Regulatory and Legal Reform

The Department of Energy is urging Treasury to loosen proposed rules for the Inflation Reduction Act’s first tax credit—the 45V, or clean hydrogen tax credit, POLITICO Pro (subscription) reports.

• The request is in line with suggestions the NAM made to the Internal Revenue Service—which, with Treasury, set forth the guidance for claiming the credit—earlier this week.

What’s going on: “The Department of Energy is pushing Treasury to relax the rules to give the industry time to embark on a massive expansion, according to three people familiar with the discussions.”

• The 45V was intended as a longer-term accompaniment to the DoE’s $7 billion regional hydrogen hubs program, which agency officials are concerned will be hamstrung if the tax guidance is too stringent, according to the article.
• The credit “will directly impact how much hydrogen the U.S. produces and the financial bottom line for many companies.”

Why it’s important: The 45V is a major pillar of the Biden administration’s climate agenda, which seeks to make low-carbon hydrogen cost-effective enough to help decarbonize various industries, according to E&E News’ ENERGYWIRE (subscription).

The NAM’s view: “If implemented properly, the 45V credit would provide the certainty needed for manufacturers to make investment decisions that encourage further production, transportation and use of clean hydrogen,” NAM Vice President of Domestic Policy Brandon Farris said.

• “However, the NAM is concerned Treasury is considering renewable sourcing provisions regarding incrementality, temporal-matching and deliverability requirements, which would limit the amount of energy sources available to power the hydrogen production process.”

What should be done: To create a workable, fair 45V framework, Treasury and the IRS should do the following:

• Lengthen the three-year time frame for incrementality, the time frame within which new electricity must be put into service.
• Push back to 2032 (at the earliest) the date by which energy projects must match clean electricity and hydrogen production at an hourly level.
• Recognize energy attribute certificates from outside manufacturers’ own regions as capable of delivering electricity or natural gas into the region where the clean hydrogen production is taking place.
• Follow congressional intent and provide a more reasonable process for taxpayers to prove their food stocks are lower in carbon intensity and therefore eligible for the maximum credit.