Why It Matters

The Section 45X Advanced Manufacturing Production Credit subsidizes domestic production of solar, wind, battery, and inverter components and critical minerals, but its impact on clean energy output and manufacturing depends on whether it changes producers' behavior, according to a new Congressional Research Service (CRS) report. The One Big Beautiful Bill Act, enacted July 4, 2025, made six changes to the credit, including ending eligibility for wind energy components after Dec. 31, 2027. ​

The Joint Committee on Taxation (JCT) projects that the Section 45X credit will reduce federal revenue by $20.1 billion from fiscal 2025 through fiscal 2029, the fifth-highest five-year cost among the 53 energy and natural resources tax expenditures JCT examined.

The Big Picture

The credit was enacted as part of the Inflation Reduction Act of 2022 and remained unchanged for three years before the One Big Beautiful Bill Act amended it. The 2025 law ended wind-component eligibility after Dec. 31, 2027; scheduled critical-mineral credits to phase out from 2031 through 2034; added metallurgical coal as a qualifying critical mineral; imposed four foreign-entity restrictions targeting supply-chain ties to China, Russia, Iran and North Korea; added a 65% domestic-material-cost requirement for certain secondary components sold in taxable years beginning after Dec. 31; and required battery modules to include all essential equipment needed for functionality.

Metallurgical coal, the only Section 45X-eligible product not subject to a domestic production requirement, carries a credit rate of 2.5% of production costs, one-quarter of the 10% rate that applies to other critical minerals.

Investment in manufacturing facilities for batteries, solar, wind and critical minerals rose from $1.9 billion to $6.2 billion in constant 2024 dollars between the second quarter of 2022 and the second quarter of this year. The report noted that it is unclear how much of the increase is attributable to the Section 45X credit rather than other policy changes or nonpolicy factors.

The report found no retrospective analyses of the credit's broad economic or environmental effects. It notes that if producers would have manufactured the goods regardless, the credit may primarily provide windfall benefits rather than expand output. Because Section 45X subsidizes intermediate goods rather than final energy output, CRS also notes that it may be less efficient at reducing greenhouse gas emissions than credits directly subsidizing zero-emissions electricity production.

The Bottom Line

The 65% domestic-material-cost requirement for certain secondary components applies to components sold in taxable years beginning after Dec. 31. Several bills pending in the House Ways and Means Committee would amend Section 45X, including proposals to remove the wind-component termination or repeal the credit entirely. Wind-component producers face the nearest statutory deadline, with eligibility ending Dec. 31, 2027.

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