New guidance on IRA domestic content bonus income tax credit

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The Department of Treasury and the Internal Revenue Service (IRS) issued Notice 2023-38, which provides initial guidance on the domestic content bonus income tax credit for owners of certain green energy and storage projects. The domestic content bonus credit is an increased amount of federal tax credit that is otherwise separately available as PTC or ITC for qualified facilities or energy projects that use a certain percentage of domestic content under IRC Section 45, 45Y, 48, and 48E.

The Notice provides guidance on the definition of domestic content, the recordkeeping and certification requirements, and a safe harbor for applying these new rules for certain components. According to the IRS, taxpayers may rely on the rules in the notice for qualified facilities, energy projects, or energy storage technologies, the construction of which begins before the date that is 90 days after the date the anticipated future proposed regulations are published in the Federal Register.

The domestic content bonus credit is intended to stimulate U.S. manufacturing, jobs, and supply chain availability by encouraging the use of domestic content in clean energy projects. The additional tax credit is available for qualified facilities or energy projects that use 100% domestic steel and iron, and at least 40% manufactured domestic content. The domestic content must be manufactured or produced in the United States as defined in the Notice.

The Notice provides guidance on the determination and calculation of domestic content, as well as recordkeeping and certification requirements that taxpayers must satisfy to qualify for the domestic content bonus credit. Taxpayers must keep records that demonstrate the domestic content of the qualified facility or energy project and must also certify to the IRS on their tax returns that the qualified facility or energy project meets the domestic content requirements.

What does CohnReznick think?

The Notice is a helpful resource for taxpayers who are considering investing in green energy projects.

Project developers, sponsors, and EPCs should know these rules to help maximize their project tax credits. They can be monetized under traditional tax equity or sold under the new IRA tax credit transferability rules.

The newly enacted “Direct-Pay” provisions under IRC Section 6417 are also impacted by domestic content requirements. Therefore, tax exempts, non-federal governments, tribes, and certain utilities and COOPs should also follow these rules.

Qualifying for additional tax credits based on domestic content can increase available capital for all types of ITC and PTC eligible clean energy and storage related project finance. However, it is unclear how long it will take the U.S. supply chain to meet the demand for such projects. The mere existence of the domestic content adder-bonus is expected to stimulate increased domestic manufacturing.


Lee Peterson, JD, Senior Manager



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JD, Senior Manager

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