Internal Revenue Bulletin 2024-3 (PDF rendition): IRS Notices

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Bulletin No. 2024–3
January 16, 2024
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2024-10, page 406.
This notice provides additional interim guidance regarding
the application of the new corporate alternative minimum tax
(CAMT), as added to the Code by the Inflation Reduction Act
of 2022. Specifically, the notice provides additional rules for
determining the adjusted financial statement income (AFSI)
of a U.S. Shareholder when a controlled foreign corporation
(CFC) pays a dividend to the U.S. Shareholder or another
CFC and modifies and clarifies the interim guidance provided
in Notice 2023-64 regarding the applicable financial state-
ment (AFS) of members of a tax consolidated group.
REG-107423 -23, page 411.
The notice of proposed rulemaking (NPRM) would implement
the new section 45X advanced manufacturing production
credit established by the Inflation Reduction Act of 2022
(IRA), Public Law 117-169. Section 45X provides a credit for
the production (within the United States) and sale of eligible
components and is designed to incentivize domestic produc-
tion of certain green energy components including certain
solar energy components, wind energy components, invert-
ers, qualifying battery components, and applicable critical
minerals. The proposed regulations would affect eligible tax-
payers who produce and sell eligible components and intend
to claim an advanced manufacturing production credit.
T.D. 9984, page 386.
These final regulations implement the Internal Revenue
Code’s de minimis error safe harbor exceptions for de mini-
mis errors on information returns and payee statements,
which treat erroneous information returns and payee state-
ments as correct for certain penalty purposes if the errors
are de minimis in amount. The final regulations prescribe
the time and manner in which a payee may elect not to have
the de minimis error safe harbor exceptions apply. The final
regulations also update dollar amounts, definitions, and refer-
ences in provisions relating to information return and payee
statement penalties, to reflect statutory enactments that are
not accounted for in the existing regulations.
Finding Lists begin on page ii.

The IRS Mission
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them understand and meet their tax responsibilities and
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
January 16, 2024 Bulletin No. 2024–3

Part I
26 CFR 1.6045-1; 26 CFR 301.6721-0; 26
CFR 301.6721-1; 26 CFR 301.6722-1; 26
CFR 301.6724-1
T.D. 9984
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1 and 301
De Minimis Error Safe
Harbor Exceptions to
Penalties for Failure to
File Correct Information
Returns or Furnish Correct
Payee Statements
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations implementing statutory
safe harbor rules that protect persons
required to file information returns or to
furnish payee statements from penalties
under the Internal Revenue Code (Code)
for failure to file correct information
returns or furnish correct payee state-
ments. The statutory safe harbor rules treat
information returns and payee statements
with erroneous dollar amounts as correct
returns or statements for certain penalty
purposes if the errors are de minimis in
dollar amount. The final regulations also
prescribe the time and manner in which a
payee may elect not to have the statutory
safe harbor rules apply. In addition, these
final regulations update dollar amounts,
definitions, and references in existing reg-
ulations relating to information return and
payee statement penalties to reflect vari-
ous statutory amendments to the Code that
are not accounted for in the existing reg-
ulations. Finally, the final regulations pro-
vide rules relating to the reporting of basis
of securities by brokers as this reporting
relates to the de minimis error safe harbor
rules. The final regulations affect persons
required to either file information returns
or to furnish payee statements (filers) and
the recipients of payee statements (pay-
ees).
DATES: Effective Date: These regula-
tions are effective on December 19, 2023.
Applicability Dates: For dates of appli-
cability, see §§1.6045-1(d)(6)(ix) and
(q), 301.6721-1(j), 301.6722-1(g), and
301.6724-1(o).
FOR FURTHER INFORMATION
CONTACT: Alexander Wu at (202) 317-
6845 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regu-
lations to amend the Income Tax Reg-
ulations (26 CFR part 1) under section
6045(g) of the Code and the Procedure
and Administration Regulations (26 CFR
part 301) under sections 6721, 6722, and
6724 of the Code. In particular, the final
regulations implement two statutory safe
harbors that except certain de minimis
errors in reporting correct dollar amounts
on information returns and payee state-
ments from the penalty for failure to file
correct information returns imposed by
section 6721 and the penalty for failure to
furnish correct payee statements imposed
by section 6722 (de minimis error safe
harbor exceptions). The de minimis error
safe harbor exceptions are found in sec-
tions 6721(c)(3) and 6722(c)(3), which
were added to the Code by section 202 of
the Protecting Americans from Tax Hikes
Act of 2015 (PATH Act), enacted as divi-
sion Q of the Consolidated Appropriations
Act, 2016, Public Law 114-113, 129 Stat.
2242, 3076-78 (2015). Under sections
6721(c)(3) and 6722(c)(3), an error in a
reported dollar amount generally is “de
minimis” if the difference between any
single amount reported in error and the
correct amount required to be reported
does not exceed $100. If such a difference
is with respect to reporting an amount of
tax withheld, the difference may not be
more than $25.
On October 17, 2018, the Department
of the Treasury (Treasury Department)
and the IRS published a notice of proposed
rulemaking (REG-118826-16) in the Fed-
eral Register (83 FR 52726) containing
proposed regulations to implement the
de minimis error safe harbor exceptions,
as well as to update dollar amounts, defi-
nitions, and references reflecting various
statutory amendments to the Code that are
not accounted for in provisions of existing
regulations relating to information return
and payee statement penalties (proposed
regulations). The proposed regulations
were issued following a notice announc-
ing and describing regulations intended to
be issued under sections 6721, 6722, and
6724. See Notice 2017-09, 2017-4 I.R.B.
542 (January 23, 2017).
The Treasury Department and the IRS
received six written comments in response
to the notice of proposed rulemaking. All
of the written comments responding to
the notice of proposed rulemaking are
available at https://www.regulations.
gov or upon request. Some comments
merely expressed appreciation for the pro-
posed regulations. No public hearing was
requested or held. After consideration of
the written comments, the proposed reg-
ulations are adopted as modified by this
Treasury Decision.
Summary of Comments and
Explanation of Revisions
This Summary of Comments and Expla-
nation of Revisions section addresses the
substantive comments in response to the
notice of proposed rulemaking that dis-
agreed with or requested clarification of
the proposed regulations. See the Expla-
nation of Provisions section of REG-
118826-16 for a detailed explanation of
the proposed regulations.
I. Effect of the regulations on tax
compliance
One comment stated that the proposed
regulations “will increase the amount of
regulation we have when it comes to ‘fail-
ure to file cases’ in the US.” The comment
did not describe how the proposed regula-
tions would increase the amount of regu-
lation applicable to “failure to file cases.”
The Treasury Department and the IRS
January 16, 2024 386 Bulletin No. 2024–3

note that the regulations implement stat-
utory provisions providing certain protec-
tions to filers and payees, and the amount
of regulation is only one of several factors
that must be considered in implementing
statutory provisions. The Treasury Depart-
ment and the IRS further note that the safe
harbor is generally intended to provide fil-
ers with relief from penalties that would
otherwise accrue due to unintentional de
minimis errors in reporting correct dollar
amounts on information returns and payee
statements. Accordingly, the final regula-
tions do not adopt this comment.
II. De minimis error safe harbor election
A. Applying the election to individual
securities and individual accounts
One comment requested a more effi-
cient way to furnish correct payee state-
ments generally. The commentator did not
suggest a specific method for furnishing
correct payee statements; nevertheless,
the method for furnishing correct payee
statements is beyond the scope of these
regulations, which is limited to imple-
menting the two de minimis error safe
harbor exceptions and otherwise updating
existing regulations for statutory changes.
The final regulations therefore do not
adopt this comment.
One comment disagreed with provid-
ing filers the option to choose whether to
correct de minimis errors. The comment
also stated that the de minimis thresh-
old was too high and disagreed with
the de minimis error safe harbor excep-
tions applying on a “per security” rather
than a “per account” basis. The Treasury
Department and the IRS note that sec-
tions 6721(c)(3) and 6722(c)(3) mandate
the option for filers to choose whether to
correct de minimis errors, subject to an
election by a payee to override this option.
Sections 6721(c)(3)(A) and 6722(c)(3)
(A) also mandate the de minimis thresh-
olds with specificity. The final regulations
reflect these statutory requirements. The
Treasury Department and the IRS further
note that the statutory de minimis error
safe harbor exceptions apply on a “per
statement” basis. Section 6722(c)(3)(A)
expressly provides that the de minimis
error safe harbor exceptions apply “with
respect to any payee statement.” Further,
section 6722(c)(3)(B) provides that the
de minimis error safe harbor exceptions
“shall not apply to any payee statement
if the person to whom such statement is
required to be furnished makes an elec-
tion . . . with respect to such statement.”
To the extent that a statement relates only
to a single security, the statute applies, in
effect, on a “per security” basis. The stat-
ute allows for this outcome, and the final
regulations accord with the plain reading
of the statute.
One comment reiterated comments
submitted in 2018 prior to the publication
of the proposed regulations. This com-
ment suggested that a payee’s election to
override the de minimis error safe harbor
exceptions should apply on an account-
by-account basis, rather than on a state-
ment-by-statement basis. The comment
questioned whether it was Congress’s
intent to require taxpayers to make sep-
arate elections for each payee statement.
As stated in the preamble of the notice
of proposed rulemaking, the comment’s
suggested rule would significantly limit a
payee’s options for making elections and
is inconsistent with the statutory frame-
work of sections 6721 through 6724,
which generally impose a penalty on a
per statement (or return) basis. However,
a payee need not decide on elections indi-
vidually for each payee statement asso-
ciated with a single account or filer but
may elect as to all payee statements or any
combination of payee statements, with the
election lasting indefinitely by default.
As recognized in the notice of proposed
rulemaking, nothing in the Code prohibits
filers from providing corrected statements
regardless of the de minimis error safe
harbor exceptions or payee election. Thus,
in drafting the PATH Act, Congress was
aware that filers could provide corrections
on an account-wide basis once a payee
made an election with respect to a single
type of payee statement associated with
that account.
B. Potential for inconsistencies in basis
reporting
A comment stated that the proposed
regulations could cause inconsistencies
in basis reporting that are contrary to
congressional intent. The comment was
specifically concerned with a situation in
which a payee would elect to override the
de minimis error safe harbor exceptions
with respect to one form but not another
corresponding form. For example, a payee
could elect to override the safe harbor
exception with respect to a Form 1099-
DIV, Dividends and Distributions, but not
elect to override the safe harbor excep-
tion with respect to a corresponding Form
1099-B, Proceeds From Broker and Bar-
ter Exchange Transactions, potentially
resulting in inconsistently reported basis.
The Treasury Department and the IRS
have determined that the text of proposed
§1.6045-1(d)(6)(vii) should be amended
to more clearly address this situation.
Under the rule as modified by these final
regulations, if a Form 1099-DIV is cor-
rected because a payee elects to override
the de minimis error safe harbor excep-
tions as applied to the Form 1099-DIV,
then the adjusted basis reported on the cor-
responding Form 1099-B must be based
on and consistent with the corresponding
corrected dollar amount shown on the
corrected Form 1099-DIV. After taking
into account the corrected dollar amount
shown on the corrected Form 1099-DIV,
Form 1099-B should be corrected if there
is an error on the Form 1099-B and that
error is not de minimis. In any event, to
avoid inconsistent reporting, the filer can
always choose to correct the Form 1099-
B, or the payee can elect to override the
de minimis safe harbor exceptions with
respect to the Form 1099-B.
The Treasury Department and the IRS
note that the fact that Congress enacted
the de minimis error safe harbor excep-
tions indicates Congress was aware that
there might be minor inconsistencies in
basis reporting and that the de minimis
error safe harbor exceptions apply only
for certain penalty purposes. The de mini-
mis error safe harbor exceptions have no
effect on the operation of those provisions
of the Code that apply to determine the
basis of property, such as section 1012 of
the Code.
C. Effective date of payee election
Another comment requested the payee
election be effective only on a prospective
basis, citing administrative burden. The
Treasury Department and the IRS note
that the election is prospective in that a
Bulletin No. 2024–3 387 January 16, 2024

