New Domestic Content Adder Guidance: ‘Buy American’ is Back

 |  Share

On May 16, 2024, the Department of the Treasury and the IRS announced the release of Notice 2024-41,[1] which clarifies the safe harbor for classification of project components created in Notice 2023-38 and provides a new safe harbor for the domestic content bonus credit percentages for clean energy tax credits offered under the Inflation Reduction Act. This is part of the federal government’s ongoing attempt to stimulate investment in American manufacturing, in particular green technology manufacturing.


The 2022 Inflation Reduction Act (the “IRA”) created new incentives for qualified facilities and energy projects,[2] including a domestic content bonus credit. If domestically produced steel, iron, or manufactured products are used in the construction of such facilities, the taxpayer will qualify for the bonus credit (allowing for an additional 10% credit). To be eligible to receive this bonus credit, the project must incorporate domestically produced steel, iron, and other manufactured products. The manufactured products will be considered domestically produced if no less than the “adjusted percentage” of their component parts were mined, produced, or manufactured in the United States. The adjusted percentage was 40% at the time the IRA was enacted, but it increases over time.

In Notice 2023-38, the IRS provided clarity on how different components in utility-scale photovoltaic systems, land-based wind facilities, offshore wind facilities, and battery energy storage technologies would be classified for purposes of the iron, steel, and manufactured products requirements, such as steel photovoltaic module racking, towers for wind facilities, and inverters for batteries (to name just a few).[3] However, Notice 2023-38 also required that taxpayers obtain the direct material and direct labor costs that were paid or incurred by the manufacturer of the manufactured product, and further required taxpayers to calculate the direct costs of any U.S. components that may have been incorporated into non-U.S. manufactured products. This created a lot of industry concern, as taxpayers claiming the credit do not often have reliable cost calculations from manufacturers or the EPC contractors that construct the system.

New Guidance on the Domestic Content Adders

The latest guidance in Notice 2024-41 clarifies which project components of Hydropower Facilities and Pumped Hydropower Storage Facilities are considered steel/iron or manufactured products. Notice 2024-41 also clarifies that the categorization of components for a “utility-scale photovoltaic system” set forth in Notice 2023-38 is applicable to any “ground-mount and rooftop photovoltaic system.” While these clarifications are desirable for application of the safe harbor for classification of project components, developers, investors and lenders have been more focused on the new safe harbor that was created by Notice 2024-41.

The new guidance provides relief to taxpayers when attempting to comply with the domestic sourcing requirements through the New Elective Safe Harbor. This safe harbor sets cost percentages (obtained from the Department of Energy) for purposes of calculating the domestic cost percentage and satisfying the adjusted percentage rules for manufactured products. These cost percentages will be accepted by the IRS for purposes of calculating the domestic cost percentage. It may be helpful to run through an example using the following table from Notice 2024-41 applicable to land-based wind projects:

APC[4] MPC[5] Value
Wind Turbine Blades 31.2
Rotor Hub 9.9
Nacelle 47.5
Power Converter 8.9
Production 0.9
Wind Tower Flanges Material 0.8
Production 0.8
Tower Steel/Iron Product
Steel or iron rebar in
Steel/Iron Product
Total 100

If a taxpayer elects into the New Elective Safe Harbor for a five (5) MWac land-based wind project, the taxpayer would apply the above table in determining eligibility for the domestic content adder. For purposes of this example, we will make the following assumptions:

  • The project is comprised of four components: the wind turbine, the wind tower flanges, the tower, and steel rebar in the foundation.
  • The tower and rebar in the foundation meet the steel or iron requirements in Notice 2023-38.
  • The wind tower flanges are not domestically produced.
  • The blades and nacelles are manufactured in the United States but the rotor hub and power converter are not manufactured in the United States.

The wind turbine and the wind tower flanges are the only manufactured products under consideration. However, due to the wind tower flanges not being domestically produced, the wind turbine alone must be used to determine whether the adjusted percentage is met. Due to the rotor hub and power converter not being domestically produced, the wind turbine is a Non-U.S. Manufactured Product. However, as the blades and the nacelle are U.S. manufactured product components (constituting 31.2% and 47.5% of the cost percentages, respectively), the Domestic Cost Percentage for the wind turbine alone is 78.7%. This exceeds the adjusted percentage required for manufactured products used in land-based wind projects. Therefore, the project would be eligible for the domestic content adder.

One important warning regarding the New Elective Safe Harbor: Notice 2024-41 prohibits selective reliance; once a taxpayer has elected to use the New Elective Safe Harbor for purposes of determining eligibility, the taxpayer must apply the entirety of the cost percentages set forth in Notice 2024-41 for purposes of calculating eligibility for the domestic content adder.


Overall, Notice 2024-41 adds to the stream of guidance the IRS has issued that clarify eligibility for the new adders.[6] While the additional safe harbor provides more certainty, the real utility of this guidance will depend on whether lenders, insurers and investors feel comfortable relying on this guidance to determine eligibility. Often the decision regarding system components and construction are made in advance of lenders investing capital or insurers issuing policies; if investors and developers doubt that lenders and insurers will rely on this guidance and adjust their underwriting for this adder, investors and developers may choose not to incur the additional costs associated with qualifying.


This DarrowEverett Insight should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This Insight is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this Insight, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.

Unless expressly provided, this Insight does not constitute written tax advice as described in 31 C.F.R. §10, et seq. and is not intended or written by us to be used and/or relied on as written tax advice for any purpose including, without limitation, the marketing of any transaction addressed herein. Any U.S. federal tax advice rendered by DarrowEverett LLP shall be conspicuously labeled as such, shall include a discussion of all relevant facts and circumstances, as well as of any representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) upon which we rely, applicable to transactions discussed therein in compliance with 31 C.F.R. §10.37, shall relate the applicable law and authorities to the facts, and shall set forth any applicable limits on the use of such advice.


[2] For more information on the IRA, see our other article:

[3] Notice 2023-38 also provided a different schedule of adjusted percentages applicable to offshore wind projects.

[4] APCs are Applicable Project Components

[5] MPCs are Manufactured Product Components

[6] For more information on the energy community adder, see our other article: