By: Bracewell.
On January 3, 2025, the Treasury Department and the Internal Revenue Service issued final regulations under Internal Revenue Code (Code) Section 45V (the Final Regulations) with respect to credits for the production of clean hydrogen (the 45V Credit). The Final Regulations generally retain the requirements set forth in the proposed regulations under Code Section 45V (the Proposed Regulations) with respect to the “three pillars†(incrementality, temporal matching and deliverability) for hydrogen produced using clean power but provide leniency with respect to each pillar. The Final Regulations also provide critical new guidance on hydrogen produced using methane reformation technologies. Taxpayers may rely on the Final Regulations as of January 10, 2025.
Background
Code Section 45V provides a tax credit for the production of clean hydrogen at a qualified clean hydrogen production facility for 10 years beginning on the date the facility is placed in service. The 45V Credit is technology agnostic in that qualification for the credit is not dependent on how the clean hydrogen is produced. The 45V Credit is generally calculated as the product of the kilograms of qualified clean hydrogen produced at a qualified clean hydrogen production facility and the applicable rate. The applicable rate is based on the lifecycle greenhouse gas (GHG) emissions rate of the hydrogen production process. Taxpayers qualify for an increased 45V Credit amount if the construction, alteration and repair of the qualified clean hydrogen production facility complies with the prevailing wage and apprenticeship requirements.
