The Biden administration has unveiled final rules for the Advanced Manufacturing Product Credit, which officials say will boost domestic mining of critical minerals and reduce reliance on foreign materials from nations such as China.
On Friday, the Department of Treasury and Internal Revenue Service released the final rules, which are meant to provide clarity on the tax credit available for U.S. manufacturers through Section 45X of the Internal Revenue Code.
The tax credit, established through the 2022 Inflation Reduction Act, which was passed by Democrats and signed by President Joe Biden, is geared toward manufacturers involved in the domestic production and sale of certain eligible solar and wind energy parts, qualifying battery components, as well as the critical minerals used in popular clean energy products such as solar panels and electric batteries.
The final rules come nearly a year after the administration put forth its proposed regulations in December 2023. Administration officials have said the final rules are largely aligned with the past proposal, but they go further to clarify definitions and confirm credit amounts for components eligible for the tax credit based on feedback from stakeholders.
Specifically, the regulations allow taxpayers to claim the credit for material and extraction costs for producing critical minerals and electrode active materials. The administration said this will allow for more investments in domestic mining for critical minerals, thereby strengthening national energy security and boosting the supply chain.
Administration officials claimed the tax credit has already driven a large boom in clean energy manufacturing within the United States — with over $126 billion in private sector investments having been announced since the IRA was signed into law. With the final rules, the administration expects the tax credit to incentivize domestic manufacturing and mining even further.
“The U.S. has major deposits of critical minerals like lithium and palladium,” Deputy Secretary of the Treasury Wally Adeyemo told reporters ahead of the announcement. “Extracting and processing them here in America, as opposed to relying on China, Russia, and other countries with weak worker and environmental protections, is an economic and national security priority for us.”
Deputy Secretary of Energy David Turk said the final rules will “help level the playing field for U.S. companies,” allowing for the onshoring of production for technologies currently dominated by China.
In practice, the tax credit would allow battery cell manufacturers to claim $35 for every kilowatt-hour produced and sold. Meanwhile, critical mineral producers can receive 10% back on their production costs.
“This is absolutely a game changer for our ability to lean into mineral security sourced, processed, [and] manufactured here in the United States,” White House climate adviser Ali Zaidi said.
As many U.S. manufacturers of clean energy products, such as solar panels and batteries, often rely on foreign components, administration officials insisted the final rules will help instill safeguards to ensure foreign entities, such as Russia or China, won’t benefit from the tax credit. Only U.S. taxpayers are able to claim the tax credit and must have done most of the production or extraction within the U.S. to receive any of the benefits.
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While the administration has said these rules will boost domestic mining and production, officials said it would also make existing mining more profitable. However, the administration declined to provide any projections as to how much the tax credit could affect manufacturing.
The final rules are effective as of Dec. 27.