solar grade
polysilicon, an electrode active material,
or an applicable critical mineral. The term
integrated, incorporated, or assembled
does not mean minor assembly or superfi-
cial modification of an eligible component
used as an element, material, or subcom-

December 16, 2024 1328 Bulletin No. 2024–51
ponent and other elements, materials, or
subcomponents that results in a distinct
product.
(2) Application—(i) In general. A
taxpayer may claim a section 45X credit
for each eligible component the taxpayer
produces and sells to an unrelated person,
including any eligible component the tax-
payer produces that was used as a constit-
uent element, material, or subcomponent
and integrated, incorporated, or assembled
into another complete and distinct eligible
component or another complete and dis-
tinct product (that is not itself an eligible
component) that the taxpayer also pro-
duces and sells to an unrelated person.
(ii) Example: Sale of product with
incorporated eligible components to unre-
lated person. In 2022, X, a domestic cor-
poration that has a calendar year taxable
year, begins production of electrode active
materials (EAMs) that are completed in
2023 and incorporated into battery cells
that X also produces. In 2024, X incor-
porates those battery cells into battery
modules (within the meaning of §1.45X-
3(e)(4)(i)(A)) and integrates the battery
modules into electric vehicles. X sells the
electric vehicles to Z, an unrelated person,
in 2024. X may claim a section 45X credit
for the EAMs, the battery cells, and the
battery modules in 2024.
(g) Interaction between sections 45X
and 48C—(1) In general. For purposes
of the section 45X credit, consistent with
section 45X(c)(1)(B), property that would
otherwise qualify as an eligible compo-
nent (otherwise qualified property) is
only an eligible component if the property
is produced at a section 45X facility (as
defined in paragraph (g)(2) of this section)
and no part of that section 45X facility is
also a section 48C facility (as defined in
paragraph (g)(3) of this section).
(2) Section 45X facility—(i) In general.
A section 45X facility comprises the inde-
pendently functioning tangible property
used by the taxpayer that is necessary to
be considered the producer of the other-
wise qualified property within the mean-
ing of paragraph (c)(1) or (2) of this sec-
tion, as applicable. The tangible property
that comprises a section 45X facility may
be in more than one location.
(ii) Special rule for contract manufac-
turing arrangement. In the case of a con-
tract manufacturing arrangement where
the parties have agreed to who can claim a
section 45X credit under paragraph (c)(3)
(iii) of this section, the section 45X facil-
ity under paragraph (g)(2)(i) of this sec-
tion is determined by taking into account
the tangible property used to produce the
otherwise qualified property, regardless of
which party to the arrangement claims the
credit.
(3) Section 48C facility—(i) In gen-
eral. A section 48C facility includes all
eligible property included in a qualify-
ing advanced energy project for which a
taxpayer receives an allocation of section
48C credits under the allocation program
established under section 48C(e) and
claims such credits after August 16, 2022.
(ii) Eligible property. Eligible property
is property that—
(A) Is necessary for the production
or recycling of property described in
section 48C(c)(1)(A)(i), re-equipping
an industrial or manufacturing facility
described in section 48C(c)(1)(A)(ii), or
re-equipping, expanding, or establishing
an industrial facility described in sec-
tion 48C(c)(1)(A)(iii);
(B) Is tangible personal property, or
other tangible property (not including a
building or its structural components), but
only if such property is used as an inte-
gral part of the qualified investment credit
facility; and
(C) With respect to which depreciation
(or amortization in lieu of depreciation) is
allowable.
(4) Examples. The following examples
illustrate the application of this paragraph
(g), and assume any other requirements of
section 45X that are not described have
been met:
(i) Example 1: Two independent section 45X
facilities—(A) Facts. Taxpayer owns and operates
a manufacturing site that contains tangible property
made up of Equipment A and Equipment B, each
set of which functions independently and which is
arranged in serial fashion. Equipment A is used by
the taxpayer to produce otherwise qualified property
1. Equipment B is used to produce otherwise quali-
fied property 2, a different type of product than oth-
erwise qualified property 1. Taxpayer was allocated a
section 48C credit under the section 48C(e) program
for a section 48C facility that includes Equipment A
and subsequently placed the section 48C facility and
Equipment A in service in taxable year 2026. Tax-
payer claimed a section 48C credit related to Equip-
ment A for taxable year 2026.
(B) Analysis. The section 45X facility with
respect to otherwise qualified property 1 is the tan-
gible property made up of Equipment A, which is
the independently functioning tangible property
used by the taxpayer that is necessary to be con-
sidered the producer of the otherwise qualified
property within the meaning of paragraph (c)(1) or
(2) of this section. However, Equipment A is also
eligible property that is considered part of a sec-
tion 48C facility as defined in paragraph (g)(3) of
this section. Therefore, otherwise qualified property
1 is not an eligible component under paragraph (g)
(1) of this section because part (all in this case) of
the section 45X facility where otherwise qualified
property 1 was produced is also considered a sec-
tion 48C facility. There is a separate section 45X
facility with respect to otherwise qualified property
2. That section 45X facility is the tangible prop-
erty made up of Equipment B. Equipment A is not
included in the section 45X facility as it is not used
to produce otherwise qualified property 2. None of
the tangible property comprising the section 45X
facility with respect to otherwise qualified property
2 is considered part of a section 48C facility. Thus,
otherwise qualified property 2 is an eligible compo-
nent under paragraph (g)(1) of this section.
(ii) Example 2: Single section 45X facility at
different locations—(A) Facts. Taxpayer owns and
operates two manufacturing sites at different loca-
tions. The tangible property at manufacturing site 1
is Equipment A, which is used to continue and finish
the first part of the production process for otherwise
qualified property. The tangible property at manufac-
turing site 2 is Equipment B, which is used to com-
plete the production process of the same otherwise
qualified property. Taxpayer was allocated a section
48C credit under the section 48C(e) program for
Equipment A.
(B) Analysis. Equipment A and B comprise a sin-
gle section 45X facility regardless of location under
paragraph (g)(2)(i) of this section because both
Equipment A and B were used to produce the other-
wise qualified property and the use of Equipment A
and B are necessary to consider the taxpayer the pro-
ducer, consistent with the meaning of produced by
the taxpayer in paragraph (c)(1) or (2) of this section.
However, part of the property comprising the sec-
tion 45X facility is also a section 48C facility under
paragraph (g)(3) of this section because Equipment
A is eligible property that is part of a section 48C
facility. As a result, the otherwise qualified property
is not considered an eligible component, and the sale
of the otherwise qualified property will not generate
a section 45X credit.
(iii) Example 3: Independent tangible property
and production of component—(A) Facts. Taxpayer
owns and operates two manufacturing sites. Man-
ufacturing Site 1 contains tangible property that is
Equipment A, which is used to produce photovol-
taic cells. Manufacturing Site 2 contains tangible
property that is Equipment B and tangible property
that is Equipment C, which are arranged in serial
fashion. Equipment B is used to produce photo-
voltaic cells. Equipment C is used to produce solar
modules, in part, by combining the photovoltaic
cells produced by Equipment A and Equipment B.
Taxpayer was allocated a section 48C credit under
the section 48C(e) program for a section 48C facility
that includes Equipment B. Subsequently, Taxpayer
places the section 48C facility and Equipment B in
service in taxable year 2026. Taxpayer claimed a

Bulletin No. 2024–51 1329 December 16, 2024
section 48C credit for Equipment B in taxable year
2026.
(B) Analysis. Equipment A and Equipment B
each comprise a section 45X facility since each
independently functions to produce otherwise
qualified property, photovoltaic cells. No part of
the section 45X facility comprised of Equipment
A is eligible property that is included in a section
48C facility. Thus, the photovoltaic cells produced
in the section 45X facility comprised of Equip-
ment A are eligible components. The photovoltaic
cells that are produced in the section 45X facility
comprised of Equipment B are otherwise qualified
property that cannot qualify as eligible compo-
nents because part (all in this case) of the section
45X facility comprised of Equipment B where the
photovoltaic cells are produced is also consid-
ered a section 48C facility. Solar modules, a dif-
ferent otherwise qualified property, are produced
in using Equipment C, which is itself a separate
section 45X facility. Equipment C does not have
to include any of the tangible property included
in Equipment A or B under paragraph (g)(2)(i)
of this section because it is not necessary for the
Taxpayer to use that equipment to be considered
the producer of the solar modules for purposes of
section 45X. As a result, no part of section 45X
facility comprised of Equipment C where the solar
modules are produced is considered a section 48C
facility, and the solar modules are considered an
eligible component for purposes of section 45X.
(iv) Example 4: Manufacturing under a contract
manufacturing arrangement—(A) Facts. X is hired
by Y to manufacture photovoltaic cells, but X and Y
agree under paragraph (c)(3)(iii) of this section that
Y will be the party to claim any section 45X credit
resulting from the sale of the photovoltaic cells. X
owns and operates a manufacturing site that contains
equipment that is tangible property used to produce
the photovoltaic cells. X was allocated a section 48C
credit under the section 48C(e) program for a sec-
tion 48C facility that includes the equipment used
to produce the photovoltaic cells. The equipment is
eligible property that is part of the section 48C facil-
ity that was placed in service in taxable year 2026.
X claimed a section 48C credit for the equipment in
taxable year 2026.
(B) Analysis. Under paragraph (g)(2)(ii) of this
section, in determining the section 45X facility
related to the photovoltaic cells (the otherwise qual-
ified property), Y must consider the equipment that
X used in producing the photovoltaic cells. In this
case, that means that part of the section 45X facil-
ity is also considered a section 48C facility, as the
equipment used to produce the photovoltaic cells is
also eligible property that is part of a section 48C
facility. Therefore, the photovoltaic cells are not eli-
gible components for purposes of section 45X to X
or Y, and there is no section 45X credit generated if
the photovoltaic cells are sold.
(v) Example 5: Multiple tangible property used to
produce separate eligible components—(A) Facts.
Assume the facts are the same as in paragraph (g)
(4)(iv) of this section (Example 4), except that Y and
X also agreed for X to produce photovoltaic wafers
using other equipment that is tangible property that
is different than the equipment X uses to produce the
photovoltaic cells.
(B) Analysis. While Y must consider the equip-
ment that X uses to produce the photovoltaic wafers
(the otherwise qualified property) under paragraph
(g)(2)(ii) of this section to determine the section
45X facility associated with the photovoltaic wafer
production, Y is not required to include any of the
equipment used by X to produce the photovoltaic
cells because it was not necessary to use that equip-
ment to be considered the producer of the photovol-
taic wafers. As a result, no part of the section 45X
facility related to photovoltaic wafers is part of a sec-
tion 48C facility. Therefore, the photovoltaic wafers
are eligible components for purposes of section 45X
and Y will be entitled to claim a section 45X credit
upon the sale.
(h) [Reserved]
(i) Anti-abuse rule—(1) In general.
The rules of section 45X and the section
45X regulations must be applied in a man-
ner consistent with the purposes of section
45X and the section 45X regulations (and
the regulations in this chapter under sec-
tions 6417 and 6418 related to the section
45X credit). A purpose of section 45X and
the section 45X regulations (and the regu-
lations in this chapter under sections 6417
and 6418 related to the section 45X credit)
is to provide taxpayers an incentive to pro-
duce eligible components in a manner that
contributes to the development of secure
and resilient supply chains. Accordingly,
the section 45X credit is not allowable
if the primary purpose of the produc-
tion and sale of an eligible component is
to obtain the benefit of the section 45X
credit in a manner that is wasteful, such
as discarding, disposing of, or destroying
the eligible component without putting it
to a productive use. A determination of
whether the production and sale of an eli-
gible component is inconsistent with the
purposes of section 45X and the section
45X regulations (and the regulations in
this chapter under sections 6417 and 6418
related to the section 45X credit) is based
on all facts and circumstances.
(2) Example—(i) Facts. Taxpayer is engaged in
the activity of producing and selling multiple units
of Eligible Component 1 (EC1). Taxpayer engages
in no other activities. The cost of producing each unit
of EC1 is less than the amount of the section 45X
credit that would be available if each EC1 qualified
for the section 45X credit. Taxpayer sells some of its
units of EC1 to related persons and makes a Related
Person Election pursuant to section 45X(a)(3)(B)
(i). Taxpayer also sells some of its units of EC1 to
unrelated persons. Taxpayer sells all units of EC1
at an amount equal to cost plus a markup to reflect
an anticipated accommodation fee and establishes
corresponding accounts receivable at the time of the
respective sales. In addition, Taxpayer knows or rea-
sonably expects that after acquiring the units of EC1,
the related and unrelated transferees will not resell
the units of EC1 or use them in their trades or busi-
nesses. Taxpayer intends to obtain the benefit from
the section 45X credit by claiming such credits itself
or monetizing such credits through an election under
section 6417 or section 6418. Taxpayer eliminates
the aforementioned accounts receivable at the time
it claims the section 45X credit or receives related
payments attributable to the section 45X credit, and
further makes payments to the related and unrelated
transferees as accommodation fees computed as a
percentage of such benefits.
(ii) Analysis. Based on all of the facts and cir-
cumstances in paragraph (i)(2)(i) of this section, the
primary purpose of Taxpayer’s production and sale
of EC1 is to obtain the benefit of the section 45X
credit in a manner that is wasteful and will not be
treated as the production and sale of eligible compo-
nents in a trade or business of Taxpayer for purposes
of section 45X(a)(1) and (2). Taxpayer is not eligible
for the section 45X credit with respect to units of
EC1 that it produced and sold. See sections 6417(d)
(6) (excessive payments) and 6418(g)(2) (excessive
credit transfer).
(j) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after October
28, 2024.
§1.45X-2 Sale to unrelated person.
(a) In general. The amount of the sec-
tion 45X credit for any taxable year is
equal to the sum of the credit amounts
determined under section 45X(b) (and
described in §§1.45X-3 and 1.45X-4) with
respect to each eligible component that
is produced by the taxpayer and, during
the taxable year, sold by the taxpayer to
an unrelated person. Applicable Federal
income tax principles apply to determine
whether a transaction is in substance a
sale (or the provision of a service, or some
other disposition). See §1.45X-1(d) and
(e) for additional requirements relating to
sales.
(b) Definitions. This paragraph (b) pro-
vides definitions of terms that apply for
purposes of this section.
(1) Person. The term person means
an individual, a trust, estate, partnership,
association, company, or corporation,
as provided in section 7701(a)(1) of the
Code. For purposes of this section, an
entity disregarded as separate from a per-
son (for example, under §301.7701-3 of
this chapter) is not a person.
(2) Related person. The term related
person means a person who is related to

December 16, 2024 1330 Bulletin No. 2024–51
another person if such persons would be
treated as a single employer under the
regulations in this chapter under section
52(b) of the Code.
(3) Unrelated person. The term unre-
lated person means a person who is not a
related person as defined in paragraph (b)
(2) of this section.
(c) Special rule for sale to related per-
son—(1) In general. For purposes of sec-
tion 45X(a), a taxpayer is treated as sell-
ing an eligible component to an unrelated
person if such component is sold to such
person by a person who is a related person
with respect to the taxpayer.
(2) Example. X and Y are members of a
group of trades or businesses under com-
mon control under section 52(b), and thus
are related persons under section 45X(d)
(1). Each of X and Y has a calendar year
taxable year. Z is an unrelated person. X
is in the trade or business of producing
and selling solar modules. X produces and
sells solar modules to Y in 2023. Y sells
the solar modules to Z in 2024. X may
claim a section 45X credit for the sale
of the solar modules in 2024, the taxable
year of X in which Y sells the solar mod-
ules to Z.
(d) Related person election—(1) Avail-
ability of election—(i) In general. In such
form and manner as the Secretary may
prescribe, a taxpayer may make an elec-
tion under section 45X(a)(3)(B) (Related
Person Election), to treat a sale of eligible
components by such taxpayer to a related
person as if made to an unrelated person.
As a condition of, and prior to, a tax-
payer making a Related Person Election
(as described in paragraph (d)(2) of this
section), the Secretary may require such
information or registration as the Secretary
deems necessary for purposes of prevent-
ing duplication, fraud, or any improper or
excessive credit amount determined under
section 45X(a)(1).
(ii) Members of a consolidated group.
A Related Person Election is made by
a member of a consolidated group (as
defined in §1.1502-1(h)) in the man-
ner described in paragraph (d)(3)(ii) of
this section. A member of a consolidated
group that sells eligible components in an
intercompany transaction (as defined in
§1.1502-13(b)(1)) may make the Related
Person Election to claim the section 45X
credit in the year of the intercompany sale.
For the treatment of the selling member’s
gain or loss from that sale, see §1.1502-
13.
(2) Time and manner of making elec-
tion—(i) In general. A taxpayer must
make an affirmative Related Person Elec-
tion annually on the taxpayer’s timely
filed original Federal income tax return,
including extensions in such form and
in such manner as may be prescribed in
guidance. The Related Person Election
will be applicable to all sales of eligible
components to related persons by the tax-
payer for each trade or business that the
taxpayer engages in during the taxable
year that resulted in a credit claim and for
which the taxpayer has made the Related
Person Election.
(ii) Required information. For all sales
of eligible components to related persons,
the taxpayer must provide all required
information set forth in guidance. Such
information may include, for example, the
taxpayer’s name, employer identification
number (EIN), a description of the taxpay-
er’s trade or business (including principal
business activity code); the name(s) and
EINs of all related persons; a listing of the
eligible components that are sold; and the
intended purpose of any sales of eligible
components to or from related persons.
(3) Scope and effect of election—(i) In
general. A separate Related Person Elec-
tion must be made with respect to related
person sales made by a taxpayer for each
eligible trade or business of the taxpayer.
The election applies only to such trade
or business for which the Related Person
Election is made. An election under this
section applies to all sales to related per-
sons (including between members of the
same consolidated group) of eligible com-
ponents produced by the taxpayer during
the taxable year with respect to each trade
or business for which the Related Person
Election is made and is irrevocable for
the taxable year for which the election is
made. An election under paragraph (d)(2)
(i) of this section applies solely for pur-
poses of the section 45X credit and the
section 45X regulations (and the regula-
tions in this chapter under sections 6417
and 6418 related to the section 45X credit).
(ii) Application to consolidated groups.
For a trade or business of a consolidated
group, a Related Person Election must be
made by the agent for the group on behalf
of the members claiming the section 45X
credit and filed with the group’s timely
filed original Federal income tax return,
including extensions, with respect to each
trade or business that the consolidated
group conducts. See §1.1502-77 (provid-
ing rules regarding the status of the com-
mon parent as agent for its members). A
separate election must be filed on behalf
of each member claiming the section 45X
credit, and each election must include the
name and EIN of the agent for the group
and the member on whose behalf the elec-
tion is being made.
(iii) Application to partnerships. The
Related Person Election for a partnership
must be made on the partnership’s timely
filed original Federal income tax return,
including extensions, with respect to each
trade or business that the partnership con-
ducts. The election applies only to such
trade or business for which the Related
Person Election is made. An election by
a partnership does not apply to any trade
or business conducted by a partner outside
the partnership.
(4) Anti-abuse rule—(i) In general. A
Related Person Election may not be made
if, with respect to the eligible components
relevant to such election, the taxpayer fails
to provide the information described in
paragraph (d)(2) of this section, provides
information described in paragraph (d)(2)
of this section that shows that such com-
ponents are described in paragraph (d)(4)
(ii) or (iii) of this section, or such compo-
nents are described in paragraph (d)(4)(ii)
or (iii) of this section.
(ii) Improper use. For purposes of this
paragraph (d)(4) the term improper use
means a use that is wasteful, such as dis-
carding, disposing of, or destroying the
eligible component without putting it to
a productive use by the related person to
which the eligible component is sold.
(iii) Defective components. The term
defective component means a component
that does not meet the requirements of
section 45X and the section 45X regula-
tions.
(e) Sales of integrated components to
related person—(1) In general. For pur-
poses of section 45X and the section 45X
regulations (and the regulations in this
chapter under sections 6417 and 6418
related to the section 45X credit), a tax-
payer that produces and then sells an eli-

