Complete guide to earning the 10% domestic content bonus by using American-made steel, iron, and manufactured products in renewable energy projects.
The Domestic Content Bonus is one of the most valuable—and most complex—bonus adders available to renewable energy projects. This 10% bonus credit rewards projects that use American-made steel, iron, and manufactured products, supporting U.S. manufacturing and supply chain development while providing substantial financial incentives to project developers. When combined with the prevailing wage and apprenticeship multiplier, projects can achieve up to 40% Investment Tax Credit (30% base + 10% domestic content) or significantly enhanced Production Tax Credit rates.
However, qualifying for the domestic content bonus is challenging. It requires meeting strict two-part requirements: 100% of steel and iron must be produced in the United States, and manufactured products must meet escalating cost-based thresholds (40-55% of total project costs, depending on the year placed in service). Additionally, starting in 2027, projects must comply with Foreign Entity of Concern (FEOC) restrictions that prohibit components from China, Russia, Iran, and North Korea. The documentation requirements are extensive, the premium costs for domestic content can range from 15-25%, and supply chain constraints remain significant.
This guide provides a comprehensive roadmap to understanding, evaluating, and pursuing the domestic content bonus, including detailed compliance requirements, cost calculations, certification processes, and strategic considerations for determining whether the 10% adder justifies the additional investment and complexity.
The domestic content bonus increases your project’s base tax credit by an additional 10 percentage points. This bonus applies on top of your base credit rate and can be combined with other bonus adders.
Investment Tax Credit (ITC) Enhancement: - Base rate with prevailing wage/apprenticeship: 30% - With domestic content bonus: 40% - Example: $20 million project = $8 million credit (vs. $6 million without bonus)
Production Tax Credit (PTC) Enhancement: - Base rate (wind, 2024): $0.0275/kWh - With domestic content bonus: $0.03025/kWh (10% increase) - Example: 100 MW wind farm producing 394,200 MWh annually = $11.9M/year (vs. $10.8M without bonus)
The domestic content bonus delivers substantial financial value, particularly on large-scale projects:
Small Project (5 MW Solar, $6M basis): - Without bonus: $1.8M credit (30% ITC) - With bonus: $2.4M credit (40% ITC) - Additional value: $600,000
Medium Project (50 MW Solar, $60M basis): - Without bonus: $18M credit (30% ITC) - With bonus: $24M credit (40% ITC) - Additional value: $6 million
Large Project (200 MW Wind, $300M basis): - Without bonus: $90M credit (30% ITC) - With bonus: $120M credit (40% ITC) - Additional value: $30 million
The domestic content bonus can be combined with other bonus adders, creating even more value:
Maximum ITC Rate (All Bonuses): - Base: 6% (without prevailing wage/apprenticeship) - With prevailing wage/apprenticeship: 30% (5× multiplier) - Plus domestic content: 40% - Plus energy community: 50% - Plus low-income (maximum): 60%
Example: Community Solar in Energy Community with Domestic Content: - Project basis: $10 million - Base credit (30%): $3M - Domestic content (+10%): +$1M - Energy community (+10%): +$1M - Low-income community (+20%): +$2M - Total credit: $7M (70% of project cost)
This stacking capability makes domestic content particularly valuable when combined with other geographic or community-benefit bonuses.
Qualifying for the domestic content bonus requires satisfying BOTH of the following requirements. Failing either requirement disqualifies the project from claiming the bonus.
All steel and iron used in the project must be produced in the United States. This is an absolute requirement with limited exceptions.
Key Requirements: - 100% of steel and iron must be melted, manufactured, and coated (if applicable) in the USA - Includes structural steel, rebar, pilings, racking systems, enclosures, transformers - Minimal exceptions: de minimis (2%/$10,000 threshold) and non-availability waivers
What Counts as Steel/Iron: - Structural components (beams, columns, piles, foundations) - Racking and mounting systems for solar panels - Transformer cores and enclosures - Electrical enclosures and junction boxes - Conduit, cable trays, and support structures - Torque tubes and support posts
Manufactured products used in the project must meet an escalating cost-based threshold. The percentage of “adjusted basis” (total project costs) attributable to qualifying manufactured products must exceed:
Phase-In Schedule: - 2023-2024: 40% of adjusted basis - 2025: 45% of adjusted basis - 2026: 50% of adjusted basis - 2027 and later: 55% of adjusted basis
What Counts as Manufactured Products: - Solar PV modules and panels - Inverters and power conversion equipment - Battery cells, modules, and energy storage systems - Wind turbine nacelles, blades, towers, and generators - Trackers and mounting hardware - Switchgear, transformers, and electrical equipment - Monitoring and control systems
Qualifying Domestic Manufacturing: - The manufactured product must be manufactured or assembled in the United States - Manufacturing includes substantial transformation or assembly processes - Mere packaging, labeling, or minimal assembly does not constitute manufacturing
Projects must satisfy both the steel/iron requirement (100% domestic) and the manufactured products requirement (40-55% cost test) to claim the bonus. Satisfying only one requirement is insufficient.