January 16, 2024 388 Bulletin No. 2024–3
filer is required to furnish corrected state-
ments after the date the election is made
by the payee, and an election, once made,
is in effect until revoked. Any administra-
tive burden as described by the comment
is limited because the payee must elect no
later than the later of 30 days after the date
on which the payee statement is required
to be furnished to the payee, or October 15
of the calendar year, to receive a correct
payee statement required to be furnished
in that calendar year. As discussed in the
preamble to the proposed regulations,
administrative burden is but one factor
that must be considered. A competing con-
sideration is the flexibility that Congress
provided for payees to elect out of the de
minimis error safe harbor exceptions. The
Treasury Department and the IRS have
determined that the proposed rules reflect
a reasonable balancing of these consider-
ations. Thus, the final regulations do not
adopt this suggestion.
III. Clarification of items in the proposed
regulations and other guidance
Two comments requested clarification
that the term “tax withheld” in proposed
§301.6722-1(d)(2) includes social secu-
rity, Medicare, and Additional Medicare
taxes. The definition in the proposed
regulations referenced some of the more
common types of taxes withheld but was
not intended to be an exhaustive list of all
Federal taxes considered to be “tax with-
held.” The use of the term “includes” in
proposed §301.6722-1(d)(2) is based on
the definition of “includes” in section
7701(c) of the Code, which provides that
the term “includes” when used in a defi-
nition “shall not be deemed to exclude
other things otherwise within the mean-
ing of the term defined.” Nevertheless,
to resolve any ambiguity as to whether
the term “tax withheld” includes social
security, Medicare, and Additional Medi-
care taxes, the final regulations generally
adopt the text of proposed §301.6722-
1(d)(2) but modify the definition of “tax
withheld” by adding a reference to sec-
tion 3102 of the Code in §301.6722-1(d)
(2).
One comment requested clarification
on whether different taxes withheld and
reported separately on an information
return or payee statement are consid-
ered separately in determining whether
the de minimis threshold is reached. To
illustrate, the comment asked if errors
on an employee’s Form W-2, Wage and
Tax Statement, in the amounts of $20
in Federal income tax withheld, $20
in Medicare tax withheld, and $7.41
in Additional Medicare tax withheld
would be considered separately for de
minimis threshold purposes. The defini-
tion of “de minimis error” in proposed
§301.6722-1(d)(2) refers to “any sin-
gle amount in error.” Accordingly, if a
payee statement does not require taxes
withheld to be combined into a single
amount for reporting purposes, then
each single amount of tax required to
be reported separately would be consid-
ered separately in determining whether
an error is de minimis. To respond to
the concern raised by this comment, the
final regulations add new examples in
§301.6722-1(d)(5)(iv) and (v) to illus-
trate this result and update the Table
of Contents in §301.6721-0 relating to
§301.6722-1(d)(5).
The comment also suggested that addi-
tional disclosures be provided in the Gen-
eral Instructions for Forms W-2 and W-3,
Transmittal of Wage and Tax Statements.
The comment correctly noted that the
de minimis error safe harbor exceptions
under sections 6721(c)(3) and 6722(c)
(3) apply only for information return and
payee statement penalty purposes, and
do not apply for other purposes, includ-
ing the requirement to pay and report
employment taxes on Form 941, Employ-
er’s QUARTERLY Federal Tax Return.
The comment suggested including a note
of caution concerning the effect of incor-
rect information returns on other aspects
of tax compliance. The Treasury Depart-
ment and the IRS will consider revising
the General Instructions for Forms W-2
and W-3. To respond to the concern raised
by this comment, the final regulations add
§§301.6721-1(e)(5) and 301.6722-1(d)
(7), which state that the de minimis error
safe harbor exceptions under sections
6721(c)(3) and 6722(c)(3) apply only for
information return and payee statement
penalty purposes, respectively, and not
for other purposes, including require-
ments to pay and report taxes pursuant to
provisions of the Code other than sections
6721 and 6722. The final regulations also
add §§301.6721-1(e)(4) and 301.6722-
1(d)(6) to make clear that, regardless of
whether the de minimis error safe harbor
exceptions provide an exception for not
filing or furnishing the corrected state-
ment, a filer may voluntarily file (1) a
corrected information return if the cor-
responding payee statement is furnished
concurrently, or (2) a corrected payee
statement may be furnished voluntarily
if the corresponding information return is
filed concurrently.
Finally, proposed §301.6724-1(g)
proposed to update the questions and
answers in §301.6724-1(g) regarding the
due diligence safe harbor as in effect on
October 12, 2018, the date the proposed
regulations were published in the Federal
Register. The proposed changes updated
the existing regulations to remove out-
dated references and to make numerous
conforming amendments to reflect the
addition and redesignation of paragraphs.
No comments were received in response
to the proposed changes to §301.6724-
1(g). Nevertheless, the final regulations
make non-substantive formatting changes
to convert the outmoded questions and
answers into more clearly stated rules.
Applicability Dates
The proposed regulations provided that
the regulations generally would apply with
respect to information returns required to
be filed and payee statements required to
be furnished on or after January 1 of the
calendar year immediately following the
date of publication of a Treasury decision
adopting these rules as final regulations in
the Federal Register.
However, the proposed regulations
provided that proposed §301.6724-1(h)
would apply with respect to information
returns required to be filed and payee
statements required to be furnished on or
after January 1, 2017. The final regulations
generally adopt the applicability dates
proposed in the proposed regulations.
However, because Notice 2017-09 was
released to the public on January 4, 2017,
the final regulations postpone the appli-
cability date of § 301.6724-1(h) by pro-
viding that § 301.6724-1(h) applies with
respect to information returns required to
be filed and payee statements required to
be furnished after January 4, 2017.

