45V: Clean Hydrogen Production Tax Credit

Federal Agency

Sub-Department

Internal Revenue Service (IRS)

Purpose

To encourage and support the development of clean hydrogen projects.

Applicant and/or Project Eligibility Requirements

To qualify the tax credit, hydrogen needs to be produced through a process that results in a lifecycle greenhouse gas emissions rate of not greater than 4 kilograms of CO2e per kilogram of hydrogen. The qualified clean hydrogen production facility needs to be owned by the taxpayers.

Decarbonization Considerations

Clean hydrogen has a high potential to help decarbonize multiple hard to abate sectors, including heavy vehicles, industrial processes, and power sector. See here for more information: https://rmi.org/we-need-hydrogen-but-not-for-everything/

Equity Considerations

If a new clean hydrogen production facility is planned, consider engaging with community members in the early stage to address challenges and concerns through open conversations. Local governments may consider working with the facility owners to leverage such economic development opportunities to build a clean hydrogen workforce.

Helpful Tips

Tax-exempt entities can leverage these credits through a new mechanism known as "elective" or "direct" pay. To learn more about how these tax credits work for entities with and without tax liability, check out our Funding Guidance here: https://cityrenewables.org/funding-guidance/understanding-available-incentives/tax-credits-for-renewable-energy/

Other Notes

Proposed guidance can be found here: https://www.federalregister.gov/documents/2023/12/26/2023-28359/section-45v-credit-for-production-of-clean-hydrogen-section-48a15-election-to-treat-clean-hydrogen