Bulletin No. 2024–51 1331 December 16, 2024
gible component to a related person, who
then integrates, incorporates, or assembles
the taxpayer’s eligible component into
another complete and distinct eligible
component that is subsequently sold to an
unrelated person, may claim a section 45X
credit (or make an election under section
6417 or section 6418) with respect to the
taxable year in which the related person’s
sale to the unrelated person occurs.
(2) Examples. The following examples
illustrate the rules provided in paragraph
(e)(1) of this section.
(i) Example 1: Sales of multiple incorporated eli-
gible components to related persons. X and Y are C
corporations that are members of a group of trades
or businesses under common control under section
52(b), and thus are related persons under section
45X(d)(1) and paragraph (b)(2) of this section. Each
of X and Y has a calendar year taxable year. Z is an
unrelated person. X and Y are in the trade or business
of producing and selling photovoltaic wafers and
cells. X produces and sells photovoltaic wafers to Y
in 2023. Y incorporates the photovoltaic wafers into
photovoltaic cells and sells the photovoltaic cells to
Z in 2024. X may claim a section 45X credit for the
sale of the photovoltaic wafers in 2024, the taxable
year of X in which Y sells the photovoltaic cells to Z.
(ii) Example 2: Sales of multiple incorporated
eligible components to related and unrelated per-
sons. W, X, and Y are domestic C corporations that
are members of a group of trades or businesses under
common control under section 52(b), and thus are
related persons under section 45X(d)(1) and para-
graph (b)(2) of this section. Each of W, X, and Y has
a calendar year taxable year. W produces electrode
active materials (EAMs) and sells the EAMs to X in
2023. In 2024, X incorporates the EAMs into battery
cells that it produces and sells the battery cells to Y.
In 2025, Y incorporates the battery cells into battery
modules (within the meaning of §1.45X-3(e)(4)(i)
(A)) that it produces and sells the battery modules to
Z, an unrelated person. W may claim a section 45X
credit for EAMs sold to X, X may claim a section
45X credit for the battery cells sold to Y, and Y may
claim a section 45X credit for the battery modules
sold to Z in 2025, the taxable year of each of W, X,
and Y in which the battery modules are sold to Z.
(3) Special rules applicable to related
person election—(i) In general. If a tax-
payer makes a valid Related Person Elec-
tion under section 45X(a)(3)(B)(i) and
paragraph (d)(1) of this section, and the
taxpayer produces and then sells an eli-
gible component to a related person, who
then integrates, incorporates, or assem-
bles the taxpayer’s eligible component
into another complete and distinct eligible
component that is subsequently sold to
an unrelated person, the taxpayer’s sale
of the eligible component to the related
person is treated (solely for purposes of
the section 45X credit and the section
45X regulations, and the regulations in
this chapter under sections 6417 and 6418
related to the section 45X credit) as if
made to an unrelated person in the taxable
year in which the sale to the related person
occurs.
(ii) Example: Sales of multiple inte-
grated eligible components to related and
unrelated persons with a related person
election. W, X, and Y are domestic C cor-
porations that are members of a group of
trades or businesses under common con-
trol and thus are related persons under
section 45X(d)(1) and paragraph (b)(2) of
this section. Each of W, X, and Y has a cal-
endar year taxable year. W produces elec-
trode active materials (EAMs) and sells
the EAMs to X in 2023. W makes a valid
Related Person Election under paragraph
(d)(1) of this section in 2023 with regard
to the sale. In 2024, X incorporates the
EAMs into battery cells that it produces
and sells the battery cells to Y. X makes a
valid Related Person Election under para-
graph (d)(1) of this section in 2024 with
regard to the sale. In 2025, Y incorporates
the battery cells into battery modules that
it produces and sells the battery modules
to Z, an unrelated person. W may claim a
section 45X credit for the sale of the EAMs
in 2023 because the sale to X is treated as
if made to an unrelated person solely for
purposes of section 45X(a). X may claim
a section 45X credit for the sale of the bat-
tery cells in 2024 because the sale to Y is
treated as if made to an unrelated person
solely for purposes of section 45X(a). Y
may claim a section 45X credit for the sale
of battery modules in 2025 because Z is an
unrelated person.
(f) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after October
28, 2024.
§1.45X-3 Eligible components.
(a) In general. For purposes of the sec-
tion 45X credit, eligible component means
any solar energy component (as defined in
paragraph (b) of this section), any wind
energy component (as defined in para-
graph (c) of this section), any inverter (as
defined in paragraph (d) of this section),
any qualifying battery component (as
defined in paragraph (e) of this section),
and any applicable critical mineral (as
defined in §1.45X-4(b)). See paragraph (f)
of this section for certain phase-out rules
applicable to eligible components other
than applicable critical minerals.
(b) Solar energy components. Solar
energy component means a solar mod-
ule, photovoltaic cell, photovoltaic wafer,
solar grade polysilicon, torque tube, struc-
tural fastener, or polymeric backsheet,
each as defined in this paragraph (b).
(1) Photovoltaic cell—(i) Definition.
Photovoltaic cell means the smallest
semiconductor element of a solar module
that performs the immediate conversion
of light into electricity that is either a thin
film photovoltaic cell or a crystalline pho-
tovoltaic cell.
(ii) Credit amount. For a photovoltaic
cell, the credit amount is equal to the prod-
uct of 4 cents multiplied by the capacity
of such photovoltaic cell. The capacity of
each photovoltaic cell is expressed on a
direct current watt basis. Capacity is the
nameplate capacity in direct current watts
using Standard Test Conditions (STC), as
defined by the International Electrotech-
nical Commission (IEC). In the case of
a tandem technology produced in serial
fashion, such as a monolithic multijunc-
tion cell composed of two or more sub-
cells, capacity must be measured at the
point of sale at the end of the single cell
production unit. In the case of a four-ter-
minal tandem technology produced by
mechanically stacking two distinct cells
or interconnected layers, capacity must
be measured for each cell at each point of
sale. If a cell is sold to a customer who
will use it as the bottom cell in a tandem
module, its capacity should be measured
with the customer’s intended top cell
placed between the bottom cell and the
one-sun light source.
(iii) Substantiation. The taxpayer must
document the capacity of a photovoltaic
cell in a bill of sale or design documen-
tation, such as an IEC certification (for
example, IEC 61215 or IEC 60904).
(2) Photovoltaic wafer—(i) Definition.
Photovoltaic wafer means a thin slice,
sheet, or layer of semiconductor material
of at least 240 square centimeters that com-
prises the substrate or absorber layer of one
or more photovoltaic cells. A photovoltaic
wafer must be produced by a single man-

December 16, 2024 1332 Bulletin No. 2024–51
ufacturer by forming an ingot from mol-
ten polysilicon (for example, Czochralski
method) and then subsequently slicing it
into wafers, forming molten or evaporated
polysilicon into a sheet or layer, or depos-
iting a thin-film semiconductor photon
absorber into a sheet or layer (that is, thin-
film deposition).
(ii) Credit amount. For a photovoltaic
wafer, the credit amount is $12 per square
meter.
(3) Polymeric backsheet—(i) Defini-
tion. Polymeric backsheet means a sheet
on the back of a solar module, composed,
at least in part, of a polymer, that acts as
an electric insulator and protects the inner
components of such module from the sur-
rounding environment.
(ii) Credit amount. For a polymeric
backsheet, the credit amount is 40 cents
per square meter.
(4) Solar grade polysilicon—(i) Defi-
nition. Solar grade polysilicon means sil-
icon that is suitable for use in photovoltaic
manufacturing and purified to a minimum
purity of 99.999999 percent silicon by
mass. Satisfaction of the minimum purity
requirement will be determined in accor-
dance with the standards provided in SEMI
Specification PV17-1012, Category 1.
(ii) Credit amount. For solar grade
polysilicon, the credit amount is $3 per
kilogram.
(5) Solar module—(i) Definition. Solar
module means the connection and lami-
nation of photovoltaic cells into an envi-
ronmentally protected final assembly that
is—
(A) Suitable to generate electricity
when exposed to sunlight; and
(B) Ready for installation without an
additional manufacturing process.
(ii) Credit amount. For a solar module,
the credit amount is equal to the product
of 7 cents multiplied by the capacity of
such module. The capacity of each solar
module is expressed on a direct current
watt basis. Capacity is the nameplate
capacity in direct current watts using STC,
as defined by the IEC.
(iii) Substantiation. The taxpayer must
document the capacity of a solar module
in a bill of sale or design documentation,
such as an IEC certification (for example,
IEC 61215 or IEC 61646).
(6) Solar tracker. Solar tracker means
a mechanical system that moves solar
modules according to the position of
the sun and to increase energy output. A
torque tube (as defined in paragraph (b)
(7) of this section) or structural fastener
(as defined in paragraph (b)(8) of this sec-
tion) are solar tracker components that are
eligible components for purposes of the
section 45X credit.
(7) Torque tube—(i) Definition. Torque
tube means a structural steel support ele-
ment (including longitudinal purlins)
that—
(A) Is part of a solar tracker;
(B) Is of any cross-sectional shape;
(C) May be assembled from individu-
ally manufactured segments;
(D) Spans longitudinally between
foundation posts;
(E) Supports solar panels and is con-
nected to a mounting attachment for solar
panels (with or without separate module
interface rails); and
(F) Is rotated by means of a drive sys-
tem.
(ii) Credit amount. For a torque tube,
the credit amount is 87 cents per kilogram.
(iii) Substantiation. The taxpayer must
document that a torque tube is part of a
solar tracker with a specification sheet,
bill of sale, or other similar documentation
that explicitly describes its application as
part of a solar tracker.
(8) Structural fastener—(i) Definition.
Structural fastener means a component
that is used—
(A) To connect the mechanical and
drive system components of a solar tracker
to the foundation of such solar tracker;
(B) To connect torque tubes to drive
assemblies; or
(C) To connect segments of torque
tubes to one another.
(ii) Credit amount. For a structural fas-
tener, the credit amount is $2.28 per kilo-
gram.
(iii) Substantiation. The taxpayer
must document that a structural fastener
is used in a manner described in para-
graph (b)(8)(i)(A), (B), or (C) of this sec-
tion with a bill of sale or other similar
documentation that explicitly describes
such use.
(c) Wind energy components. Wind
energy component means a blade, nacelle,
tower, offshore wind foundation, or related
offshore wind vessel, each as defined in
this paragraph (c).
(1) Blade—(i) Definition. Blade means
an airfoil-shaped blade that is responsible
for converting wind energy to low-speed
rotational energy.
(ii) Credit amount. For a blade, the
credit amount is equal to the product of 2
cents multiplied by the total rated capacity
of the completed wind turbine for which
the blade is designed.
(2) Offshore wind foundation—(i) Defi-
nition. Offshore wind foundation means
the component (including transition piece)
that secures an offshore wind tower and
any above-water turbine components to
the seafloor using—
(A) Fixed platforms, such as offshore
wind monopiles, jackets, or gravity-based
foundations; or
(B) Floating platforms and associated
mooring systems.
(ii) Credit amount. For a fixed off-
shore wind foundation platform, the credit
amount is equal to the product of 2 cents
multiplied by the total rated capacity of
the completed wind turbine for which the
fixed offshore wind foundation platform
is designed. For a floating offshore wind
foundation platform, the credit amount is
equal to the product of 4 cents multiplied
by the total rated capacity of the com-
pleted wind turbine for which the float-
ing offshore wind foundation platform is
designed.
(3) Nacelle—(i) Definition. Nacelle
means the assembly of the drivetrain and
other tower-top components of a wind tur-
bine (with the exception of the blades and
the hub) within their cover housing.
(ii) Credit amount. For a nacelle, the
credit amount is equal to the product of 5
cents multiplied by the total rated capacity
of the completed wind turbine for which
the nacelle is designed.
(4) Related offshore wind vessel—(i)
Definition. Related offshore wind vessel
means any vessel that is purpose-built or
retrofitted for purposes of the develop-
ment, transport, installation, operation,
or maintenance of offshore wind energy
components. A vessel is purpose-built
for development, transport, installation,
operation, or maintenance of offshore
wind energy components if it is built to
be capable of performing such functions
and it is of a type that is commonly used
in the offshore wind industry. A vessel
is retrofitted for development, transport,

Bulletin No. 2024–51 1333 December 16, 2024
installation, operation, or maintenance
of offshore wind energy components if
such vessel was incapable of perform-
ing such functions prior to being retro-
fitted, the retrofit causes the vessel to be
capable of performing such functions,
and the retrofitted vessel is of a type that
is commonly used in the offshore wind
industry.
(ii) Credit amount. For a related off-
shore wind vessel, the credit amount is
equal to 10 percent of the sales price of
the vessel. The sales price of the vessel,
determined under Federal income tax
principles, does not include the price of
maintenance, services, or other similar
items that may be sold with the vessel. For
a related offshore wind vessel with respect
to which an election under section 45X(a)
(3)(B)(i) has been made, such election will
not cause the sale price of such vessel to
be treated as having been determined with
respect to a transaction between uncon-
trolled taxpayers for purposes of section
482 of the Code and the regulations in this
chapter.
(5) Tower—(i) Definition. Tower means
a tubular or lattice structure that supports
the nacelle and rotor of a wind turbine.
(ii) Credit amount. For a tower, the
credit amount is equal to the product of 3
cents multiplied by the total rated capacity
of the completed wind turbine for which
the tower is designed.
(6) Total rated capacity of the com-
pleted wind turbine. For purposes of this
section, total rated capacity of the com-
pleted wind turbine means, for the com-
pleted wind turbine for which a blade,
nacelle, offshore wind foundation, or
tower was manufactured and sold, the
nameplate capacity at the time of sale as
certified to the relevant national or inter-
national standards, such as IEC 61400, or
ANSI/ACP 101-1-2021, the Small Wind
Turbine Standard (Standard). Certification
of the turbine to such Standards must be
documented by a certificate issued by an
accredited certification body. The total
rated capacity of a wind turbine must be
expressed in watts.
(7) Substantiation. Taxpayers must
maintain specific documentation regard-
ing wind energy components for which a
section 45X credit is claimed. For blades,
nacelles, offshore wind foundations, or
towers, a taxpayer must document the tur-
bine model for which such component is
designed and the total rated capacity of the
completed wind turbine in technical docu-
mentation associated with the sale of such
component. For related offshore wind
vessel, such documentation could include
the contract to construct or retrofit (along
with retrofit plans), sales contract, U.S.
Coast Guard bill of sale, U.S. Coast Guard
Certificate of Documentation (COD), and
U.S. Coast Guard Certificate of Inspection
(COI).
(d) Inverters—(1) In general. Inverter
means an end product that is suitable to
convert direct current (DC) electricity
from one or more solar modules or cer-
tified distributed wind energy systems
into alternating current electricity. An end
product is suitable to convert DC elec-
tricity from one or more solar modules or
certified distributed wind energy systems
into alternating current electricity if, in the
form sold by the manufacturer, it is able
to connect with such modules or systems
and convert DC electricity to alternating
current electricity from such connected
source. The term inverter includes a cen-
tral inverter, commercial inverter, dis-
tributed wind inverter, microinverter, or
residential inverter. Only an inverter that
meets at least one of the requirements in
paragraphs (d)(2) through (7) of this sec-
tion is an eligible component for purposes
of the section 45X credit.
(2) Central inverter—(i) Definition.
Central inverter means an inverter that
is suitable for large utility-scale systems
and has a capacity that is greater than
1,000 kilowatts. The capacity of a cen-
tral inverter is expressed on an alternating
current watt basis. An inverter is suitable
for large utility-scale systems if, in the
form sold by the manufacturer, it is capa-
ble of serving as a component in a large
utility-scale system and meets the core
engineering specifications for such appli-
cation.
(ii) Credit amount. For a central
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 0.25 cents multiplied by the
total rated capacity of the central inverter.
(iii) Substantiation. The taxpayer must
document that a central inverter meets the
core engineering specifications for use
in a large utility-scale system and has a
capacity that is greater than 1,000 kilo-
watts with a specification sheet, bill of
sale, or other similar documentation that
explicitly describes such specifications
and capacity.
(3) Commercial inverter—(i) Defi-
nition. Commercial inverter means an
inverter that—
(A) Is suitable for commercial or utili-
ty-scale applications;
(B) Has a rated output of 208, 480, 600,
or 800 volt three-phase power; and
(C) Has a capacity expressed on an
alternating current watt basis that is not
less than 20 kilowatts and not greater than
125 kilowatts.
(ii) Suitable for commercial or util-
ity-scale applications. An inverter is
suitable for commercial or utility-scale
applications if, in the form sold by the
manufacturer, it is capable of serving as a
component in commercial or utility-scale
systems and meets the core engineering
specifications for such application.
(iii) Credit amount. For a commercial
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 2 cents multiplied by the total
rated capacity of the commercial inverter.
(iv) Substantiation. The taxpayer must
document that a commercial inverter
meets the core engineering specifications
for use in commercial or utility-scale
applications, the inverter’s rated output,
and the inverter’s capacity in a specifi-
cation sheet, bill of sale, or other similar
documentation.
(4) Distributed wind inverter—(i) In
general. Distributed wind inverter means
an inverter that is used in a residential or
non-residential system that utilizes one
or more certified distributed wind energy
systems and has a total rated output,
expressed on an alternating current watt
basis, of not greater than 150 kilowatts.
(ii) Certified distributed wind energy
system. Certified distributed wind energy
system means a wind energy system that
is certified by an accredited certification
agency to meet Standard 9.1-2009 of the
American Wind Energy Association; IEC
61400-1, 61400-2, 61400-11, 61400-12;
or ANSI/ACP 101-1-2021, the Standard,
including any subsequent revisions to or
modifications of such Standard that have
been approved by ANSI.

