Shariff Barakat, Susan Lent Quoted on New Guidance re: Using Manufacturing Costs to Determine Tax Credit Eligibility
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Akin projects & energy transition partner Shariff Barakat and infrastructure & transportation practice head Susan Lent were quoted by Law360 for its article “Cost Puzzle Poses Hurdle To Claiming Bonus Energy Credits,” which looks at recent interim guidance from the Treasury Department on domestic content bonus tax credits. Developers may face challenges, it notes, claiming these credits as the new guidance requires developers to use direct manufacturing costs in calculating whether projects meet new sourcing requirements in the Inflation Reduction Act tied to tax incentives.
Shariff points out the question of whether some manufacturers keep track of costs described in the guidance. Said Shariff, “If manufacturers want to be part of large clean energy building projects, they may have to set up new accounting systems to trace information that developers need for claiming the credits.”
Law360 notes that cooperation of vendors, suppliers and manufacturers is needed in order to figure out these costs—and they may not be willing to share this information for privacy and competition reasons. According to Susan, in infrastructure projects subject to the current "Buy America" rules, there exists a certain level of prior practice by which manufacturers have disclosed confidential business information in projects governed by “Buy America” requirements: “The information is actually protected against disclosure [under the Freedom of Information Act].” She added, “I think everyone is going to look at the requirements and know that this is going to be the cost of doing business.”
The article reports that the guidance requires owners to certify that their projects meet all domestic content requirements, which means owners may have to convince manufactures to cooperate with Internal Revenue Service (IRS) audits of projects. Shariff said, “The IRS itself doesn't have the authority to mandate the manufacturer to do anything if the manufacturer is not claiming any credits.”
