Domestic content bonus credit: requirements, thresholds, and safe harbor
The domestic content bonus adds 10% of qualified basis to a §48 or §48E ITC, or 10% to a §45 or §45Y PTC rate, for projects that use 100% U.S. structural steel and iron and meet a manufactured products threshold that rises from 40% to 55% depending on when construction began.
Introduction
The Inflation Reduction Act created three bonus credits, or adders: domestic content, energy community, and low-income community. The domestic content bonus credit is the most complex of the three to qualify for and to diligence in a transfer. The domestic content adder applies to four credits in the IRA's ITC and PTC family, §45, §45Y, §48, and §48E, and is intended to incentivize domestic clean energy production and manufacturing. For a project that meets prevailing wage and apprenticeship requirements (PWA), the domestic content adder is worth up to 10% of qualified basis on an investment tax credit (ITC). This guide covers the IRA domestic content requirements , the thresholds by construction start date, the elective safe harbor tables, and what buyers check when a transferred credit includes the adder.
What is domestic content?
A project qualifies for the bonus by meeting two requirements: all structural steel and iron must be produced in the U.S., and a minimum percentage of the total cost of manufactured products, including their components, must be mined, produced, or manufactured in the U.S.
Every applicable project component is categorized as either steel/iron or a manufactured product, and the category determines which test it faces. For the manufactured products test, developers can either document the actual costs of the products and their components or elect an IRS safe harbor that assigns fixed cost percentages to listed components.
The three IRS notices on domestic content
Three notices govern the bonus: Notice 2023-38 (May 12, 2023), the base guidance under §45, §45Y, §48, and §48E; Notice 2024-41 (May 16, 2024), which expanded the applicable projects and created the elective safe harbor; and Notice 2025-08 (January 16, 2025), the First Updated Elective Safe Harbor and the current version, which applies to calculations made on or after January 16, 2025.
How much is the domestic content bonus?
For §48 and §48E ITCs, the bonus is 10% of qualified basis with PWA compliance, or 2% without it. A PWA-compliant project that qualifies for domestic content therefore receives an ITC worth 40% of basis instead of 30%, and the adders stack: a project that meets PWA and qualifies for both energy community and domestic content receives an ITC worth 50% of qualified basis.
For §45 and §45Y production tax credits, the bonus is a 10% increase to the PTC rate. Using 2026 rates, the §45 PTC with PWA is $30 per MWh, which becomes $33 per MWh with the domestic content adder. The §45Y PTC with PWA is $31 per MWh, which becomes $34.10 per MWh with the adder. A §45 project that qualifies for both domestic content and energy community adders receives $36 per MWh.
The two domestic content requirements
A project must meet both requirements.
Steel and iron requirement
100% of all structural steel or iron products used in the project must be produced in the U.S. In the safe harbor tables, items such as steel photovoltaic module racking, steel piles or ground screws, and steel or iron reinforcing products in foundations are classified as steel/iron products rather than manufactured products.
Manufactured products requirement
A minimum percentage of the total costs of manufactured products, including their components, must be mined, produced, or manufactured in the U.S. Direct labor costs of incorporating a manufactured product into the project, such as installation costs, are excluded. The minimum percentage depends on when the project begins construction.
Domestic content thresholds by construction start date
The manufactured products threshold rises with the beginning-of-construction (BOC) date, as amended by the One Big Beautiful Bill Act (OBBBA) for projects beginning construction on or after June 16, 2025.
For offshore wind projects, the percentage starts at 20% and climbs to 55% for projects that begin construction after 2026.
How to calculate the domestic content adjusted percentage
Under the adjusted percentage rule, developers divide the cost of the manufactured products or components made in the U.S. by the entire cost of all U.S. and foreign manufactured products used to build the project. Collecting and validating the inputs is complex. Interim IRS guidance requires analyzing the origin of parts and materials that the U.S. manufacturer used to make the product, so developers, manufacturers, and suppliers have to work together to validate the calculation, and manufacturers need to disclose far more about their supply chains and cost structures than has been customary.
Before the elective safe harbor, application of the bonus was minimal, partly because of the complexity of validating qualification. Reunion's Q2 2025 Market Monitor report found that the safe harbor meaningfully increased domestic content adoption for §48 ITCs, while adoption on §45 PTCs stayed limited because many are legacy projects placed in service before the IRA.
Using the elective safe harbor tables
To minimize the complexity of collecting cost data from manufacturers, the IRS created a new elective safe harbor in Notice 2024-41. It allows developers to determine the project's domestic content percentage by aggregating fixed, IRS-determined percentages from an "exclusive and exhaustive" list of manufactured components and subcomponents, instead of relying on manufacturers to disclose actual direct costs. Notice 2025-08 modified Notice 2024-41 to adjust the percentages in the First Updated Elective Safe Harbor.
The rules for using the tables:
- All or nothing. A developer that elects the safe harbor must use it for the entire project and must disregard any manufactured products or components not listed in Table 1 of Notice 2025-08. Listed items not used in the project carry zero value, and unlisted items used in the project do not disqualify the election but are excluded from the adjusted percentage.
- Not an exemption. The safe harbor does not exempt sellers from the domestic content requirements in Notice 2023-38.
- Scope. The tables cover solar (including parking canopies, carports, and floating systems), onshore wind, and battery storage. Offshore wind, hydropower, biomass, geothermal, fuel cells, and other technologies remain outside the safe harbor, so those projects must rely on calculations based on actual component costs.
- Retrofits. Qualifying retrofits, such as wind repowers, can use the tables, with any retained used components assigned a 0% value.