Bulletin No. 2024–3 389 January 16, 2024
Effect on Other Documents
These final regulations under sections
6045(g), 6721, 6722, and 6724 supersede
Notice 2017-09 with respect to informa-
tion returns required to be filed and payee
statements required to be furnished on or
after January 1, 2024.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby cer-
tified that the regulations will not have a
significant economic impact on a substan-
tial number of small entities. Accordingly,
a regulatory flexibility analysis is not
required. These regulations implement the
de minimis error safe harbor exceptions
in sections 6721(c)(3) and 6722(c)(3)
to the sections 6721 and 6722 penalties.
Pursuant to section 6722(c)(3)(B), these
regulations also provide for the time and
manner for elections by payees that the de
minimis error safe harbor exceptions not
apply, including optional notifications by
filers to provide for an alternative reason-
able manner for the election. Finally, these
regulations provide rules for revocations
by payees of elections and record reten-
tion rules.
Although these regulations may affect
a substantial number of small entities, the
economic impact on these entities is not
significant. The de minimis error safe har-
bor exceptions are expected to reduce the
burden on all filers, including small enti-
ties, to file corrected information returns
and furnish corrected payee statements
because of de minimis errors. In those
cases where payees opt to make a volun-
tary election for the de minimis error safe
harbor exceptions to not apply to a payee
statement, the expense of making the vol-
untary election will be borne by the pay-
ees, some of which may be small entities.
However, any expense to make this vol-
untary election is expected to be minimal
and therefore not have a significant eco-
nomic impact.
Filers that are small entities receiv-
ing elections may incur costs in process-
ing the elections, including initial costs
in implementing systems or modifying
existing systems to process elections, and
subsequently in time incurred administer-
ing these systems. However, because sec-
tion 6722(c)(3)(B) provides for a payee
election, such costs flow from the stat-
ute regardless of these regulations. The
Code and regulations have long required
the filing of information returns and the
furnishing of payee statements by filers.
Accordingly, systems for filing informa-
tion returns and furnishing payee state-
ments are already in existence. Any costs
incurred pursuant to these regulations in
modifying those systems are not expected
to be significant. These regulations pro-
vide clarity regarding the election pro-
cess, which is expected to result in a more
streamlined process for correcting payee
statements.
Similarly, in those cases where payees
opt to make a voluntary revocation of a
prior voluntary election, the expense of
making the voluntary revocation will be
borne by the payees, some of which may
be small entities. Any expense to make
a voluntary revocation of a prior volun-
tary election is expected to be minimal
and therefore not have a significant eco-
nomic impact. Filers that are small entities
receiving revocations will benefit from
the resulting applicability of the de mini-
mis error safe harbor exceptions, result-
ing in reduced burden to file corrected
information returns and furnish corrected
payee statements because of de minimis
errors. Filers that are small entities receiv-
ing revocations may incur costs in pro-
cessing the revocations similar to those
incurred in processing elections; how-
ever, it is expected that systems imple-
menting payee elections can be modified
with minimal additional cost to account
for revocations in addition to elections.
Filers that are small entities choosing to
provide the optional notification to pay-
ees regarding an alternative reasonable
manner for making the election may incur
costs in providing the notification. How-
ever, it is expected that filers will only
provide optional notifications if they have
determined that any cost in providing the
notification is offset by a resulting eco-
nomic benefit to the filer, such as a more
cost-efficient election system. The record
retention rules may also increase expenses
for filers that are small entities; however,
any added expenses are expected to be
minimal given existing record retention
systems.
Pursuant to section 7805(f), the notice
of proposed rulemaking preceding these
final regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small businesses. No
comments were received from the Chief
Counsel for Advocacy of the Small Busi-
ness Administration.
III. Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545-2301.
The collection of information in these
final regulations is in §301.6722-1(d)(3)
(iii) regarding the payee election, (d)(3)
(v)(B) regarding the filer notification,
(d)(3)(vii) regarding the payee revoca-
tion, and (d)(4) regarding record reten-
tion. The information in final regulations
§301.6722-1(d)(3)(iii) and (vii) will be
used by payees to make and revoke elec-
tions and by filers to determine whether
they are required to furnish corrected
payee statements to payees and file cor-
rected information returns with the IRS
to avoid application of penalties under
sections 6721 and 6722 of the Code.
The information under final regulation
§301.6722-1(d)(3)(v)(B) will be used to
give filers and payees flexibility in estab-
lishing reasonable alternative manners
for elections. And the information in final
regulation §301.6722-1(d)(4) will be
used by the IRS to determine whether fil-
ers are subject to penalties under sections
6721 and 6722. The collection of infor-
mation in final regulations §301.6722-
1(d)(3)(iii) regarding the payee election,

January 16, 2024 390 Bulletin No. 2024–3
(d)(3)(v)(B) regarding the filer notifica-
tion, and (d)(3)(vii) regarding the payee
revocation is voluntary to obtain a bene-
fit. The collection of information in final
regulation §301.6722-1(d)(4) regarding
record retention is mandatory. The likely
respondents are individuals, state or local
governments, farms, business or other
for-profit institutions, nonprofit institu-
tions, and small businesses or organiza-
tions.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it dis-
plays a valid control number assigned by
the Office of Management and Budget.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a state,
local, or tribal government, in the aggre-
gate, or by the private sector, of $100 mil-
lion (updated annually for inflation). This
rule does not include any Federal mandate
that may result in expenditures by state,
local, or tribal governments, or by the pri-
vate sector in excess of that threshold.
V. Executive Order 13132: Federalism
E.O. 13132 (Federalism) prohibits an
agency from publishing any rule that has
federalism implications if the rule either
imposes substantial, direct compliance
costs on state and local governments, and
is not required by statute, or preempts
state law, unless the agency meets the
consultation and funding requirements of
section 6 of the E.O. This rule does not
have federalism implications and does
not impose substantial direct compliance
costs on state and local governments or
preempt state law within the meaning of
the E.O.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs has
designated this rule as not a major rule as
defined by 5 U.S.C. 804(2).
Drafting Information
The principal author of these regula-
tions is Alexander Wu of the Office of the
Associate Chief Counsel (Procedure and
Administration). However, other person-
nel from the Treasury Department and the
IRS participated in the development of the
regulations.
Statement of Availability
The IRS Notices and Revenue Pro-
cedures cited in this Treasury Decision
are published in the Internal Revenue
Bulletin (or Cumulative Bulletin) and
are available from the Superintendent of
Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS amends 26 CFR parts 1 and
301 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Par. 2. Section 1.6045-1 is amended
by:
1. Redesignating paragraph (d)(6)(vii)
as paragraph (d)(6)(viii);
2. Adding a new paragraph (d)(6)(vii);
3. In newly redesignated paragraph (d)
(6)(viii), designating Examples 1
through 4 as paragraphs (d)(6)(viii)
(A) through (D), respectively;
4. Redesignating newly designated
paragraphs (d)(6)(viii)(A)(i) through
(iii) as paragraphs (d)(6)(viii)(A)(1)
through (3), respectively;
5. In newly designated paragraph (d)
(6)(viii)(B), removing the language
“Example 1” and adding “paragraph
(d)(6)(viii)(A)(1) of this section
(Example 1)” in its place;
6. Redesignating newly designated
paragraphs (d)(6)(viii)(C)(i) and (ii)
as paragraphs (d)(6)(viii)(C)(1) and
(2);
7. Adding paragraph (d)(6)(ix); and
8. Revising paragraphs (k)(4), (l), and
(q).
The additions and revisions read as fol-
lows:
§1.6045-1 Returns of information of
brokers and barter exchanges.
* * * * *
(d) * * *
(6) * * *
(vii) Treatment of de minimis errors.
For purposes of this section, a customer’s
adjusted basis generally must be deter-
mined by treating any incorrect dollar
amount that is not required to be corrected
by reason of section 6721(c)(3) or 6722(c)
(3) as the correct amount. However, if a
broker, upon identifying a dollar amount
as incorrect, voluntarily or is required to
file a corrected information return and
furnish the corresponding corrected payee
statement showing the correct dollar
amount, then regardless of any provision
under section 6721 or 6722, the adjusted
basis for purposes of this section must be
based on and consistent with the correct
dollar amount as reported on the corrected
information return and corrected payee
statement.
* * * * *
(ix) Applicability date. Paragraph (d)
(6)(vii) of this section applies with respect

Bulletin No. 2024–3 391 January 16, 2024
to information returns required to be filed
and payee statements required to be fur-
nished on or after January 1, 2024.
* * * * *
(k) * * *
(4) Cross-reference to penalty. For
provisions for failure to furnish timely a
correct payee statement, see §301.6722-1
of this chapter (Procedure and Adminis-
tration Regulations). See §301.6724-1 of
this chapter for the waiver of a penalty if
the failure is due to reasonable cause and
is not due to willful neglect.
(l) Use of magnetic media or electronic
form. See §301.6011-2 of this chapter for
rules relating to filing information returns
on magnetic media or in electronic form
and for rules relating to waivers granted
for undue hardship. A broker or barter
exchange that fails to file a proper Form
1099 electronically, when required, may
be subject to a penalty under section 6721
for each such failure. See paragraph (j) of
this section.
* * * * *
(q) Applicability dates. Except as other-
wise provided in paragraphs (d)(6)(ix), (m)
(2)(ii), and (n)(12)(ii) of this section, and in
this paragraph (q), this section applies on
or after January 6, 2017. Paragraphs (k)(4)
and (l) of this section apply with respect to
information returns required to be filed and
payee statements required to be furnished
on or after January 1, 2024. (For rules
that apply after June 30, 2014, and before
January 6, 2017, see 26 CFR 1.6045-1, as
revised April 1, 2016.)
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 3. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
* * * * *
Par. 4. Section 301.6721-0 is amended
by:
1. Revising the introductory text and the
entries for §301.6721-1(b)(6) and (d)
(4);
2. Redesignating the entries for
§301.6721-1(e), (e)(1) and (2), (f),
(f)(1) through (6), (g), and (g)(1)
through (6) as entries for §301.6721-
1(f), (f)(1) and (2), (g), (g)(1) through
(6), (h), and (h)(1) through (6),
respectively;
3. Adding entries for §301.6721-1(e),
(e)(1) through (5), (i), and (j);
4. Redesignating the entries for
§301.6722-1(d) and (d)(1) through
(3) as the entries for §301.6722-1(e)
and (e)(1) through (3);
5. Adding entries for §301.6722-1(d),
(d)(1) through (7), (e)(4), (f), and (g);
6. In the entry for §301.6724-1(c)(4),
removing “Internal Revenue Service”
and adding “IRS” in its place;
7. Revising the entry for §301.6724-
1(h);
8. Removing the entries for §301.6724-
1(h)(1) and (2); and
9. Adding an entry for §301.6724-1(o).
The additions and revisions read as fol-
lows:
§301.6721-0 Table of Contents.
In order to facilitate the use of
§§301.6721-1 through 301.6724-1, this
section lists the paragraph headings con-
tained in these sections.
§301.6721-1 Failure to file correct
information returns.
* * * * *
(b) * * *
(6) Application to returns not due on
January 31, February 28, or March 15.
* * * * *
(d) * * *
(4) Nonapplication to returns not due
on January 31, February 28, or March 15.
(e) Safe harbor exception for certain de
minimis errors.
(1) In general.
(2) Definition of de minimis error.
(3) Election to override the safe harbor
exception.
(4) Voluntary corrections.
(5) Limitations on applicability.
* * * * *
(i) Adjustment for inflation.
(j) Applicability date.
§301.6722-1 Failure to furnish correct
payee statements.
* * * * *
(d) Safe harbor exception for certain de
minimis errors.
(1) In general.
(2) Definition of de minimis error.
(3) Election to override the safe harbor
exception.
(4) Record retention.
(5) Examples.
(6) Voluntary corrections.
(7) Limitations on applicability.
(e) * * *
(4) Filer.
(f) Adjustment for inflation.
(g) Applicability date.
* * * * *
§301.6724-1 Reasonable cause.
* * * * *
(h) Reasonable cause safe harbor after
election under section 6722(c)(3)(B).
* * * * *
(o) Applicability dates.
Par. 5. Section 301.6721-1 is amended
by:
1. Revising paragraphs (a)(1) and (b)(1)
and (2);
2. In paragraph (b)(3), removing “Inter-
nal Revenue Service” and adding
“IRS” in its place;
3. Revising paragraph (b)(5) introduc-
tory text and (b)(5)(i) and (ii);
4. Revising paragraph (b)(6);
5. Revising paragraphs (c)(1), (c)(2)
(iii), and (c)(3) introductory text;
6. In paragraph (c)(3), designating
Examples 1 through 3 as paragraphs
(c)(3)(i) through (iii), respectively;
7. In newly designated paragraphs (c)
(3)(i) through (iii), removing “Inter-
nal Revenue Service” and adding
“IRS” in its place;
8. In newly designated paragraph (c)
(3)(ii), removing the language “the
error” and adding “The error” in its
place;
9. Revising paragraph (d);
10. Redesignating paragraphs (e), (f), (g),
and (h) as paragraphs (f), (g), (h), and
(j), respectively;
11. Adding a new paragraph (e);
12. Revising newly redesignated para-
graphs (f)(1) and (g)(1);
13. In newly redesignated paragraph (g)
(3)(iii), removing “Internal Reve-
nue Service” and adding “IRS” in its
place;
14. Revising newly redesignated para-
graphs (g)(4) through (6), (h)(1), and
(h)(2)(x) and (xi);
15. Adding paragraphs (h)(2)(xii);