December 16, 2024 1334 Bulletin No. 2024–51
(iii) Credit amount. For a distributed
wind inverter the total rated capacity of
which is expressed on an alternating cur-
rent watt basis, the credit amount is equal
to the product of 11 cents multiplied by
the total rated capacity of the distributed
wind inverter.
(iv) Substantiation. The taxpayer must
document that a distributed wind inverter is
used in a residential or non-residential sys-
tem that utilizes one or more certified dis-
tributed wind energy systems with a spec-
ification sheet, bill of sale, or other similar
documentation that explicitly describes
such use and the total rated output of the
inverter on an alternating current watt basis.
(5) Microinverter—(i) Definition.
Microinverter means an inverter that—
(A) Is suitable to connect with one
solar module;
(B) Has a rated output described in
paragraph (d)(5)(ii) of this section; and
(C) Has a capacity, expressed on an
alternating current watt basis, that is not
greater than 650 watts.
(ii) Rated output. For purposes of para-
graph (d)(5)(i)(B) of this section, for an
inverter to be a microinverter, the inverter
must have a rated output of—
(A) 120 or 240 volt single-phase
power; or
(B) 208 or 480 volt three-phase power.
(iii) Suitable to connect to one solar
module—(A) In general. An inverter is
suitable to connect to one solar module if,
in the form sold by the manufacturer, it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity.
(B) Application to direct current (DC)
optimized inverter systems. A DC opti-
mized inverter system means an inverter
that is comprised of an inverter connected
to multiple DC optimizers that are each
designed to connect to one solar module.
A DC optimized inverter system is suit-
able to connect with one solar module if,
in the form sold by the manufacturer, it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity.
(C) Application to multi-module
inverters. A multi-module inverter
means an inverter that is comprised of
an inverter with independent connections
and DC optimizing components for two
or more modules. A multi-module micro-
inverter is suitable to connect with one
solar module if it is capable of connect-
ing to one or more solar modules and
regulating the DC electricity from each
module independently before that elec-
tricity is converted into alternating cur-
rent electricity.
(iv) Credit amount—(A) In general.
For a microinverter the total rated capac-
ity of which is expressed on an alternating
current watt basis, the credit amount is
equal to the product of 11 cents multiplied
by the total rated capacity of the microin-
verter.
(B) DC optimized inverter systems. A
DC optimized inverter system qualifies as
a microinverter if it meets the requirements
of paragraph (d)(5)(i) of this section. For
purposes of paragraph (d)(5)(i)(C) of this
section, a DC optimized inverter system’s
capacity is determined separately for each
DC optimizer paired with the inverter in
a DC optimized inverter system. If each
DC optimizer paired with the inverter in
a DC optimized inverter system meets
the requirements of paragraph (d)(5)(i)
of this section, then the DC optimized
inverter system qualifies as a microin-
verter. The credit amount for a DC opti-
mized inverter system that qualifies as a
microinverter is equal to the product of
11 cents multiplied by the lesser of the
sum of the alternating current capacity of
each DC optimizer when paired with the
inverter in the DC optimized inverter sys-
tem or the alternating current capacity of
the inverter in the DC optimized inverter
system. For purposes of this paragraph
(d)(5)(iv)(B), capacity must be measured
in watts of alternating current converted
from DC electricity by the inverter in a
DC optimized inverter system. For a DC
optimized inverter system to qualify as a
microinverter, a taxpayer must produce
and sell the inverter and the DC optimiz-
ers in the DC optimized inverter system
together as a combined end product.
(C) Multi-module inverters. A
multi-module inverter qualifies as a
microinverter if it meets the requirements
of paragraph (d)(5)(i) of this section. For
purposes of paragraph (d)(5)(i)(C) of this
section, a multi-module inverter’s capac-
ity is determined separately for each inter-
nal DC optimizer paired with the inverter.
The credit amount for a multi-module
inverter is equal to the product of 11 cents
multiplied by the total alternating cur-
rent capacity of the DC optimizers in the
multi-module inverter when paired with
the inverter in the system. For purposes
of this paragraph (d)(5)(iv)(C), capacity
must be measured in watts of alternating
current converted from DC electricity by
the inverter in a multi-module microin-
verter.
(v) Substantiation. The taxpayer must
document that a microinverter meets the
core engineering specifications to be suit-
able to connect with one solar module, the
inverter’s rated output, and the inverter’s
capacity in a specification sheet, bill of
sale, or other similar documentation. In
the case of a DC optimized inverter sys-
tem, the taxpayer must also document that
the DC optimizers and the inverter in such
system were sold as a combined end prod-
uct.
(6) Residential inverter—(i) Definition.
Residential inverter means an inverter
that—
(A) Is suitable for a residence;
(B) Has a rated output of 120 or 240
volt single-phase power; and
(C) Has a capacity expressed on an
alternating current watt basis that is not
greater than 20 kilowatts.
(ii) Suitable for a residence. An inverter
is suitable for a residence if, in the form
sold by the manufacturer, it is capable of
serving as a component in a residential
system and meets the core engineering
specifications for such application.
(iii) Credit amount. For a residential
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 6.5 cents multiplied by the total
rated capacity of the residential inverter.
(iv) Substantiation. The taxpayer must
document that a residential inverter meets
the core engineering specifications for use
in a residence, the inverter’s rated output,
and the inverter’s capacity in a specifi-
cation sheet, bill of sale, or other similar
documentation.
(7) Utility inverter—(i) Definition.
Utility inverter means an inverter that—
(A) Is suitable for commercial or utili-
ty-scale systems;

Bulletin No. 2024–51 1335 December 16, 2024
(B) Has a rated output of not less than
600 volt three-phase power; and
(C) Has a capacity expressed on an
alternating current watt basis that is
greater than 125 kilowatts and not greater
than 1000 kilowatts.
(ii) Suitable for commercial or utili-
ty-scale systems. An inverter is suitable
for commercial or utility-scale systems if,
in the form sold by the manufacturer, it is
capable of serving as a component in such
systems and meets the core engineering
specifications for such application.
(iii) Credit amount. For a utility
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 1.5 cents multiplied by the total
rated capacity of the utility inverter.
(iv) Substantiation. The taxpayer must
document that a utility inverter meets the
core engineering specifications for use in
commercial or utility-scale systems, the
inverter’s rated output, and the inverter’s
capacity in a specification sheet, bill of
sale, or other similar documentation.
(e) Qualifying battery component—(1)
In general. Qualifying battery component
means electrode active materials, battery
cells, or battery modules, each as defined
in this paragraph (e).
(2) Electrode active materials—(i)
Definitions—(A) Electrode active materi-
als. Electrode active materials means cath-
ode electrode materials, anode electrode
materials, and electrochemically active
materials that contribute to the electro-
chemical processes necessary for energy
storage. Electrode active materials do
not include battery management systems,
terminal assemblies, cell containments,
gas release valves, module containments,
module connectors, compression plates,
straps, pack terminals, bus bars, thermal
management systems, and pack jackets.
(B) Cathode electrode materials.
Cathode electrode materials means the
materials that comprise the cathode of a
commercial battery technology, such as
binders, and current collectors (for exam-
ple, cathode foils).
(C) Anode electrode materials. Anode
electrode materials means the materials
that comprise the anode of a commercial
battery technology, including anode foils.
(D) Electrochemically active materi-
als. Electrochemically active materials
that contribute to the electrochemical
processes necessary for energy storage
means battery-grade materials that enable
the electrochemical storage within a com-
mercial battery technology. In addition to
solvents, additives, and electrolyte salts,
electrochemically active materials that
contribute to the electrochemical pro-
cesses necessary for energy storage may
include electrolytes, catholytes, anolytes,
separators, and metal salts and oxides.
(E) Example. A commercial battery
technology contains Cathode Active
Material (CAM), which is a powder used
in the battery that is made by processing
and combining Battery-Grade Materials
A and B. Battery-Grade Material A is a
derivative of Material C, which has been
refined to the necessary level to enable
electrochemical storage. The production
costs for CAM and its direct inputs (Bat-
tery-Grade Material A and Battery-Grade
Material B) are eligible for the section
45X credit for electrode active materials,
but the unrefined Material C is not.
(F) Battery-grade materials. Bat-
tery-grade materials means the processed
materials found in a final battery cell or an
analogous unit, or the direct battery-grade
precursors to those processed materials.
(ii) Credit amount. For an electrode
active material, the credit amount is equal
to 10 percent of the costs incurred by the
taxpayer with respect to production of
such materials.
(iii) Production processes for electrode
active materials—(A) Conversion. For
purposes of section 45X, the term con-
version means a chemical transformation
from one species to another.
(B) Purification. For purposes of sec-
tion 45X, the term purification means
increasing the mass fraction of a certain
element.
(iv) Production costs incurred—(A)
In general—(1) Definition of production
costs incurred. Costs incurred by the tax-
payer with respect to production of an
electrode active material includes all costs
as defined in §1.263A-1(e) that are paid or
incurred within the meaning of section 461
of the Code by the taxpayer for the pro-
duction of such electrode active material
only, including direct materials costs as
defined in §1.263A-1(e)(2)(i)(A), or indi-
rect materials costs as defined in §1.263A-
1(e)(3)(ii)(E), but does not include direct
or indirect materials costs that relate to
the purchase of materials that are an eli-
gible component at the time of acquisition
(for example, an electrode active material
as defined in paragraph (e)(2)(i) of this
section or applicable critical mineral as
defined in §1.45X-4(b)). This definition
of production costs incurred also includes
any costs incurred by the taxpayer related
to the extraction, as defined in paragraph
(e)(2)(iv)(B) of this section, of raw mate-
rials in the United States or a United States
territory, but only if those costs are paid
or incurred by the taxpayer that claims
the section 45X credit with respect to the
relevant electrode active material. Section
263A of the Code and the regulations in
this chapter under section 263A apply
solely to identify the types of costs that are
includible in production costs incurred for
purposes of computing the amount of the
section 45X credit, but do not apply for
any other purpose, such as to determine
whether a taxpayer is engaged in produc-
tion activities.
(2) Production costs for production of
incorporated eligible components. The
production costs that a taxpayer pays or
incurs in the production of an eligible
component (whether produced domestically
or not) that the taxpayer then incorporates
into a further distinct electrode active
material within the meaning of §1.45X-
1(f)(1) are not included in the costs
incurred by the taxpayer in producing the
further distinct electrode active material.
A taxpayer may not include the same
production costs in the calculation of the
credit amount for more than one eligible
component. For example, if the taxpayer
pays or incurs production costs of $50X
for eligible component 1 and an additional
$100X of production costs for eligible
component 2 that included integrating eli-
gible component 1 within the meaning of
§1.45X-1(f)(1), then the production costs
for eligible component 1 equal $50X and
the production costs for eligible compo-
nent 2 equal $100X.
(3) Examples. The following examples
illustrate the rules of this section:
(i) Example 1. Taxpayers X, Y and Z are unrelated
C corporations that have calendar year taxable years.
In 2024, X extracts raw nickel from natural mineral
deposits located in the United States and purifies the
extracted material to 99% nickel by mass (qualify-
ing nickel) as required by section 45X(c)(6)(S) and
§1.45X-4(b)(19)(ii). Y subsequently purchases the

December 16, 2024 1336 Bulletin No. 2024–51
qualifying nickel and uses the material to produce
battery-grade nickel salts which qualify as electrode
active materials within the meaning of paragraph (e)
(2) of this section. Y sells the battery-grade nickel
salts to Z in tax year 2026. Y may claim a section
45X credit for the battery-grade nickel salts in tax
year 2026 because Y produced, within the meaning
of §1.45X-1(c)(2), an eligible component. In calcu-
lating its production costs with respect to such credit,
Y may not include the purchase price it paid to X for
the qualifying nickel because the qualifying nickel
met the minimum purity requirement prescribed by
section 45X(c)(6)(S) such that the material consti-
tuted an applicable critical mineral (and, accord-
ingly, an eligible component) at the time at which Y
acquired the qualifying nickel.
(ii) Example 2. Assume the facts are the same
as in paragraph (e)(2)(iv)(A)(3)(i) of this section
(Example 1), except that X purifies the extracted
raw nickel material to a purity of 90% nickel by
mass, rather than 99% nickel by mass as required
by section 45X(c)(6)(S) and §1.45X-4(b)(19)(ii). Y
may claim a section 45X credit for the battery-grade
nickel salts in tax year 2026 because Y produced,
within the meaning of §1.45X-1(c)(2), an eligible
component. In calculating its production costs with
respect to such credit, Y may include the purchase
price of the 90% nickel material among its produc-
tion costs, provided that Y satisfies the substantia-
tion requirements described in paragraph (e)(2)(iv)
(C) of this section, because, at the time at which Y
acquired such material, the material did not meet the
minimum purity as required by section 45X(c)(6)(S)
to constitute an applicable critical mineral.
(B) Definition of extraction. The term
extraction means the activities performed
to harvest minerals or natural resources
from the ground or from a body of water.
Extraction includes, but is not limited to,
operating equipment to harvest minerals
or natural resources from mines and wells
and the physical processes involved in
refining. Extraction also includes oper-
ating equipment to extract minerals or
natural resources from the waste or resi-
due of prior extraction, including crude
oil extraction to the extent that processes
applied to that crude oil yield an applica-
ble critical mineral or an electrode active
material as a byproduct. Extraction con-
cludes when activities are performed to
convert raw mined or harvested products
or raw well effluent to substances that can
be readily transported or stored for direct
use in critical mineral or electrode active
material processing. Extraction does not
include activities that begin with a recy-
clable commodity (as such activities are
recycling). Extraction does not include the
chemical and thermal processes involved
in refining.
(C) Substantiation. In order to include
direct or indirect materials costs as defined
in §1.263A-1(e)(2)(i)(A) and (e)(3)(ii)(E) as
production costs when calculating a section
45X credit for the production and sale of an
electrode active material, a taxpayer, as part
of filing an annual tax return (or a return for
a short year within the meaning of section
443 of the Code), must include the informa-
tion in paragraph (e)(2)(iv)(C)(1) of this sec-
tion as an attachment to that return, prepare
the information required in paragraphs (e)
(2)(iv)(C)(2) through (4) of this section and
maintain that information in the taxpayer’s
books and records under section 6001, and
comply with directions for the information
required in paragraph (e)(2)(iv)(C)(5) of this
section as specified in guidance:
(1) Certifications from any supplier,
including the supplier’s employer identi-
fication number and that is signed under
penalties of perjury, from which the tax-
payer purchased any constituent elements,
materials, or subcomponents of the tax-
payer’s electrode active material, stating
that the supplier is not claiming the sec-
tion 45X credit with respect to any of the
material acquired by the taxpayer, nor is
the supplier aware that any prior supplier
in the chain of production of that material
claimed a section 45X credit for the mate-
rial.
(2) A document that provides an anal-
ysis of any constituent elements, materi-
als, or subcomponents that concludes the
material did not meet the definition of an
eligible component (for example, did not
meet the definition of applicable critical
mineral or electrode active material) at the
time of acquisition by the taxpayer. The
document may be prepared by the tax-
payer or ideally by an independent third-
party.
(3) A list of all direct and indirect mate-
rial costs and the amount of such costs that
were included within the taxpayer’s total
production cost for each electrode active
material.
(4) A document related to the taxpay-
er’s production activities with respect to
the direct and indirect material costs that
establishes the materials were used in the
production of the electrode active mate-
rial. The document may be prepared by
the taxpayer or ideally by an independent
third-party.
(5) Any other information related to
the direct or indirect materials specified in
guidance.
(D) Failure to provide the documenta-
tion described in paragraph (e)(2)(iv)(C)
of this section with the return filing, or
providing an available upon request state-
ment, will constitute a failure to substan-
tiate the claim.
(v) Materials that are both electrode
active materials and applicable critical
minerals—(A) In general. A material that
qualifies as an electrode active material
and an applicable critical material is eli-
gible for the section 45X credit. A tax-
payer may claim the section 45X credit
with respect to such material either as an
electrode active material or an applicable
critical material, but not both.
(B) Example. Lithium carbonate is an
electrode active material because it is a
direct battery-grade precursor to electro-
lyte salts, which are processed materials
found in a final battery cell. Lithium car-
bonate is also eligible for the 45X critical
minerals credit. A taxpayer who produces
and sells lithium carbonate may claim
either the electrode active material credit
or the critical mineral credit for its produc-
tion and sale of lithium carbonate but may
not take both credits.
(3) Battery cells—(i) Definition. Bat-
tery cell means an electrochemical cell—
(A) Comprised of one or more positive
electrodes and one or more negative elec-
trodes;
(B) With a volumetric energy density
of not less than 100 watt-hours per liter;
and
(C) Capable of storing at least 12 watt-
hours of energy.
(ii) Capacity measurement. Taxpayers
must measure the capacity of a battery cell
in accordance with a national or interna-
tional standard, such as IEC 60086-1 (Pri-
mary Batteries), or an equivalent standard.
Taxpayers can reference the United States
Advanced Battery Consortium (USABC)
Battery Test Manual for additional guid-
ance.
(iii) Credit amount. For a battery cell,
the credit amount is equal to the product
of $35 multiplied by the capacity of such
battery cell, subject to the limitation pro-
vided in paragraph (e)(5) of this section.
The capacity of a battery cell is expressed
on a kilowatt-hour basis.
(4) Battery module definitions and
applicable rules—(i) Battery module
defined. The term battery module means

