US Treasury Finalizes Regulations for Hydrogen Tax Credits
Key Ideas
- The US Department of the Treasury released final regulations for hydrogen production tax credits under Section 45V and the investment tax credit for hydrogen production facilities under Section 48(a)(15).
- The regulations incentivize low-carbon hydrogen production based on the lifecycle greenhouse gas emissions rate of the production process.
- Changes include exceptions for renewable power sources, extended temporal matching transition rule, and the elimination of the first productive use requirement for renewable natural gas.
- The future of the Hydrogen Tax Credits under the Trump administration remains uncertain, with possibilities ranging from full repeal to potential expansion of the regime.
On January 3, 2025, the US Department of the Treasury finalized regulations for the Hydrogen Tax Credits, encouraging low-carbon hydrogen production. These tax credits, part of the Inflation Reduction Act of 2022, offer incentives based on the greenhouse gas emissions rate of the production process. The regulations maintain the 'three pillars' approach to track energy sources using a book-and-claim system with energy attribute certificates. Changes include exceptions for renewable power sources and an extended temporal matching rule. The requirement for power used in hydrogen production to be sourced locally was relaxed. The regulations also eliminate the first productive use requirement for renewable natural gas, introducing a gas book-and-claim system. Hydrogen producers can use the GREET model in effect during the facility's construction. The future of the tax credits under the Trump administration is uncertain, with possibilities ranging from repeal to potential expansion, reflecting differing views on domestic power production and skepticism towards the tax credits.