On Thursday, January 16th, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued updated guidance to the Inflation Reduction Act’s domestic content bonus for Clean Electricity Production and Investment Tax Credits. The guidance updates and builds upon the domestic content safe harbor table that Treasury and the IRS published in May of 2024 that provides clean energy developers the option to rely on default cost percentages provided by Department of Energy (in lieu of obtaining direct cost information from suppliers) to determine eligibility for the domestic content bonus.
The Treasury issued a press release to announce this update (linked below). Included in this release is Notice 2025-08, Domestic Content Bonus Credit Amounts under the Inflation Reduction Act of 2022: First Updated Elective Safe Harbor modifying Notice 2024-41 (herceforth referred to as Notice 2025-08). The Safe Harbor Table includes substantive changes to the previous Safe Harbor table. These changes significantly impact manufacturers of modules, inverters and racking systems and changes the calculus developers will use to build their systems. This notice takes effect as of the date it was published, January 16th, 2025, and will remain usable guidance this date forward. Should future updated guidance or rulings from Treasury be published, this guidance will be valid for 90 days from the issuance of that updated guidance. Similarly, the Safe Harbor Table provided in May of 2024 (Notice 2024-01) is still available for use for projects that have already commenced construction or will commence construction on or before April 16th, 2025. A third option remains viable, as well. The “Direct Cost Method” as outlined in Notice 2023-38 is available for use, and will remain so until further notice is provided by the Treasury.

40% or 45%?
On January 15, 2025, the IRS published the Final Rules for Section 48E, which is the part of the tax code that regulates the IRA Domestic Content Bonus Investment Tax Credit. In it, the IRS left the rate of domestic content required to qualify a project at 40% for 2025 (Adjusted Percentage Rule: Section 3.03(2)(a) of Notice 2023-38 (updated by Notice 2024-41). It was thought that this percentage would escalate 5% per year, capping at 55% in 2027. This methodology would align with the Production Tax Credit, or PTC, a per kilowatt-hour (kWh) federal tax credit included under Section 45 of the U.S. tax code for electricity generated by qualified renewable energy resources. Notice 2025-08 does not mention any adjustment to the qualifying rate for the ITC. While 40% is current law, adjustments to the rate, including retroactive ones, are at the discretion of the Treasury and Internal Revenue Service.
What does the updated Safe Harbor Table tell us:
As mentioned, the percentages assigned to module, inverter, and racking system product components has been substantially changed with this new guidance. Domestic modules are significantly incentivized, while percentages allotted to domestic inverters and domestic racking have been significantly reduced. May 2024 guidance can still be used for the next 90 days to achieve 40% domestic content. Qualifying projects are now unable to meet a potential 45% threshold through inverters and racking alone. New guidance may be provided, and percentages adjusted, at the discretion of the Treasury and IRS.
Rails now contribute 15% to a qualifying project using MLPE’s, and 18.7% toward projects using String Inverters. Fasteners have been classified under the term “Structural Fasteners” and defined as a component that connects the rails, modules, and MLPE (if applicable) to one another. Their percentage has been reduced to 3.5%. The total possible contributing percentage that racking can provide is now 19.6% when using both domestically produced “Rail” and domestically produced “Structural Fasteners.’ A fully domestic inverter now contributes 24.8%, down from 35.6% previously.
Module manufacturers such as Hanwa Q.Cells have modules available that have domestically manufactured product components already incorporated into their current product offerings. A module with a domestically sourced encapsulant, for example, can contribute 3.1% toward the needed percentage.
Manufacturers and commercial entities looking to capture this bonus credit will carefully analyze this new guidance and make decisions based on a variety of factors. They will look at modules, inverters and racking wholistically to understand availability, function, and cost. They’ll weigh the costs and benefits of short-term change knowing domestic cell manufacturing is likely to come (The new table also includes columns for Domestic Si PV cells & Domestic Wafers). And they’ll consider the political landscape and the variety of potential changes to tax and renewable policy that may occur. IronRidge will be here with you, synthesizing this information with a diligent and thoughtful approach you can trust.