January 16, 2024 392 Bulletin No. 2024–3
16. Revising newly redesignated para-
graphs (h)(3)(xvii), (xviii), (xxiv),
and (xxv);
17. Adding paragraphs (h)(3)(xxvi) and
(xxvii);
18. Revising newly redesignated para-
graphs (h)(4) and (6);
19. Adding paragraph (i); and
20. Revising newly redesignated para-
graph (j).
The revisions and additions read as fol-
lows:
§301.6721-1 Failure to file correct
information returns.
(a) * * *
(1) General rule. A penalty of $250 is
imposed for each information return (as
defined in section 6724(d)(1) and para-
graph (h) of this section) with respect
to which a failure (as defined in section
6721(a)(2) and paragraph (a)(2) of this
section) occurs. No more than one penalty
will be imposed under this paragraph (a)
(1) with respect to a single information
return even though there may be more
than one failure with respect to such
return. The total amount imposed on any
person for all failures during any calendar
year with respect to all information returns
will not exceed $3,000,000. See paragraph
(b) of this section for a reduction in the
penalty if the failures are corrected within
specified periods. See paragraph (c) of this
section for an exception to the penalty
for inconsequential errors or omissions.
See paragraph (d) of this section for an
exception to the penalty for a de minimis
number of failures. See paragraph (e) of
this section for a safe harbor exception for
certain de minimis errors. See paragraph
(f) of this section for lower limitations
to the $3,000,000 maximum penalty. See
paragraph (g) of this section for higher
penalties if a failure is due to intentional
disregard of the requirement to file timely
correct information returns. See paragraph
(i) of this section for inflation adjustments
to penalty amounts. See §301.6724-1(a)
(1) for waiver of the penalty for a failure
that is due to reasonable cause.
* * * * *
(b) * * *
(1) Correction within 30 days. The
penalty imposed under section 6721(a) for
a failure to file timely or for a failure to
include correct information will be $50 in
lieu of $250 if the failure is corrected on
or before the 30th day after the required
filing date (corrected within 30 days). The
total amount imposed on a person for all
failures during any calendar year that are
corrected within 30 days will not exceed
$500,000.
(2) Correction after 30 days but on
or before August 1. The penalty imposed
under section 6721(a) for a failure to file
timely or for a failure to include correct
information will be $100 in lieu of $250
if the failure is corrected after the 30-day
period described in paragraph (b)(1) of
this section but on or before August 1 of
the year in which the required filing date
occurs (corrected after 30 days but on or
before August 1). See paragraph (b)(6) of
this section for an exception to the provi-
sions of this paragraph (b)(2) for returns
that are not due on January 31, Febru-
ary 28, or March 15. The total amount
imposed on a person for all failures during
any calendar year corrected after 30 days
but on or before August 1 will not exceed
$1,500,000.
* * * * *
(5) Examples. The provisions of para-
graphs (a) and (b)(1) through (4) of this
section may be illustrated by the following
examples. These examples do not take into
account any possible application of the de
minimis exception under paragraph (d) of
this section, the safe harbor exception for
certain de minimis errors under paragraph
(e) of this section, the lower small busi-
ness limitations under paragraph (f) of this
section, the penalty for intentional disre-
gard under paragraph (g) of this section,
adjustments for inflation under paragraph
(i) of this section, or the reasonable cause
waiver under §301.6724-1(a):
(i) Example 1. Corporation R fails to file timely
23,000 Forms 1099-MISC, Miscellaneous Infor-
mation, for the 2023 calendar year. Of the forms
filed, 5,000 are filed with correct information within
30 days, and 18,000 after 30 days but on or before
August 1, 2024. For the same year R fails to file
timely 400 Forms 1099-INT, Interest Income, which
R eventually files on September 28, 2024, after the
period for reduction of the penalty has elapsed.
R is subject to a penalty of $100,000 for the 400
forms that were not filed by August 1 ($250 x 400
= $100,000), $1,500,000 for the 18,000 forms filed
after 30 days ($100 x 18,000 = $1,800,000, limited
to $1,500,000 under paragraph (b)(2) of this sec-
tion), and $250,000 for the 5,000 forms filed within
30 days ($50 x 5,000 = $250,000), for a total penalty
of $1,850,000.
(ii) Example 2. Corporation T fails to file timely
14,000 Forms 1099-MISC for the 2023 calendar
year. T files the 14,000 Forms 1099-MISC on Sep-
tember 3, 2024. Because T does not correct the fail-
ure by August 1, 2024, T is subject to a penalty of
$3,000,000, the maximum penalty under paragraph
(a) of this section. Without the limitation of para-
graph (a) of this section, T would be subject to a
$3,500,000 penalty ($250 x 14,000 = $3,500,000).
* * * * *
(6) Application to returns not due on
January 31, February 28, or March 15.
For returns that are not due on January 31,
February 28, or March 15 (for example,
a Form 8300, Report of Cash Payments
Over $10,000 Received in a Trade or
Business), the penalty is $50 if the failure
is corrected within 30 days. If the failure
is corrected after 30 days, the penalty is
$250 rather than $100. There is no period
during which the penalty is reduced to
$100 under paragraph (b)(2) of this sec-
tion.
(c) * * *
(1) In general. An inconsequential
error or omission is not considered a fail-
ure to include correct information. For
purposes of this paragraph (c)(1), the term
inconsequential error or omission means
any failure that does not prevent or hinder
the IRS from processing the return, from
correlating the information required to be
shown on the return with the information
shown on the payee’s tax return, or from
otherwise putting the return to its intended
use. See paragraph (h)(5) of this section
for the definition of payee.
(2) * * *
(iii) Any monetary amounts, except
as provided in paragraph (e) of this sec-
tion. The IRS may, by administrative pro-
nouncement, specify other types of errors
or omissions that are never inconsequen-
tial.
(3) Examples. The provisions of this
paragraph (c) may be illustrated by the
following examples, which do not take
into account any possible application of
the penalty for intentional disregard under
paragraph (g) of this section or the reason-
able cause waiver under §301.6724-1(a):
* * * * *
(d) Exception for a de minimis number
of failures—(1) Requirements. The pen-
alty under paragraph (a) of this section is
not imposed for a de minimis number of
failures to include correct information if
the filer corrects such failures on or before