Example of Failure: - A solar project uses 100% U.S.-made steel for racking (Part 1 satisfied) - But the solar panels are manufactured in Malaysia and represent 55% of project cost (Part 2 failed) - Result: Project does not qualify for domestic content bonus
Example of Success: - A solar project uses 100% U.S.-made steel for racking (Part 1 satisfied) - Uses U.S.-manufactured solar panels and inverters representing 48% of project cost (Part 2 satisfied for 2024) - Result: Project qualifies for 10% domestic content bonus
Steel and iron products include any components made primarily of iron or steel that provide structural support, enclosure, or integral function in the energy facility.
Typical Steel and Iron Components:
Solar Projects: - Racking systems (torque tubes, posts, rails) - Foundation piles and anchors - Electrical enclosures and junction boxes - Transformer housings - Cable trays and conduit - Perimeter fencing - Support structures for inverters and equipment
Wind Projects: - Tower sections - Foundation rebar and structural steel - Transformer enclosures - Nacelle frame and structural components - Crane pads and equipment foundations - Substation structural steel
Battery Storage Projects: - Container frames and structural supports - Electrical enclosures - Racking systems for battery modules - HVAC system supports - Fire suppression system piping
All steel and iron used in the project must satisfy all three of the following requirements:
1. Melting: All steel and iron products must be melted in the United States. This means the iron ore or scrap metal must be melted in a U.S. facility to create the raw steel or iron material.
2. Manufacturing: All manufacturing processes that convert raw steel into finished products (rolling, bending, cutting, welding, forming) must occur in the United States.
3. Coating: If the steel or iron product is coated (galvanized, painted, powder-coated), the coating process must occur in the United States.
Example of Compliance: - Racking system manufacturer sources U.S.-produced steel coils - Steel is cut, formed, and welded into racking components at a U.S. facility - Components are galvanized at a U.S. coating facility - Result: Qualifies as domestic steel
Example of Non-Compliance: - Racking system manufacturer sources steel melted in India - Steel is shipped to U.S. facility and formed into racking components - Components are galvanized in the U.S. - Result: Does not qualify (melting occurred outside U.S.)
Projects can use a small amount of foreign steel or iron without disqualification, if the total cost or volume is minimal:
De Minimis Threshold (choose one): - Cost: Foreign steel/iron costs less than $10,000, or - Volume: Foreign steel/iron is less than 2% of total steel/iron by weight
How It Works: - Calculate the total cost (or weight) of all steel and iron in the project - If foreign steel/iron is under the de minimis threshold, it is disregarded - Remaining steel/iron must be 100% domestic
Example: - Total steel/iron in project: $1,500,000 and 300,000 lbs - Foreign bolts and fasteners: $8,000 and 800 lbs (0.27% by weight) - Result: De minimis exception applies; project can still qualify for domestic content bonus if all other steel is domestic and manufactured products requirement is met
Important: De minimis applies only to steel and iron, not to manufactured products.
Starting with projects placed in service in 2027 and later, steel and iron (and manufactured products) must not originate from a Foreign Entity of Concern (FEOC).
FEOC Countries: - China - Russia - Iran - North Korea
FEOC Ownership Threshold: - Any entity owned by, controlled by, or subject to the jurisdiction of an FEOC government - Ownership or control of 25% or more by FEOC-affiliated entities
Impact on Steel and Iron: - Steel or iron melted, manufactured, or coated in FEOC countries will disqualify the project - Components sourced from FEOC-owned entities (even if manufactured in the U.S.) may disqualify the project - Supply chain tracing to identify FEOC involvement becomes mandatory
Planning for 2027+: - Begin vetting suppliers now for FEOC ownership and origin - Request certifications from manufacturers regarding FEOC compliance - Consider alternative suppliers for components with FEOC exposure - Budget for third-party supply chain verification services
Manufactured products are components and equipment that undergo significant manufacturing, assembly, or transformation processes to create the finished products used in renewable energy facilities.
Key Characteristics: - Involve substantial transformation or assembly (not mere packaging or labeling) - Result in a product with new form, function, or characteristics - Include energy-generating equipment and support systems
Examples of Manufactured Products:
Solar Projects: - Photovoltaic (PV) solar modules/panels - Inverters (string, central, microinverters) - Racking and tracker systems (mechanical components) - DC optimizers and power electronics - Combiner boxes and electrical equipment - Monitoring systems and data loggers - Battery energy storage systems
Wind Projects: - Turbine nacelles (including gearbox, generator, drivetrain) - Rotor blades - Tower sections - Transformers and switchgear - Control systems and SCADA equipment - Pitch and yaw systems
Battery Storage Projects: - Battery cells and modules - Inverters and power conversion systems - Battery management systems (BMS) - Thermal management systems (HVAC) - Fire suppression systems - Transformers and electrical equipment
To satisfy the manufactured products requirement, the total cost of qualifying domestic manufactured products must equal or exceed a specified percentage of the project’s adjusted basis (total qualifying project costs).
