§ 1.45X-1. General rules applicable to the advanced manufacturing production credit.

¶(A) Example 1. Taxpayers X, Y, and Z each produce one of three sections of a wind tower that together make up the wind tower. No taxpayer has produced an eligible component within the meaning of section 45X(a)(1)(A) because no taxpayer has produced all sections of the wind tower.

¶(B) Example 2. Same facts as paragraph (c)(1)(iii)(A) of this section (Example 1), but taxpayers X, Y, and Z instead form Partnership XYZ. Partnership XYZ produces all three sections of the wind tower. Partnership XYZ has produced an eligible component within the meaning of section 45X(a)(1)(A).

¶(C) Example 3. Taxpayer V puts the external casing on a battery module (within the meaning of § 1.45X-3(e)(4)(i)(A)) that already had cells, battery management systems, and other components integrated into it. Taxpayer V has engaged in minor assembly and has not produced an eligible component within the meaning of section 45X(a)(1)(A).

¶(D) Example 4. Taxpayer U purchases two finished halves of a wind turbine nacelle and combines them into a single nacelle. Taxpayer U has engaged in minor assembly and has not produced an eligible component within the meaning of section 45X(a)(1)(A).

¶(E) Example 5. Taxpayer T purchases a dry cell battery and fills the electrolyte of the battery. Taxpayer T has engaged in minor assembly and has not produced an eligible component within the meaning of section 45X(a)(1)(A).

¶(F) Example 6. Taxpayer W purchases a prefabricated wind turbine blade and applies paint and finishes. Taxpayer W has engaged in superficial modification of the blade and has not produced an eligible component within the meaning of section 45X(a)(1)(A).

¶(A) In general. If the production of an eligible component is performed in whole or in part pursuant to a contract that is a contract manufacturing arrangement, then, provided the other requirements of section 45X are met, the party to such contract that may claim the section 45X credit with respect to such eligible component is the party that performs the actual production activities that bring about a substantial transformation resulting in the eligible component.

¶(B) Contract manufacturing arrangement defined. The term contract manufacturing arrangement means any agreement (or agreements) providing for the production of an eligible component if the agreement is entered into before the production of the eligible component to be delivered under the contract is completed. A routine purchase order for off-the-shelf property is not treated as a contract manufacturing arrangement for purposes of this paragraph (c)(3). An agreement will be treated as a routine purchase order for off-the-shelf property if the contractor is required to make no more than de minimis modifications to the property to tailor it to the customer's specific needs, or if at the time the agreement is entered into, the contractor knows or has reason to know that the contractor can satisfy the agreement out of existing stocks or normal production of finished goods.

¶(A) All required information set forth in guidance; and

¶(B) A properly signed penalty of perjury statement that includes the following: under penalties of perjury, I declare that I have examined this statement, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this statement are true, correct, and complete.

¶(A) Example 1: Contract manufacturing with sale. Taxpayers X, Y and Z are unrelated C corporations that have calendar year taxable years. In 2024, pursuant to a contract manufacturing arrangement as described in paragraph (c)(3)(ii)(B) of this section, X hires Y to produce a solar module. The contract is a tolling arrangement and provides that Y will produce the solar module according to X's designs and specifications and using the materials and subcomponents that X provides. X and Y enter an agreement providing that X is the sole party that may claim a section 45X credit for the production and sale of the solar module, and X and Y each sign a certification statement as described in paragraph (c)(3)(iv) of this section reflecting this agreement. In 2025, Y produces and delivers the solar module to X, and in 2026, X sells the solar module to Z. X may claim a section 45X credit in taxable year 2026 for the solar module it sold to Z provided all other requirements of section 45X are met and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by X. Y could claim a section 45X credit if the agreement between X and Y had designated Y as the sole party that could claim a section 45X credit for the production and sale of the solar module provided all other requirements of section 45X are met and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by Y.

¶(B) Example 2: Contract manufacturing with no sale. Assume the facts are the same as in paragraph (c)(3)(v)(A) of this section (Example 1), except that X does not sell the solar module and instead X uses it to generate electricity for use in X's trade or business. Because there has been no sale, neither X nor Y may claim a section 45X credit for the solar module regardless of whether X and Y submit signed certification statements described in paragraph (c)(3)(iv) of this section.

