Advanced Manufacturing Production Credit (AMPC)

Origins

Section 45X was added to the Internal Revenue Code on August 16, 2022 by section 13502(a) of the Inflation Reduction Act (Pub. L. 117-169), and it applies to components produced and sold after December 31, 2022. The IRA was passed by the 117th Congress and signed by President Joe Biden; on Congressional Budget Office and Joint Committee on Taxation figures it authorizes $891 billion in total spending, including $391 billion on energy and climate change, and is described as the largest US investment toward reducing greenhouse gas emissions. The Joint Committee on Taxation forecast the total cost of the Section 45X credit at $30.6 billion over 2022-2031, of which direct cash payments would account for $14.7 billion.

Eligibility and rates

Eligible components must be manufactured in the United States or its possessions and sold to unrelated persons, and must be substantially transformed into a complete and distinct component through a significant change to constituent elements, materials or subcomponents. The covered categories are solar energy components, wind energy components, specified inverters, qualifying battery components and applicable critical minerals; property produced at a facility whose basis was taken into account for the section 48C qualifying advanced energy project credit after August 16, 2022 is excluded. Qualifying battery components are electrode active materials, battery cells and battery modules, and capacity for battery cells and modules is capped at a 100:1 capacity-to-power ratio. Rates are fixed per unit: battery cells receive $35/kWh of capacity and battery modules $10/kWh on top of the cell credit, or $45/kWh for modules not using cells; electrode active materials and critical minerals receive 10% of production costs, and solar, wind and inverter components have their own per-unit rates (for example photovoltaic cells $0.04/W DC, solar modules $0.07/W DC, central inverters $0.025/W AC, wind blades $0.02 per rated watt).

Claiming the credit

The credit can be used as a direct offset against federal income tax, as an elective direct cash payment (Form 3800), or transferred to unrelated taxpayers for cash (Form 7207). Transferability and direct pay were retained under the 2025 Act, with a new prohibition on transfers to specified foreign entities.

Phase-down and changes after 2025

Under prior law the credit is effective from January 1, 2023 through December 31, 2032, with a phase-down for most components beginning in 2030 (75% in 2030, 50% in 2031, 25% in 2032). Under section 45X(b)(3) the phase-out percentage for a component sold after December 31, 2032 is zero, and the 2023 proposed regulations state that on that basis current law provided no 45X credit after 2032 for eligible components other than applicable critical minerals, which were then excluded from the phase-out. That description reflects the law before the 2025 changes.

The One Big Beautiful Bill Act, signed on July 4, 2025, generally maintains the IRA phase-out schedule for 45X but terminates the credit for wind energy components sold after 2027, and applies a phase-out schedule to critical minerals that were previously codified as a permanent credit excluded from the phase-out. For minerals other than metallurgical coal, production in 2031 receives 75% of the credit, 2032 50%, 2033 25%, and no credit in 2034 or after; the credit for metallurgical coal produced after 2029 ends. The Act adds metallurgical coal as a critical mineral, requires battery modules to comprise all other essential equipment needed for battery functionality, and imposes new restrictions on vertically integrated credit claims: the primary component must be produced in the same manufacturing facility, and at least 65% of total direct material costs to produce each secondary component must be attributable to primary components mined, produced or manufactured in the United States.

Foreign entities of concern

Under the 2025 Act, use of 45X is limited by Foreign Entities of Concern rules. At the taxpayer level, companies based in China, Russia, Iran or the Democratic People's Republic of Korea cannot claim the credit. At the product and material level, limits apply to sourcing key minerals, components or materials, to licensing agreements for technology and patents, and to funding or investment arrangements with prohibited foreign entities. The restrictions apply to projects owned or controlled by prohibited foreign entities or receiving material assistance from them, and they broaden the categories of restricted foreign entities relative to the Biden-era Department of Energy interpretation used for electric vehicles. From 2027, integrated components qualify only if built into another element at the same facility, sold to an unrelated buyer, and made with at least 60% US-sourced materials.

Relation to the South Korean battery industry

LG Energy Solution, SK On and Samsung SDI began establishing North American joint ventures starting in 2019, and IRA tax credits from 2022 encouraged that expansion. Plants built with GM, Ford, Stellantis, Honda and Hyundai formed parts of the Battery Belt. After the July 2025 One Big Beautiful Bill Act prematurely ended EV subsidies (September 2025), Korean firms began winding down US joint-venture projects, dividing ownership of sites, and shifting focus from EVs to energy storage, alongside a shift from NCM toward LFP batteries.

Examples

Companies producing and selling batteries in the United States are eligible for the IRA AMPC, with options including tax credits, cash refunds, and transferring rights after receiving cash from other taxpayers. LG Energy Solution transferred rights to the previous year's AMPC worth 676.8 billion won (about US$495.1 million) to other companies and considered selling the remainder, while SK On, holding rights to 617 billion won in subsidies, also contemplated transferring its rights, doing so at a discount because of immediate cash shortages and because the US government's payment comes around October of the following year. LG Energy Solution's provisional Q1 2026 results showed 6.5550 trillion won in revenue and a 207.8 billion won operating loss, with 189.7 billion won of AMPC already reflected; excluding AMPC the real operating loss is estimated in the 400 billion won range. In the same quarter Samsung SDI's consensus was 3.4606 trillion won in revenue and a 263.1 billion won operating loss, and SK On was expected to lose around 300 billion won. Results were weak across the three firms because of North American investment costs and low utilisation, with subsidies and tax credits acting as a buffer while structural profitability remained the challenge.

As of June 2025 an estimated 62,700 jobs had been created and $48.3 billion invested in battery manufacturing, in part due to 45X, making 45X a key IRA incentive supporting domestic battery supply chains and competitiveness against lower-cost producers such as China.

Distinctions

45X is a production credit for manufacturers and differs from the 30D clean vehicle consumer credit of up to $7,500. The two were designed to operate in tandem, with 30D making American-made EVs more affordable and 45X making it cheaper to build batteries domestically. Under the One Big Beautiful Bill Act, 30D sunsets on September 30, 2025, seven years earlier than planned in the IRA, while 45X continued with modifications.

Estimates of IRA manufacturing credit use differ widely, ranging from $67 billion to $183 billion for manufacturing in various summaries, $250 billion or more in advanced manufacturing tax credits under a Credit Suisse projection, and BCG's $71 billion for clean manufacturing. Aggregate advanced-manufacturing credit figures are therefore contested and should not be stated as a single authoritative number.

Conflicting assessments

How the 2025 budget law affects the credit is characterised differently. One account describes it as effectively repealing the IRA and gutting the tax credits helping American manufacturing catch up to China, citing a Princeton ZERO Lab report that estimates cancellation of 100% of planned battery facilities and threats to up to three-fourths of battery plants. A legal-side reading holds that the Act generally maintains the IRA phase-out schedule for 45X with a few exceptions. This should be read as a difference in interpretation rather than settled fact.