Bulletin No. 2024–51 1337 December 16, 2024
a module described in paragraph (e)(4)(i)
(A) or (B) of this section with an aggregate
capacity of not less than 7 kilowatt-hours
(or, in the case of a module for a hydro-
gen fuel cell vehicle, not less than 1 kilo-
watt-hour).
(A) Modules using battery cells. A
module using battery cells, is a module
with two or more battery cells that are
configured electrically, in series or paral-
lel, to create voltage or current, as appro-
priate, to a specified end use, meaning
an end-use configuration of battery tech-
nologies. An end-use configuration is the
product that combines cells into a module
such that any subsequent manufacturing is
done to the module rather than to the cells.
Where multiple points in a supply chain
may be eligible under this section, the first
module produced and sold that meets the
requirements of this section and the kilo-
watt-hour requirement in paragraph (e)(4)
(i) of this section will be the only module
eligible.
(B) Modules with no battery cells.
A module with no battery cells means a
product with a standardized manufactur-
ing process and form that is capable of
storing and dispatching useful energy, that
contains an energy storage medium that
remains in the module (for example, it is
not consumed through combustion), and
that is not a custom-built electricity gen-
eration or storage facility. For example,
neither standalone fuel storage tanks nor
fuel tanks connected to engines or gener-
ation systems qualify as modules with no
battery cells.
(ii) Capacity measurement—(A) Mod-
ules using battery cells. Taxpayers must
measure the capacity of a module using
battery cells with a testing procedure that
complies with a national or international
standard published by a recognized stan-
dard setting organization. The capacity of
a battery module may not exceed the total
nameplate capacity of the battery cells in
the module. Taxpayers must measure the
capacity of a battery cell in accordance
with a national or international standard,
such as IEC 60086-1 (Primary Batteries),
or an equivalent standard. Taxpayers can
reference the USABC Battery Test Man-
ual for additional guidance.
(B) Modules with no battery cells.
Taxpayers must measure the capacity
of a module with no battery cells with a
testing procedure that complies with a
national or international standard pub-
lished by a recognized standard setting
organization. Taxpayers producing ther-
mal and thermochemical battery modules
described in paragraph (e)(4)(i)(B) of this
section must convert the energy storage
to a kilowatt-hour basis and provide both
methodology and testing regarding this
conversion. Such conversion of the kilo-
watt-hour basis cannot exceed the total
direct conversion of the total nameplate
capacity of the thermal battery module to
kilowatt-hours.
(C) Substantiation of capacity mea-
surement. Taxpayers must maintain the
testing standard and methodology with
respect to the capacity measurement
described in paragraphs (e)(4)(ii)(A) and
(B) of this section as part of books and
records under section 6001 and §1.6001-
1. The testing procedure and methodology
must consistently be used, subject to any
updated standard of the same methodol-
ogy and testing, for battery modules (with
or without cells) sold in the taxpayer’s
trade or business.
(iii) Credit amount—(A) Modules
using battery cells. For a battery module
with cells, the credit amount is equal to the
product of $10 multiplied by the capacity
of such battery module, subject to the lim-
itation provided in paragraph (e)(5) of this
section. The capacity of each battery mod-
ule is expressed on a kilowatt-hour basis.
(B) Modules with no battery cells. For
a battery module without cells, the credit
amount is equal to the product of $45
multiplied by the capacity of such bat-
tery module, subject to the limitation pro-
vided in paragraph (e)(5) of this section.
The capacity of each battery module is
expressed on a kilowatt-hour basis.
(5) Limitation on capacity of battery
cells and battery modules—(i) In general.
For purposes of paragraphs (e)(3)(iii) and
(e)(4)(iii) of this section, the capacity
determined with respect to a battery cell or
battery module must not exceed a capaci-
ty-to-power ratio of 100:1.
(ii) Capacity to power ratio. For pur-
poses of paragraph (e)(5)(i) of this sec-
tion, capacity-to-power ratio means,
with respect to a battery cell or battery
module, the ratio of the capacity of such
cell or module to the maximum discharge
amount of such cell or module.
(f) Phase out rule—(1) In general.
Except as provided in paragraph (f)(3)
of this section, in the case of any eligi-
ble component sold after December 31,
2029, the amount of the section 45X credit
determined with respect to such eligible
component must be equal to the product
of—
(i) The amount determined under this
section with respect to such eligible com-
ponent, multiplied by
(ii) The phase out percentage under
paragraph (f)(2) of this section.
(2) Phase out percentages. The phase
out percentage is equal to—
(i) 75 percent for eligible components
sold during calendar year 2030;
(ii) 50 percent for eligible components
sold during calendar year 2031;
(iii) 25 percent for eligible components
sold during calendar year 2032, and
(iv) Zero percent for eligible compo-
nents sold after calendar year 2032.
(3) Exception for applicable critical
minerals. The phase out rules described
in paragraphs (f)(1) and (2) of this section
apply to all eligible components except
applicable critical minerals.
(g) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after October
28, 2024.
§1.45X-4 Applicable critical minerals.
(a) In general. The term applicable
critical mineral means any of the miner-
als that are listed in section 45X(c)(6) and
defined in paragraph (b) of this section.
(b) Definitions. The following defi-
nitions apply for the purpose of this sec-
tion—
(1) [Reserved]
(2) Antimony. The term antimony
means antimony that is—
(i) Converted to antimony trisulfide
concentrate with a minimum purity of 90
percent antimony trisulfide by mass; or
(ii) Purified to a minimum purity of
99.65 percent antimony by mass.
(3) Barite. The term barite means bar-
ite that is barium sulfate purified to a min-
imum purity of 80 percent barite by mass.
(4) Beryllium. The term beryllium
means beryllium that is—

December 16, 2024 1338 Bulletin No. 2024–51
(i) Converted to copper-beryllium mas-
ter alloy; or
(ii) Purified to a minimum purity of 99
percent beryllium by mass.
(5) Cerium. The term cerium means
cerium that is—
(i) Converted to cerium oxide that is
purified to a minimum purity of 99.9 per-
cent cerium oxide by mass; or
(ii) Purified to a minimum purity of 99
percent cerium by mass.
(6) Cesium. The term cesium means
cesium that is—
(i) Converted to cesium formate or
cesium carbonate; or
(ii) Purified to a minimum purity of 99
percent cesium by mass.
(7) Chromium. The term chromium
means chromium that is—
(i) Converted to ferrochromium con-
sisting of not less than 60 percent chro-
mium by mass; or
(ii) Purified to a minimum purity of 99
percent chromium by mass.
(8) Cobalt. The term cobalt means
cobalt that is—
(i) Converted to cobalt sulfate; or
(ii) Purified to a minimum purity of
99.6 percent cobalt by mass.
(9) Dysprosium. The term dysprosium
means dysprosium that is—
(i) Converted to not less than 99 per-
cent pure dysprosium iron alloy by mass;
or
(ii) Purified to a minimum purity of 99
percent dysprosium by mass.
(10) Europium. The term europium
means europium that is—
(i) Converted to europium oxide that is
purified to a minimum purity of 99.9 per-
cent europium oxide by mass; or
(ii) Purified to a minimum purity of 99
percent of europium by mass.
(11) Fluorspar. The term fluorspar
means fluorspar that is—
(i) Converted to fluorspar that is puri-
fied to a minimum purity of 97 percent
calcium fluoride by mass; or
(ii) Purified to a minimum purity of 99
percent fluorspar by mass.
(12) Gadolinium. The term gadolinium
means gadolinium that is—
(i) Converted to gadolinium oxide that
is purified to a minimum purity of 99.9
percent gadolinium oxide by mass; or
(ii) Purified to a minimum purity of 99
percent gadolinium by mass.
(13) Germanium. The term germanium
means germanium that is—
(i) Converted to germanium tetrachlo-
ride; or
(ii) Purified to a minimum purity of
99.99 percent germanium by mass.
(14) Graphite. The term graphite means
natural or synthetic graphite that is purified
to a minimum purity of 99.9 percent gra-
phitic carbon by mass. The term 99.9 per-
cent graphitic carbon by mass means graph-
ite that is 99.9 percent carbon by mass.
(15) Indium. The term indium means
indium that is—
(i) Converted to—
(A) Indium tin oxide; or
(B) Indium oxide that is purified to a
minimum purity of 99.9 percent indium
oxide by mass; or
(ii) Purified to a minimum purity of 99
percent indium by mass.
(16) Lithium. The term lithium means
lithium that is—
(i) Converted to lithium carbonate or
lithium hydroxide; or
(ii) Purified to a minimum purity of
99.9 percent lithium by mass.
(17) Manganese. The term manganese
means manganese that is—
(i) Converted to manganese sulphate;
or
(ii) Purified to a minimum purity of
99.7 percent manganese by mass.
(18) Neodymium. The term neodymium
means neodymium that is—
(i) Converted to neodymium-pra-
seodymium oxide that is purified to a
minimum purity of 99 percent neodymi-
um-praseodymium oxide by mass;
(ii) Converted to neodymium oxide
that is purified to a minimum purity of
99.5 percent neodymium oxide by mass;
or
(iii) Purified to a minimum purity of
99.9 percent neodymium by mass.
(19) Nickel. The term nickel means
nickel that is—
(i) Converted to nickel sulphate; or
(ii) Purified to a minimum purity of 99
percent nickel by mass.
(20) Niobium. The term niobium means
niobium that is—
(i) Converted to ferronibium; or
(ii) Purified to a minimum purity of 99
percent niobium by mass.
(21) Tellurium. The term tellurium
means tellurium that is—
(i) Converted to cadmium telluride; or
(ii) Purified to a minimum purity of 99
percent tellurium by mass.
(22) Tin. The term tin means tin that
purified to low alpha emitting tin that—
(i) Has a purity of greater than 99.99
percent by mass; and
(ii) Possesses an alpha emission rate of
not greater than 0.01 counts per hour per
centimeter square.
(23) Tungsten. The term tungsten
means tungsten that is converted to ammo-
nium paratungstate or ferrotungsten.
(24) Vanadium. The term vanadium
means vanadium that is converted to fer-
rovanadium or vanadium pentoxide.
(25) Yttrium. The term yttrium means
yttrium that is—
(i) Converted to yttrium oxide that is
purified to a minimum purity of 99.999
percent yttrium oxide by mass; or
(ii) Purified to a minimum purity of
99.9 percent yttrium by mass.
(26) Other minerals. The following
minerals are also applicable critical miner-
als provided that such mineral is purified to
a minimum purity of 99 percent by mass:
(i) Arsenic.
(ii) Bismuth.
(iii) Erbium.
(iv) Gallium.
(v) Hafnium.
(vi) Holmium.
(vii) Iridium.
(viii) Lanthanum.
(ix) Lutetium.
(x) Magnesium.
(xi) Palladium.
(xii) Platinum.
(xiii) Praseodymium.
(xiv) Rhodium.
(xv) Rubidium.
(xvi) Ruthemium.
(xvii) Samarium.
(xviii) Scandium.
(xix) Tantalum.
(xx) Terbium.
(xxi) Thulium.
(xxii) Titanium.
(xxiii) Ytterbium.
(xxiv) Zinc.
(xxv) Zirconium.
(c) Credit amount—(1) In general. For
any applicable critical mineral, the credit
amount is equal to 10 percent of the costs
incurred by the taxpayer with respect to
production of such mineral.

Bulletin No. 2024–51 1339 December 16, 2024
(2) Production processes for applica-
ble critical minerals—(i) Conversion. For
purposes of section 45X, the term con-
version means a chemical transformation
from one species to another.
(ii) Purification. For purposes of sec-
tion 45X, the term purification means
increasing the mass fraction of a certain
element.
(3) Production costs incurred—(i) In
general. Costs incurred by the taxpayer
with respect to the production of appli-
cable critical minerals includes all costs
as defined in §1.263A-1(e) that are paid
or incurred within the meaning of sec-
tion 461 of the Code by the taxpayer for
the production of an applicable critical
mineral only, including direct or indirect
materials costs as defined in §1.263A-1(e)
(2)(i)(A) and (e)(3)(ii)(E), respectively,
but only if those direct or indirect material
costs do not relate to the purchase of mate-
rials that are an eligible component at the
time of acquisition (for example, an elec-
trode active material as defined in §1.45X-
3(e)(2)(i) or applicable critical mineral
as defined in paragraph (b) of this sec-
tion). This definition of production costs
incurred would include any costs incurred
by the taxpayer related to the extraction
of raw materials in the United States or a
United States territory, but only if those
costs are paid or incurred by the taxpayer
that claims the section 45X credit with
respect to the relevant applicable critical
mineral. Section 263A of the Code and the
regulations in this chapter under section
263A apply solely to identify the types
of costs that are includible in production
costs incurred for purposes of computing
the amount of the section 45X credit, but
do not apply for any other purpose, such
as to determine whether a taxpayer is
engaged in production activities.
(ii) Production costs for production of
incorporated eligible components. The
production costs that a taxpayer pays or
incurs in the production of an eligible
component (whether produced domesti-
cally or not) that the taxpayer then incor-
porates into a further distinct applicable
critical mineral within the meaning of
§1.45X-1(f)(1) are not included in the
costs incurred by the taxpayer in produc-
ing the further distinct applicable critical
mineral. A taxpayer may not include the
same production costs in the calculation
of the credit amount for more than one
eligible component. For example, if the
taxpayer pays or incurs production costs
of $50X for eligible component 1 and an
additional $100X of production costs for
eligible component 2 that included inte-
grating eligible component 1 within the
meaning of §1.45X-1(f)(1), then the pro-
duction costs for eligible component 1
equal $50X and the production costs for
eligible component 2 equal $100X.
(4) Substantiation. In order to include
direct or indirect materials costs as
defined in §1.263A-1(e)(2)(i)(A) and (e)
(3)(ii)(E) as production costs when cal-
culating a section 45X credit for the pro-
duction and sale of an applicable critical
mineral, a taxpayer, as part of filing an
annual tax return (or a return for a short
year within the meaning of section 443 of
the Code), must include the information
in paragraph (c)(4)(i) of this section as
an attachment to that return, prepare the
information required in paragraph (c)(4)
(ii) through (iv) of this section and main-
tain that information in the taxpayer’s
books and records under section 6001,
and comply with directions for the infor-
mation required in paragraph (c)(4)(v) of
this section as specified in guidance:
(i) Certification from any supplier,
including the supplier’s employer identi-
fication number and that is signed under
penalties of perjury, from which the tax-
payer purchased any constituent elements,
materials, or subcomponents of the tax-
payer’s applicable critical mineral, stating
that the supplier is not claiming the sec-
tion 45X credit with respect to any of the
material acquired by the taxpayer, nor is
the supplier aware that any prior supplier
in the chain of production of that material
claimed a section 45X credit for the mate-
rial.
(ii) A document that provides an anal-
ysis of any constituent elements, materi-
als, or subcomponents that concludes the
material did not meet the definition of
an eligible component (for example, an
applicable critical mineral or electrode
active material) at the time of acquisition
by the taxpayer. The document may be
prepared by the taxpayer or ideally by an
independent third-party.
(iii) A list of all direct and indirect mate-
rial costs and the amount of such costs that
were included within the taxpayer’s total
production cost for each applicable criti-
cal mineral.
(iv) A document related to the taxpay-
er’s production activities with respect to
the direct and indirect material costs that
establishes the materials were used in the
production of the applicable critical min-
eral. The document may be prepared by
the taxpayer or ideally by an independent
third-party.
(v) Any other information related to
the direct or indirect materials specified in
guidance.
(5) Failure to provide the documenta-
tion described in paragraph (c)(4) of this
section with the return filing, or provid-
ing an available upon request statement,
will constitute a failure to substantiate the
claim.
(d) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after October
28, 2024.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: October 17, 2024.
Aviva R. Aron-Dine,
Deputy Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register October
24, 2024, 8:45 a.m., and published in the issue of the
Federal Register for October 28, 2024, 89 FR 85798)
26 CFR 1.752-2: Partner’s share of recourse liabil-
ities

December 16, 2024 1340 Bulletin No. 2024–51
T.D. 10014
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Recourse Partnership
Liabilities and Related
Party Rules
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations relating to recourse lia-
bilities of a partnership and special rules
for related persons. These regulations
affect partnerships and their partners.
DATES: Effective date: These regulations
are effective on December 2, 2024.
Applicability dates: For dates of appli-
cability, see §§1.704-2(l)(1)(vi), 1.752-
2(l)(4), and 1.752-5(a).
FOR FURTHER INFORMATION
CONTACT: Concerning these final regu-
lations, contact Caroline Hay of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries), (202) 317-6850
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document amends the Income Tax
Regulations (26 CFR part 1) under section
752 of the Internal Revenue Code (Code)
regarding a partner’s share of a recourse
partnership liability (final regulations).
The final regulations are issued
under the express delegation of author-
ity under section 7805(a) of the Code,
which provides that “[t]he Secretary
shall prescribe all needful rules and
regulations for the enforcement of [the
Code], including all rules and regula-
tions as may be necessary by reason of
any alteration of law in relation to inter-
nal revenue.”
Background
Section 752(a) provides, in general,
that an increase in a partner’s share of part-
nership liabilities (or an increase in a part-
ner’s individual liabilities by reason of the
assumption by the partner of partnership
liabilities) will be considered a contribu-
tion of money by the partner to the part-
nership. Conversely, section 752(b) pro-
vides that a decrease in a partner’s share
of partnership liabilities (or a decrease in
a partner’s individual liabilities by reason
of the assumption by the partnership of the
individual liabilities) will be considered a
distribution of money to the partner by the
partnership.
When determining a partner’s share of
partnership liabilities, the existing regula-
tions under section 752 (existing §§1.752-1
through 1.752-3) distinguish between two
categories of liabilities—recourse and
nonrecourse. In general, a partnership
liability is recourse to the extent that a
partner or related person bears the eco-
nomic risk of loss (EROL) as provided in
existing §1.752-2 and nonrecourse to the
extent that no partner or related person
bears the EROL under existing §1.752-
2. See existing §1.752-1(a)(1) and (2). A
partner bears the EROL for a partnership
liability if the partner or related person:
(1) has a payment obligation as provided
in existing §1.752-2(b) (except as pro-
vided in existing §1.752-2(d)(2)); (2) is
a lender to the partnership as provided in
existing §1.752-2(c) (except as provided
in existing §1.752-2(d)(1)); (3) guarantees
payment of interest on a partnership non-
recourse liability as described in existing
§1.752-2(e); or (4) pledges property as
security for a partnership liability as pro-
vided in existing §1.752-2(h).
On December 16, 2013, the Depart-
ment of the Treasury (Treasury Depart-
ment) and the IRS published in the Fed-
eral Register (78 FR 76092) a notice of
proposed rulemaking (REG-136984-12)
that would amend the existing regulations
under section 752 relating to a partner’s
share of a recourse partnership liability
and the rules for related persons (proposed
regulations). The provisions of the pro-
posed regulations are explained in greater
detail in the preamble to the proposed reg-
ulations. The Treasury Department and
the IRS received two comments respond-
ing to the proposed regulations. A public
hearing on the proposed regulations was
not requested or held.
The Treasury Department and the IRS
are mindful that the proposed regulations
were issued approximately eleven years
ago. However, no intervening legislative
changes regarding allocations of partner-
ship liabilities have been made, no subse-
quent changes to regulatory rules concern-
ing allocations of partnership liabilities
address the issues in the proposed regu-
lations, and the issues raised by the com-
menters continue to remain relevant. For
these reasons, the Treasury Department
and the IRS have determined that a new
notice of proposed rulemaking or a further
opportunity for public comment would be
unlikely to generate different comments.
Furthermore, issuing the same rules again
as a notice of proposed rulemaking would
unnecessarily delay further this rulemak-
ing to the continued detriment of taxpay-
ers desiring to apply these rules to allocate
their partnership liabilities.
Accordingly, after full consideration of
the comments received, these final regula-
tions adopt the proposed regulations with
certain modifications in response to the
comments described in the Summary of
Comments and Explanation of Revisions.
Summary of Comments and
Explanation of Revisions
I. Overlapping Economic Risk of Loss
Under existing §1.752-2(a), a partner’s
share of a recourse partnership liability
equals the portion of that liability, if any,
for which the partner or related person
bears the EROL. The proposed regu-
lations would have provided a propor-
tionality rule to determine how partners
share a partnership liability when multi-
ple partners bear the EROL for the same
liability (overlapping EROL). Under the
proportionality rule, the EROL borne by
a partner would be the amount of the part-
nership liability (or portion thereof) mul-
tiplied by a fraction obtained by dividing
the amount of EROL borne by the partner
by the sum of the EROL borne by all part-
ners with respect to that liability.
One commenter suggested that the final
regulations should not adopt the propor-
tionality rule but should instead allocate