Bulletin No. 2024–3 393 January 16, 2024
August 1 of the year in which the required
filing date occurs. See paragraph (d)(4)
of this section for special rules relating
to returns that are not due on January 31,
February 28, or March 15.
(2) Calculation of the de minimis
exception. The number of returns to which
the de minimis exception in this paragraph
(d) applies for any calendar year will not
exceed the greater of 10 or one-half of one
percent of the total number of all infor-
mation returns the filer is required to file
during the year. If the number of returns
on which the filer fails to include cor-
rect information exceeds the number of
returns to which the de minimis exception
applies, the de minimis exception applies
to those returns that will afford the filer
the greatest reduction in penalty. The de
minimis exception applies to failures to
include correct information that exist after
the application (if any) of the safe harbor
exception for certain de minimis errors
under paragraph (e) of this section and
after the application (if any) of the waiver
for reasonable cause under section 6724(a)
and §301.6724-1. Returns to which the de
minimis exception applies are treated as
having been originally filed with correct
information.
(3) Examples. The provisions of this
paragraph (d) may be illustrated by the fol-
lowing examples. In each of the examples,
the failures to file and to include correct
information are subject to penalty under
paragraph (a) of this section. The exam-
ples do not take into account any possible
application of the safe harbor exception
for certain de minimis errors under para-
graph (e) of this section, the lower small
business limitations under paragraph (f)
of this section, the penalty for intentional
disregard under paragraph (g) of this sec-
tion, any adjustment for inflation under
paragraph (i) of this section, or the reason-
able cause waiver under §301.6724-1(a).
(i) Example 1. Corporation T files timely 10,000
Forms 1099-INT, Interest Income, for 2023 by Feb-
ruary 28, 2024. The 10,000 forms are all the infor-
mation returns that T is required to file during the
2024 calendar year. Of the forms filed, 70 contained
incorrect information. T corrects the failures on July
12, 2024. No penalty is imposed for 50 of the fail-
ures (that is, the greater of 10 or .005 x 10,000 = 50)
even though the total failures, 70, exceed the number
to which the de minimis exception may apply. The
$100 penalty under paragraph (b)(2) of this section
is imposed, in lieu of $250, for the remaining 20 fail-
ures, which were corrected after 30 days but before
August 1, resulting in a total penalty of $2,000 ($100
x 20 = $2,000).
(ii) Example 2. Corporation U files timely 9,500
Forms 1099-INT for 2023 by February 28, 2024.
Fifty of these returns contain incorrect information
with respect to which U files correct information on
August 1, 2024. U also files 500 Forms 1099-INT
for 2023 on August 30, 2024, after the required fil-
ing date. The 10,000 returns are all the information
returns that U is required to file during the 2024
calendar year. The calculation of the de minimis
exception is based on the 10,000 returns required to
be filed during the 2024 calendar year even though
500 of the returns filed during the year were not filed
timely. Therefore, the number of failures for which
the de minimis exception applies is 50, and accord-
ingly no penalty is imposed for the 50 Forms 1099-
INT that were corrected on August 1. However, the
$250 penalty under paragraph (a)(1) of this section is
imposed for each failure to file timely (that is, the de
minimis exception does not apply to this penalty for
failure to file timely), resulting in a total penalty of
$125,000 ($250 x 500 = $125,000).
(iii) Example 3. Corporation V files timely 9,950
Forms 1099-INT for 2023 by February 28, 2024.
However, V fails to file timely 50 of its Forms 1099-
INT. The 10,000 returns are all the information
returns that V is required to file during the 2024 cal-
endar year. Upon discovering the error, V files the 50
returns within 30 days of February 28, 2024. The 50
returns are complete and correct except that V fails
to include the taxpayer identification numbers of the
payees on the returns. V files corrected returns on
August 1, 2024. Absent application of the de mini-
mis exception, the penalty imposed for the failure to
include correct information would be $5,000 ($100 x
50 = $5,000). Because the incorrect returns are cor-
rected on August 1, the 50 forms are treated under
the de minimis exception as originally filed with cor-
rect information, and therefore no penalty is imposed
under paragraph (a) of this section for the failure to
include correct information. Nevertheless, the pen-
alty under paragraph (a) of this section is imposed
for the failure to file timely the 50 returns because
the de minimis exception does not apply to the pen-
alty for the failure to file timely. Hence, a penalty of
$2,500 ($50 x 50 = $2,500) is imposed.
(iv) Example 4. Corporation W files timely 100
Forms 1099-DIV and files an additional 50 Forms
1099-DIV late, but within 30 days of February 28,
2024. These are all the information returns that W
was required to file during the 2024 calendar year.
W discovers errors on 10 of the returns that were
filed timely, and on 5 of the returns that were filed
late. W corrects all the errors on August 1, 2024. The
de minimis exception applies to 10 of the corrected
returns. The exception will be allocated to the 10
returns that were filed timely with incorrect informa-
tion, because that allocation is most favorable to W
(that is, applying the exception to a return filed late
with incorrect information would save W $50, by
reducing the penalty on that return from $100 to $50,
but applying the exception to a return filed timely
would save W $100, by reducing the penalty on that
return from $100 to $0). (See paragraph (b)(4) of this
section.)
(4) Nonapplication to returns not due
on January 31, February 28, or March 15.
The exception for a de minimis number
of failures provided in paragraph (d)(1)
of this section does not apply to failures
with respect to returns that are not due on
January 31, February 28, or March 15 (for
example, Forms 8300 reporting certain
cash payments of $10,000 or more). Nev-
ertheless, the returns that are not due on
January 31, February 28, or March 15 are
included in the total number of all infor-
mation returns that the filer is required to
file during a year for purposes of calcu-
lating the number of the returns subject to
the de minimis exception under paragraph
(d)(2) of this section.
(e) Safe harbor exception for cer-
tain de minimis errors—(1) In general.
Except as provided in paragraph (e)
(3) or (g)(4) of this section, the penalty
under section 6721(a) and paragraph (a)
of this section is not imposed for a fail-
ure described in section 6721(a)(2)(B)
and paragraph (a)(2)(ii) of this section
(failure to include correct information on
information return) if the failure relates
to an incorrect dollar amount and is a de
minimis error. If the safe harbor in this
paragraph (e) applies to an information
return and the information return was
otherwise correct and timely filed, no
correction is required and, for purposes
of this section, the information return is
treated as having been filed with all of the
correct required information.
(2) Definition of de minimis error. For
the definition of de minimis error, see
§301.6722-1(d)(2).
(3) Election to override the safe har-
bor exception. The safe harbor exception
provided for by paragraph (e)(1) of this
section does not apply to any informa-
tion return if the incorrect dollar amount
that would qualify as a de minimis error
for purposes of this paragraph (e) relates
to an amount with respect to which an
election has been made (and has not been
revoked) under section 6722(c)(3)(B) and
§301.6722-1(d)(3). See §301.6722-1(d)
(3) for additional rules relating to the
election under section 6722(c)(3)(B) and
§301.6722-1(d)(3), including rules relat-
ing to the revocation of the election and
the inapplicability of the election to cer-
tain information. See §301.6724-1(h) for
rules relating to waiver of the section 6721
penalty in cases where the safe harbor
exception provided for by paragraph (e)

January 16, 2024 394 Bulletin No. 2024–3
(1) of this section does not apply because
of an election under §301.6722-1(d)(3).
(4) Voluntary corrections. Regard-
less of whether the de minimis error safe
harbor in this paragraph (e) provides an
exception for not filing a particular cor-
rected information return, the corrected
information return may be filed volun-
tarily if a corresponding payee statement
reflecting the information shown on the
corrected information return is concur-
rently furnished to the payee.
(5) Limitations on applicability. The
safe harbor exception provided for by
paragraph (e)(1) of this section applies
only for the purposes of information return
penalties under section 6721. Accord-
ingly, this safe harbor exception applies
to the reporting of amounts on informa-
tion returns, including the reporting of the
withholding of tax on information returns,
but it does not apply for purposes of any
underlying requirements to withhold or
pay tax. Interest, penalties, and other addi-
tions to tax may be imposed under other
sections for under-withholding or under-
paying tax in any amount.
(f) * * *
(1) In general. If a person meets the
gross receipts test (as defined in paragraph
(f)(2) of this section) for any calendar year,
the total amount of the penalty imposed
on the person for all failures described in
section 6721(a)(2) and paragraph (a)(2) of
this section during the calendar year will
not exceed $1,000,000. The total amount
of the penalty imposed under paragraph
(b)(1) of this section for failures corrected
within 30 days will not exceed $175,000
for the calendar year. The total amount of
the penalty imposed under paragraph (b)
(2) of this section for failures corrected
after 30 days but on or before August 1
will not exceed $500,000 for the calendar
year.
* * * * *
(g) * * *
(1) Application of section 6721(e). If
a failure is due to intentional disregard
of the requirement to file timely or to
include correct information on a return
as described in paragraph (h) of this sec-
tion, the amount of the penalty imposed
under paragraph (a) of this section must
be determined under paragraph (g)(4) of
this section.
* * * * *
(4) Amount of the penalty. If one or
more failures to file timely or to include
correct information are due to intentional
disregard of the requirement to file timely
or to include correct information, then,
with respect to each failure determined
under this paragraph (g)—
(i) Paragraphs (b), (d), (e), and (f) of
this section will not apply;
(ii) The $3,000,000 limitation under
paragraph (a) of this section will not apply,
and the penalty under this paragraph (g)
will not be taken into account in applying
the $3,000,000 limitation (or any similar
limitation under paragraph (b) or (f) of
this section) to penalties not determined
under this paragraph (g);
(iii) The penalty imposed under para-
graph (a) of this section will be $500 or, if
greater, the statutory percentage; and
(iv) The term statutory percentage
means—
(A) In the case of a return other than
a return required under section 6045(a),
6041A(b), 6050H, 6050I, 6050J, 6050K,
6050L, or 6050V, 10 percent of the aggre-
gate dollar amount of the items required to
be reported correctly;
(B) In the case of a return required to
be filed by section 6045(a), 6050K, or
6050L, 5 percent of the aggregate dol-
lar amount of the items required to be
reported correctly;
(C) In the case of a return required to
be filed under section 6050I(a), for any
transaction (or related transactions), the
greater of $25,000 or the amount of cash
(within the meaning of section 6050I(d))
received in such transaction to the extent
the amount of such cash does not exceed
$100,000; or
(D) In the case of a return required to
be filed under section 6050V, 10 percent
of the value of the benefit of any con-
tract with respect to which information is
required to be included on the return.
(5) Computation of the penalty; aggre-
gate dollar amount of the items required
to be reported correctly. The aggregate
dollar amount used in computing the pen-
alty under this paragraph (g) is the amount
that is not reported or is reported incor-
rectly. If the intentional disregard relates
to a dollar amount, the statutory percent-
age is applied to the difference between
the dollar amount reported and the amount
required to be reported correctly. If the
intentional disregard relates to any other
item on the return, the statutory percent-
age is applied to the aggregate amount of
items required to be reported correctly.
In determining the aggregate amount of
items required to be reported correctly,
no item will be taken into account more
than once. For example, if a filer willfully
fails to file a Form 1099-INT, Interest
Income, on which $800 of interest and
$160 of Federal income tax withheld (that
is, backup withholding) is required to be
reported, only the $800 amount is taken
into account in computing the penalty.
(6) Examples. The provisions of this
paragraph (g) may be illustrated by the
following examples, which do not take
into account any adjustments for inflation
under paragraph (i) of this section:
(i) Example 1. On December 1, 2023, Automo-
bile dealer P receives $55,000 from an individual for
the purchase of an automobile in a transaction sub-
ject to reporting under section 6050I. The individual
presents documents to P that identify him as John
Doe. However, P completes the Form 8300 (relating
to cash payments over $10,000 received in a trade or
business) and reflects the name of a cartoon character
as the filer. Because P knew at the time of filing the
Form 8300 that the filer’s name was not the name of
the cartoon character, he willfully failed to include
correct information as described under paragraph
(g)(2) of this section. Therefore, the penalty under
paragraph (g)(4) of this section is imposed for the
intentional disregard of the requirement to include
correct information. The amount used in computing
the penalty under paragraph (g)(5) of this section is
$55,000 (that is, the amount required to be reported
on the return with respect to which the payee is not
correctly identified). The amount of the penalty
determined under paragraph (g)(4)(iv)(C) of this
section is $55,000 (that is, the greater of $25,000 or
the amount of cash received in the transaction up to
$100,000).
(ii) Example 2. On December 1, 2023, Individual
B contacts his agent, F, to act as his intermediary in
the purchase of an automobile. B gives F $20,000
and requests F to purchase the automobile in F’s
name, which F does. F prepares the Form 8300 as
required under section 6050I, but in the area desig-
nated for the name of the filer, F writes confidential.
Because F knew at the time the return was filed that it
contained incomplete information, the penalty under
paragraph (g)(4) of this section is imposed for the
intentional disregard of the requirement to include
correct information. The amount used in computing
the penalty under paragraph (g)(5) of this section is
$20,000 (that is, the amount required to be reported
on the return with respect to which the payee is not
correctly identified). The amount of the penalty
determined under paragraph (g)(4)(iv)(C) of this
section is $25,000 (that is, the greater of $25,000 or
the amount of cash received in the transaction up to
$100,000).
(iii) Example 3. Corporation M deliberately
does not include $5,000 of dividends on a Form

