The American Public Power Association recently submitted comments along with other groups to the Department of Treasury addressing domestic content requirements for elective payment of energy tax credits.
Joining APPA in signing the July 15 letter were the Government Finance Officers Association, the National League of Cities, the National Association of Counties, and the National Rural Electric Cooperative Association.
In their comments, the groups noted that Internal Revenue Service Notices 2023-38 and Notice 2024-41 were both titled as relating to the “Domestic Content Bonus Credit” and mentioned only the domestic content bonus credit, but not the domestic content elective payment requirement.
“As a result, we and other Applicable Entity stakeholders initially viewed these notices as not applying with respect to the domestic content requirements for elective payment under section 6417 and have not previously commented,” the groups said.
However, in a recent webinar, Treasury clarified that the notices do apply for purposes of determining compliance with the domestic content requirement for elective payment.
While Notice 2023-38 did not solicit comments and Notice 2024-41 solicited comments only regarding additional technologies for the notice’s safe harbor and nameplate capacity allocation rules, “we are nonetheless using Treasury’s clarification as an opportunity to comment on the underlying domestic content regime provided under Notice 2023-38 and on the safe harbor provisions of Notice 2024-41,” APPA and the others said.
The letter raises continued concern with the underlying domestic content regime, which would require obtaining proprietary information from suppliers. However, the letter also praises several safe harbor provisions included in both notices.
Signatories to the letter believe these provisions could provide the foundation for a clear, simple, and reliable mechanism for meeting domestic content requirements or qualifying for one of the statutory exceptions to the domestic content requirement for elective payment.
To do so, though, Treasury needs to make a number of additional policy decisions, the groups said.
Specifically, the letter says Treasury should provide:
- Clarification regarding the treatment of subcomponent and production cost percentages for purposes of the percentage safe harbor provided under Notice 2024-41;
- Clarification that a request for proposal or bid resulting in no responsive bids is proof of non-availability of the respective component/components for purposes of qualifying for a non-availability exception to the domestic content requirement for elective payment;
- Clarification that the increased cost exception to the domestic content requirement for elective payment is based on the cost to the purchaser not direct costs for the supplier; and
- Clarification that components for which a waiver is obtained are deemed domestic content for purposes of the applicable percentage safe harbor with the component constituting the percentage prescribed under the elective cost-percentage safe harbor.
The letter also proposes a mechanism by which the Treasury Department could itself determine whether key project components for certain safe harbor technologies are available in sufficient quantities, or whether blanket exceptions to the domestic content requirements for these technology types should be provided.