Bulletin No. 2024–51 1341 December 16, 2024
liabilities among partners with overlap-
ping EROL in a manner analogous to the
manner in which a nonrecourse liability is
allocated under §1.752-3. Specifically, the
commenter suggested that such liabilities
should be allocated in a manner consistent
with the partner’s interest in partnership
profits. The commenter stated that this
allocation approach more closely reflects
the partners’ economic arrangements and
permits losses attributable to the liability
to be allocated among the partners without
any of the losses being suspended under
section 704(d) of the Code.
Under the existing section 752 regu-
lations, a recourse partnership liability
is shared among partners that bear the
EROL for the liability. Conversely, with
a nonrecourse partnership liability, no
partner bears economic risk with respect
to the liability; therefore, the liability is
generally allocated in accordance with
a partner’s share of partnership prof-
its. Adopting a framework applicable to
a nonrecourse partnership liability for
purposes of determining how a recourse
partnership liability should be shared
under section 752 could cause the lia-
bility to be allocated disproportionally
among those partners depending upon
their profit-sharing ratios even though
the partners bear the same amount of
EROL for the liability. The proportional-
ity rule provides a reasonable approach
in addressing how a recourse partnership
liability should be shared when partners
have overlapping EROL. Therefore, the
final regulations do not adopt the com-
menter’s suggestion.
Another commenter requested clar-
ification on the effect of local law and
separate agreements between partners in
determining whether partners have over-
lapping EROL. Under existing §1.752-
2(b)(3), all statutory and contractual
obligations relating to a partnership lia-
bility are taken into account for purposes
of determining a partner’s EROL. There-
fore, the proportionality rule applies to
cases in which partners have overlapping
EROL after taking into account all statu-
tory and contractual obligations relating
to the partnership liability. The final reg-
ulations illustrate in §1.752-2(f)(9) that
these obligations are considered in deter-
mining whether the partners have over-
lapping EROL.
II. Tiered Partnerships
Another overlapping EROL issue
under section 752 relates to tiered part-
nerships. The proposed regulations would
have provided guidance on how a low-
er-tier partnership (LTP) must allocate a
liability in cases in which a partner of an
upper-tier partnership (UTP) is also a part-
ner of the LTP and that partner bears the
EROL with respect to the LTP’s liability.
Under the proposed regulations, the LTP
would be required to allocate the liability
directly to the partner.
One commenter, while acknowledging
that the rule in the proposed regulations
provides certainty and is administrable,
expressed concerns that this rule could
cause the partner in both the UTP and the
LTP to recognize gain. The commenter
recommended that the final regulations
allow the LTP to allocate the liability in
any reasonable manner between the part-
ner and the UTP. The final regulations do
not adopt this suggestion. The rule in the
proposed regulations is the most admin-
istrable, especially in a case in which
an LTP may not be aware that one of its
partners is also a partner in a UTP that is
removed from the LTP. Therefore, under
the final regulations, an LTP must allo-
cate the liability directly to the partner
that bears the EROL with respect to the
LTP’s liability. Section §1.752-2(i)(2) of
the final regulations also clarifies how the
tiered partnership rule applies in a case in
which there is overlapping EROL among
unrelated partners as provided in §1.752-
2(a)(2). Finally, the final regulations add
an example to illustrate the application
of the proportionality rule when there are
tiered partnerships.
Another commenter suggested that a
gap might exist between §§1.704-2 and
1.752-2 concerning partner nonrecourse
deductions when a partner of a UTP (that
is not also a partner of an LTP) bears the
EROL for a liability of the LTP. Existing
§1.704-2(i) requires the partnership to
allocate partner nonrecourse deductions to
the partner that bears the EROL. Existing
§1.704-2(k)(5) treats an LTP’s liability
that is treated as a UTP’s liability under
§1.752-4(a) also as a liability of the UTP
for purpose of applying the rules under
§1.704-2(i). Under existing §1.752-2(i),
the LTP allocates its liability to the UTP
when a partner of the UTP bears the EROL
for the LTP’s liability. The commenter
asserted that, although existing §1.752-
2(i) requires the LTP to allocate the liabil-
ity to the UTP, existing §1.704-2 does not
explicitly direct the LTP to allocate part-
ner nonrecourse deductions attributable
to that liability to the UTP. Thus, in the
commenter’s view, the existing rules do
not treat the UTP as bearing the EROL for
the LTP’s liability for purposes of §1.704-
2(i). Contrary to this commenter’s sugges-
tion, existing §§1.704-2(i) and 1.704-2(k)
(5) implicitly require an LTP to allocate
partner nonrecourse deductions attribut-
able to a liability of the LTP to a UTP if a
partner in the UTP bears the EROL for the
LTP’s liability. To eliminate any uncer-
tainty, the final regulations add a sentence
to §1.704-2(k)(5) to clarify that a UTP is
treated as bearing the EROL for an LTP’s
liability that is treated as the UTP’s liabil-
ity under §1.752-4(a). Therefore, partner
nonrecourse deductions attributable to the
LTP’s liability are allocated to the UTP
under §1.704-2(i).
III. General Issues of EROL
As previously stated, existing §1.752-
2(a) generally provides that a partner’s
share of a recourse partnership liabil-
ity equals the portion of that liability, if
any, for which the partner or related per-
son bears the EROL. A partner bears the
EROL for a partnership liability if the
partner or related person has a payment
obligation under §1.752-2(b), is a lender
as provided in §1.752-2(c), guarantees
payment of interest on a partnership non-
recourse liability as described in §1.752-
2(e), or pledges property as a security as
provided in §1.752-2(h). In describing
when a partner bears the EROL for a part-
nership liability, the proposed regulations
inadvertently failed to include situations
under §1.752-2(e) and (h). A commenter
also suggested that references to §1.752-
2(c) relating to when a partner or related
person is the lender take into account a
de minimis rule under §1.752-2(d)(1).
Existing §1.752-2(d)(1) provides that the
general rule in §1.752-2(c)(1) does not
apply if a partner or related person whose
interest (directly or indirectly through one
or more partnerships and including the
interest of any related person) in each item

December 16, 2024 1342 Bulletin No. 2024–51
of partnership income, gain, loss, deduc-
tion, or credit for every taxable year that
the partner is a partner in the partnership
is 10 percent or less, makes a loan to the
partnership that constitutes qualified non-
recourse financing within the meaning of
section 465(b)(6) (determined without
regard to the type of activity financed).
To incorporate the rules in §1.752-2(d)
(1), the commenter suggested that the
final regulations broadly refer to §1.752-2
when describing situations that give rise
to EROL instead of listing specific appli-
cable paragraphs in §1.752-2.
The final regulations correct the over-
sight in the proposed regulations by list-
ing in one section of the regulations all the
situations under §1.752-2 in which a per-
son directly bears the EROL, including by
taking into account the de minimis excep-
tions in §1.752-2(d). A person directly
bears the EROL if that person, and not a
related person, meets the requirements of
the listed situations.
IV. Related Party Rules
A. Constructive Ownership Rules
Under existing §1.752-4(b)(1), a per-
son is related to a partner if the person
and the partner bear a relationship to each
other that is specified in section 267(b) or
section 707(b)(1) of the Code, except that
“80 percent or more” is substituted for
“more than 50 percent” in each of those
sections, a person’s family is determined
by excluding siblings, and section 267(e)
(1) and (f)(1)(A) are disregarded. In deter-
mining whether a partner and a person bear
a relationship to each other that is speci-
fied in section 267(b) or section 707(b)(1),
the constructive stock ownership rules in
section 267(c) apply. See sections 267(c)
and 707(b)(3). The proposed regulations
would disregard the constructive stock
ownership rules under section 267(c)(1)
in determining whether to treat stock of a
corporation owned, directly or indirectly,
by or for a partnership as owned propor-
tionately by or for its partners if the corpo-
ration is a lender under §1.752-2(c) or has
a payment obligation with respect to a lia-
bility of its partnership owner. The pream-
ble to the proposed regulations explained
that a partner’s EROL that is limited to the
partner’s equity investment in the partner-
ship should be treated differently than the
risk of loss beyond that investment.
Commenters agreed with the ratio-
nale underlying the proposed regulations
and suggested that the final regulations
disregard two other constructive owner-
ship situations in determining relatedness
under §1.752-4(b)(1). First, commenters
suggested that the final regulations also
disregard section 267(c)(1) in determining
whether to treat a UTP’s direct or indirect
interest in an LTP as owned proportion-
ately by or for the UTP’s partners if the
LTP is a lender or has a payment obliga-
tion with respect to a liability of the UTP.
Commenters expressed the view that in
this situation, like the one described in
the proposed regulations, a partner should
not be treated as bearing the EROL for a
partnership liability merely as a result of
the UTP’s investment in an LTP that has
a payment obligation with respect to a lia-
bility of the UTP.
Second, commenters suggested that the
final regulations disregard section 1563(e)
(2) of the Code in determining related-
ness under §1.752-4(b)(1). For purposes
of §1.752-4(b)(1), a person is related to a
partner if the two parties bear a relation-
ship to each other as described in section
267(b)(3). Under section 267(b)(3), a cor-
porate partner and another corporation that
are members of the same controlled group
(as defined in section 267(f)) are treated
as related for purposes of §1.752-4(b)(1).
Section 267(f) gives “controlled group”
the same meaning as in section 1563(a).
Under section 1563(a), a controlled group
of corporations includes a parent-subsidi-
ary controlled group and a brother-sister
controlled group. Section 1563(e) pro-
vides attribution rules that apply in deter-
mining whether a corporation is a member
of a parent-subsidiary controlled group
or of a brother-sister controlled group.
Specific to partnerships, section 1563(e)
(2) provides that stock owned, directly or
indirectly, by or for a partnership is con-
sidered as owned by any partner having an
interest of 5 percent or more in either the
capital or profits of the partnership in pro-
portion to the partner’s interest in capital
or profits, whichever is greater. Therefore,
in applying the attribution rules under sec-
tion 1563(e)(2), a corporate partner in a
partnership could be treated as a member
of a parent-subsidiary controlled group
or of a brother-sister controlled group,
and thus, related to a corporation in that
group that is owned by the partnership. If
the corporate subsidiary of the partnership
has a payment obligation with respect to a
liability of the partnership, the corporate
partner is treated as bearing the EROL for
that liability. Commenters recommended
not treating the corporate partner as bear-
ing the EROL merely as a result of apply-
ing the attribution rules under section
1563(e)(2) because the partner’s risk is
limited to the investment in the partner-
ship.
The final regulations adopt these sug-
gestions. Thus, in determining relatedness
under §1.752-4(b)(1), the final regulations
disregard: (1) section 267(c)(1) in deter-
mining whether a UTP’s interest in an
LTP is owned proportionately by or for
the UTP’s partners when an LTP directly
bears the EROL for a liability of the
UTP and (2) section 1563(e)(2) in deter-
mining whether a corporate partner in a
partnership and a corporation owned by
the partnership are members of the same
controlled group when the corporation
directly bears the EROL for a liability of
the owner partnership. In both of these sit-
uations, a partner should not be treated as
bearing the EROL when the partner’s risk
is limited to the partner’s equity invest-
ment in the partnership.
B. Related Partner Exception to Related
Party Rules
Under the proposed regulations, if a
person who owns (directly or indirectly
through one or more partnerships) an
interest in a partnership is a lender or has a
payment obligation with respect to a part-
nership liability, or portion thereof, then
other persons owning interests directly
or indirectly (through one or more part-
nerships) in that partnership would not be
treated as related to that person for pur-
poses of determining the EROL borne by
each of them for the partnership liability,
or portion thereof (related partner excep-
tion).
One commenter recommended that
the final regulations clarify the meaning
of the phrase “not treated as related” as
used in proposed examples illustrating the
related partner exception. The phrase “not
treated as related” is intended to mean

Bulletin No. 2024–51 1343 December 16, 2024
that, under §1.752-4(b)(1), the partner and
the other person are not treated as bearing
a relationship to each other that is spec-
ified in section 267(b) or section 707(b)
(1) (taking into account any applicable
attribution rules). Accordingly, the phrase
“not treated as related” should be broadly
interpreted. For instance, in §1.752-4(b)
(5)(iii) of the final regulations, A wholly
owns corporations X and Y. X and Y are
members of Partnership, an entity treated
as a partnership for Federal tax purposes.
The partnership agreement provides that
X and Y share equally in all items of
income, gain, loss, deduction, and credit
of Partnership. X owns 79 percent of Z,
a corporation, and Y owns 21 percent of
Z. Each of X and Z guarantees the entire
amount of a liability of Partnership. Under
this example, X and Y are not treated as
related for purposes of determining the
EROL borne by each of them for the part-
nership’s liability, and, because neither X
nor Y owns an 80 percent or more interest
in Z, X and Y are not treated as related to
Z under §1.752-4(b)(1). In other words, X
and Y are not related to Z within the mean-
ing of §1.752-4(b)(1), which takes into
account any applicable attribution rules.
Another commenter suggested that the
related partner exception should apply
only to turn off relatedness so that the
direct EROL borne by one partner is not
attributed to another partner. This com-
menter recommended that the rule should
not turn off the relationship between a
partner that directly bears the EROL for
a partnership liability and another partner
for purposes of determining whether those
partners are related to a non-partner that
also bears EROL for the partnership’s lia-
bility. If the related partner exception did
not apply in this situation, both partners
would be treated as bearing the EROL for
the partnership liability and share the lia-
bility under the proportionality rule.
The proposed regulations would imple-
ment the result in IPO II v. Commissioner,
122 T.C. 295 (2004), which applied the
related partner exception to turn off the
relationship between the partners and
allocated the entirety of a partnership’s
liability to the partner that directly bore
the EROL for the partnership’s liability
despite a non-partner related person also
bearing the EROL. Therefore, the final
regulations do not adopt this suggestion.
C. Person Related to Multiple Partners
(Multiple Partner Rule)
The proposed regulations provide that
if a person is a lender or has a payment
obligation with respect to a partnership
liability and is related to more than one
partner, then those partners that are related
to that person (related partners) share the
liability equally. One commenter sug-
gested that the multiple partner rule may
be unnecessary and recommended that the
final regulations only include the propor-
tionality rule in proposed §1.752-2(a) to
address how to allocate EROL when there
is overlapping EROL, including because
multiple partners are related to a person
with a payment obligation. The final reg-
ulations do not adopt this suggestion. The
multiple partner rule is necessary because,
without this rule, the partners might share
EROL incorrectly. For example, cor-
porations X, Y, and Z are partners in an
entity treated as a partnership for Federal
tax purposes. The partnership agreement
provides that the partners share equally
in all items of income, gain, loss, deduc-
tion, and credit of XYZ partnership. A,
an individual, wholly owns X and Y. Z
is an unrelated third party. Partnership
borrows $1,000 from a bank and A and
Z both guarantee the entire amount of the
liability. Without the multiple partner rule,
each of X and Y has $1,000 of EROL from
A’s $1,000 guarantee and Z has $1,000 of
EROL from its guarantee. Each would be
allocated one-third of the liability under
the proportionality rule. In contrast, by
applying the multiple partner rule, each
of X and Y has $500 of EROL. When the
proportionality rule is applied, X and Y
are each allocated one-fourth of the liabil-
ity and Z is allocated one-half of the liabil-
ity. This is the correct result because there
is one guarantee from A’s related group
and one guarantee by Z.
The commenter also recommended that
if the final regulations retain the multiple
partner rule, the final regulations allow the
related partners to agree among themselves
how to allocate the liability, provided that
the allocation is consistently applied. The
commenter explained that allowing related
partners to choose among themselves who
receives the allocation could prevent related
partners from recognizing an uneconomic
gain. To address the commenter’s under-
lying concern, the final regulations under
§1.752-4(b)(3) treat related partners as
bearing the EROL for a partnership liabil-
ity in proportion to each related partner’s
interest in partnership profits.
V. Ordering Rule
The proposed regulations had differ-
ent rules regarding allocations of partner-
ship liabilities for related and unrelated
parties. In particular, the proportionality
rule in proposed §1.752-2(a) addressed
when partners have overlapping EROL,
the related partner exception in proposed
§1.752-4(b)(2) described when partners
with direct EROL are not treated as related
to other partners, and the multiple part-
ner rule in proposed §1.752-4(b)(3) pro-
vided how EROL is shared when multiple
partners are related to a person that is a
lender or has a payment obligation. One
commenter expressed confusion regard-
ing how these rules interact and suggested
that the final regulations include an order-
ing rule.
The final regulations adopt this sugges-
tion. An ordering rule is warranted to clarify
how the proportionality rule interacts with
the multiple partner rule and how the mul-
tiple partner rule interacts with the related
partner exception. Therefore, under §1.752-
4(e), the first step is to determine whether
any partner (direct or indirect) directly
bears the EROL for the partnership liability
and apply the related partner exception in
§1.752-4(b)(2). After applying the related
partner exception (if applicable), the next
step is to determine the amount of EROL
each partner is considered to bear under
§1.752-4(b)(3) when multiple partners are
related to a person that directly bears the
EROL for a partnership liability. The final
step is to apply the proportionality rule in
§1.752-2(a)(2) to determine the amount of
EROL that each partner is considered to
bear when the amount of EROL that multi-
ple partners bear exceed the amount of the
partnership liability. The final regulations
include an example to illustrate the order-
ing rule in §1.752-4(e).
VI. Liquidating Distributions of
Partnership Interests
The preamble to the proposed regula-
tions requested comments concerning the

