Complete guide to earning the 10% domestic content bonus by using American-made steel, iron, and manufactured products in renewable energy projects.
U.S. Manufacturing Requirement: - Solar cells must be assembled into finished panels in the United States - Panel framing, lamination, junction box attachment, and testing in U.S. facilities - Pre-2027: Cells can be foreign-sourced if panel assembly occurs in the U.S. - Post-2027: Cells must be FEOC-free (non-Chinese)
Qualifying U.S. Solar Manufacturers (as of 2024-2025): - First Solar (thin-film CdTe modules, fully U.S.-manufactured) - Silfab Solar (crystalline silicon panels, U.S. assembly) - Heliene (crystalline silicon panels, U.S. assembly) - Mission Solar (panels assembled in Texas) - Qcells (expanding U.S. manufacturing capacity)
Cost Premium: U.S.-manufactured solar panels typically cost 15-30% more than imported panels from China or Southeast Asia.
U.S. Manufacturing Requirement: - Inverter assembly, testing, and certification must occur in the U.S. - Circuit boards, transformers, and components can be globally sourced if final assembly is in the U.S. - Post-2027: Components must be FEOC-free
Qualifying U.S. Inverter Manufacturers: - SMA America (string and central inverters, U.S. assembly) - Power Electronics (central inverters, U.S. manufacturing) - KACO New Energy (inverters assembled in U.S.) - Tesla (Powerwall inverters for residential storage)
Cost Premium: U.S.-assembled inverters cost 5-15% more than fully imported inverters.
U.S. Manufacturing Requirement: - Battery cells must be assembled into modules and integrated into battery management systems in the U.S. - Pre-2027: Cells can be foreign-sourced if module assembly and BMS integration occur in the U.S. - Post-2027: Cells must be FEOC-free (extremely challenging, as most lithium-ion cells are Chinese)
Qualifying U.S. Battery Manufacturers: - Tesla (battery packs assembled in Nevada Gigafactory) - LG Energy Solution (expanding U.S. battery manufacturing) - Fluence (battery systems assembled in the U.S.) - Powin Energy (modular battery systems, U.S. integration)
Cost Premium: U.S.-assembled battery systems cost 10-20% more than fully imported systems.
Post-2027 Challenge: Most lithium-ion cells are manufactured in China or by Chinese-owned companies. Achieving FEOC-free battery storage systems will require significant supply chain shifts to South Korean, Japanese, or emerging U.S. cell manufacturers.
U.S. Manufacturing Requirement: - Nacelles, blades, towers, and major components must be manufactured or assembled in the U.S. - Many large wind turbine manufacturers operate U.S. facilities
Qualifying U.S. Wind Manufacturers: - GE Renewable Energy (nacelles and blades manufactured in U.S. facilities) - Vestas (U.S. manufacturing facilities in Colorado) - Siemens Gamesa (nacelle assembly and blade manufacturing in U.S.) - TPI Composites (wind turbine blades, U.S. facilities)
Cost Premium: U.S.-manufactured wind components typically cost 5-10% more due to labor and material costs.
U.S. Manufacturing Requirement: - Structural steel components (torque tubes, posts, rails) must be manufactured in the U.S. - Mechanical and electrical components (motors, controllers) must be assembled in the U.S.
Qualifying U.S. Racking Manufacturers: - Array Technologies (tracker systems manufactured in U.S.) - GameChange Solar (fixed-tilt racking, U.S. manufacturing) - Terrasmart (racking systems, U.S. manufacturing) - FTC Solar (tracker systems with U.S. components)
Cost Premium: U.S.-manufactured racking systems cost 10-20% more than imported systems.
U.S. Manufacturing Requirement: - Transformers, switchgear, and electrical equipment must be assembled and tested in the U.S. - Cores and coils can be globally sourced if final assembly occurs in the U.S.
Qualifying U.S. Manufacturers: - ABB (transformers and switchgear, U.S. manufacturing) - Eaton (electrical equipment, U.S. facilities) - Schneider Electric (switchgear and controls, U.S. assembly) - GE Grid Solutions (transformers, U.S. manufacturing)
Cost Premium: U.S.-manufactured electrical equipment costs 5-15% more.
Foreign Entity of Concern (FEOC) refers to entities owned by, controlled by, or subject to the jurisdiction of governments designated as concerns for U.S. national security and supply chain integrity.