Formula:
Qualifying Domestic Manufactured Products Cost / Total Adjusted Basis ≥ Required Percentage
Required Percentage (Phase-In): - 2023-2024: 40% - 2025: 45% - 2026: 50% - 2027+: 55%
Adjusted basis is the total qualifying cost basis eligible for the Investment Tax Credit (or equivalent for PTC projects). This includes:
Included in Adjusted Basis: - Equipment costs (solar panels, inverters, batteries, turbines) - Installation and labor costs - Structural components and materials - Engineering, design, and permitting fees directly attributable to the project - Freight and delivery costs for equipment - Sales taxes on qualifying equipment and services - Site preparation and grading costs directly related to the energy facility
Excluded from Adjusted Basis: - Land acquisition costs - General business overhead not directly attributable to the project - Financing costs and interest during construction - Non-tangible costs (legal, accounting, consulting unrelated to project design) - Costs incurred after placed-in-service date
Example Calculation: - Solar equipment (panels, inverters, racking): $12M - Installation labor: $3M - Electrical and interconnection equipment: $2M - Engineering and design: $1M - Site work and civil: $1.5M - Total Adjusted Basis: $19.5M
Only manufactured products that meet the domestic manufacturing requirement can be counted toward the cost threshold.
Domestic Manufacturing Requirement: - The product must be manufactured or assembled in the United States - Manufacturing includes substantial transformation processes (not just assembly of pre-manufactured parts) - The manufacturer must provide certification of domestic manufacturing and component origins
What Qualifies: - Solar panels manufactured in a U.S. facility using domestic or foreign cells (if cells are assembled into panels in the U.S.) - Inverters assembled and tested in a U.S. facility - Battery modules assembled in a U.S. facility (even if individual cells are imported) - Wind turbine components manufactured or assembled in U.S. facilities - Trackers and racking systems manufactured in the U.S.
What Does Not Qualify: - Solar panels manufactured in China or Southeast Asia and imported - Inverters manufactured in Europe and imported - Battery cells manufactured in Asia with minimal assembly in the U.S. - Equipment merely labeled, packaged, or warehoused in the U.S. without substantial manufacturing
The IRS guidance provides specific rules for determining whether products are “manufactured” in the United States:
Substantial Transformation Test: - Manufacturing must involve substantial transformation of materials into a new product - Mere assembly of fully manufactured components may not qualify unless assembly involves significant processes - The product must have a new name, character, or use as a result of U.S. manufacturing
Example: Solar Panels: - Scenario 1: Solar cells manufactured in Taiwan; cells are assembled into panels, tested, and framed in a U.S. facility - Result: Panel assembly qualifies as U.S. manufacturing; full panel cost counts toward threshold - Scenario 2: Fully assembled solar panels manufactured in China; panels are imported and re-labeled in the U.S. - Result: Does not qualify as U.S. manufacturing; panel cost does not count
Example: Inverters: - Scenario 1: Inverter components (circuit boards, transformers, enclosures) sourced globally; components are assembled, tested, and certified in a U.S. facility - Result: Inverter assembly qualifies as U.S. manufacturing; full inverter cost counts - Scenario 2: Fully assembled inverters manufactured in Germany; inverters are imported with minimal U.S. testing - Result: Does not qualify; inverter cost does not count
A project’s placed-in-service year determines the required threshold:
2024 Project (40% Threshold): - Adjusted basis: $20M - Required domestic manufactured products cost: $20M × 40% = $8M minimum - Actual domestic products: $9M (solar panels $6M + inverters $2M + trackers $1M, all U.S.-manufactured) - Result: Qualifies (45% > 40% threshold)
2026 Project (50% Threshold): - Adjusted basis: $20M - Required domestic manufactured products cost: $20M × 50% = $10M minimum - Actual domestic products: $9M (same as 2024) - Result: Does not qualify (45% < 50% threshold)
Planning Implication: Projects placed in service in later years face higher thresholds, requiring greater investment in domestic products or higher domestic content percentages.
Starting in 2027, manufactured products must not be produced by or contain components from Foreign Entities of Concern (FEOC).
FEOC Compliance Requirements: - Manufactured products must not be produced in FEOC countries - Components within manufactured products must not originate from FEOC countries - Manufacturers must certify that products and components are FEOC-free
Impact on Supply Chain: - Solar panels containing Chinese-manufactured cells will not qualify (even if assembled in the U.S.) - Battery systems containing Chinese cells will not qualify - Wind turbine components manufactured in China will not qualify - Extensive supply chain tracing and documentation required
Example Post-2027: - Scenario: Solar project uses panels assembled in the U.S. from Chinese-manufactured solar cells - Result: Panels do not qualify for domestic content (FEOC violation) - Project may still attempt to meet 55% threshold using other domestic products (inverters, trackers, batteries), but without panels this is extremely difficult for solar projects
Strategic Consideration: For projects targeting placed-in-service dates in 2027 or later, begin sourcing FEOC-free components now to ensure supply chain readiness.
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Contact UsThis content is for educational purposes only and does not constitute tax, legal, or financial advice. Always consult with qualified professionals before making tax credit decisions.