Bulletin No. 2024–3 395 January 16, 2024
1099-DIV, Dividends and Distributions, on which a
total of $200,000 (including the $5,000 dividends)
is required to be reported under section 6042(a).
Because the failure was deliberate, M’s failure is due
to intentional disregard of the requirement to include
correct information. Accordingly, the amount of the
penalty imposed under paragraph (a) of this section
is determined under paragraph (g)(4) of this section.
Because the Form 1099-DIV is required to be filed
under section 6042(a), under paragraph (g)(4)(iv)(A)
of this section the amount of the penalty with respect
to such failure is 10 percent of the aggregate dollar
amount of the items that were required to be but that
were not reported correctly. Under paragraph (g)(5)
of this section, $5,000 is the difference between the
dollar amount reported and the amount required to
be reported correctly. Therefore, the amount of the
penalty is $500 ($5,000 x 0.10 = $500).
(iv) Example 4. Form 8027, Employer’s
Annual Information Return of Tip Income and
Allocated Tips, requires certain large food and
beverage establishments to report certain infor-
mation with respect to tips. The form requires
(among other things) that the establishment report
its gross receipts from food and beverage opera-
tions. Establishment A, in intentional disregard of
the information reporting requirement, reported
gross receipts of $1,000,000, when the correct
amount was $1,500,000. The significance of the
gross receipts reporting requirement is that sec-
tion 6053(c)(3)(A) requires an establishment to
allocate as tips among its employees the excess
of 8 percent of its gross receipts over the aggre-
gate amount reported by employees to the estab-
lishment as tips under section 6053(a). A’s mis-
statement of its gross receipts caused A to show
$80,000 on the Form 8027 as 8 percent of its
gross receipts, rather than the correct amount of
$120,000. A correctly reported the amount of tips
reported to it by employees under section 6053(a)
as $80,000. Thus, A reported the excess of 8 per-
cent of its gross receipts over tips reported to it as
zero, rather than as the correct amount of $40,000.
The requirement of reporting gross receipts is
considered merely a step in the computation of
the excess of 8 percent of gross receipts over tips
reported to A under section 6053(a), so that the
penalty for intentional disregard will be $4,000
(that is, 10 percent of the difference between the
$40,000 required to be reported as the excess of 8
percent of gross receipts over tips reported under
section 6053(a), and the zero amount actually
reported).
(h) * * *
(1) Information return. For purposes
of this section, the term information
return has the same meaning as informa-
tion return as defined in section 6724(d)
(1), including any statement described in
paragraph (h)(2) of this section, any return
described in paragraph (h)(3) of this sec-
tion, and any other items described in
paragraph (h)(4) of this section.
(2) * * *
(x) Section 408(i) (relating to reports
with respect to individual retirement
accounts or annuities on Form 1099-R,
Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.);
(xi) Section 6047(d) (relating to reports
by employers, plan administrators, etc., on
Form 1099-R); or
(xii) Section 6035 (relating to basis
information with respect to property
acquired from decedents, generally Form
8971, Information Regarding Beneficia-
ries Acquiring Property From a Decedent,
and the Schedule(s) A required to be filed
along with it).
(3) * * *
(xvii) Section 1060(b) (relating to
reporting requirements of transferors and
transferees in certain asset acquisitions,
generally reported on Form 8594, Asset
Acquisition Statement), or section 1060(e)
(relating to information required in the
case of certain transfers of interests in
entities);
(xviii) Section 4101(d) (relating to
information reporting with respect to fuel
oils);
* * * * *
(xxiv) Section 6055 (relating to infor-
mation returns reporting minimum essen-
tial coverage);
(xxv) Section 6056 (relating to infor-
mation returns reporting on offers of
health insurance coverage by applicable
large employer members);
(xxvi) Section 6050Y (relating to
returns relating to certain life insurance
contract transactions); or
(xxvii) Section 6050Z (relating to
reports relating to long-term care pre-
mium statements).
(4) Other items. The term information
return also includes any form, statement,
or schedule required to be filed with the
IRS under chapter 4 of the Internal Rev-
enue Code (the Code) or with respect to
any amount from which tax is required
to be deducted and withheld under chap-
ter 3 of the Code (or from which tax
would be required to be so deducted and
withheld but for an exemption under
the Code or any treaty obligation of the
United States), including but not limited
to Form 1042-S, Foreign Person’s U.S.
Source Income Subject to Withholding,
or Form 8805, Foreign Partner’s Infor-
mation Statement of Section 1446 With-
holding Tax.
* * * * *
(6) Filer. For purposes of this sec-
tion the term filer means a person that is
required to file an information return as
defined in paragraph (h)(1) of this section
under the applicable information report-
ing section described in paragraphs (h)(2)
through (4) of this section.
(i) Adjustment for inflation. Each of the
dollar amounts under paragraphs (a), (b),
(f) (other than paragraph (f)(2)), and (g) of
this section and section 6721(a), (b), (d)
(other than section 6721(d)(2)(A)), and (e)
will be adjusted for inflation pursuant to
section 6721(f).
(j) Applicability date. This section
applies with respect to information returns
required to be filed on or after January 1,
2024. See 26 CFR 301.6721-1, as revised
April 1, 2023, for rules applicable prior to
January 1, 2024.
Par. 6. Section 301.6722-1 is amended
by:
1. Revising paragraphs (a)(1), (a)(2)(ii),
and (b)(2)(i);
2. In paragraphs (b)(2)(ii) and (iii),
removing the comma at the end of
each paragraph and adding a semico-
lon in its place;
3. In paragraphs (b)(2)(iii) and (iv),
removing “Internal Revenue Service”
and adding “IRS” in its place;
4. Revising paragraph (b)(3) introduc-
tory text;
5. In paragraph (b)(3), designating
Examples 1 and 2 as paragraphs (b)
(3)(i) and (ii); and
6. In newly designated paragraph (b)(3)
(ii), removing the language “Example
1” and adding “paragraph (d)(3)(i) of
this section (Example 1)” in its place;
7. Revising paragraph (c)(1);
8. Redesignating paragraphs (c)(2)(i)
through (iii) as paragraphs (c)(2)(ii)
through (iv);
9. Adding a new paragraph (c)(2)(i);
10. Revising newly redesignated para-
graphs (c)(2)(ii) and (iii);
11. Redesignating paragraphs (d) and (e)
as paragraphs (e) and (g);
12. Adding a new paragraph (d);
13. Revising newly redesignated para-
graphs (e)(1), (e)(2) introductory text,
and (e)(2)(xxxiii) and (xxxiv);
14. Adding paragraphs (e)(2)(xxxv)
through (xxxviii);
15. In newly designated paragraph (e)(3):