December 16, 2024 1344 Bulletin No. 2024–51
proper treatment of liabilities when a UTP
bears the EROL for an LTP’s liability and
distributes, in a liquidating distribution, its
interest in the LTP to one of its partners,
but the transferee partner does not bear
the EROL. As a result of this transaction,
the LTP’s recourse liability became a non-
recourse liability for purposes of section
752. The preamble requested comments
specifically on the timing of the liability
reallocation relative to the transaction
that caused the liability to change from
recourse to nonrecourse.
The Treasury Department and the IRS
received thoughtful comments regarding
this issue in response to the request for
comments and are continuing to consider
whether additional guidance regarding the
issue is warranted.
VII. Applicability Date
Under the proposed regulations the
rules would apply to any liability incurred
or assumed by a partnership on or after
the date the regulations are published as
final regulations in the Federal Regis-
ter. Commenters suggested that the final
regulations allow a taxpayer to apply the
final regulations to all liabilities incurred
or assumed by a partnership (even liabil-
ities incurred or assumed before the date
of publication of these regulations), with
respect to all returns, including amended
returns, filed after the date these regula-
tions are published. The final regulations
adopt this suggestion, but clarify that a
partnership must apply these rules con-
sistently to all of its partnership liabili-
ties and may not pick and choose which
rules apply to them. Allowing taxpayers to
apply these regulations before the publica-
tion date will provide greater certainty for
partnerships and their partners and allow
uniform rules to apply to all partnership
liabilities. As a result, these final regula-
tions allow a partnership to apply the rules
to all liabilities with respect to returns
filed on or after December 2, 2024, pro-
vided the partnership consistently applies
all the rules in these final regulations to
those liabilities.
A commenter also suggested that the
final regulations permit partnership liabil-
ities that are modified or refinanced and
payment obligations that are modified to
continue to be subject to the provisions
of the regulations in effect prior to the
applicability date of the final regulations,
but only to the extent of the amount and
duration of the pre-modification (or refi-
nancing) liability or payment obligation.
The commenter identified §1.707-5(c)
as a model for a special refinancing rule.
The commenter noted that without such a
rule, the applicability date in the proposed
regulations might discourage partnerships
from refinancing debts or subject partners
to unexpected adverse results.
The final regulations adopt this sug-
gestion. Accordingly, the final regula-
tions do not apply to refinanced debts to
the extent of the amount and duration of
the pre-modification liability. Instead, the
rules in the regulations as in effect prior
to December 2, 2024, continue to apply
to those liabilities. For example, assume
a partnership borrowed $1,000 on Janu-
ary 28, 2024, from Bank, and X, a person
related to Partners A and B, guaranteed
the entire amount of that liability. Further
assume that this liability was refinanced
after December 2, 2024, so that the lia-
bility is now $2,000 and X continues to
guarantee the entire amount of the liabil-
ity. The rules in effect prior to December
2, 2024, would continue to apply to the
$1,000 of pre-modification liability and
X’s guarantee of the $1,000 when deter-
mining which partner bears the EROL.
The rules in effect after December 2, 2024
would apply to the remaining $1,000.
Special Analyses
I. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management
and Budget before collecting information
from the public, whether such collection
of information is mandatory, voluntary,
or required to obtain or retain a benefit.
These regulations do not impose a col-
lection of information and, therefore, the
PRA does not apply.
II. Regulatory Flexibility Act
The Treasury Department and the IRS
have determined the rule will not have a
significant economic impact on a substan-
tial number of small entities. Although
the rules affect small entities, data is not
readily available about the number of tax-
payers affected. Section 752 affects the
allocation of partnership liabilities among
partners in a partnership. The economic
impact of these regulations is not likely
to be significant, because the regulations
will make it easier for taxpayers to comply
with section 752. Pursuant to the Regula-
tory Flexibility Act (5 U.S.C. chapter 6),
the Secretary hereby certifies that these
regulations will not have a significant eco-
nomic impact on a substantial number of
small entities.
Pursuant to section 7805(f) of the Code,
the proposed regulations that preceded
these final regulations were submitted to
the Chief Counsel for the Office of Advo-
cacy of the Small Business Administration
(SBA) for comment on its impact on small
business. The Chief Counsel for the Office
of Advocacy of the SBA did not provide
any comments on the proposed regulations.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a State, local, or Tribal gov-
ernment, in the aggregate, or by the pri-
vate sector, of $100 million in 1995 dol-
lars, updated annually for inflation. This
rule does not include any Federal mandate
that may result in expenditures by State,
local, or Tribal governments, or by the pri-
vate sector in excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications and do not impose
substantial direct compliance costs on
state and local governments or preempt

Bulletin No. 2024–51 1345 December 16, 2024
State law within the meaning of the Exec-
utive order.
V. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs has
designated this rule as not a “major rule,”
as defined by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin and
is available from the Superintendent of
Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by visit-
ing the IRS website at https://www.irs.gov.
Drafting Information
The principal author of these regulations
is Caroline E. Hay, Office of the Associate
Chief Counsel (Passthroughs and Special
Industries). However, other personnel from
the Treasury Department and the IRS par-
ticipated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.704-2 is amended by:
1. Adding a sentence after the first sen-
tence of paragraph (k)(5).
2. Adding paragraph (l)(1)(vi).
The additions read as follows:
§1.704-2 Allocations attributable to
nonrecourse liabilities.
* * * * *
(k) * * *
(5) * * * In addition, for purposes of
applying paragraph (i) of this section, the
upper-tier partnership is treated as bearing
the economic risk of loss for the lower-tier
partnership’s liabilities that are treated
as the upper-tier partnership’s liabilities
under §1.752-4(a).* * *
(l) * * *
(1) * * *
(vi) The second sentence of paragraph
(k)(5) of this section applies on or after
December 2, 2024.
* * * * *
Par. 3. Section 1.752-0 is amended by:
1. In §1.752-2:
i. Revising the entry (a); and
ii. Adding entries (a)(1) through (3)
and (i)(1) through (3).
2. In §1.752-4:
i. Revising the entry (b)(2);
ii. Removing the entries (b)(2)(i)
though (iii);
iii. Redesignating the entries (b)
(2)(iv), (b)(2)(iv)(A) and (B) as
(b)(4), (b)(4)(i) and (ii), respec-
tively;
iv. Removing the entry (b)(2)(iv)
(C); and
v. Adding the entries (b)(3) and (5),
(e), and (f).
The revisions and additions read as fol-
lows:
1.752-0 Table of contents.
* * * * *
§1.752-2 Partner’s share of recourse
liabilities.
(a) Partner’s share of recourse liabili-
ties.
(1) In general.
(2) Overlapping economic risk of loss.
(3) Direct economic risk of loss.
* * * * *
(i) * * *
(1) In general.
(2) Coordination with overlapping eco-
nomic risk of loss.
(3) Example.
* * * * *
§1.752-4 Special rules.
* * * * *
(b) * * *
(2) Related partner exception.
(3) Person related to more than one
partner.
* * * * *
(5) Examples.
* * * * *
(e) Ordering rule.
(f) Example.
* * * * *
Par. 4. Section 1.752-2 is amended by:
1. Revising paragraphs (a).
2. Revising the headings for paragraphs
(f)(1) through (8).
3. Revising paragraphs (f)(9), and (i).
4. In the first sentence of paragraph (l)
(1), removing the language “Paragraphs
(a)” and adding the language “Paragraphs
(a)(1)” in its place.
5. In the first sentence of paragraph (l)
(3), removing the language “§1.752-2(a)”
and adding “§1.752-2(a)(1)” in its place.
6. Adding paragraph (l)(4).
The revisions and addition read as fol-
lows:
§1.752-2 Partner’s share of recourse
liabilities.
(a) Partner’s share of recourse liabili-
ties—(1) In general. A partner’s share of
recourse partnership liability equals the
portion of that liability, if any, for which
the partner or related person bears the
economic risk of loss. The determination
of the extent to which a partner bears the
economic risk of loss for a partnership
liability is made under the rules in para-
graphs (b) through (k) of this section.
(2) Overlapping economic risk of loss.
For purposes of determining a partner’s
share of a recourse partnership liability,
the amount of the partnership liability is
taken into account only once. If the aggre-
gate amount of the economic risk of loss
that all partners are determined to bear for

December 16, 2024 1346 Bulletin No. 2024–51
a partnership liability (or portion thereof)
under paragraph (a)(1) of this section
(without regard to this paragraph (a)(2))
exceeds the amount of such liability (or
portion thereof), then the economic risk
of loss borne by each partner for such lia-
bility equals the amount determined by
multiplying—
(i) The amount of such liability (or por-
tion thereof) by
(ii) The fraction obtained by dividing
the amount of the economic risk of loss
that such partner is determined to bear for
that liability (or portion thereof) under
paragraph (a)(1) of this section, by the
sum of such amounts for all partners.
(3) Direct economic risk of loss. For
purposes of this section and §1.752-4, a
person directly bears the economic risk of
loss for a partnership liability if that per-
son has a payment obligation under para-
graph (b) of this section (except as pro-
vided in paragraph (d)(2) of this section
for certain partner guarantees), is a lender
as provided in paragraph (c) of this section
(except as provided in paragraph (d)(1)
of this section for certain partner loans),
guarantees payment of interest on a part-
nership nonrecourse liability as described
in paragraph (e) of this section, or pledges
property as a security as provided in para-
graph (h) of this section.
* * * * *
(f) * * *
(1) Example 1. Determining when a partner
bears the economic risk of loss. * * *
(2) Example 2. Recourse liability; deficit resto-
ration obligation. * * *
(3) Example 3. Guarantee by limited partner;
partner deemed to satisfy obligation. * * *
(4) Example 4. Partner guarantee with right of
subrogation. * * *
(5) Example 5. Bifurcation of partnership liabil-
ity; guarantee of part of nonrecourse liability. * * *
(6) Example 6. Wrapped debt. * * *
(7) Example 7. Guarantee of interest by partner
treated as part recourse and part nonrecourse. * * *
(8) Example 8. Continent obligation not recog-
nized. * * *
(9) Example 9. Overlapping economic risk of
loss. (i) A and B are unrelated equal members of
limited liability company, AB. AB is treated as a
partnership for Federal tax purposes. AB borrows
$1,000 from Bank. A guarantees payment for the
entire amount of AB’s $1,000 liability and B guar-
antees payment of up to $500 of the liability, if any
amount of the full $1,000 liability is not recovered by
Bank. Under paragraph (b)(1) of this section, A bears
$1,000 of economic risk of loss for AB’s liability and
B bears $500 of economic risk of loss for AB’s lia-
bility. A and B have not entered into a loss-sharing
agreement addressing their status as co-guarantors,
and local law does not clearly establish responsibil-
ity as between them for the liability.
(ii) Because the aggregate amount of A’s and B’s
economic risk of loss under paragraph (a)(1) of this
section ($1,500) exceeds the amount of AB’s liabil-
ity ($1,000), the economic risk of loss borne by each
of A and B is determined under paragraph (a)(2) of
this section. Under paragraph (a)(2) of this section,
A’s economic risk of loss equals $1,000 multiplied
by $1,000/$1,500, or $667, and B’s economic risk
of loss equals $1,000 multiplied by $500/$1,500, or
$333.
* * * * *
(i) Treatment of recourse liabilities in
tiered partnerships—(1) In general. If a
partnership (upper-tier partnership) owns
(directly or indirectly through one or
more partnerships) an interest in another
partnership (lower-tier partnership), the
liabilities of the lower-tier partnership are
allocated to the upper-tier partnership in
an amount equal to the sum of the follow-
ing--
(i) The amount of liabilities with
respect to which the upper-tier partnership
directly bears the economic risk of loss as
described in paragraph (a)(3) of this sec-
tion; and
(ii) The amount of any other liabili-
ties with respect to which a partner of the
upper-tier partnership bears the economic
risk of loss, provided the partner is not
also a partner in the lower-tier partnership.
(2) Coordination with overlapping eco-
nomic risk of loss. A lower-tier partnership
takes into account paragraph (a)(2) of this
section prior to the application of this
paragraph (i).
(3) Example. (i) A and B (which is unrelated to A)
contribute $810,000 and $90,000 to UTP, a limited
liability company treated as a partnership for Federal
tax purposes, in exchange for a 90 percent and 10
percent interest in UTP, respectively. UTP contrib-
utes the $900,000 to LTP, a partnership for Federal
tax purposes, in exchange for a 90 percent interest
in LTP and A contributes $100,000 directly to LTP
in exchange for a 10 percent interest in LTP. UTP
and LTP both reported losses in their initial years that
reduced the partners’ bases in UTP and LTP to zero.
LTP borrows $10 million. UTP and LTP both had
no income in the year at issue. At the request of the
lender, A and B both provide their personal guaranty
for the entire amount of LTP’s liability.
(ii) Under paragraph (b)(1) of this section, A
has $10 million of economic risk of loss for LTP’s
liability and B has $10 million of economic risk of
loss for LTP’s liability. Under paragraph (i)(2) of this
section, LTP takes into account paragraph (a)(2) of
this section prior to determining the amount of lia-
bilities allocated to UTP under paragraph (i)(1) of
this section. Under paragraph (a)(2) of this section,
A is considered to bear $5 million (($10 million/$20
million) x $10 million) of economic risk of loss and
B is considered to also bear $5 million (($10 mil-
lion/$20 million) x $10 million) of economic risk of
loss for LTP’s liability. Pursuant to paragraph (a)(1)
of this section, LTP allocates $5 million to A for A’s
direct interest in LTP’s liability. Under paragraph (i)
(1) of this section, LTP allocates $5 million to UTP
($5 million attributable to B’s economic risk of loss
for LTP’s liability).
(iii) Pursuant to §1.752-4(a), UTP treats its share
of LTP’s liability ($5 million) as a liability of UTP.
Because A bears the economic risk of loss for LTP’s
liability and is a partner in LTP, under paragraph (i)
(1)(ii) of this section, UTP’s share of LTP’s liability
($5 million) only includes the amount of LTP’s lia-
bilities with respect to which B bears the economic
risk of loss. Therefore, under paragraph (a)(1) of this
section, UTP allocates $5 million of UTP’s share of
LTP’s liability to B and none to A.
* * * * *
(l) * * *
(4) Paragraphs (a)(2) and (3), (f)(9),
and (i) of this section apply to liabilities
incurred or assumed by a partnership on
or after December 2, 2024, other than lia-
bilities incurred or assumed by a partner-
ship pursuant to a written binding contract
in effect prior to that date. To the extent
that the proceeds of a partnership liabil-
ity (refinancing debt) are allocable under
the rules of §1.163-8T to payments dis-
charging all or part of any other liability
(pre-modification liability) of that partner-
ship, the refinancing debt will be treated
as though it was incurred or assumed by
the partnership prior to December 2, 2024,
to the extent of the amount and duration of
the pre-modification liability. A partner-
ship may apply paragraphs (a)(2) and (3),
(f)(9), and (i) of this section to all of its
liabilities (including liabilities incurred or
assumed by a partnership prior to Decem-
ber 2, 2024), for any return filed on or
after December 2, 2024 provided the part-
nership consistently applies all the rules
in paragraphs (a)(2) and (3), (f)(9), and (i)
of this section and §1.752-4(b)(1)(iv) and
(v), (b)(2) and (3), (b)(5)(i) through (iv),
(e), and (f) to those liabilities.
Par. 5. Section 1.752-4 is amended by:
1. In paragraph (b)(1)(i), removing the
language “sections;” and adding the lan-
guage “sections.” in its place.
2. In paragraph (b)(1)(ii), removing
the language “sisters; and” and adding the
language “sisters.” in its place.
3. Adding paragraphs (b)(1)(iv) and
(v).
4. Revising paragraph (b)(2).
5. Adding paragraphs (b)(3) through
(5), (e), and (f).

