The Section 45X Advanced Manufacturing Production Credit is a federal tax credit that pays U.S. manufacturers a set amount for each qualifying clean-energy component or critical mineral they produce domestically and sell to an unrelated buyer. Created by the Inflation Reduction Act of 2022 and amended significantly in 2025, it covers solar hardware, wind hardware, inverters, battery cells and modules, and 50 listed minerals. You claim it on Form 7207, carry it to Form 3800, and, if you can’t use it against tax liability, you can take it as a cash payment or sell it.
What Qualifies and How Much It Pays
The credit is per unit, and the unit depends on the component. A manufacturer earns nothing on components consumed internally or given away; the item has to be produced in the United States (or a U.S. possession) and sold to an unrelated person in the ordinary course of business.1Internal Revenue Service. Advanced Manufacturing Production Credit
Solar Components
- Photovoltaic cells: $0.04 per direct-current watt
- Photovoltaic wafers: $12 per square meter
- Solar-grade polysilicon: $3 per kilogram
- Solar modules: $0.07 per direct-current watt
- Polymeric backsheets: $0.40 per square meter
- Torque tubes: $0.87 per kilogram
- Structural fasteners: $2.28 per kilogram
Torque tubes are the steel supports that span between foundation posts on a solar tracker and rotate via a drive system; structural fasteners connect tracker components to the foundation and to each other.2Office of the Law Revision Counsel. 26 U.S. Code 45X – Advanced Manufacturing Production Credit
Wind Components
Wind hardware is priced against the rated capacity of the completed turbine the part is designed for, so larger turbines yield larger credits on every piece.
- Blades: $0.02 per watt
- Nacelles: $0.05 per watt
- Towers: $0.03 per watt
- Offshore wind foundations, fixed platform: $0.02 per watt
- Offshore wind foundations, floating platform: $0.04 per watt
Inverters
Six inverter categories qualify, each priced against total rated AC watt capacity.
- Central inverter: $0.0025 per AC watt
- Utility inverter: $0.015 per AC watt
- Commercial inverter: $0.02 per AC watt
- Residential inverter: $0.065 per AC watt
- Microinverter: $0.11 per AC watt
- Distributed wind inverter: $0.11 per AC watt
Battery Cells and Modules
Battery credits are measured by kilowatt-hour of capacity. Cells earn $35 per kWh.3Congressional Research Service. The Section 45X Advanced Manufacturing Production Credit Modules earn $10 per kWh if they contain cells that were themselves eligible for the cell credit, or $45 per kWh if built without separately eligible cells. Either way the combined value tops out at $45 per kWh, so vertical integration isn’t penalized. Capacity has to be measured under a recognized national or international testing standard, applied consistently across every unit sold and documented in the manufacturer’s books.4eCFR. 26 CFR 1.45X-3 – Eligible Components
Critical Minerals
Fifty minerals qualify once refined to specified purity, commonly 99 percent by mass. Graphite must reach 99.9 percent graphitic carbon by mass. The mineral credit doesn’t work on a per-unit rate; it equals 10 percent of production costs incurred to produce the mineral, which includes direct costs like labor, raw materials, and electricity, but requires you to allocate general overhead out.5Federal Register. Section 45X Advanced Manufacturing Production Credit Metallurgical coal, added by the 2025 legislation for tax years beginning after July 4, 2025, gets a reduced rate of 2.5 percent of production costs.6Internal Revenue Service. Instructions for Form 7207 (Rev. December 2025)
Who Can Claim It
Two gates apply to every component. First, the production has to happen in the United States or a U.S. possession (Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands) as part of a trade or business. Second, the finished component has to be sold to an unrelated person.
“Related person” is defined by reference to Section 52(b), which treats trades or businesses under common control as a single employer. It’s a common-control test, not a simple percentage threshold, so a sale to any entity in your controlled group won’t qualify under the default rule.7Federal Register. Advanced Manufacturing Production Credit Vertically integrated companies can fix this with the Related Person Election, treating intra-group sales as sales to unrelated buyers. The election is annual, covers every related-party sale for the whole tax year, and is indicated on Line 5 of Part I of Form 7207.
Contract Manufacturing
If production is outsourced, the parties can decide by written agreement which one claims the credit. Each side files a signed certification statement with Form 7207, under penalty of perjury. Without a written agreement, the credit goes to whichever party performed the substantial transformation that turned raw materials or subcomponents into the finished component.8eCFR. 26 CFR 1.45X-1 – General Rules Applicable to the Advanced Manufacturing Production Credit A routine purchase order for off-the-shelf inventory isn’t contract manufacturing, and minor modifications by a fabricator won’t bring the arrangement inside these rules.
Foreign-Entity Restrictions Starting in 2025
For tax years beginning after July 4, 2025, a component is disqualified if its production received “material assistance” from a prohibited foreign entity.6Internal Revenue Service. Instructions for Form 7207 (Rev. December 2025) For solar cells and modules, compliance is measured as a cost ratio: total direct material costs minus the direct material costs attributable to prohibited foreign entities, divided by total direct material costs. That ratio has to exceed:
- 50 percent in 2026
- 60 percent in 2027
- 70 percent in 2028
- 80 percent in 2029
- 85 percent in 2030 and later
A narrow transition rule lets manufacturers with binding written contracts predating June 16, 2025 exclude those contracted material costs from the ratio for components sold before January 1, 2027. Credit transfers face a parallel restriction: a 45X credit can’t be sold to a transferee that is a specified foreign entity. Supply-chain documentation matters much more than it did before these rules took effect.