January 16, 2024 396 Bulletin No. 2024–3
i. Adding the language “or 4” after
the language “chapter 3”;
ii. Removing the language “gen-
erally” and adding the language
“including but not limited to” in
its place; and
iii. Removing the language “sub-
ject” and adding the language
“Subject” in its place;
16. Adding paragraphs (e)(4) and (f); and
17. Revising newly redesignated para-
graph (g).
The revisions and additions read as fol-
lows:
§301.6722-1 Failure to furnish correct
payee statements.
(a) * * *
(1) General rule. A penalty of $250
is imposed for each payee statement (as
defined in section 6724(d)(2) and para-
graph (e)(2) of this section) with respect
to which a failure (as defined in section
6722(a) and paragraph (a)(2) of this sec-
tion) occurs. No more than one penalty
will be imposed under this paragraph (a)
with respect to a single payee statement
even though there may be more than one
failure with respect to such statement.
However, the penalty will apply to fail-
ures on composite substitute payee state-
ments as though each type of payment
and other required information were fur-
nished on separate statements. A compos-
ite substitute payee statement is a single
document created by a filer to reflect sev-
eral types of payments made to the same
payee. The total amount imposed on any
person for all failures during any calendar
year with respect to all payee statements
will not exceed $3,000,000. See section
6722(e) and paragraph (c) of this section
for higher penalties if a failure is due to
intentional disregard of the requirement to
furnish timely correct payee statements.
See paragraph (d) of this section for a safe
harbor exception for certain de minimis
errors. See paragraph (f) of this section for
inflation adjustments to penalty amounts.
See §301.6724-1(a)(1) for a waiver of the
penalty for a failure that is due to reason-
able cause.
(2) * * *
(ii) A failure to include all of the
information required to be shown on
a payee statement or the inclusion of
incorrect information (failure to include
correct information). A failure to fur-
nish timely includes a failure to fur-
nish a written statement to the payee in
a statement mailing as required under
sections 6042(c), 6044(e), 6049(c), and
6050N(b), as well as a failure to furnish
the statement on a form acceptable to the
Internal Revenue Service (IRS). Except
as provided in paragraph (b) or (d) of this
section, a failure to include correct infor-
mation encompasses a failure to include
the information required by applicable
information reporting statutes or by any
administrative pronouncements issued
thereunder (such as regulations, revenue
rulings, revenue procedures, or informa-
tion reporting forms).
(b) * * *
(2) * * *
(i) A dollar amount, except as provided
in paragraph (d) of this section;
* * * * *
(3) Examples. The provisions of this
paragraph (b) may be illustrated by the
following examples, which do not take
into account any possible application of
the penalty for intentional disregard under
paragraph (c) of this section, the safe
harbor exception for certain de minimis
errors under paragraph (d) of this sec-
tion, or the reasonable cause waiver under
§301.6724-1(a):
* * * * *
(c) * * *
(1) Application of section 6722(e). If
a failure is due to intentional disregard of
the requirement to furnish timely correct
payee statements, the amount of the pen-
alty must be determined under paragraph
(c)(2) of this section. Whether a failure is
due to intentional disregard of the require-
ment to furnish timely correct payee state-
ments is based upon the facts and circum-
stances surrounding the failure. The facts
and circumstances considered include
those under §301.6721-1(g)(3), which
will apply in determining whether a fail-
ure under this section is due to intentional
disregard.
(2) * * *
(i) Paragraph (d) of this section will not
apply;
(ii) The $3,000,000 limitation under
paragraph (a) of this section will not apply
and the penalty under this paragraph (c)(2)
will not be taken into account in applying
the $3,000,000 limitation to penalties not
determined under this paragraph (c)(2);
(iii) The penalty imposed under para-
graph (a) of this section will be $500 or, if
greater, the statutory percentage; and
* * * * *
(d) Safe harbor exception for certain
de minimis errors—(1) In general. Except
as provided in paragraphs (c) and (d)(3)
of this section, the penalty under section
6722(a) and paragraph (a) of this section
is not imposed for a failure described in
section 6722(a)(2)(B) and paragraph (a)
(2)(ii) of this section (failure to include
correct information on payee statement)
if the failure relates to an incorrect dollar
amount and is a de minimis error. If the
safe harbor in this paragraph (d) applies to
a payee statement and the payee statement
was otherwise correct and timely fur-
nished, no correction is required and, for
purposes of this section, the payee state-
ment is treated as having been furnished
with all of the correct required informa-
tion.
(2) Definition of de minimis error. For
purposes of this paragraph (d), an error in
a dollar amount is de minimis if the differ-
ence between any single amount in error
and the correct amount is not more than
$100, and, if the difference is with respect
to an amount of tax withheld, it is not more
than $25. For purposes of this paragraph
(d)(2), tax withheld includes any amount
required to be shown on an information
return or payee statement (as defined in
section 6724(d)(1) and (2), respectively)
withheld under section 3102 or 3402, as
well as any such amount required to be
shown on such an information return or
payee statement that is creditable under
section 27, 31, 33, or 1474.
(3) Election to override the safe harbor
exception—(i) In general. Except as pro-
vided in paragraphs (d)(3)(vi) and (vii) of
this section, the safe harbor exception pro-
vided for by this paragraph (d) does not
apply to any payee statement if the person
to whom the statement is required to be
furnished (the payee) makes an election
that the safe harbor not apply with respect
to the statement.
(ii) Timing of election. The payee must
elect no later than the later of 30 days after
the date on which the payee statement is
required to be furnished to the payee, or
October 15 of the calendar year, to receive

Bulletin No. 2024–3 397 January 16, 2024
a correct payee statement required to be
furnished in that calendar year without
having the safe harbor under paragraph
(d)(1) of this section apply. The date of an
election is the date the election is received
by the filer. For purposes of this section,
the provisions of section 7502 relating to
timely mailing treated as timely delivery
apply in determining the date an election
is considered to be received by the filer,
treating delivery to the filer as if the filer
were an agency, officer, or office under
such section. The election will remain
in effect for all subsequent years unless
revoked under paragraph (d)(3)(vii) of
this section.
(iii) Manner for making the election.
Except as provided in paragraph (d)(3)(v)
of this section, the payee must make the
election by delivering the election in writ-
ing to the filer. Except as provided in para-
graph (d)(3)(v) of this section, the writ-
ten election must be made in writing on
paper. The payee may deliver the election
in person, by mail by United States Postal
Service, or by a designated delivery ser-
vice as defined under section 7502(f)(2).
If the filer has not otherwise provided an
address under paragraph (d)(3)(v) of this
section, the payee must send the written
election to the filer’s address appearing
on the payee statement furnished by the
filer to the payee with respect to which the
election is being made or as directed by
that person upon appropriate inquiry by
the payee. The written election must:
(A) Clearly state that the payee is mak-
ing the election;
(B) Provide the payee’s name, address,
and taxpayer identification number (TIN)
(as defined in section 7701(a)(41) of the
Internal Revenue Code) to the filer;
(C) If the payee wants the election to
apply only to specific types of statements,
identify the type of payee statement(s) and
account number(s), if applicable, to which
the election applies (for example, Form
1099-DIV, Dividends and Distributions);
and
(D) Provide any other information
required by the IRS in forms, instructions,
or publications.
(iv) Payee statements to which the elec-
tion applies. An election by a payee under
paragraph (d)(3)(i) of this section applies
to all types of payee statements the filer
is required to furnish to the payee, unless
the payee specifies otherwise on the elec-
tion under paragraph (d)(3)(iii)(C) of this
section.
(v) Reasonable alternative manner for
making the election in cases of notification
by the filer—(A) In general. If the filer
satisfies the requirements of paragraph
(d)(3)(v)(B) of this section, and provides
for a reasonable alternative manner as
described in paragraph (d)(3)(v)(E) of this
section, a payee may decide to make the
election under paragraph (d)(3)(i) of this
section pursuant to that reasonable alter-
native manner.
(B) Notification of payee of reasonable
alternative manner for making election.
The filer may elect to provide notification
to the payee of a reasonable alternative
manner to make the election under para-
graph (d)(3)(i) of this section, as described
in paragraph (d)(3)(v)(E) of this section.
To provide a valid notification under this
paragraph (d)(3)(v)(B), the filer must pro-
vide notification to the payee that:
(1) Is in writing (either on paper or in
electronic format);
(2) Is timely provided to the payee
under paragraph (d)(3)(v)(D) of this sec-
tion;
(3) Explains to the payee to whom that
filer is required to furnish a payee state-
ment of the payee’s ability to elect, under
paragraph (d)(3)(i) of this section, that
the safe harbor exceptions for de minimis
errors not apply, and of the payee’s ability
to choose to make the election using the
default method under paragraph (d)(3)(iii)
of this section;
(4) Provides an address to which the
payee may send an election under para-
graphs (d)(3)(i) and (iii) of this section;
(5) Provides any reasonable alternative
manner or manners, as described in para-
graph (d)(3)(v)(E) of this section, that the
filer is making available for the payee to
make the election under paragraph (d)(3)
(i) of this section; and
(6) Describes the information required
for making the election described by para-
graphs (d)(3)(iii)(A) through (D) of this
section. Solely for purposes of the reason-
able alternative manner, the notification
may provide that some or all of the infor-
mation described in paragraph (d)(3)(iii)
(B) of this section is not required and may
provide that the provision of an account
number as referenced in paragraph (d)(3)
(iii)(C) of this section is required if the
payee decides to use the reasonable alter-
native manner for the election.
(C) Notification of revocation proce-
dures. A notification under this paragraph
(d)(3)(v) may also provide the procedures
for making a revocation of an election
under paragraph (d)(3)(vii) of this sec-
tion. Solely for purposes of the reasonable
alternative manner, the notification may
provide that some or all of the information
described in paragraph (d)(3)(vii)(B) of
this section is not required and may pro-
vide that the provision of an account num-
ber as referenced in paragraph (d)(3)(vii)
(E) of this section is required if the payee
decides to use a reasonable alternative
manner for making a revocation.
(D) Time for providing notification of
reasonable alternative manner for making
payee election. A notification under this
paragraph (d)(3)(v) will be timely under
paragraph (d)(3)(v)(B)(2) of this section
if:
(1) The notification is provided with, or
at the time of, the furnishing of the payee
statement; or
(2) The filer previously provided a
valid notification under paragraph (d)(3)
(v) of this section to the payee with, or at
the time of, the furnishing of a payee state-
ment associated with a particular account,
in which case notification will be consid-
ered to have been timely provided with
respect to subsequent payee statements
associated with that particular account.
If the filer wishes to provide for a differ-
ent reasonable alternative manner than a
previous reasonable alternative manner,
the filer must provide new notification
in compliance with the timeliness rule of
paragraph (d)(3)(v)(D)(1) of this section,
and must accept payee elections under
the previous reasonable alternative man-
ner for a period of at least 60 days after
the receipt of the new notification by the
payee.
(E) Reasonable alternative manner. A
reasonable alternative manner described
in a notification under paragraph (d)(3)
(v)(B) of this section may include that a
payee election under paragraph (d)(3)(i)
of this section may be made electronically
(for example, via email or website) or
telephonically. The reasonable alternative
manner may not impose any prerequisite,
condition, or time limitation on, or other-

