IRS Releases Clean Hydrogen Credit Inflation Adjustment

Credit for Production of Clean Hydrogen 2023 and 2024 Section 45V Inflation Adjustment Factor and Applicable Amount

Part III

SECTION 1. PURPOSE

This notice publishes the inflation adjustment factors and applicable amounts for the credit for production of clean hydrogen under §45V of the Internal Revenue Code (Code) for calendar years 2023 and 2024. The inflation adjustment factor and applicable amount are used to determine the amount of the credit under §45V(a) of the Code.

SECTION 2. BACKGROUND

Section 45V was added to the Code by section 13204 of the Inflation Reduction Act of 2022, enacted as Pub. L. 117-169, 136 Stat. 1818, 1935 (August 16, 2022), to provide a credit for producing qualified clean hydrogen.

Section 45V(a) provides that, for purposes of section 38, the clean hydrogen production credit for any taxable year is an amount equal to the product of (i) the kilograms of qualified clean hydrogen produced by the taxpayer during such taxable year at a qualified clean hydrogen production facility during the 10year period beginning on the date such facility was originally placed in service, multiplied by (ii) the applicable amount as determined under §45V(b) with respect to such hydrogen.

Section 45V(b)(1) provides that, for purposes of §45V(a)(2), the applicable amount is an amount equal to the applicable percentage of $0.60. If the amount so determined is not a multiple of 0.1 cent, then such amount is rounded to the nearest multiple of 0.1 cent.

Section 45V(b)(2) provides that, for purposes of §45V(b)(1), the applicable percentage is determined based on the lifecycle greenhouse gas emissions (lifecycle GHG emissions) rate of the process to produce any qualified clean hydrogen as follows: (i) if the lifecycle GHG emissions rate is not greater than 4 kilograms of carbon dioxide equivalent (CO2e) per kilogram of hydrogen, and not less than 2.5 kilograms of CO2e per kilogram of hydrogen, then the applicable percentage is 20 percent; (ii) if the lifecycle GHG emissions rate is less than 2.5 kilograms of CO2e per kilogram of hydrogen, and not less than 1.5 kilograms of CO2e per kilogram of hydrogen, then the applicable percentage is 25 percent; (iii) if the lifecycle GHG emissions rate is less than 1.5 kilograms of CO2e per kilogram of hydrogen, and not less than 0.45 kilograms of CO2e per kilogram of hydrogen, then the applicable percentage is 33.4 percent; and (iv) if the lifecycle GHG emissions rate is less than 0.45 kilograms of CO2e per kilogram of hydrogen, then the applicable percentage is 100 percent.

Section 45V(b)(3) provides that the $0.60 amount in §45V(b)(1) is adjusted by multiplying such amount by the inflation adjustment factor (as determined under §45(e)(2), determined by substituting “2022” for “1992” in §45(e)(2)(B)) for the calendar year in which the qualified clean hydrogen is produced. If any amount as increased under §45V(b)(3) is not a multiple of 0.1 cent, such amount is rounded to the nearest multiple of 0.1 cent.

Section 45(e)(2)(B) defines the term “inflation adjustment factor” as, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term “GDP implicit price deflator” means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.

SECTION 3. INFLATION ADJUSTMENT FACTORS

.01 2023 Inflation Adjustment Factor.

For purposes of §45V(b)(3), for qualified clean hydrogen produced in calendar year 2023, the inflation adjustment factor is a fraction the numerator of which is the GDP implicit price deflator for 2022 (117.973) and the denominator of which is the GDP implicit price deflator for 2022 (117.973), which yields an inflation adjustment factor of 1.

.02 2024 Inflation Adjustment Factor.

For purposes of §45V(b)(3), for qualified clean hydrogen produced in calendar year 2024, the inflation adjustment factor is a fraction the numerator of which is the GDP implicit price deflator for 2023 (122.273) and the denominator of which is the GDP implicit price deflator for 2022 (117.973), which yields an inflation adjustment factor of 1.0364.

SECTION 4. APPLICABLE AMOUNTS

.01 2023 Applicable Amount.

For qualified clean hydrogen produced in calendar year 2023, the applicable amount determined under §45V(b)(1) is the product of $0.60 ($0.60 x inflation adjustment factor of 1) and the applicable percentage, which depends on the lifecycle GHG emissions rate of the qualified clean hydrogen production process. For qualified clean hydrogen produced through a process that results in a lifecycle GHG emissions rate of:

(i) not greater than 4 kilograms of CO2e per kilogram of hydrogen, and not less than 2.5 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.120;

(ii) less than 2.5 kilograms of CO2e per kilogram of hydrogen, and not less than 1.5 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.150;

(iii) less than 1.5 kilograms of CO2e per kilogram of hydrogen, and not less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.200; and

(iv) less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.600.

.02 2024 Applicable Amount.

For qualified clean hydrogen produced in calendar year 2024, the applicable amount determined under §45V(b)(1) is the product of $0.622 ($0.60 x inflation adjustment factor of 1.0364) and the applicable percentage, which depends on the lifecycle GHG emissions rate of the qualified clean hydrogen production process. For qualified clean hydrogen produced through a process that results in a lifecycle GHG emissions rate of:

(i) not greater than 4 kilograms of CO2e per kilogram of hydrogen, and not less than 2.5 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.124;

(ii) less than 2.5 kilograms of CO2e per kilogram of hydrogen, and not less than 1.5 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.156;

(iii) less than 1.5 kilograms of CO2e per kilogram of hydrogen, and not less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.208; and

(iv) less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable amount is $0.622.

SECTION 5. DRAFTING INFORMATION

The principal author of this notice is Courtney Hutson of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Courtney Hutson at (202) 317-5319 (not a toll-free number).