FEOC Designated Countries: - China (People’s Republic of China) - Russia (Russian Federation) - Iran (Islamic Republic of Iran) - North Korea (Democratic People’s Republic of Korea)
Effective Date: FEOC restrictions apply to projects placed in service January 1, 2027 and later.
An entity is considered a FEOC if:
Government Ownership or Control: - The entity is owned by, controlled by, or subject to the jurisdiction of an FEOC government - Any ownership or control by an FEOC government (no threshold)
Private Entity FEOC Affiliation: - The entity is owned or controlled (25% or more) by FEOC-affiliated entities - Officers, directors, or substantial shareholders have FEOC government connections
Example: - A solar panel manufacturer is 30% owned by a Chinese state-owned enterprise - Result: The manufacturer is considered a FEOC entity; products do not qualify for domestic content bonus (post-2027)
Projects must trace the supply chain to identify and exclude FEOC components and materials.
Tracing Requirements: - Identify the origin of all steel, iron, and manufactured products - Verify ownership structure of manufacturers and suppliers - Certify that components do not contain FEOC-sourced materials or parts
Levels of Tracing: 1. Direct Supplier: Is the manufacturer a FEOC entity? 2. Component Origin: Where are the components (e.g., solar cells, battery cells) manufactured? 3. Sub-Component Origin: Where are critical materials (e.g., silicon wafers, cathode materials) sourced? 4. Ownership: Who owns the manufacturers at each level of the supply chain?
Example: Solar Panel Tracing: - Panel manufacturer: U.S.-based (non-FEOC) - Solar cells: Taiwan-based manufacturer (non-FEOC) - Silicon wafers: Sourced from Chinese manufacturer (FEOC) - Result: Post-2027, panels may not qualify if silicon wafers are traced to FEOC source (depending on IRS final guidance on sub-component tracing depth)
Major Challenge: Chinese Dominance: - Solar: China produces ~80% of global solar manufacturing capacity (cells, wafers, polysilicon) - Batteries: China produces ~75% of global lithium-ion battery cells - Wind: Significant Chinese ownership in global supply chains - Critical Minerals: China controls processing of lithium, cobalt, rare earths essential for batteries and magnets
Post-2027 Compliance Challenges: - Sourcing non-Chinese solar cells and battery cells will be extremely difficult and costly - Limited non-FEOC alternatives exist as of 2025, with capacity ramping slowly - Supply chain tracing requirements will be extensive and costly - Premium costs for FEOC-free components may increase from 20-40%
Emerging Non-FEOC Supply Chains: - Solar: Expansion of manufacturing in the U.S., Europe, India, South Korea, and Southeast Asia (non-Chinese) - Batteries: South Korean (LG, Samsung), Japanese (Panasonic), and U.S. (Tesla, others) cell manufacturing expansion - Wind: European and U.S. turbine manufacturers with non-Chinese supply chains - Critical Minerals: Emerging processing capacity in the U.S., Canada, Australia
Strategic Planning for 2027+: - Begin qualifying non-FEOC suppliers now - Budget for 20-40% cost premiums for FEOC-free components - Consider delayed placed-in-service dates if non-FEOC supply chains are not ready - Evaluate whether domestic content bonus economics justify FEOC compliance costs
Manufacturer Certifications: - Manufacturers must certify that products are not FEOC-sourced or contain FEOC components - Certifications must include ownership structure disclosure - Certifications must trace component origins to the extent required by IRS guidance
Independent Third-Party Verification: - Engage independent engineers or supply chain auditors to verify FEOC compliance - Verify manufacturer certifications against public ownership records and supply chain data - Document supply chain tracing efforts for IRS audit defense
Documentation Retention: - Retain all FEOC certifications and supply chain documentation for at least 6 years - Include FEOC compliance in independent engineer reports - Maintain records of supplier due diligence and verification efforts
Qualifying for the domestic content bonus requires extensive documentation to demonstrate compliance with both the steel/iron and manufactured products requirements.
