Treasury updated the Domestic Content Safe Harbor cost percentages. What’s different in 2025?

The U.S. Department of the Treasury released additional guidance on the Inflation Reduction Act’s domestic content tax credit bonus for solar and battery energy storage projects. The guidance today builds on the domestic content safe harbor that Treasury and the IRS published in May of 2024, which included the New Elective Safe Harbor tables for default cost percentages that developers could cite to determine eligibility for the domestic content bonus.
The most notable change in this “First Updated Elective Safe Harbor” is a new column for PV Module cost percentages for modules with domestically sourced wafers. The idea is to enhance the incentives for onshoring wafer production.
ICYMI, global wafer supply is also under increased scrutiny as several Chinese wafer makers were added to the UFLPA Entity List earlier this week.
Guidance updates in snapshot
- Solar: The updated tables update cost percentages, make certain adjustments to the characterizations of applicable project components and manufactured product components, and offer clarifying definitions.
- Domestic Solar Wafers: For each solar table, there are new optional alternative cost percentages for projects using domestic solar cells manufactured with domestic wafers. Key to the new wafer table is the U.S. made wafer must also be part of a U.S.-made cell. So, hypothetically, if a U.S.-made wafer went out of the country to become a cell and was shipped back for module assembly, that would likely not qualify.
- Battery Electric Storage System (BESS): The updated table updates cost percentages, makes certain adjustments to the characterizations of applicable project components and manufactured product components, and offers clarifying definitions.
Another notable change came in the Rooftop Solar Safe Harbor tables. The domestic cost percentages associated with MLPE and String inverters were split into slightly different categories compared to the original safe harbor table. The First Updated Elective Safe Harbor …
Removes “Electrical Parts for rooftop PV systems,” and adds their costs to “Printed Circuit Board Assemblies” (DC-DC) and “Printed Circuit Board Assemblies” (DC-AC). …. this categorizes DC-to-DC and DC-to-AC “Printed Circuit Board Assemblies” as separate Manufactured Products Components, and the domestic “Printed Circuit Board Assemblies” that perform both functions (that is, convert both DC to DC and DC to AC) can get credit for each cost percentage.
The total cost percentage when tallying both Printed Circuit Board Assembly numbers is less than the totals for MLPE and String Inverters compared to the percentages in the 2024 tables (see below for comparison).
You’ll also note the “Production Costs” were reduced across the board. Consistent with Notice 2023-38, the direct cost of producing a Manufactured Product counts toward the Domestic Cost Percentage only if all its Manufactured Product Components are domestically produced.
An update we anticipated that was not (yet) included in Treasury guidance, was a change to the annual 5% step up in the Adjusted Percentage Rule (APR). To qualify for the domestic content tax credit adder for either the investment tax credit (ITC) or production tax credit (PTC), the PV system must satisfy the APR. Under the PTC, the APR started at 40% in 2024 and steps up 5% each year until it reaches 55% in 2027. The law did not specify the 5% annual escalation for the ITC — this was widely considered to be an oversight that would be corrected in further guidance. That still may be the case, but it was not changed in this new guidance.
Safe Harbor Tables 2025 vs. 2024
Here is a breakdown of the “First Updated Elective Safe Harbor” tables from the guidance, which modifies Table 1 for Solar PV in section 4.04(1) of Notice 2024-41. Projects are still divided into Ground-Mount Tracker, Ground-Mount Fixed Tilt, Rooftop MLPE, Rooftop String. But as noted the big difference is the additional column for modules with wafers.
In the last column in the tables below, we included the original Safe Harbor Table from May 2024 for the sake of comparison. We also note the differential below the total for each category.
Ground-Mount Tracking First Updated Elective Safe Harbor table
Ground-Mount Fixed Tilt First Updated Elective Safe Harbor table
Rooftop MLPE First Updated Elective Safe Harbor table
Rooftop String First Updated Elective Safe Harbor table
As we noted in “Domestic Influence,” there is an imbalance between the Rooftop Solar tables between MLPE and String inverters. That divide widened even further in this new guidance:
- Rooftop Solar MLPE projects can achieve a percentage of 44.4 with MLPE + racking and no domestic PV module. Unless new guidance says otherwise, this would still qualify a system for the domestic credit under the ITC, which is still a 40% APR.
- Rooftop with String inverters without a domestic module maxes out at a combined percentage of 30.8. Domestic modules will be mandatory for any project seeking the DC with a string inverter.
New Safe Harbor Table Reaction
Mike Carr, Executive Director of the Solar Energy Manufacturers for America (SEMA) Coalition, released the below statement following the announcement:
“The purpose of the domestic content bonus is to build a U.S.-based solar supply chain, and the latest guidance, although a positive step, falls short in some respects. Congress intended the bonus to serve as a technology-neutral direct complement to the Section 45X advanced manufacturing production tax incentives, creating a clear demand signal in the market for American-made products built with components produced in America, spurring new investments in domestic energy manufacturing.
“While it’s significant that the value of U.S. wafer production is now recognized, if the tables were more focused on the core, strategic components of all solar technologies, we would see a faster and more expansive build-out of factories in the United States. Unfortunately, we still have an overly complicated approach that misses the mark in important ways and risks deepening our country’s reliance on China’s solar supply chain by failing to play to our technological strengths.”
How long can I reference the previous Safe Harbor Table cost percentages?
This guidance indicates that the New Elective Safe Harbor table from May 2024 may be used for projects that start construction for 90 days after the effective date of this guidance: Jan. 16, 2025.
“Taxpayers may rely on Notice 2024-41, in its entirety and as modified by section 4 of this notice, for the domestic content bonus credit requirements for any Applicable Project, the construction of which begins before the date that is 90 days after the effective date of this notice.”