¶(C) Example 3: Multiple contract manufacturing arrangements. Taxpayers V, W, X, Y, and Z are unrelated C corporations that have calendar year taxable years. In 2024, pursuant to three separate contract manufacturing arrangements as described in paragraph (c)(3)(ii)(B) of this section, V hires W, X, and Y to produce the bottom, middle and top segments, respectively, of a single wind tower that V designed. W, X, Y, and V enter into an agreement providing that V is the sole party that may claim a section 45X credit for the production and sale of the wind tower, and W, X, Y, and V each sign a certification statement as described in paragraph (c)(3)(iv) of this section reflecting this agreement. In 2024, W and X both produce and deliver their respective wind tower segments to the installation site, and in 2025, Y produces and delivers its wind tower segment to the installation site. In 2026, V sells the completed wind tower to Z. V may claim a section 45X credit in taxable year 2026 for the wind tower it sold to Z provided all other requirements of section 45X are met and the certification statements signed by V, W, X, and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by V. W or X or Y could be the party that could claim a section 45X credit if the agreement between V, W, X and Y had designated W or X or Y as the sole party that could claim a section 45X credit for the production and sale of the wind tower provided all other requirements of section 45X are met and the certification statements signed by V, W, X, and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by the party designated as the sole party that could claim a section 45X credit.

¶(D) Example 4: Applicable Critical Mineral Processing with Certification. Taxpayers X, Y, and Z are unrelated C corporations that have calendar year taxable years. In 2024, X extracts raw lithium from natural mineral deposits and purifies the extracted material to 90% lithium by mass. X subsequently hires Y to further process the lithium material pursuant to a contract manufacturing arrangement as described in paragraph (c)(3)(ii)(B) of this section. Specifically, the contract is a tolling arrangement and provides that X remains the owner for Federal income tax purposes throughout the purification process and that Y will further purify the lithium material furnished by X to a purity of no less than 99.9% lithium by mass as required by section 45X(c)(6)(P) and § 1.45X-4(b)(16)(ii). X and Y enter an agreement providing that X is the sole party that may claim a section 45X credit for the production and sale of the applicable critical mineral, and X and Y each sign a certification statement as described in paragraph (c)(3)(iv) of this section reflecting this agreement. In 2025, Y purifies the material to 99.9% lithium by mass (qualifying lithium) and delivers it to X. X subsequently sells the qualifying lithium to Z in 2026. X may claim a section 45X credit in taxable year 2026 for the qualifying lithium sold to Z, provided that all other requirements of section 45X are met, and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by X. Y could claim a section 45X credit if the agreement between X and Y had designated Y as the sole party that could claim a section 45X credit for the qualifying lithium, provided that all other requirements of section 45X are met, and the certification statements signed by X and Y meet the requirements described in paragraph (c)(3)(iv) of this section and are properly submitted by Y. Neither X nor Y could claim a section 45X credit in the absence of a designating agreement and certification statement (described in paragraphs (c)(3)(iii) and (iv) of this section, respectively) for the reasons stated in paragraph (c)(3)(i) of this section.

¶(A) Is necessary for the production or recycling of property described in section 48C(c)(1)(A)(i), re-equipping an industrial or manufacturing facility described in section 48C(c)(1)(A)(ii), or re-equipping, expanding, or establishing an industrial facility described in section 48C(c)(1)(A)(iii);

¶(B) Is tangible personal property, or other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment credit facility; and

¶(C) With respect to which depreciation (or amortization in lieu of depreciation) is allowable.

¶(A) Facts. Taxpayer owns and operates a manufacturing site that contains tangible property made up of Equipment A and Equipment B, each set of which functions independently and which is arranged in serial fashion. Equipment A is used by the taxpayer to produce otherwise qualified property 1. Equipment B is used to produce otherwise qualified property 2, a different type of product than otherwise qualified property 1. Taxpayer was allocated a section 48C credit under the section 48C(e) program for a section 48C facility that includes Equipment A and subsequently placed the section 48C facility and Equipment A in service in taxable year 2026. Taxpayer claimed a section 48C credit related to Equipment A for taxable year 2026.

¶(B) Analysis. The section 45X facility with respect to otherwise qualified property 1 is the tangible property made up of Equipment A, which is the independently functioning tangible property used by the taxpayer that is necessary to be considered the producer of the otherwise qualified property within the meaning of paragraph (c)(1) or (2) of this section. However, Equipment A is also eligible property that is considered part of a section 48C facility as defined in paragraph (g)(3) of this section. Therefore, otherwise qualified property 1 is not an eligible component under paragraph (g)(1) of this section because part (all in this case) of the section 45X facility where otherwise qualified property 1 was produced is also considered a section 48C facility. There is a separate section 45X facility with respect to otherwise qualified property 2. That section 45X facility is the tangible property made up of Equipment B. Equipment A is not included in the section 45X facility as it is not used to produce otherwise qualified property 2. None of the tangible property comprising the section 45X facility with respect to otherwise qualified property 2 is considered part of a section 48C facility. Thus, otherwise qualified property 2 is an eligible component under paragraph (g)(1) of this section.