Bulletin No. 2024–51 1347 December 16, 2024
The additions and revision read as fol-
lows:
§1.752-4 Special rules.
* * * * *
(b) * * *
(1) * * *
(iv) Disregard section 267(c)(1) in
determining whether—
(A) Stock of a corporation owned,
directly or indirectly, by or for a partner-
ship is considered as being owned propor-
tionately by or for its partners when the
corporation directly bears the economic
risk of loss as described in §1.752-2(a)(3)
for a liability of the partnership; and
(B) A capital interest or a profits inter-
est in a partnership (lower-tier partner-
ship) owned, directly or indirectly, by or
for a partnership (upper-tier partnership)
is considered as being owned proportion-
ately by or for the upper-tier partnership’s
partners when the lower-tier partnership
directly bears the economic risk of loss as
described in §1.752-2(a)(3) for a liability
of the upper-tier partnership.
(v) Disregard section 1563(e)(2) in
determining whether a corporate partner
and a corporation are members of the same
controlled group (as defined in section
267(f)) under section 267(b)(3) when the
corporation directly bears the economic
risk of loss as described in §1.752-2(a)(3)
for a liability of the partnership.
(2) Related partner exception. Not-
withstanding paragraph (b)(1) of this
section (which defines related person),
if a person who owns (directly or indi-
rectly through one or more partnerships)
an interest in a partnership directly bears
the economic risk of loss as described in
§1.752-2(a)(3) for a partnership liabil-
ity, or portion thereof, then other persons
owning interests directly or indirectly
(through one or more partnerships) in that
partnership are not treated as related to
that person for purposes of determining
the economic risk of loss borne by each
of them for such partnership liability, or
portion thereof. This paragraph (b)(2)
does not apply when determining a part-
ner’s interest under the de minimis rules
in §1.752-2(d) and (e).
(3) Person related to more than one
partner. For purposes of determining a
partner’s economic risk of loss for a part-
nership liability, or a portion thereof, when
a person who directly bears the economic
risk of loss as described in §1.752-2(a)
(3) for the partnership liability is related
to more than one partner under paragraph
(b)(1) of this section, each partner that
is related to such person is considered
to bear the economic risk of loss for the
partnership liability, or portion thereof, in
proportion to the partner’s interest in part-
nership profits.
(4) Special rule where entity structured
to avoid related person status—(i) In gen-
eral. If—
(A) A partnership liability is owed to or
guaranteed by another entity that is a part-
nership, an S corporation, a C corporation,
or a trust;
(B) A partner or related person owns
(directly or indirectly) a 20 percent or
more ownership interest in the other
entity; and
(C) A principal purpose of having the
other entity act as a lender or guarantor of
the liability was to avoid the determina-
tion that the partner that owns the interest
bears the economic risk of loss for fed-
eral income tax purposes for all or part
of the liability; then the partner is treated
as holding the other entity’s interest as a
creditor or guarantor to the extent of the
partner’s or related person’s ownership
interest in the entity.
(ii) Ownership interest. For purposes
of paragraph (b)(4)(i) of this section, a
person’s ownership interest in—
(A) A partnership equals the partner’s
highest percentage interest in any item of
partnership loss or deduction for any tax-
able year;
(B) An S corporation equals the per-
centage of the outstanding stock in the S
corporation owned by the shareholder;
(C) A C corporation equals the percent-
age of the fair market value of the issued
and outstanding stock owned by the share-
holder; and
(D) A trust equals the percentage of the
actuarial interests owned by the beneficial
owner of the trust.
(5) Examples. The following examples
illustrate the principles of paragraph (b) of
this section.
(i) Example 1: Person related to more than one
partner. A, an individual, owns 100 percent of X, a
corporation. X owns 100 percent of Y, a corporation.
A owns a 40 percent capital and profits interest and
X owns a 60 percent capital and profits interest in P,
a limited liability company treated as a partnership
for Federal tax purposes. P borrows $1,000 from
Bank. Y guarantees payment of the entire $1,000
debt owed to Bank. A and X do not directly bear the
economic risk of loss as described in §1.752-2(a)(3)
for the liability. Therefore, paragraph (b)(2) of this
section does not apply for purposes of determining
the economic risk of loss borne by A and X. Under
paragraph (b)(1) of this section, Y is related to A and
X. Therefore, under paragraph (b)(3) of this sec-
tion, A bears the economic risk of loss of $400 and
X bears the economic risk of loss of $600 for the
$1,000 liability.
(ii) Example 2: Related partner exception. A, an
individual, owns 100 percent of two corporations, X
and Y. A and Y are members of P, a limited liability
company treated as a partnership for Federal tax pur-
poses. P borrows $1,000 from Bank. Each of A and X
guarantees payment of the entire $1,000 debt owed
to Bank. A and Y are not treated as related to each
other pursuant to paragraph (b)(2) of this section
because A directly bears the economic risk of loss as
described in §1.752-2(a)(3) for the $1,000 liability. Y
is therefore not treated as related to X. Because A is
the only partner that bears the economic risk of loss
for P’s $1,000 liability, A’s share of the liability is
$1,000 under §1.752-2(a)(1).
(iii) Example 3: Related partner exception. A, an
individual, owns 100 percent of two corporations, X
and Y. X owns 79 percent of a corporation, Z, and
Y owns the remaining 21 percent of Z. X and Y are
members of P, a limited liability company treated as
a partnership for Federal tax purposes. The partner-
ship agreement provides that X and Y share equally
in all items of income, gain, loss, deduction, and
credit of P. P borrows $2,000 from Bank. Each of X
and Z guarantees payment of the entire $2,000 debt
owed to Bank. X directly bears the economic risk of
loss as described in §1.752-2(a)(3) for P’s $2,000
liability; therefore, paragraph (b)(2) of this section
applies and X and Y are not treated as related for pur-
poses of determining the economic risk of loss borne
by each of them for P’s $2,000 liability. Because X
and Y are not treated as related and neither owns an
80 percent or more interest in Z, neither X nor Y is
treated as related to Z under paragraph (b)(1) of this
section. Because X bears the economic risk of loss
for P’s $2,000 liability, X’s share of the liability is
$2,000 under §1.752-2(a)(1).
(iv) Example 4: Related partner exception and
person related to more than one partner. Same facts
as in paragraph (b)(5)(iii) of this section (Example
3), but X guarantees payment of up to $1,200 of the
debt owed to Bank if any amount of the full $2,000 is
not recovered by Bank and Z guarantees payment of
$2,000. Pursuant to paragraph (b)(2) of this section,
X and Y are not treated as related to the extent of
X’s $1,200 guarantee because X directly bears the
economic risk of loss as described in §1.752-2(a)(3)
for $1,200 of P’s $2,000 liability. X’s share of the
liability is $1,200 under §1.752-2(a)(1). In addition,
because paragraph (b)(2) of this section does not
apply to the remaining portion of the liability that X
did not guarantee, X and Y are treated as related for
purposes of the remaining $800 of the liability pur-
suant to paragraph (b)(1) of this section. Therefore,
Z is treated as related to X and Y under paragraph (b)
(1) of this section. Pursuant to paragraph (b)(3) of

December 16, 2024 1348 Bulletin No. 2024–51
this section, because X and Y each has a 50 percent
interest in all items of income, gain, loss, deduction,
and credit of P, X and Y each bear the economic
risk of loss for $400 of the remaining $800 liability,
and thus each has a $400 share of the liability under
§1.752-2(a)(1). In sum, X’s share of P’s $2,000 lia-
bility is $1,600 ($1,200 plus $400) and Y’s share of
P’s $2,000 liability is $400.
(v) Example 5: Entity structured to avoid related
person status. A, B, and C form a general partner-
ship, ABC. A, B, and C are equal partners, each con-
tributing $1,000 to the partnership. A and B want to
loan money to ABC and have the loan treated as non-
recourse for purposes of section 752. A and B form
partnership AB to which each contributes $50,000. A
and B share losses equally in partnership AB. Part-
nership AB loans partnership ABC $100,000 on a
nonrecourse basis secured by the property ABC buys
with the loan. Under these facts and circumstances,
A and B bear the economic risk of loss with respect
to the partnership liability equally based on their per-
centage interest in losses of partnership AB.
* * * * *
(e) Ordering rule. In determining a
partner’s share of a recourse partnership
liability, the rules in paragraph (b)(2) of
this section, if applicable, apply before the
rules in paragraph (b)(3) of this section.
The rules in paragraph (b)(3) of this sec-
tion apply before the rules in §1.752-2(a)
(2).
(f) Example. The following example
illustrates the application of paragraph (e)
of this section.
(1) Facts. A, an individual, owns 100 percent of
two corporations, X and Y. X, Y, and Z, a corpora-
tion, are members of P, a limited liability company
treated as a partnership for Federal tax purposes.
The partnership agreement provides that the part-
ners share equally in all items of income, gain, loss,
deduction, and credit of P. Z is not related to A, X,
or Y. P borrows $1,000 from Bank. Each of A, X,
and Z guarantees payment for the entire amount of
P’s $1,000 liability. Each of A, X, and Z has a pay-
ment obligation of $1,000 under §1.752-2(b) for P’s
$1,000 liability.
(2) Analysis. (i) Under paragraph (e) of this sec-
tion, first apply the rules under paragraph (b)(2) of
this section, then apply the rules under paragraph (b)
(3) of this section, and finally apply the rules under
§1.752-2(a)(2) to determine how to allocate P’s
$1,000 liability among X, Y, and Z under §1.752-2(a)
(1). Under paragraph (b)(2) of this section, X and Y
are not treated as related to each other with respect
to X’s payment obligation for the $1,000 liability
because X directly bears the economic risk of loss as
described in §1.752-2(a)(3). Therefore, X is treated
as bearing $1,000 of the economic risk of loss for
P’s liability.
(ii) Because the rules in paragraph (b)
(2) of this section do not affect A’s rela-
tionship to X and Y, X and Y are related
to A under paragraph (b)(1) of this sec-
tion. Because A is related to both X and
Y, each of X and Y is considered to bear
the economic risk of loss for P’s liabil-
ity in proportion to X’s and Y’s interests
in P. Because they both have a one-third
interest in all items of income, gain, loss,
deduction, and credit of P, each of X and
Y bears $500 of economic risk of loss
under paragraph (b)(3) of this section with
respect to A’s $1,000 payment obligation
for P’s liability.
(iii) Z has a payment obligation with
respect to the $1,000 liability under
§1.752-2(b)(1) and thus, bears $1,000 of
the economic risk of loss for P’s liability.
(iv) After applying paragraphs (b)(2)
and (3) of this section, X is considered
to bear $1,500 of the economic risk of
loss for P’s liability and Y is considered
to bear $500 of the economic risk of loss
for P’s liability. Z is considered to bear
$1,000 of the economic risk of loss for P’s
liability. Because the aggregate amount
of X’s, Y’s, and Z’s economic risk of
loss ($3,000) exceeds the amount of P’s
liability ($1,000), the economic risk of
loss borne by X, Y, and Z is determined
under §1.752-2(a)(2). Under §1.752-2(a)
(2), X’s economic risk of loss is $500
(($1,500/$3,000) x $1,000), Y’s economic
risk of loss is $167 (($500/$3,000) x
$1,000), and Z’s economic risk of loss is
$333 (($1,000/$3,000) x $1,000). There-
fore, under §1.752-2(a)(1), X’s share of
P’s liability is $500, Y’s share is $167, and
Z’s share is $333.
Par. 6. Section 1.752-5 is amended by:
1. Revising the section heading.
2. Adding three sentences after the first
sentence in paragraph (a).
3. In paragraph (a), removing the word
“However” at the beginning of the fifth
sentence and adding “In addition” in its
place.
The revision and additions read as fol-
lows:
§1.752-5 Applicability dates and
transition rules.
(a) * * * However, §1.752-4(b)(1)(iv)
and (v), (b)(2) and (3), (b)(5)(i) through
(iv), (e), and (f) apply to any liability
incurred or assumed by a partnership on
or after December 2, 2024, other than a
liability incurred or assumed by a partner-
ship pursuant to a written binding contract
in effect prior to that date. To the extent
that the proceeds of a partnership liabil-
ity (refinancing debt) are allocable under
the rules of §1.163-8T to payments dis-
charging all or part of any other liability
(pre-modification liability) of that partner-
ship, the refinancing debt will be treated
as though it was incurred or assumed by
the partnership prior to December 2 2024,
to the extent of the amount and duration
of the pre-modification liability. A part-
nership may apply §1.752-4(b)(1)(iv) and
(v), (b)(2) and (3), (b)(5)(i) through (iv),
(e), and (f) to all of its liabilities (includ-
ing liabilities incurred or assumed by a
partnership prior to December 2, 2024),
for any return filed on or after December
2, 2024 provided the partnership consis-
tently applies all the rules in §1.752-2(a)
(2) and (3), (f)(9), and (i) and §1.752-4(b)
(1)(iv) and (v), (b)(2) and (3), (b)(5)(i)
through (iv), (e), and (f) to those liabili-
ties.* * *
* * * * *
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: October 30, 2024
Aviva R. Aron-Dine,
Deputy Assistant Secretary of the Trea-
sury (Tax Policy).
(Filed by the Office of the Federal Register Novem-
ber 29, 2024, 8:45 a.m., and published in the issue
of the Federal Register for December 02, 2024, 89
FR 95108)

Bulletin No. 2024–51 1349 December 16, 2024
Part III
Revised Timeline
Regarding Implementation
of Amended Section
6050W(e)
Notice 2024-85
SECTION 1. PURPOSE
This notice announces that calendar
years 2024 and 2025 will be regarded as
the final transition period for purposes of
Internal Revenue Service (IRS) enforce-
ment and administration with respect
to the implementation of the amend-
ments made to the minimum threshold
for reporting by third party settlement
organizations (TPSO) under section
6050W(e) of the Internal Revenue Code
(Code)
1
by the American Rescue Plan
Act of 2021 (ARP), Public Law 117-2,
135 Stat. 4 (March 11, 2021). In addition,
this notice provides transitional relief
from certain penalties for a TPSO mak-
ing payments to a participating payee in
settlement of third party network trans-
actions who fails to pay backup with-
holding tax required to be withheld under
section 3406 and its accompanying reg-
ulations during calendar year 2024. The
transition period described in this notice
is intended to facilitate an orderly tran-
sition for TPSO compliance with section
6050W(e) and participating payee com-
pliance with income tax reporting.
SECTION 2. BACKGROUND
.01 Section 6050W, Returns relating to
payments made in settlement of payment
card and third party network transactions
Section 6050W was added to the Code
by section 3091 of the Housing Assis-
tance Tax Act of 2008, Div. C of Public
Law 110-289, 122 Stat. 2654, 2908, and
requires payment settlement entities to
file an information return for each calen-
dar year with respect to payments made in
settlement of certain reportable payment
transactions. Under section 6050W(a),
the annual information return must set
forth (1) the name, address, and tax-
payer identification number (TIN) of the
participating payee to whom payments
were made and (2) the gross amount of
the reportable payment transactions with
respect to that payee in that calendar year.
Section 1.6050W-1(a)(6) defines “gross
amount” to mean the total dollar amount
of the aggregate reportable payment trans-
actions for each participating payee, with-
out regard to any adjustments for credits,
cash equivalents, discount amounts, fees,
refunded amounts, or any other amounts.
Payment settlement entities required
to make annual information returns under
section 6050W do so by filing Form 1099-
K, Payment Card and Third Party Net-
work Transactions with the IRS. They are
also required to furnish Form 1099-K to
the participating payee. Forms 1099-K
must be furnished to the participating pay-
ees on or before January 31st of the year
following the calendar year for which the
return was made. Forms 1099-K must
be filed with the IRS on or before Feb-
ruary 28th (March 31st if filed electroni-
cally) of the year following the calendar
year for which the return was made. See
§ 6050W(f); § 1.6050W-1(g).
Pursuant to section 6050W(c), section
6050W covers two types of reportable
payment transactions: (1) payment card
transactions and (2) third party network
transactions. Section 6050W(c)(3) states
that a third party network transaction
is any transaction for the provision of
goods or services that is settled through a
third party payment network. Under sec-
tion 6050W(b) and § 1.6050W-1(c)(2),
a TPSO is the payment settlement entity
that must report third party network trans-
actions – that is, the transactions for goods
or services that are settled through the
TPSO’s third party payment network – on
Form 1099-K.
Section 6050W(b)(3) defines a TPSO
as the central organization that has the
contractual obligation to make payment
to the participating payees of third party
network transactions. Pursuant to section
6050W(d)(3), a third party payment net-
work is any agreement or arrangement
that (i) involves the establishment of
accounts with a central organization by a
substantial number of providers of goods
or services who are unrelated to the central
organization and who have agreed to set-
tle transactions for the provision of goods
and services with purchasers according
to the terms of agreements; (ii) provides
standards and mechanisms for settling
such transactions; and (iii) guarantees
payments to the providers of goods and
services in settlement of transactions with
the purchasers.
Under section 6050W(d)(1)(A)(ii), a
participating payee, in the case of a third
party network transaction, is any person
who accepts payment from a TPSO in set-
tlement of such transaction.
As originally enacted in 2008, section
6050W(e) provided that a TPSO is not
required to report third party network
transactions with respect to a participating
payee unless the gross amount that would
otherwise be reported exceeds $20,000
and the number of such transactions with
that participating payee exceeds 200.
.02 Section 3406, Backup withholding
Section 3406(a) requires certain pay-
ors to perform backup withholding by
deducting and withholding income tax
from a reportable payment when, among
other circumstances, the payee fails to
furnish the payee’s TIN to the payor or
the IRS has notified the payor that the TIN
furnished by the payee is incorrect. Pur-
suant to section 3406(b)(3)(F), a report-
able payment includes payments made
by a TPSO that are required to be shown
under section 6050W on a Form 1099-
K. Section 31.3406(b)(3)-5 provides that
whether payments made in settlement of
third party network transactions are sub-
ject to withholding under section 3406 is
determined without regard to the statu-
tory monetary or transactional thresholds
found in section 6050W. Those monetary
and transactional thresholds are consid-
ered solely for determining whether a
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1), or to the Employment Taxes and Collection of Income
Tax at Source Regulations (26 CFR part 31).

