In 2022, Congress passed the Inflation Reduction Act (IRA) establishing new tax credits designed to support the transition to clean and renewable energy. Critically, Congress recognized the importance of the US manufacturing industry to spearhead this transition and created or modified two significant tax credits designed to support domestic manufacturing. 

Since then, the advanced manufacturing production tax credit (§45X) and the expansion of the advanced energy project investment tax credit (§48C) have spearheaded billions of dollars in investments supporting domestic manufacturing, creating thousands of jobs and fostering innovation and progress in the energy sector. ‍In 2024 alone, Clean Investment Monitor reports that $272 billion was invested in the manufacturing and deployment of clean energy products and technology. 

Both the §45X and §48C credits are transferable, meaning they can be purchased for cash by a third party with qualifying tax liabilities. Crux has found that these credits are enormously popular with corporate tax credit buyers — the 2024 Transferable Tax Credit Market Intelligence Report found that §45X advanced manufacturing credits made up 26.9% of the 2024 tax credit market.

In this guide, we’ll explore how these credits work, their unique circumstances, and why they’re so desirable.

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What are advanced manufacturing tax credits?

To understand the nuances of §48C and §45X credits, it's crucial to distinguish between investment tax credits (ITCs) and production tax credits (PTCs): 

• PTCs (§45X) are generated annually and linked to the actual manufacturing production from a facility.
• ITCs (§48C) are calculated based on the upfront costs of a given project.

§45X advanced manufacturing tax credit overview

To generate §45X tax credits, a manufacturing facility must produce components or systems that are considered "advanced energy property." This includes items such as:

• Solar and wind energy components
• Battery storage components
• Inverters
• Certain critical minerals 

Producing these components generates a tax credit, calculated as a dollar value of credit multiplied by capacity/unit or as a percentage of the cost of producing the products (depending upon the product). Subsequently, credits can be sold to a third party, taken by the manufacturer generating the credit, or taken through elective pay.

Unique advanced manufacturing production tax credit qualities

Many credit buyers have found value in the unique qualities of §45X credits: 

• Compared to ITCs, PTCs tend to sell at a premium due to their lower risk, specifically regarding recapture and basis. Unlike ITCs, which bear a risk of recapture over the five years after the project enters service (and after the credit is claimed), PTCs are only generated after a unit of an eligible good (such as electric power or a manufactured good) has been created.
• Sellers often sell credits in shorter tranches — typically several years — instead of the 10-year tranche common for power-sector PTCs. Shorter tranches reduce the buyer's exposure to long-term risks associated with future tax balances, making §45X a more accessible and flexible investment. Shorter tranches also provide manufacturers with more options for monetizing their credits: sell them, take them against their tax balances, or, for the first five years, take them as a cash refund through elective pay (also known as direct pay). 

Manufacturers can effortlessly leverage this demand by posting their credits on Crux, automatically accessing the largest network of buyers and buyer advisors. 

§48C advanced manufacturing tax credit overview

Projects seeking §48C credits must apply under one of three categories:

1. New investment in clean energy manufacturing or recycling.
2. Reduction of greenhouse gas (GHG) emissions from existing industrial facilities.
3. New critical mineral production or recycling.

This targeted approach encourages diverse projects contributing to multiple components of building a domestic clean energy supply chain.

Unique advanced manufacturing investment tax credit qualities

Unlike most other clean energy tax credits (including §45X), the total allocation under §48C is capped at $10 billion. The government has disbursed all $10 billion of these funds as of January 2025.

Applications for the first $4 billion of §48C credits were awarded in March 2024, and the remaining $6 billion in funds were allocated in January 2025. As of now, there are no announced plans for additional application rounds.

Because the funding was limited, interested parties had to apply via a rigorous process. Only those projects that the US Department of Energy judged to most strongly address the critical supply chain gaps and other policy priorities articulated in the guidance were awarded credit (as opposed to simply meeting the eligibility criteria for most other credits). 

What qualifies for each advanced manufacturing tax credit?

Qualifying for §45X production tax credits

To qualify for the §45X PTC, US manufacturers must meet a few criteria:

1. Offer eligible products that qualify as advanced energy properties, as discussed above.
2. Follow domestic manufacturing requirements to ensure their product achieves a “substantial transformation” of inputs (i.e., not just assembling components or doing superficial modifications).
3. Adhere to contract manufacturing arrangements.
4. Sell the manufactured components to a third party.

E-book: Download the Ultimate Guide to Advanced Manufacturing Tax Credits

Qualifying for §48C investment tax credits

Although §48C disbursements have reached their cap, it’s helpful to understand the requirements in the event that Congress allocates more funds. Many clean energy technologies can leverage either ITCs or PTCs, including advanced manufacturing facilities. However, there are some important distinctions for these credits: 

• A facility cannot claim both an ITC and a PTC election for the same part of its manufacturing operation. Existing manufacturing facilities may generate PTCs through 2032, but a facility would have to make a new investment to apply to claim ITC credits.
• A single entity may claim both the ITC and PTC for distinct parts of their manufacturing operations but must be careful to distinguish between the ITC- and PTC-claiming activities. 

In an example cited by the Internal Revenue Service (IRS) in its additional guidance for qualifying advanced energy projects, a single entity owns a manufacturing business with two production lines. One production line manufactures photovoltaic wafers and the other photovoltaic cells. The two lines are arranged serially but function independently — the second line utilizes the wafers produced in the first line. In this example, the manufacturer received a §48C credit for the first production line and placed it into service in the taxable year 2024, rendering the first line ineligible for §45X. 

However, the IRS notes in its guidance that because the second line is “tangible property that comprises an independently functioning production unit that produces eligible components,” it can be eligible to generate tax credits under §45X.

Why should buyers consider advanced manufacturing tax credits?

Unique credits, standard process

While §45X and §48C credits are unique in their objectives, the process of transferring them follows the standard framework of any other transferable credit. This standardization simplifies the transaction process, making these credits accessible to more investors.

Supports domestic jobs and communities

For some projects (especially those aligned with §48C and similar ITCs), the credits provide more than just financial incentives. Because they’re investments in larger projects or facilities, they catalyze high-paying domestic jobs and promote investment in historic energy communities. This dual impact contributes to economic growth.

Visibility into tax credit generation

Investors eyeing PTCs, especially under the §45X framework, benefit from a high degree of visibility into credit generation. The unique characteristics of §45X credits, including contracted production and shorter tranches, create a low-risk profile for investors seeking to navigate the complex landscape of renewable energy tax credits.

What are the best practices for leveraging advanced manufacturing tax credits?

Before selling advanced manufacturing tax credits, manufacturers should keep these best practices in mind:

• Understand eligibility requirements for individual tax credits such as those mentioned above.
• Maintain meticulous documentation on sales, production outputs, and other cash flows to prepare for potential audits.
• Register facilities for pre-filing with the IRS to leverage transferability or direct pay (cash payment of the tax credit).‍
• Stay current on IRS rules and market trends to ensure compliance with regulations and maximize the value of tax credit transactions.

How can Crux help?

Crux has helped many manufacturing companies with advanced manufacturing tax credits list their credits for sale, solicit bids, and navigate a transaction — securing the best price with low transaction fees. 

The Crux platform offers credit sellers, buyers, and advisors a convenient and centralized location to exchange information and manage the due diligence process with §45X-specific, market-standard checklists and documentation.

If your firm is interested in leveraging this exciting and flourishing market by buying or selling §45X tax credits, get in touch with us.