¶(A) Facts. Taxpayer owns and operates two manufacturing sites at different locations. The tangible property at manufacturing site 1 is Equipment A, which is used to continue and finish the first part of the production process for otherwise qualified property. The tangible property at manufacturing site 2 is Equipment B, which is used to complete the production process of the same otherwise qualified property. Taxpayer was allocated a section 48C credit under the section 48C(e) program for Equipment A.

¶(B) Analysis. Equipment A and B comprise a single section 45X facility regardless of location under paragraph (g)(2)(i) of this section because both Equipment A and B were used to produce the otherwise qualified property and the use of Equipment A and B are necessary to consider the taxpayer the producer, consistent with the meaning of produced by the taxpayer in paragraph (c)(1) or (2) of this section. However, part of the property comprising the section 45X facility is also a section 48C facility under paragraph (g)(3) of this section because Equipment A is eligible property that is part of a section 48C facility. As a result, the otherwise qualified property is not considered an eligible component, and the sale of the otherwise qualified property will not generate a section 45X credit.

¶(A) Facts. Taxpayer owns and operates two manufacturing sites. Manufacturing Site 1 contains tangible property that is Equipment A, which is used to produce photovoltaic cells. Manufacturing Site 2 contains tangible property that is Equipment B and tangible property that is Equipment C, which are arranged in serial fashion. Equipment B is used to produce photovoltaic cells. Equipment C is used to produce solar modules, in part, by combining the photovoltaic cells produced by Equipment A and Equipment B. Taxpayer was allocated a section 48C credit under the section 48C(e) program for a section 48C facility that includes Equipment B. Subsequently, Taxpayer places the section 48C facility and Equipment B in service in taxable year 2026. Taxpayer claimed a section 48C credit for Equipment B in taxable year 2026.

¶(B) Analysis. Equipment A and Equipment B each comprise a section 45X facility since each independently functions to produce otherwise qualified property, photovoltaic cells. No part of the section 45X facility comprised of Equipment A is eligible property that is included in a section 48C facility. Thus, the photovoltaic cells produced in the section 45X facility comprised of Equipment A are eligible components. The photovoltaic cells that are produced in the section 45X facility comprised of Equipment B are otherwise qualified property that cannot qualify as eligible components because part (all in this case) of the section 45X facility comprised of Equipment B where the photovoltaic cells are produced is also considered a section 48C facility. Solar modules, a different otherwise qualified property, are produced in using Equipment C, which is itself a separate section 45X facility. Equipment C does not have to include any of the tangible property included in Equipment A or B under paragraph (g)(2)(i) of this section because it is not necessary for the Taxpayer to use that equipment to be considered the producer of the solar modules for purposes of section 45X. As a result, no part of section 45X facility comprised of Equipment C where the solar modules are produced is considered a section 48C facility, and the solar modules are considered an eligible component for purposes of section 45X.

¶(A) Facts. X is hired by Y to manufacture photovoltaic cells, but X and Y agree under paragraph (c)(3)(iii) of this section that Y will be the party to claim any section 45X credit resulting from the sale of the photovoltaic cells. X owns and operates a manufacturing site that contains equipment that is tangible property used to produce the photovoltaic cells. X was allocated a section 48C credit under the section 48C(e) program for a section 48C facility that includes the equipment used to produce the photovoltaic cells. The equipment is eligible property that is part of the section 48C facility that was placed in service in taxable year 2026. X claimed a section 48C credit for the equipment in taxable year 2026.

¶(B) Analysis. Under paragraph (g)(2)(ii) of this section, in determining the section 45X facility related to the photovoltaic cells (the otherwise qualified property), Y must consider the equipment that X used in producing the photovoltaic cells. In this case, that means that part of the section 45X facility is also considered a section 48C facility, as the equipment used to produce the photovoltaic cells is also eligible property that is part of a section 48C facility. Therefore, the photovoltaic cells are not eligible components for purposes of section 45X to X or Y, and there is no section 45X credit generated if the photovoltaic cells are sold.

¶(A) Facts. Assume the facts are the same as in paragraph (g)(4)(iv) of this section (Example 4), except that Y and X also agreed for X to produce photovoltaic wafers using other equipment that is tangible property that is different than the equipment X uses to produce the photovoltaic cells.

¶(B) Analysis. While Y must consider the equipment that X uses to produce the photovoltaic wafers (the otherwise qualified property) under paragraph (g)(2)(ii) of this section to determine the section 45X facility associated with the photovoltaic wafer production, Y is not required to include any of the equipment used by X to produce the photovoltaic cells because it was not necessary to use that equipment to be considered the producer of the photovoltaic wafers. As a result, no part of the section 45X facility related to photovoltaic wafers is part of a section 48C facility. Therefore, the photovoltaic wafers are eligible components for purposes of section 45X and Y will be entitled to claim a section 45X credit upon the sale.