IRS Leans “Green” — Much-Awaited Section 45V Guidance Creates New Opportunities for Hydrogen Markets

On Dec. 22, the Internal Revenue Service published long-awaited proposed regulations for hydrogen tax credits under Internal Revenue Code Sections 45V and 48. The proposed regulations address many gating questions, including providing rules for determining lifecycle greenhouse gas emissions rates resulting from hydrogen production processes and the introduction of qualified “energy attribute certificates” to ensure feedstock electricity source eligibility. Of note, the proposed regulations adopt a stringent approach to feedstock electricity source eligibility, raising important considerations for hydrogen producers, developers and investors.

The proposed regulations also provide guidance on the verification of the production and sale or use of clean hydrogen, modifying or retrofitting existing hydrogen production facilities, electing the Section 48 investment tax credit in lieu of the Section 45V production tax credit, and the interaction between Section 45Q and Section 45V tax credits.