The Advanced Manufacturing Production Tax Credit (45X MPTC) and the Advanced Energy Project Investment Tax Credit (48C ITC) are two federal tax credits that support clean energy manufacturing in the United States.
45X MPTC & 48C ITC
The 45X MPTC provides tax credits for each domestically produced clean energy component. In contrast, the 48C ITC provides a tax credit for purchasing and commissioning property to build a manufacturing facility.
They established 45X MPTC and extended the 48C ITC as part of the Inflation Reduction Act of 2022.
Projects cannot claim the MPTC and the 48C ITC: if components were manufactured in a facility that claimed a 48C ITC, manufacturers could not also claim the 45X MPTC.
The ITC 48C is an initial tax credit based on capital investment in an industrial or manufacturing facility. It does not vary based on the amount of product sold by the plant. While the MPTC 45X is earned over time based on the production and sale of specific eligible components.
Select one of the two
The choice of ITC or MPTC depends primarily on whether the facility will manufacture MPTC-eligible components (as ITC eligibility is broader). If both are eligible, the decision depends on the comparative importance of the facility’s capital costs versus the operating expenses.
Manufacturing facilities producing MPTC 45X-eligible components receive more value from MPTC than ITC 48C.
Clean energy components eligible for MPTC include the PV module and specific subcomponents:
- tracking system components,
- certain critical minerals.
Manufacturers may also monetize the tax credit through a direct payment from the Internal Revenue Service (IRS). Instead of a credit against their taxes owed or opt to carry forward the credit, as described below:
- Direct payment option: Manufacturers can receive a refund for MPTC tax credits for the first five years they claimed. Although they are still subject to credit sunset in 2033.
- Credit Carryover: Manufacturers may also elect to carry over all or a portion of a given year’s tax credits to an unrelated qualifying taxpayer.
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