Comparing 45X AMPC To Other Clean Energy Tax Credits: Know What Makes It Unique

The clean energy production in the United States has taken a big hike in recent years. The Inflation Reduction Act (IRA) of 2022 introduced a variety of tax credits to encourage the advanced manufacturing of solar, wind, and battery components, along with inverters and critical minerals. Firms or taxpayers manufacturing these projects are eligible for tax credits under §45X AMPC or the Advanced Manufacturing Production Credit. It is a powerful and game-changing policy for developing a greener and cleaner domestic space on American soil.

Are you curious to know what makes §45X AMPC better than other clean energy tax credits? Keep reading as we dive deeper into its key features and major differences. 

What is the §45X Advanced Manufacturing Production Credit?

Introduced under section 45X of the IRA 2022, AMPC is designed to boost the domestic production of clean energy projects. This is a Production Tax Credit (PTC), meaning it is rewarded on the basis of the volume of units manufactured. It is a long-term tool implemented by the government and has been showing some promising results in recent years. For instance, manufacturing has increased from 22 billion dollars in 2022 to an impressive 89 billion dollars in 2023-24. 

Key Characteristic of §45X AMPC

45X AMPCs are a key part of the U.S dream of a greener future. Here are some key features of this revolutionary tax credit:

Per-Unit Credit Amount

45X AMPC credit is generated on a rolling basis, meaning they are earned on the production and sale of the eligible components. Other than that, it is also eligible for the conversion of critical minerals to a purity level. This allows buyers to negotiate their prices for quarterly or monthly payment terms. For instance, JD Tech Solar produces 50,000 square meters of photovoltaic wafers. At $12 per square meter, they earn $600,000 in credits (50,000 × $12). If they sell the credits at 90 per cent of their value, they can earn $540,000. More so, the value of each sustainable component is specified by the IRA.

For critical minerals, the tax value is 10% of the production. The list includes 50 minerals. 

Quick Liquidity Through Transferability

Owners of 45X AMPC are eligible to sell the credits directly to a third party for cash. You would have to elect to be treated as an “applicable entity” to enjoy the benefits of direct pay. However, there are a few considerations one must be aware of before this election:

• This is applicable to all eligible units in the elected facility.
• This also applies to the whole taxable year and subsequent years till January 2033. 

Simple and Straightforward Due Diligence

The due diligence and process are based on facts and follow a simple process. Unlike Investment Tax Credit (ITC), there is no risk of future credit recapture or prevailing wage and apprenticeship requirement. Once the production is deemed eligible and legal, it follows little to no future interference. 

Comparison: §45X AMPC vs. §45 PTC vs. §48 ITC 

Here’s a table to show the key difference between 45x AMPC, 45 PTC, and 48 ITC:

Conclusion

45X AMPC is a powerful tool in boosting domestic manufacturing of solar, wind, battery, and other clean energy components. Unlike other credits, such as production and investment, 45X AMPC rewards are based on the scale of your production. It puts the control in your hands and rewards faster and larger-scale growth. When compared to §45 PTC and. §48 ITC, it is clear that 45X offers multifold value to the government’s green initiative. It not only encourages clean energy production but also boosts the domestic economy. If you are thinking about reaping these credits, follow the due diligence and IRA rules with utmost sincerity.