Treasury, IRS release additional guidance on domestic content bonus elective safe harbor under the Inflation Reduction Act

On January 16, the Treasury and IRS published Notice 2025-08, which provides additional guidance on the Inflation Reduction Act’s domestic content bonus credit elective safe harbor. The Treasury and IRS introduced the elective safe harbor in May 2024 in Notice 2024-41.

According to the Treasury’s press release, the latest guidance “updates and builds upon the domestic content safe harbor 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 [the] Department of Energy (in lieu of obtaining direct cost information from suppliers) to determine eligibility for the domestic content bonus.” 

Notice 2025-08 “reflects improved default values that more closely align with the characteristics and costs of applicable project components and manufactured product components in the marketplace, as analyzed by the Department of Energy.”

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Definitions and percentages updated for solar, battery storage, and onshore wind

Solar

Definitions

Notice 2025-08 split the solar PV table into two separate tables:

• PV ground-mount (tracking and fixed)
• PV rooftop (module level power electronics (MLPE) and string)

The guidance also renamed, redefined, and reclassified several applicable project components (APCs) and manufactured product components (MPCs).

Percentages 

In addition to updating several existing assigned cost percentages, the guidance added updated assigned cost percentages for PV modules that “incorporate c-Si [crystalline silicon] PV cells and wafers manufactured in the United States.”

These additional cost percentages were added to reflect “the significant cost premium” associated with domestic cells. Depending on the system, the premium for domestic cells can exceed 40%.

Although the applicable percentages for domestic cells increased, the applicable percentages for other manufactured product components MPCs decreased (to keep the total at 100). 

Battery storage 

Definitions

The guidance made certain adjustments to the characterizations of applicable project components and manufactured product components. For example, a “battery pack” is now a “battery pack/module,” and an “inverter” is now “inverter/converter.” It also provided a number of clarifying definitions.

Cost percentages

The guidance updated assigned cost percentages for manufactured products and manufactured product components for BESS. The updated cost percentages apply to “grid-scale BESS and distributed BESS” projects. 

The DOE made the change after collecting data from three different national laboratories instead of a single national laboratory survey, as well as “comprehensive interviews of manufacturers, installers, developers, and owners” of BESS technologies.”

Onshore, or “land-based,” wind

Definitions

The updated table for onshore, or “land-based,” wind includes minor adjustments to the characterizations of applicable project components and manufactured product components. “Steel or iron rebar in foundation,” for instance, has been renamed “steel or iron reinforcing products in foundation.”

Cost percentages

Notice 2025-08 did not change any associated cost percentages for onshore wind. The DOE, “using analysis from the national laboratories, found only minor changes in the component cost data” from Notice 2024-41.

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Offshore wind, hydropower, and other technologies remain out of scope

Offshore wind, hydropower, biomass, geothermal, fuel cell, and other technologies remained outside the scope of the elective safe harbor. Therefore, to qualify for the domestic content bonus, these project sponsors must rely on extensive calculations based on actual component costs. 

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Retrofits qualify for domestic content safe harbor

Section 4 of Notice 2025-08 allows qualifying retrofits to use the updated classifications and cost percentages to qualify for the domestic content bonus credit amount. Wind repowers are a prime example of a retrofit.

Projects must meet the the 80/20 rule and qualify for at least one of four credits, depending on the placed-in-service date: 

• PIS after December 31, 2022: §48 ITC or §45 PTC
• PIS after December 31, 2024: §48E ITC or §45Y PTC. These are the IRA’s “technology-neutral credits”

Importantly, any used components retained from an existing facility – the 20 in the 80/20 rule – are assigned a 0% value for calculating domestic content.

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Clarity on parking canopy, carport, and floating solar projects

The guidance expanded the definition of ground-mounted solar to include parking canopies and carports (“canopy steel racking structures”) and floating solar (“floating on a body of water”). 

Parking canopies and carports are considered fixed-tilt systems, while floating solar can be fixed-tilt or tracker systems.

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Relationship to elective, or “direct,” pay

As our team highlighted in a prior update, taxpayers who choose to monetize their tax credits – like the Section 45X advanced manufacturing production credit (AMPC) – through direct pay, may be subject to a “haircut” if they do not meet certain domestic content requirements. These taxpayers may utilize the domestic content safe harbor.

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Record-keeping

Taxpayers, including transferable tax credit buyers, who claim the domestic content bonus credit must meet the general recordkeeping requirements under Section 6001 to substantiate that the domestic content requirement has been met. 

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Timing and future guidance 

The updated domestic content tables apply to calculations made on or after January 16, 2025, and the Treasury signaled that they intend to update the safe harbor annually. Taxpayers may utilize the safe harbor tables included in Notice 2025-08 for projects beginning construction up to 90 days after the release of further guidance or after any future modification, update, or withdrawal of the updated elective safe harbor.