The U.S. Department of the Treasury and IRS on Jan. 3, 2025, released final regulations regarding the production tax credit (PTC) for hydrogen under Section 45V of the Internal Revenue Code, as enacted by the Inflation Reduction Act. The U.S. Department of Energy intends to release a new version of 45VH2-GREET with an accompanying user manual later this month.
Under Section 45V, a PTC is available for each kilogram of clean hydrogen produced during the taxable year for the first 10 years after the hydrogen generation facility is placed in service. Alternatively, taxpayers may elect to claim the investment tax credit (ITC) under Section 48 in lieu of the Section 45V PTC. The Section 45V credit equals $3 (adjusted for inflation) per kilogram of hydrogen produced, multiplied by the applicable rate. The applicable rate is based on the lifecycle greenhouse gas (GHG) emissions rate of the hydrogen produced as follows:
- 4 kilograms of carbon dioxide equivalent (CO2e) per kilogram of hydrogen through 2.5 kilograms of CO2e per kilogram of hydrogen: 20 percent
- 5 kilograms of CO2e per kilogram of hydrogen through 1.5 kilograms of CO2e per kilogram of hydrogen: 25 percent
- 5 kilograms of CO2e per kilogram of hydrogen through 0.45 kilograms of CO2e per kilogram of hydrogen: 33.4 percent
- Less than 0.45 kilograms of CO2e per kilogram of hydrogen: 100 percent
The $3 per kilogram amount is reduced to $0.60 per kilogram if prevailing wage and apprenticeship requirements are not satisfied. (See Holland & Knight's previous alert, "A Look at IRA Prevailing Wage and Apprenticeship Requirements Final Regulations Highlights," July 8, 2024.) To be eligible for the Section 45V credit, construction of the facility must begin before 2033.
The Holland & Knight Energy Tax Team is reviewing the final regulations and will provide additional analysis. To receive this forthcoming analysis, please subscribe to our alerts and access the Holland & Knight Inflation Reduction Act Tax Resource Library.