Required for Each Supplier/Manufacturer: - Certification that products are manufactured or assembled in the United States - Certification that steel and iron components are melted, manufactured, and coated in the U.S. - Disclosure of component origins (domestic vs. foreign) - Certification of FEOC compliance (for projects placed in service 2027+) - Ownership structure disclosure (to identify FEOC affiliations)
Certification Content: - Manufacturer name and address - Product description and specifications - Manufacturing location(s) - Steel/iron melting and manufacturing locations - Component sourcing details (where applicable) - Cost allocation (to support cost-based calculations) - Signature and date by authorized company representative
Example Certification Language: “[Manufacturer Name] certifies that the [Product Name] supplied to [Project Name] was manufactured/assembled at [U.S. Facility Location]. All steel and iron components were melted and manufactured in the United States. [Percentage]% of product components by cost were sourced from domestic suppliers. This product does not contain components from Foreign Entities of Concern. This certification is made under penalty of perjury.”
Bills of Materials (BOM): - Detailed list of all components, materials, and products used in the project - Origin designation (U.S. vs. foreign) for each component - Cost allocation for each component
Cost Segregation: - Separate steel/iron costs from manufactured product costs - Identify domestic vs. foreign costs for manufactured products - Calculate domestic manufactured product cost percentage of adjusted basis
Example BOM Excerpt:
| Component | Quantity | Unit Cost | Total Cost | Origin | Category |
|---|---|---|---|---|---|
| Solar PV Panels | 25,000 | $200 | $5,000,000 | U.S. (assembled) | Manufactured Product (Qualified) |
| Inverters (string) | 500 | $2,000 | $1,000,000 | U.S. (assembled) | Manufactured Product (Qualified) |
| Racking (steel) | 1 lot | $1,500,000 | $1,500,000 | U.S. (manufactured) | Steel/Iron (Qualified) |
| Solar Cells (imported) | N/A | N/A | $0 | Taiwan (pre-2027) | Component (included in panels) |
| Transformers | 10 | $50,000 | $500,000 | Germany | Manufactured Product (Not Qualified) |
Required Documentation: - Invoices showing equipment and material purchases - Purchase orders specifying domestic content requirements - Delivery documentation showing shipping from U.S. facilities
Key Information to Capture: - Supplier/manufacturer name and location - Product description and model numbers - Quantity and unit pricing - Total cost - Manufacturing origin statements - Domestic content certifications (referenced or attached)
Purpose: - Third-party verification of domestic content compliance - Support for tax credit claims and IRS audit defense - Validation of cost calculations and certifications
Report Contents: - Project description and technical specifications - Review of manufacturer certifications - Verification of steel/iron domestic origin - Calculation of manufactured products cost percentage - FEOC compliance verification (for 2027+ projects) - Summary of documentation reviewed - Conclusion regarding domestic content bonus eligibility
Cost: Independent engineer reports for domestic content typically cost $25,000 to $100,000+ depending on project size and complexity.
IRS Requirement: Retain all domestic content documentation for at least 6 years from the later of: - The date the tax credit is claimed, or - The date the tax return is filed
Best Practice: Retain documentation for at least 7-10 years to account for: - Extended IRS audit periods - Recapture periods (5 years for ITC) - Potential disputes or litigation - Transfer of project ownership
Documentation Storage: - Maintain organized digital and physical files - Index documentation by supplier, component category, and compliance requirement - Provide access to documentation for auditors, buyers, and lenders - Include documentation in project data room for asset sales
Accurately calculating the domestic content cost percentage requires determining the project’s adjusted basis and the cost of qualifying domestic manufactured products.
Adjusted basis is the total cost of the project eligible for the ITC (or equivalent basis for PTC projects).
Step 1: Identify Total Project Costs
Included Costs: - Equipment (solar panels, inverters, batteries, turbines, trackers, transformers) - Materials (racking, steel, wiring, foundations) - Labor (installation, construction, commissioning) - Engineering and design services - Permitting and interconnection fees directly attributable to the project - Freight, delivery, and sales taxes on equipment - Site work and civil construction for the energy facility
Excluded Costs: - Land acquisition - Financing costs and interest during construction - General corporate overhead - Legal and accounting fees not directly related to construction - Pre-development costs (if not capitalized) - Post-placed-in-service costs
Example Total Project Costs: - Solar panels: $10,000,000 - Inverters: $2,000,000 - Racking systems: $1,500,000 - Electrical equipment: $1,000,000 - Installation labor: $4,000,000 - Engineering and design: $800,000 - Site work and civil: $700,000 - Total Adjusted Basis: $20,000,000
Step 2: Identify Manufactured Product Costs
From the total adjusted basis, identify costs attributable to manufactured products (not steel/iron, labor, or other non-manufactured costs).