- Production. Each product in the tables has a "Production" row, the cost of assembling its components into the finished product. That row counts only when every listed component of the product is U.S.-made. Otherwise only the U.S.-made components count.
- Timing. The updated tables apply to calculations made on or after January 16, 2025. Treasury said in January 2025 that it intended to update the safe harbor annually; as of the July 2026 edition of Reunion's Transferable Tax Credit Handbook, no further update had been issued. Taxpayers may continue to use the Notice 2025-08 tables for projects beginning construction up to 90 days after any further guidance or modification.
Which solar panels and components qualify for domestic content?
Domestic content for a solar project is determined component by component. Under the safe harbor, each component listed in the table counts if it is manufactured in the U.S., and only listed components count.
The ground-mount solar table in Notice 2025-08 lists the components and the cost percentage assigned to each. For the PV module, the listed components are cells, frame or backrail, front glass, encapsulant, backsheet or backglass, junction box, edge seals, pottants, bus ribbons, and bypass diodes. The inverter and the tracker have their own component lists. Steel racking, piles, and foundation reinforcing fall under the steel and iron requirement described above. Rooftop systems have a separate table with the same module components at different percentages.
Cells carry the largest percentage. In each column of the ground-mount table, the cells are assigned more than all other module components combined. Cell percentages from the ground-mount table are below. Appendix D of Reunion's Transferable Tax Credit Handbook reproduces the full tables, covering the other components as well.
Notice 2025-08 added separate percentages for modules that incorporate crystalline silicon cells and wafers manufactured in the U.S., reflecting a cost premium for domestic cells that, at the time of the notice, could exceed 40% depending on the system.
How to claim and document the domestic content bonus
A developer that uses the elective safe harbor must submit a certification to the IRS alongside Form 8835 (for PTCs) or Form 3468 (for ITCs) in the first taxable year in which it reports a domestic content credit amount. The IRS has not prescribed a format, but section 5 of Notice 2023-38 lists the required information: project type, tax credit, placed-in-service date, location or coordinates, and total bonus credit claimed.
Taxpayers claiming the bonus, including transferable tax credit buyers, must meet the general recordkeeping requirements under §6001 to substantiate that the requirement has been met.
Domestic content risk in tax credit transfers
Buyers of transferable tax credits bear additional risk when assuming bonus credits, since qualification for the adders is subject to IRS scrutiny and audit. Bonus credits cannot be separated from base credits: Treasury guidance from June 2023 requires all transferable credits to be sold as vertical slices, pari passu, rather than splitting the adder off from the base credit.
With the elective safe harbor, domestic content diligence has become simpler, though it will likely remain the most complex of the three adders to diligence. Buyers will want to validate the developer's safe harbor calculations, collect documentation confirming the sourcing of components and sub-components included in the calculations, and review the developer's safe harbor certification. In many cases, seller counsel prepares a legal memorandum confirming compliance. Reunion's §45 PTC due diligence guide also calls for supporting cost analysis from a third-party engineer or supporting documentation from legal counsel. In the transfer agreement, the seller represents whether the project qualifies for any bonus adders, and evidence of bonus credit qualification is a closing condition.
How Reunion supports domestic content diligence
Reunion's §48 ITC and §45 PTC due diligence guides each include a domestic content checklist. Shortly after a term sheet is signed, typically within 10 days, Reunion delivers a diligence memo that covers bonus credits among the main risk areas, then works with the buyer on risk mitigation options. In parallel, Reunion works with the seller to assemble a data room, which often takes several iterations to satisfy the buyer and hold up in a future IRS challenge. For a domestic content claim, that means the safe harbor calculations, sourcing documentation, certification, and any legal memorandum described above. Where the buyer requires tax credit insurance, Reunion helps confirm that bonus credit adders are among the covered positions and that the policy is properly sized.
Frequently asked questions
Which credits can claim the domestic content bonus credit? §45, §45Y, §48, and §48E.
How much is it worth?
10% of qualified basis for ITCs (2% without PWA), or a 10% increase to the PTC rate.
What threshold applies to my project?
40% if construction began before June 16, 2025; 45% for the rest of 2025; 50% in 2026; 55% after 2026. Offshore wind starts at 20% and rises to 55%.
Does the safe harbor cover my technology?
The tables cover solar, onshore wind, and battery storage. Offshore wind, hydropower, biomass, geothermal, fuel cells, and other technologies must use actual costs.
Can I use the safe harbor for some components and actual costs for others?
No. The election applies to the entire project.
Does domestic content affect elective pay?
Yes, for applicable entities such as tax-exempt organizations and governments. Under Notice 2024-9, projects beginning construction on or after January 1, 2024 that do not meet domestic content (and are 1 MW or larger) receive 90% of the credit, falling to 85% for 2025 starts and 0% for 2026 starts, unless an increased-cost or non-availability exception applies.
How does domestic content relate to foreign entity of concern (FEOC) material assistance rules?
The IRS is expected to publish dedicated material assistance tables by December 31, 2026. Until then, under Notice 2026-15 (February 12, 2026), taxpayers can use the Notice 2025-08 domestic content tables as a safe harbor for the material assistance calculation that governs FEOC compliance for §45Y, §48E, and §45X. One difference: material assistance is measured on the taxpayer's own direct costs or acquisition cost, while domestic content requires the manufacturer's direct costs.
Can a buyer purchase only the base credit and leave the adder?
No. Credits must be sold as vertical slices that include the same proportion of base and bonus credit.
