Domestic Content Bonus Credit: Steel Rule, Cost Percentage, and Filing

The domestic content bonus credit rewards clean energy projects that build with American-made steel, iron, and manufactured products. For projects claiming the investment tax credit under Section 48 or 48E, qualifying can add up to 10 percentage points to the credit rate. For projects claiming the production tax credit under Section 45 or 45Y, it adds 10 percent on top of the base credit amount.¹ Qualifying requires two things at once: every structural steel or iron component must be produced entirely in the United States, and a minimum percentage of the total cost of the project’s manufactured products must be domestic. That percentage rises each year, reaching 50 percent for most technologies whose construction begins in 2026.

What the Bonus Is Worth

The bonus works differently across the four credits it applies to. On the production side (Sections 45 and 45Y), it increases whatever base PTC rate the project already earns by 10 percent.² If a project meets prevailing wage and apprenticeship rules and qualifies for the full PTC, the 10 percent applies to that full rate. If it only earns the reduced rate (one-fifth of the full amount), the bonus is calculated against the smaller figure.

On the investment side (Sections 48 and 48E), the size of the increase depends on other conditions the project meets:¹

A 10-percentage-point increase is available if the project has a maximum net output under 1 megawatt, construction began before January 29, 2023, or it satisfies prevailing wage and apprenticeship requirements.
A 2-percentage-point increase applies if the project meets domestic content but none of the three conditions above.

The difference matters. A project meeting prevailing wage can move from a 30 percent ITC to 40 percent with domestic content. A project without prevailing wage moves only from 6 percent to 8 percent. For most commercial-scale developments, satisfying prevailing wage and apprenticeship is effectively a prerequisite to making the compliance effort worthwhile.

The Steel and Iron Rule

Every steel or iron component that serves a structural function must be produced entirely in the United States. Production, for these purposes, means all manufacturing processes from the initial melting and pouring of raw metal through fabrication. The only carve-out is for metallurgical processes involving the refinement of steel additives.³ Corrosion coatings applied to structural items must also happen domestically.

The controlling word is structural. Racks, beams, towers, and steel piles that hold the project up have to satisfy the standard. Smaller steel or iron items that don’t perform a structural role do not. The IRS explicitly exempts nuts, bolts, screws, washers, cabinets, covers, shelves, clamps, fittings, sleeves, adapters, tie wire, spacers, and door hinges.³ Those items are treated as components of manufactured products and run through the cost-percentage test instead.

Compliance is typically documented through mill certificates that trace structural steel back to the domestic facility where it was melted and poured. Collecting these during procurement is far easier than reconstructing them during an audit.

Manufactured Product Cost Percentage

The second half of the test looks at manufactured products. A minimum share of the total manufactured-product cost has to come from components produced in the United States. The statute sets a base of 40 percent for most projects and 20 percent for offshore wind.² IRS guidance then ratchets those numbers up based on when construction begins:¹

2024 or earlier: 40 percent (20 percent offshore wind)
2025: 45 percent (27.5 percent offshore wind)
2026: 50 percent (35 percent offshore wind)
2027 and later: 55 percent (offshore wind eventually reaches 55 percent)

A manufactured product is something produced by a process that transforms raw materials into a distinct article of commerce. The domestic cost percentage compares direct costs of U.S.-made components to the total cost of all manufactured products in the project. Direct costs are the labor and materials the manufacturer actually spent producing the component in the United States.³ Profit margins, overhead, and transportation costs are excluded.

Running that calculation from scratch requires cost breakdowns from each supplier in the chain, isolating direct production costs from everything else. Manufacturers are not always willing to share that data with customers, which is why the safe harbor tables exist.

The Safe Harbor Tables

Notice 2024-41 created an elective safe harbor that assigns pre-approved cost percentages to common components in solar, land-based wind, and battery energy storage projects.⁴ Rather than collecting actual cost data, a developer looks up each component in the applicable table, notes whether it was produced in the United States, and adds the assigned percentages for domestic items. If the total meets the required threshold, the project qualifies.

Notice 2025-08 revised the tables. Solar PV was split into separate ground-mount and rooftop tables, a new column was added for modules using U.S.-made crystalline silicon cells and wafers, several components were renamed, and certain items were reclassified between the battery pack and battery container rows.⁵ Assigned percentages for some components changed with the update, so work only from the current version.

