IRS Creates Safe Harbors for Domestic Content Calculations

The IRS on May 17 issued guidance that greatly simplifies the calculation for three of the common technologies eligible for the domestic content bonus under the Section 45 production tax credit (PTC) and Section 48 investment tax credit (ITC). 

Notice 2024-41 introduces a new elective safe harbor that allows taxpayers to more easily calculate the 10% bonus for projects constructed using specified thresholds of U.S.-source content. 

The notice provides elective safe harbors for solar photovoltaic (PV) systems, onshore wind facilities, and battery energy storage systems (BESS). In a separate press release, Treasury indicated it intends to supplement the guidance with safe harbor tables for additional sectors such as offshore wind facilities. 


To qualify for the 10% bonus, a project must meet specified thresholds for domestic-source materials. Structural iron and steel must be 100% U.S.-produced, while manufactured components currently must be at least 40% U.S.-produced, with that number rising to 55% over the next few years. 

Initial guidance in Notice 2023-38 had provided that taxpayers must segregate a project’s components into two categories -- structural “domestic iron and steel” and “manufactured components” -- to begin the analysis of whether each category met the U.S.-produced thresholds. Once the components were segregated, the taxpayer then needed to look to the “direct cost” of manufactured products – wages and associated payroll taxes, and the raw or subcomponent materials incorporated into each category. This approach created significant commercial issues, because vendors and suppliers were frequently reluctant to disclose “direct cost” data to customers. 

Safe Harbor Tables

Recognizing the difficulty created by this direct cost approach, the IRS has created a safe harbor approach and provided specific tables to allow a simplified calculation of domestic content. The safe harbors allow a taxpayer to refer to a chart in the guidance to both categorize components into “structural” and “manufactured” buckets, and to assign a fixed percentage of overall project cost of enumerated manufactured product components. As noted above, the new guidance includes charts for solar PV systems, onshore wind facilities, and BESS. For each category and corresponding percentage that the taxpayer can substantiate as being “domestic content,” the assigned amounts are added to determine the overall percentage in the domestic content calculation. 


The following example included in the notice illustrates the mechanics of the safe harbor.

Taxpayer constructs a ground-mount solar tracker project and elects to utilize the new safe harbor to determine if it is eligible for the domestic content bonus. Referring to the solar PV table, the project is deemed to have six Applicable Product Categories: PV module, inverter, PV tracker or non-steel roof racking, steel photovoltaic module racking, pile or ground screw, and steel or iron rebar in foundation. As an initial matter, the guidance deems the pile or ground screw and steel or iron rebar in foundation to be “steel/iron” products; thus, those two categories must be 100% U.S.-source content for the project to qualify. If this requirement is not satisfied, there is no need for further analysis of manufactured components. 

The solar property has eleven Manufactured Product Component categories, so any combination of these categories that is above 40% will meet the current domestic content requirements. In this example, for ground-mount solar tracker projects, if the cells (36.9%), frame/backrail (5.3%), and torque tube (9.7%) are manufactured in the U.S., then the total domestic content would be [36.9+5.3+9.7]=51.9% and the project would satisfy the elective safe harbor and qualify for the 10% domestic content bonus.

APCMPCGround-Mount (Tracking)Ground-Mount (Fixed)
Rooftop (MLPE)Rooftop (String)
PV ModuleCells36.949.221.530.8


Front Glass3.



Junction Box1.

Edge Seals0.



Bus Ribbons0.

Bypass Diodes

Production1 11.5215.326.729.62
InverterPrinted Circuit Board Assemblies3.

Electrical Parts1.

Climate Control0.70.9-0.3


PV Tracker or Non-Steel Roof Racking
Torque Tube9.7--


Slew Drive2.0--





Steel Photovaltaic Module Racking
--Steel/Iron Product
Pile or Ground Screw-Steel/Iron ProductSteel/Iron Product--
Steel or Iron Rebar in Foundation-Steel/Iron Product
Steel/Iron Product

Although “Production” is listed under the column for Manufactured Product Components (MPCs), it is not an MPC. “Production” refers to the production cost of the Manufactured Product and can only be included in the Domestic Cost Percentage if all the MPCs of a Manufactured Product are domestically produced.

2 Consistent with Notice 2023-38, the direct cost of producing a Manufactured Product counts toward the Domestic Cost Percentage only if all its Manufactured Product Components are domestically produced.

3 For purposes of this table, module-level power electronics inverter systems, including either microinverters or direct current (DC) optimizers, are considered an inverter product.

The guidance provides four additional examples of the safe harbor calculations for the other technologies covered by the new tables, but the basic mechanics of the calculation are similar.

Election Required

As with the domestic content election required by Notice 2023-38, taxpayers will be required to submit a certification that a project qualifies for the bonus and to affirmatively elect the safe harbor. Taxpayers will also be required to attach that certification to either Form 3468 for ITCs or Form 8835 for PTCs. 

Comments Requested

Treasury asked taxpayers to submit comments regarding additional technologies that should be added to the safe harbor and whether further clarity should be provided when MPCs contain a mix of foreign and domestic content. 

BDO Insight

With the addition of the safe harbor to the domestic content guidance, the IRS has provided welcome certainty regarding the availability of the 10% bonus for solar PV, onshore wind, and BESS. Given the challenges of categorization and documentation to prove the origin of content under the initial guidance’s cost approach, taxpayers will have greater confidence in properly substantiating domestic-source content. Tax credit transfers under Section 6418 will find an easier path to including the 10% bonus in their total tax credit calculations, which should simplify due diligence on that portion of a transaction. 

As noted previously, the safe harbors provided in the updated guidance apply only to the three technologies in the tables. Notably absent from the safe harbors are hydropower, renewable natural gas, electrochromic glass, and offshore wind; thus, these project types will still need to rely on the direct cost approach to calculate their domestic content percentages.