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NAM: Proposed Hydrogen Tax Credit Rules Miss the Mark

The Biden administration has unveiled proposed rules for receiving tax credits to produce clean hydrogen, Voice of America reports.

  • If implemented, the rules could undermine development of this innovative clean energy source, the NAM said.

What’s going on: Late last month, the Treasury Department and the Internal Revenue Service announced a “plan [to] give companies that meet established employee wage requirements a tax credit ranging from $.60 to $3.00 per kilogram of hydrogen produced, depending on the level of greenhouse gas emissions from the production process and the amount of fossil fuel used.”

  • The administration hopes the tax credit—which would be funded through the 2022 Inflation Reduction Act—will spur “green” hydrogen projects that make the gas using renewables instead of traditional energy sources.

The details: The new rules set forth three criteria for hydrogen plants seeking to claim the credit:

  • The clean power for production must come from a source built within three years of the plant coming online.
  • The energy source must be located close to the plant.
  • Beginning in 2028, the power used to produce the hydrogen must be generated in the same hour it is used in hydrolysis.

Why it’s problematic: In practice, the proposed rules would not follow congressional intent, and they would be too onerous to incentivize production, according to the NAM.

  • “If these regulations are put into place, America will lose out on job-creating investments across the country,” NAM President and CEO Jay Timmons said.
  • “To incentivize truly transformative growth in the necessary infrastructure to produce, transport and use hydrogen, the Biden administration should finalize a flexible credit that rejects additional requirements that were not included in the original legislation. And to realize the full potential of Inflation Reduction Act provisions, the CHIPS and Science Act and more, permitting reform must be a top priority in the new year.”
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