Offshore wind is not covered by the safe harbor. Offshore wind developers have to perform the full cost-based calculation using actual manufacturer data.

Manufacturer Certifications and the Filing Package

Every vendor supplying a component needs to give the project owner a manufacturer certification statement identifying where the product was produced. These certifications are the evidentiary backbone of the claim. Gathering them during procurement is straightforward. Chasing them down years later is not.

The project owner then prepares a domestic content certification statement that goes with the tax return. It accompanies Form 3468 for ITC claims⁶ and Form 8835 for PTC claims, and for the PTC a copy has to be attached again each year during the credit period. The statement identifies the taxpayer, describes the facility (including any IRS registration number), declares that steel, iron, and manufactured product components were produced in the United States as required, and is signed under penalties of perjury.⁷

The bonus is not a standalone credit. It increases whichever underlying credit the project claims, reported on Form 3468 or Form 8835 and rolled into Form 3800, General Business Credit.⁶

Direct Pay and Transferred Credits

Tax-exempt entities that use elective pay under Section 6417 (municipalities, tribal governments, rural electric cooperatives, and similar filers) face a phaseout of their elective payment amount if the project does not satisfy domestic content, unless the facility has a maximum net output under 1 megawatt.⁸ Two statutory exceptions can preserve the payment even when domestic content falls short: including U.S.-made steel, iron, or manufactured products would increase overall construction costs by more than 25 percent, or the relevant domestic products are not available in sufficient quantities or satisfactory quality.¹ Under Notice 2024-84, projects beginning construction before January 1, 2027 can establish these exceptions by attestation supported by records, rather than through a formal waiver.

Taxable developers who transfer credits under Section 6418 can include the domestic content bonus in the transfer. Regulations treat the bonus as part of the eligible credit amount, and any transferred portion has to reflect a proportionate share of each bonus in the total credit.⁹ Cherry-picking which bonus amounts to transfer and which to keep is not permitted.

Recapture, Penalties, and How Long to Keep the Records

For ITC claims, Section 50 imposes a five-year recapture period. If the property stops being investment credit property during that window, a percentage of the credit has to be paid back:¹⁰

Within year 1: 100 percent recaptured
Within year 2: 80 percent
Within year 3: 60 percent
Within year 4: 40 percent
Within year 5: 20 percent

Because the IRS can audit any year within the recapture window plus the standard three-year statute of limitations, keep procurement contracts, manufacturer certifications, cost calculations, and safe harbor worksheets for at least eight years after the project is placed in service. Disposing of key equipment, changing the use of the facility, or shifting components offshore within the recapture period exposes the developer to both the recapture tax and potential scrutiny of the original domestic content claim.

A claim that turns out to be unsupported can also trigger a 20 percent penalty on the excessive credit amount under the erroneous claim rules, unless the taxpayer can show reasonable cause.¹¹ Reasonable cause is fact-specific, but complete manufacturer certifications and well-documented cost calculations are the foundation of that defense.

1
Internal Revenue Service. Domestic Content Bonus Credit
2
Office of the Law Revision Counsel. 26 USC 45 – Electricity Produced From Certain Renewable Resources, Etc
3
Internal Revenue Service. Notice 2023-38 – Domestic Content Bonus Credit Guidance under Sections 45, 45Y, 48, and 48E
4
Internal Revenue Service. IRS Notice 2024-41 – Domestic Content Bonus Credit Amounts under the Inflation Reduction Act of 2022
5
Internal Revenue Service. Notice 2025-08 – Domestic Content Bonus Credit Amounts under the Inflation Reduction Act of 2022 First Updated Elective Safe Harbor
6
Internal Revenue Service. Instructions for Form 3468 – Investment Credit
7
Internal Revenue Service. Instructions for Form 8835 (2025)
8
Internal Revenue Service. Elective Pay and Transferability
9
eCFR. 26 CFR 1.6418-1 – Transfer of Eligible Credits
10
Office of the Law Revision Counsel. 26 USC 50 – Other Special Rules
11
Office of the Law Revision Counsel. 26 USC 6676 – Erroneous Claim for Refund or Credit