December 16, 2024 1350 Bulletin No. 2024–51
TPSO has an information reporting obli-
gation under section 6050W for payments
made to a payee. Accordingly, under the
regulations, TPSOs are required to obtain
a TIN from every payee in a third party
payment network, even the occasional
small volume seller, to avoid backup
withholding.
A payor is required to report the amount
of deducted and withheld Federal income
tax amounts on Form 945, Annual Return
of Withheld Federal Income Tax, and on
the information return filed with the IRS
and furnished to the payee. In the case of
the Form 1099-K, withheld income tax
is reported in box 4. The payee may then
claim credit for the amount of income tax
withheld on the payee’s Federal income
tax return.
Notice 2011-42, 2011-23 I.R.B. 866
(June 6, 2011) provided interim guidance
on backup withholding under section
3406 with respect to reportable payments
made in settlement of third party network
transactions that are required to be shown
under section 6050W on a Form 1099-
K. Specifically, the notice established
that the section 6050W statutory trans-
actional threshold for determining infor-
mation reporting obligations should be
met before any section 3406 withholding
obligations arise with respect to TPSOs.
In other words, section 3406 withholding
obligations did not begin with respect to a
particular payee until that payee received
payments from a TPSO in more than 200
transactions within a calendar year.
.03 Section 6721, Failure to file correct
information returns, and section 6722,
Failure to furnish correct payee statements
Section 6721 imposes a penalty for any
failure to file an information return on or
before the required filing date, and for any
failure to include all of the information
required to be shown on the return or the
inclusion of incorrect information.
Section 6722 imposes a penalty for
failure to furnish a payee statement on or
before the required furnishing date to the
person to whom such statement is required
to be furnished, and for any failure to
include all of the information required
to be shown on a payee statement or the
inclusion of incorrect information.
.04 Sections 6651 and 6656
A payor who fails to withhold and pay
backup withholding tax when required
may be subject to civil penalties under sec-
tions 6651 and 6656. Section 6651 gener-
ally imposes an addition to the tax owed
by a taxpayer for the failure to pay the
amount shown as tax, including backup
withholding tax, on a return required to
be filed by the taxpayer unless the failure
is due to reasonable cause and not due to
willful neglect. Section 6656 provides that
in the case of any failure by any person
to deposit taxes on the prescribed date in
an authorized government depository, a
penalty applies unless the failure is due
to reasonable cause and not due to willful
neglect. A failure to deposit backup with-
holding tax as required under section 6302
would generally subject a payor to the sec-
tion 6656 penalty.
.05 American Rescue Plan Act of 2021
Section 9674 of the ARP amended sec-
tion 6050W(e) to provide that, for Forms
1099-K for calendar years beginning after
December 31, 2021, a TPSO is required
to report payments in settlement of third
party network transactions with respect to
any participating payee that exceed a min-
imum threshold of $600 in aggregate pay-
ments, regardless of the number of such
transactions.
Notice 2023-10, 2023-3 I.R.B. 403 (Jan-
uary 17, 2023), delayed implementation of
the reporting threshold for TPSOs in sec-
tion 9674(a) of the ARP for Forms 1099-K
for calendar years beginning before Janu-
ary 1, 2023. Notice 2023-10 also provided
that the IRS would not assert penalties
under section 6721 or section 6722 for
TPSOs failing to file or failing to furnish
Forms 1099-K unless the gross amount of
aggregate payments required to be reported
exceeded $20,000 and the number of trans-
actions exceeded 200. Notice 2023-74,
2023-51 I.R.B. 1484 (December 18, 2023),
further delayed implementation of the
reporting threshold for TPSOs for calendar
year 2023 and further provided that the IRS
would not assert penalties under section
6721 or section 6722 for TPSOs failing
to file or failing to furnish Forms 1099-K
unless the gross amount of aggregate pay-
ments required to be reported exceeded
$20,000 and the number of transactions
exceeded 200.
SECTION 3. TRANSITION
PERIOD FOR ENFORCEMENT
AND ADMINISTRATION WITH
RESPECT TO CALENDAR YEARS
2024 and 2025
Calendar year 2024 will be regarded
as a further transition period for purposes
of IRS enforcement and administration of
the information reporting requirements
under section 6050W(e), as amended by
the ARP. For calendar year 2024, a TPSO
is not required to report payments in set-
tlement of third party network transactions
with respect to a participating payee unless
the gross amount of aggregate payments
to be reported exceeds $5,000, regardless
of the number of such transactions. The
IRS will not assert penalties under sec-
tion 6721 or section 6722 for a TPSO for
failing to file or failing to furnish Forms
1099-K with respect to a payee unless the
gross amount of aggregate payments to be
reported exceeds $5,000, regardless of the
number of such transactions.
In addition, calendar year 2025 will
be regarded as the final transition period
for purposes of IRS enforcement and
administration of the information report-
ing requirements under section 6050W(e).
For calendar year 2025, a TPSO is not
required to report payments in settlement
of third party network transactions with
respect to a participating payee unless the
gross amount of aggregate payments to be
reported exceeds $2,500, regardless of the
number of such transactions. The IRS will
not assert penalties under section 6721 or
section 6722 for a TPSO for failing to file
or failing to furnish Forms 1099-K with
respect to a payee unless the gross amount
of aggregate payments to be reported
exceeds $2,500, regardless of the number
of such transactions.
For Forms 1099-K for calendar years
beginning after December 31, 2025, a
TPSO is required to report payments in
settlement of third party network trans-
actions with respect to any participating
payee that exceed a minimum threshold of
$600 in aggregate payments, regardless of
the number of such transactions.
The IRS will not regard calendar year
2024 or 2025 as a transition period with
respect to the requirements of section

Bulletin No. 2024–51 1351 December 16, 2024
6050W that were not modified by sec-
tion 9674(a) of the ARP, such as provi-
sions relating to payment card transac-
tions.
SECTION 4. TRANSITION PERIOD
FOR ENFORCEMENT AND
ADMINISTRATION OF BACKUP
WITHHOLDING WITH RESPECT
TO CALENDAR YEAR 2024
For calendar year 2024, the IRS will
not assert penalties under section 6651 or
6656 with respect to a TPSO’s failure to
withhold and pay backup withholding tax
during the calendar year.
TPSOs that have performed backup
withholding under section 3406(a) for a
payee during calendar year 2024 must file
a Form 945 and a Form 1099-K with the
IRS and furnish a copy to the payee.
For calendar year 2025 and after, the
IRS will assert penalties under section
6651 or 6656 with respect to a TPSO’s
failure to withhold and pay backup with-
holding tax.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Notice 2011-42 is obsoleted.
SECTION 6. DRAFTING
INFORMATION
The principal author of this notice is
the Office of Associate Chief Counsel
(Procedure and Administration).

December 16, 2024 1352 Bulletin No. 2024–51
Part IV
Federal Income Tax
Treatment of Certain
Amounts Paid or Incurred
Pursuant to Agreements
with the Department of
Commerce Required Under
the CHIPS Act of 2022
Announcement 2024-40
This announcement confirms for
purposes of § 48D of the Internal Reve-
nue Code (Code)
1
that amounts paid or
incurred by a taxpayer for the construc-
tion, expansion, or modernization of
advanced manufacturing facilities pursu-
ant to an agreement entered into with the
United States Department of Commerce
(Commerce Department) under 15 U.S.C.
4652(a)(6)(C)
2
will not fail, solely by
reason of such agreement, to constitute
a “qualified investment” for purposes of
determining the amount of any advanced
manufacturing investment credit under §
48D (§ 48D credit).
Section 48D(a) provides that the §
48D credit is an amount equal to 25 per-
cent of the qualified investment for any
taxable year with respect to any advanced
manufacturing facility of an eligible tax-
payer. Section 48D(b)(1) provides that
the “qualified investment” with respect
to any advanced manufacturing facility
for any taxable year is the basis of any
qualified property placed in service by
the taxpayer during such taxable year
that is part of an advanced manufactur-
ing facility. The basis determined with
respect to any qualified property includes
capital expenditures, as defined in § 263
and §§ 1.263(a)–1 through 1.263(f)–1,
with respect to the qualified property.
The FY 2021 NDAA, as amended by
the CHIPS Act, established a semicon-
ductor incentives program administered
by the Commerce Department (CHIPS
Incentives Program) to incentivize invest-
ments in facilities and equipment in the
United States for the fabrication, assem-
bly, testing, advanced packaging, pro-
duction, or research and development of
semiconductors, materials used to manu-
facture semiconductors, or semiconductor
manufacturing equipment.
3
To implement
the CHIPS Incentives Program, Congress
authorized the Department of Commerce
to provide funding via grants, coopera-
tive agreements, loans, loan guarantees,
and other transactions, which are col-
lectively referred to as “awards” in this
announcement. A taxpayer receiving an
award under the CHIPS Incentives Pro-
gram must enter into an agreement with
the Commerce Department to ensure that
the requirements of 15 U.S.C. 4652(a)(6)
(C) are satisfied. The agreement will spec-
ify the terms and conditions of the award,
including the circumstances under which
the award will be “clawed back” by the
Commerce Department. The agreement
will include the condition that the award
be used for the construction, expansion,
or modernization of a facility as well as
performance milestones for the receipt of
the award.
Agreements entered into with the
Commerce Department for awards
related to the construction, expansion, or
modernization of facilities are not long-
term contracts within the meaning of §
460(f)(1) and § 1.460-1(b)(1)
4
because
§ 460 and the regulations thereunder
contemplate an agreement with a cus-
tomer for the construction of the “subject
matter” of the contract and payment of a
“contract price” as compensation for the
“subject matter” of the contract. See §§
1.460-1(c)(3)(i) (date contract completed
based in part on use of the subject mat-
ter of the contract by the customer for
its intended purpose) and 1.460-4(b)(4)
(definition of total contract price). A tax-
payer that receives an award related to the
construction of an advanced manufactur-
ing facility under the CHIPS Incentives
Program is constructing the facility on
its own behalf. Moreover, the award does
not purport to compensate the taxpayer
for the cost of the project as the award
amount typically does not approximate
the project cost, much less provide the
taxpayer a return. Consequently, grants
and other taxable awards received,
5

and costs paid or incurred, for the con-
struction, expansion, or modernization
of facilities pursuant to agreements to
effectuate the requirements of 15 U.S.C.
4652 are not subject to the PCM under §
460(a) and § 1.460-4(b).
In addition, § 263(a) and §
1.263(a)-1(a) provide that no deduction
is allowed for capital expenditures, such
as amounts paid for new buildings, or for
permanent improvements or betterments
made to increase the value of property.
Section 1.263(a)-2(d)(1) provides that
capital expenditures include amounts paid
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code and the Income Tax Regulations.
2
The CHIPS Act of 2022 (CHIPS Act), enacted as Division A of Public Law 117-167, 136 Stat. 1366, 1372-1399 (August 9, 2022), amended Division H of the William M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021 (FY 2021 NDAA), Public Law 116-283, 134 Stat. 3388, 4843-4860 (January 1, 2021) (15 U.S.C. 4651, et seq).
3
On September 25, 2023, the CHIPS Program Office, National Institute of Standards and Technology, Department of Commerce published a final rule, Preventing the Improper Use of CHIPS
Act Funding, in the Federal Register (88 FR 65600) to add part 231, subchapter C, to 15 CFR chapter II to provide guidance under 15 USC 4651, et seq., including a clarification that
semiconductor wafer production is included within the definition of semiconductor manufacturing.
4
Section 460(f)(1) and § 1.460-1(b)(1) provide that the term “long-term contract” means any contract for the manufacture, building, installation, or construction of property if such contract
is not completed within the taxable year in which such contract is entered into. Section 1.460-1(a)(1) provides, in part, that a taxpayer generally must determine the income from a long-
term contract using the percentage-of-completion method (PCM) described in § 1.460-4(b) and the cost allocation rules described in § 1.460-5. Under § 1.460-4(b)(2), allocable contract
costs are deducted as incurred. Under § 1.460-1(d), long-term contract methods of accounting apply only to the gross receipts and costs attributable to long-term contract activities. Gross
receipts and costs attributable to non-long-term contract activities generally must be taken into account using a permissible method of accounting other than a long-term contract method.
5
Government grants generally constitute gross income under § 61(a). See § 1.61-14 (clarifying that gross income encompasses various kinds of income not enumerated in the statute); Rev.
Rul. 79-356, 1979-2 C.B. 28 (grants received from the Department of Housing and Urban Development for the installation of solar hot water systems are includible in gross income under §
61); see also § 118(a) and (b)(2) (providing that contributions to the capital of a corporation by any governmental entity (other than a contribution made by a shareholder as such) are not
excludable from gross income under § 118(a)).

Bulletin No. 2024–51 1353 December 16, 2024
to acquire or produce buildings, machin-
ery and equipment, and furniture and
fixtures. Section 1.263(a)-1(b) provides
that § 263A, which requires taxpayers to
capitalize the direct and allocable indirect
costs to property produced by the taxpayer
and property acquired for resale, remains
applicable.
Because agreements to effectuate the
requirements of 15 U.S.C. 4652 are not
long-term contracts subject to § 460,
amounts paid or incurred for the con-
struction, expansion, or modernization
of advanced manufacturing facilities pur-
suant to such agreements that are capital
expenditures under § 263(a) and the reg-
ulations thereunder may constitute qual-
ified investment for purposes of the §
48D credit provided that the requirements
of § 48D and the regulations thereunder
are otherwise satisfied, including that
amounts are paid or incurred for property
constructed, reconstructed, or erected by
the taxpayer, or acquired by the taxpayer,
and the original use commences with the
taxpayer.
The principal author of this announce-
ment is Kyle C. Griffin of the Office of
Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this announcement, please con-
tact Laureen McCloskey of the Office of
Associate Chief Counsel (Income Tax and
Accounting) at (202) 317-7006 (not a toll-
free number)

Bulletin No. 2024–51 i December 16, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

December 16, 2024 ii Bulletin No. 2024–51
Numerical Finding List
1
Bulletin 2024–51
Announcements:
2024-26, 2024-27 I.R.B. 14
2024-27, 2024-27 I.R.B. 14
2024-28, 2024-28 I.R.B. 39
2024-29, 2024-29 I.R.B. 71
2024-31, 2024-34 I.R.B. 533
2024-32, 2024-35 I.R.B. 535
2024-30, 2024-36 I.R.B. 581
2024-39, 2024-39 I.R.B. 639
2024-34, 2024-41 I.R.B. 758
2024-35, 2024-43 I.R.B. 1013
2024-36, 2024-44 I.R.B. 1073
2024-37, 2024-47 I.R.B. 1124
2024-38, 2024-50 I.R.B. 1230
2024-39, 2024-50 I.R.B. 1231
2024-40, 2024-51 I.R.B. 1352
Notices:
2024-47, 2024-27 I.R.B. 1
2024-52, 2024-27 I.R.B. 2
2024-53, 2024-27 I.R.B. 4
2024-54, 2024-28 I.R.B. 24
2024-55, 2024-28 I.R.B. 31
2024-56, 2024-29 I.R.B. 64
2024-57, 2024-29 I.R.B. 67
2024-58, 2024-30 I.R.B. 120
2024-59, 2024-32 I.R.B. 348
2024-60, 2024-34 I.R.B. 515
2024-61, 2024-34 I.R.B. 520
2024-62, 2024-36 I.R.B. 570
2024-63, 2024-36 I.R.B. 573
2024-64, 2024-39 I.R.B. 632
2024-65, 2024-39 I.R.B. 633
2024-66, 2024-40 I.R.B. 682
2024-67, 2024-41 I.R.B. 726
2024-68, 2024-41 I.R.B. 729
2024-69, 2024-41 I.R.B. 733
2024-70, 2024-43 I.R.B. 1001
2024-72, 2024-43 I.R.B. 1005
2024-73, 2024-43 I.R.B. 1007
2024-71, 2024-44 I.R.B. 1026
2024-75, 2024-44 I.R.B. 1026
2024-74, 2024-45 I.R.B. 1089
2024-76, 2024-45 I.R.B. 1089
2024-77, 2024-45 I.R.B. 1093
2024-78, 2024-46 I.R.B. 1111
2024-80, 2024-47 I.R.B. 1120
2024-81, 2024-49 I.R.B. 1203
2024-83, 2024-49 I.R.B. 1206
2024-84, 2024-50 I.R.B. 1229
2024-85, 2024-51 I.R.B. 1349
Proposed Regulations:
REG-124593-23, 2024-28 I.R.B. 40
REG-109032-23, 2024-31 I.R.B. 332
REG-120137-19, 2024-31 I.R.B. 336
REG-119283-23, 2024-32 I.R.B. 351
REG-102161-23 2024-33 I.R.B. 502
REG-103529-23, 2024-33 I.R.B. 512
REG-105128-23, 2024-35 I.R.B. 536
REG-108920-24, 2024-38 I.R.B. 607
REG-111629-23, 2024-39 I.R.B. 640
REG-106851-21, 2024-40 I.R.B. 684
REG-116787-23, 2024-40 I.R.B. 709
REG-119683-22, 2024-40 I.R.B. 716
REG-118269-23, 2024-41 I.R.B. 761
REG-112129-23, 2024-42 I.R.B. 787
REG-113628-21, 2024-44 I.R.B. 1074
REG-110878-24, 2024-47 I.R.B. 1125
REG-116017-24, 2024-50 I.R.B. 1232
Revenue Procedures:
2024-26, 2024-27 I.R.B. 7
2024-29, 2024-30 I.R.B. 121
2024-30, 2024-30 I.R.B. 183
2024-27, 2024-31 I.R.B. 300
2024-28, 2024-31 I.R.B. 326
2024-32, 2024-34 I.R.B. 523
2024-34, 2024-38 I.R.B. 604
2024-35, 2024-39 I.R.B. 638
2024-36, 2024-41 I.R.B. 737
2024-37, 2024-41 I.R.B. 755
2024-38, 2024-43 I.R.B. 1010
2024-33, 2024-44 I.R.B. 1030
2024-39, 2024-45 I.R.B. 1097
2024-40, 2024-45 I.R.B. 1100
2024-31, 2024-46 I.R.B. 1113
2024-41, 2024-47 I.R.B. 1122
Revenue Rulings:
2024-13, 2024-28 I.R.B. 18
2024-14, 2024-28 I.R.B. 18
2024-15, 2024-32 I.R.B. 340
2024-16, 2024-35 I.R.B. 534
2024-17, 2024-36 I.R.B. 568
2024-18, 2024-37 I.R.B. 584
2024-20, 2024-40 I.R.B. 646
2024-21, 2024-41 I.R.B. 724
2024-22, 2024-43 I.R.B. 980
2024-23, 2024-43 I.R.B. 981
2024-24, 2024-45 I.R.B. 1086
2024-25, 2024-49 I.R.B. 1181
2024-26, 2024-49 I.R.B. 1201
2024-27, 2024-51 I.R.B. 1240
Treasury Decisions:
10002, 2024-29 I.R.B. 56
9999, 2024-30 I.R.B. 72
10000, 2024-31 I.R.B. 185
10003, 2024-32 I.R.B. 342
10001, 2024-33 I.R.B. 412
10004, 2024-33 I.R.B. 489
9998, 2024-34 I.R.B. 412
10005, 2024-34 I.R.B. 510
9991, 2024-40 I.R.B. 646
10007, 2024-43 I.R.B. 981
9994, 2024-44 I.R.B. 1014
10008, 2024-45 I.R.B. 1082
10011, 2024-48 I.R.B. 1177
10012, 2024-50 I.R.B. 1207
10013, 2024-50 I.R.B. 1220
10009, 2024-51 I.R.B. 1251
10010, 2024-51 I.R.B. 1286
10014, 2024-51 I.R.B. 1340
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

Bulletin No. 2024–51 iii December 16, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–51
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

Internal Revenue Service
Washington, DC 20224
Official Business
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