When the Credit Phases Out
Solar, battery, and inverter credits step down for components sold after December 31, 2029: 75 percent of the full rate in 2030, 50 percent in 2031, 25 percent in 2032, and zero after 2032. Wind components now run on a shorter clock and phase out for components sold after 2027.5Federal Register. Section 45X Advanced Manufacturing Production Credit Critical minerals, originally permanent, are now subject to phase-outs beginning in 2031 under the 2025 legislation. Any multi-year investment model needs these sunset dates built in.
Getting Paid When You Owe Little Tax
Many manufacturers producing eligible components don’t have enough federal tax liability to absorb the full credit. Section 45X gives you two ways around that: elective pay, and a transfer to another taxpayer.
Elective Pay
Most clean-energy credits limit elective pay (also called direct pay) to tax-exempt organizations and government entities. Section 45X is different: every taxpayer, including taxable corporations, can elect to treat the credit as a payment of tax, with any excess refunded. Partnerships and S corporations can make the election at the entity level.9Internal Revenue Service. Elective Pay and Transferability Frequently Asked Questions – Elective Pay For startups running at a loss during ramp-up, this is often the whole point.
Credit Transfers
Under Section 6418, a manufacturer can sell all or part of a 45X credit to an unrelated buyer for cash. The seller doesn’t recognize taxable income on the cash received, and the buyer can’t deduct the payment. The rules:
- Consideration must be cash.
- The transferee cannot resell the credit.
- The election is irrevocable once made.
- The transferee cannot be related under Section 267(b) or 707(b)(1).
- The transferee cannot be a specified foreign entity.
If the IRS later finds an excessive credit transfer, the transferee owes the excess plus a 20 percent penalty, unless it can show reasonable cause.10Office of the Law Revision Counsel. 26 U.S. Code 6418 – Transfer of Certain Credits
Pre-Filing Registration
Both elective pay and transfers require registration through the IRS Energy Credits Online (ECO) portal before you file. Each credit property gets a registration number, which goes on the return. Register no earlier than the start of the tax year in which the credit is earned, and at least 120 days before the return’s due date including extensions.11Internal Revenue Service. Register for Elective Payment or Transfer of Credits Miss it and the claim can be delayed or blocked.
How to File
Form 7207, Advanced Manufacturing Production Credit, is the central document. File one Form 7207 per facility where eligible components are produced.12Internal Revenue Service. About Form 7207, Advanced Manufacturing Production Credit Part I collects facility information: address, geographic coordinates, the owner’s TIN if different from the filer, a technical description, the pre-filing registration number if applicable, and the Related Person Election checkbox. Line 6 asks whether the facility received a Section 48C Advanced Energy Project Credit; if it did, no 45X credit can be claimed for that facility.
Part II walks through each component category. Enter the quantity produced and sold in the correct unit (square meters, watts, kilograms, or kilowatt-hours) and multiply by the statutory rate. The total flows to Form 3800, Part III, Line 1b.13Internal Revenue Service. Form 7207 – Advanced Manufacturing Production Credit Pass-through owners report their distributive share on a separate Form 7207 marked “Credits From Pass-Through Entities.”
On Form 3800, general business credits above your tax liability limit are used on a first-in, first-out basis, so earlier-earned credits offset tax before later ones.14Internal Revenue Service. Instructions for Form 3800 and Schedule A Because Section 45X is listed as an eligible credit under Section 6417(b), unused amounts can be carried back three years and forward twenty. The extended carryback can generate refunds from years before you scaled up the production line. There is no recapture provision for 45X; the IRS has confirmed no statutory authority exists to claw the credit back after it’s claimed.7Federal Register. Advanced Manufacturing Production Credit
You Can’t Stack 45X with 48C on the Same Facility
If a facility received a Section 48C Advanced Energy Project Investment Credit, that facility is permanently ineligible for 45X on components it produces. The bar runs at the facility level, so a company with multiple plants could take 48C on one site and 45X on another. Model the choice before applying for 48C: a production credit that runs for years often exceeds a one-time investment credit.
Penalties and Records
An excessive claim is subject to a 20 percent penalty under Section 6676 on the difference between what was claimed and what was allowable, unless the taxpayer can show reasonable cause.15Office of the Law Revision Counsel. 26 U.S. Code 6676 – Erroneous Claim for Refund or Credit Keep production records, sales documents, shipping manifests, testing-methodology records, and cost allocation workbooks for at least three years after filing the return.16Internal Revenue Service. How Long Should I Keep Records For batteries, that means the specific testing standard used for capacity measurements and evidence it was applied consistently across every unit sold. For critical minerals, keep production cost ledgers that separate direct costs from overhead, so the 10 percent calculation holds up under examination. Engineering documentation and third-party certifications aren’t required, but they strengthen a claim if the IRS opens a look.