Manufactured Product Costs: - Solar panels: $10,000,000 - Inverters: $2,000,000 - Trackers (mechanical/electrical components): $500,000 - Transformers: $400,000 - Battery systems: $0 (not included in this project) - Total Manufactured Products: $12,900,000
Non-Manufactured Costs (excluded from calculation): - Installation labor: $4,000,000 - Steel/iron (racking structural): $1,000,000 - Engineering and design: $800,000 - Site work and civil: $700,000
Step 3: Identify Which Manufactured Products Are Domestic
Review manufacturer certifications and documentation to determine which products qualify as domestically manufactured.
Example Analysis:
| Product | Cost | Domestic? | Qualified Cost |
|---|---|---|---|
| Solar Panels | $10,000,000 | Yes (U.S. assembled) | $10,000,000 |
| Inverters | $2,000,000 | Yes (U.S. assembled) | $2,000,000 |
| Trackers (mech/elec) | $500,000 | Yes (U.S. manufactured) | $500,000 |
| Transformers | $400,000 | No (imported from Germany) | $0 |
| Total | $12,900,000 | — | $12,500,000 |
Qualified Domestic Manufactured Products: $12,500,000
Step 4: Calculate Domestic Content Percentage
Formula:
Domestic Content % = (Qualified Domestic Manufactured Products Cost / Total Adjusted Basis) × 100
Example Calculation: - Qualified Domestic Manufactured Products: $12,500,000 - Total Adjusted Basis: $20,000,000 - Domestic Content %: ($12,500,000 / $20,000,000) × 100 = 62.5%
Step 5: Compare to Required Threshold
2024 Project (40% Threshold): - Domestic Content: 62.5% - Required: 40% - Result: Project qualifies for domestic content bonus (62.5% > 40%)
2027 Project (55% Threshold): - Domestic Content: 62.5% - Required: 55% - Result: Project qualifies for domestic content bonus (62.5% > 55%)
Example 1: Solar Project (Qualifies)
Project Details: - Placed in service: 2024 - Technology: 20 MW solar - Adjusted basis: $24,000,000 - Required threshold: 40%
Cost Breakdown: - U.S.-manufactured solar panels: $13,000,000 (qualified) - U.S.-assembled inverters: $2,500,000 (qualified) - U.S.-manufactured trackers: $1,800,000 (qualified) - Imported transformers: $600,000 (not qualified) - U.S. steel racking: $1,200,000 (steel/iron, not counted toward manufactured products threshold) - Installation labor: $3,500,000 (not manufactured product) - Engineering and site work: $1,400,000 (not manufactured product)
Calculation: - Qualified domestic manufactured products: $13M + $2.5M + $1.8M = $17,300,000 - Domestic content %: ($17.3M / $24M) × 100 = 72.1% - Required: 40% - Result: Qualifies (72.1% > 40%)
Additional Credit Value: $24M × 10% = $2,400,000
Example 2: Solar Project (Does Not Qualify)
Project Details: - Placed in service: 2025 - Technology: 50 MW solar - Adjusted basis: $60,000,000 - Required threshold: 45%
Cost Breakdown: - Imported solar panels (China): $30,000,000 (not qualified) - Imported inverters (Germany): $6,000,000 (not qualified) - U.S.-manufactured trackers: $4,500,000 (qualified) - U.S. steel racking: $3,000,000 (steel/iron, not counted toward manufactured products threshold) - U.S. transformers: $1,200,000 (qualified) - Installation labor: $10,000,000 (not manufactured product) - Engineering and site work: $5,300,000 (not manufactured product)
Calculation: - Qualified domestic manufactured products: $4.5M + $1.2M = $5,700,000 - Domestic content %: ($5.7M / $60M) × 100 = 9.5% - Required: 45% - Result: Does not qualify (9.5% < 45%)
Missed Credit Value: $60M × 10% = $6,000,000 (forgone)
Issue: Despite using 100% U.S. steel (satisfying Part 1), the project fails Part 2 (manufactured products threshold) because solar panels and inverters—the largest cost components—are imported. The project cannot claim the domestic content bonus.
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