January 16, 2024 398 Bulletin No. 2024–3
wise limit, the payee’s ability to make an
election under paragraph (d)(3)(iii) of this
section, except as described in paragraphs
(d)(3)(ii) and (iii) of this section; it may
only offer a reasonable alternative manner
or manners for making this election under
this paragraph (d)(3)(v).
(vi) Election not available for certain
information. The election to override the
safe harbor exception provided for by
paragraph (d)(3)(i) of this section is not
available with respect to information that
may not be altered under specific infor-
mation reporting rules. See, for example,
§1.6045-4(i)(5) of this chapter.
(vii) Revocation of election. The payee
may revoke a prior election by submit-
ting a revocation to the filer. The effect of
a revocation of a prior election is that the
safe harbor for certain de minimis errors
will apply to the payee statements that the
payee identifies and that are furnished or
are due to be furnished after the revocation
is received. The revocation will remain in
effect until the payee makes a valid and
timely election under paragraph (d)(3)(i) of
this section. The date of a revocation is the
date the revocation is received by the filer.
For purposes of this section, the provisions
of section 7502 relating to timely mailing
treated as timely delivery apply in deter-
mining the date a revocation is considered
to be received by the filer, treating delivery
to the filer as if the filer were an agency,
officer, or office under section 7502. The
revocation must be made in the same man-
ner or manners described for making the
election, that is pursuant to either para-
graph (d)(3)(iii) or (v) of this section, as the
payee chooses if paragraph (d)(3)(v) of this
section is applicable. Except as provided
under paragraph (d)(3)(v)(B)(6) of this sec-
tion, the revocation must:
(A) Clearly state that the payee is
revoking the payee’s prior election;
(B) Provide the payee’s name, address,
and TIN to the filer;
(C) Provide the name of the filer;
(D) Identify the type of payee state-
ment(s) (for example, Form 1099-DIV) to
which the revocation applies;
(E) Identify the account number(s),
if applicable, to which the revocation
applies; and
(F) Provide any other information
required by the IRS in forms, instructions
or publications.
(viii) Reasonable cause. See
§301.6724-1(h) for rules relating to waiver
of the section 6722 penalty in cases where
the safe harbor exception provided for by
paragraph (d)(1) of this section does not
apply because of an election under para-
graph (d)(3)(i) of this section.
(4) Record retention. To facilitate proof
of compliance with reporting and other
obligations under the internal revenue
laws, filers must retain records of any
election or revocation by the payee under
paragraph (d)(3)(i) or (vii) of this section,
respectively, and any notification made
under paragraph (d)(3)(v) of this section
for as long as the contents of the election,
revocation, or notification may be mate-
rial in the administration of any internal
revenue law. For rules regarding record
retention, see section 6001 and §1.6001-1
of this chapter. For additional procedures
applicable to record retention in the con-
text of electronic storage, see Rev. Proc.
97-22, 1997-1 C.B. 652, Rev. Proc. 98-25,
1998-1 C.B. 689, and any subsequently
published guidance.
(5) Examples. The provisions of para-
graphs (d)(1) through (4) of this section
may be illustrated by the following exam-
ples, which do not address any possible
application of the penalty for intentional
disregard under paragraph (c) of this sec-
tion or the reasonable cause waiver under
§301.6724-1(a):
(i) Example 1—(A) Facts. Filer W is required
to file with the IRS by February 28, 2024, and fur-
nish to Payee E by February 15, 2024, Form 1099-B
Proceeds From Broker and Barter Exchange Trans-
actions, because W is a broker who sold stocks on
behalf of E resulting in proceeds of $5,000 during
calendar year 2023. W properly withheld an amount
of $1,736 under applicable backup withholding rules
because E failed to furnish E’s TIN to W. On the
Form 1099-B, W reports as follows: Box 1d, Pro-
ceeds, $4,900; and Box 4, Federal income tax with-
held, $1,761. W otherwise correctly and timely files
and furnishes the Form 1099-B. E does not make an
election under paragraph (d)(3)(i) of this section.
(B) Analysis. The safe harbor exception for de
minimis errors provided for by paragraph (d)(1) of
this section applies, because the differences between
each of the amounts reported in error and the cor-
rect amounts are not more than the applicable lim-
its. The error in the dollar amount reported in Box
1d, Proceeds, is de minimis because the difference
between the amount in error ($4,900) and the correct
amount ($5,000) is not more than $100; it is exactly
$100. The error in the dollar amount reported in
Box 4, Federal income tax withheld, is de minimis
because the $25 difference between the amount in
error ($1,761) and the correct amount ($1,736) is not
more than $25, the limit for an error with respect to
an amount reported for tax withheld.
(ii) Example 2—(A) Facts. The facts are the
same as in paragraph (d)(5)(i)(A) of this section
(Example 1), except that Filer W reports $1,710 as
the amount in Box 4, Federal income tax withheld.
(B) Analysis. The safe harbor exception for de
minimis errors provided for by paragraph (d)(1) of
this section does not apply because the Form 1099-B
contains a failure that is not a de minimis error. The
difference between the amount in error ($1,710) and
the correct amount ($1,736) is $26, which is more
than the $25 limit for de minimis errors with respect
to an amount reported for tax withheld.
(iii) Example 3—(A) Facts. In 2024, Filer X
provides Payee B with valid notification of a rea-
sonable alternative manner under paragraph (d)(3)
(v) of this section for making the payee election
under paragraph (d)(3)(i) of this section. B timely
elects pursuant to the reasonable alternative man-
ner during 2024. B elects the reasonable alternative
manner with respect to all payee statements that X is
required to furnish to B. In January 2025, X decides
to provide for a different, but also valid, reasonable
alternative manner; X provides notification of this
different reasonable alternative manner to B, and
B receives notification of this different reasonable
alternative manner, pursuant to paragraph (d)(3)(v)
(B) of this section, on January 16, 2025. B decides to
revoke B’s prior election, with respect to the Forms
1099-DIV that X is required to furnish to B.
(B) Analysis. Under paragraph (d)(3)(vii) of this
section, Payee B may provide the revocation to Filer
X in any of three different manners. First, B may pro-
vide the revocation to X in the same manner as if B
were making an election under the default manner of
paragraph (d)(3)(iii) of this section; B may do so at
any time. Second, having received notification from
X of the different reasonable alternative manner on
January 16, 2025, B may provide the revocation to
X in the same manner as if B were making an elec-
tion under the different reasonable alternative man-
ner pursuant to paragraph (d)(3)(v) of this section.
Third, because X previously provided notification of
a reasonable alternative manner (2024 alternative)
before providing notification of a different reason-
able alternative manner on January 16, 2025 (2025
alternative), B may provide the revocation to X in
the same manner as if B were making an election
under the previous reasonable alternative manner
(2024 alternative); B may do so for a period of 60
days after January 16, 2025, pursuant to paragraph
(d)(3)(v)(D)(2) of this section.
(iv) Example 4—(A) Facts. In 2024, Filer Y
furnishes, as required, a Form W-2, Wage and Tax
Statement, to Payee C for wages paid in 2023.
The correct version of this Form W-2, without any
errors, de minimis or otherwise, would have reported
$15,200 of Federal income tax withheld, $6,200 of
social security tax withheld, $1,450 of Medicare tax
withheld, and $6,000 of state income tax withheld.
However, the Form W-2 that Y furnishes to C reports
$15,180 of Federal income tax withheld, $6,180 of
social security tax withheld, $1,430 of Medicare tax
withheld, and $5,980 of state income tax withheld.
The 2023 Form W-2 does not require reporting a sum
total of tax withheld of all types. C does not make
an election under paragraph (d)(3)(i) of this section.

Bulletin No. 2024–3 399 January 16, 2024
(B) Analysis. For each of the four amounts of
tax withheld, the difference between the amount of
tax withheld that is reported on the Form W-2 and
the correct amount is $20. Under paragraph (d)(2)
of this section, each of these errors is a de minimis
error because each is with respect to an amount of
tax withheld and is not more than $25. If there are no
other errors on the Form W-2, the safe harbor excep-
tion for de minimis errors provided for by paragraph
(d)(1) of this section applies. The amounts of tax
withheld are not combined in determining whether
an error constitutes a de minimis error, if a combined
amount is not required to be reported on the payee
statement.
(v) Example 5—(A) Facts. In 2024, Filer Z fur-
nishes, as required, a Form W-2 to Payee D for wages
paid in 2023. The correct version of this Form W-2,
without any errors, de minimis or otherwise, would
have reported $15,200 of Federal income tax with-
held, $6,200 of social security tax withheld, $1,450
of Medicare tax withheld, $6,000 of state income
tax withheld, and no other taxes withheld. The Form
W-2 that Z furnishes to D reports $15,170 of Federal
income tax withheld, $6,220 of social security tax
withheld, and the correct amount of Medicare tax
withheld and state income tax withheld.
(B) A single amount of tax withheld reported on
the Form W-2, specifically the amount of Federal
income tax withheld, differs from the correct amount
by more than $25. Under paragraph (d)(2) of this
section, this error is not a de minimis error. There-
fore, the safe harbor exception for de minimis errors
provided for by paragraph (d)(1) of this section does
not apply. It is irrelevant that the sum total of taxes
withheld reported on the Form W-2 ($28,840) differs
from the correct total of taxes withheld ($28,850) by
less than $25.
(6) Voluntary corrections. Regard-
less of whether the de minimis error safe
harbor in this paragraph (d) provides an
exception for not furnishing a particular
corrected payee statement, the corrected
payee statement may be furnished vol-
untarily if a corresponding information
return reflecting the information reported
on the corrected payee statement is con-
currently filed.
(7) Limitations on applicability. The
safe harbor exception provided for by
paragraph (d)(1) of this section applies
only for the purposes of payee statement
penalties under section 6722. Accord-
ingly, this safe harbor exception applies to
the reporting of amounts on payee state-
ments, including the reporting of the with-
holding of tax on payee statements, but
does not apply for purposes of any under-
lying requirements to withhold or pay tax.
Interest, penalties, and other additions to
tax may be imposed under other sections
for under-withholding or underpaying tax
in any amount.
(e) * * *
(1) Payee. See §301.6721-1(h)(5) for
the definition of payee.
(2) Payee statement. For purposes of
this section the term payee statement has
the same meaning as payee statement as
defined by section 6724(d)(2), including
any statement required to be furnished
under—
* * * * *
(xxxiii) Section 6055 (relating to infor-
mation returns reporting minimum essen-
tial coverage);
(xxxiv) Section 6056 (relating to infor-
mation returns reporting on offers of
health insurance coverage by applicable
large employer members);
(xxxv) Section 6035, other than a state-
ment described in section 6724(d)(1)(D),
(relating to basis information with respect
to property acquired from decedents, gen-
erally Schedule A of Form 8971, Informa-
tion Regarding Beneficiaries Acquiring
Property From a Decedent);
(xxxvi) Section 6050Y(a)(2), 6050Y(b)
(2), or 6050Y(c)(2) (relating to certain life
insurance contract transactions);
(xxxvii) Section 6226(a)(2) (regarding
statements relating to alternative to pay-
ment of imputed underpayment by a part-
nership) or under any other provision of
this title that provides for the application
of rules similar to section 6226(a)(2); or
(xxxviii) Section 6050Z (relating to
reports relating to long-term care pre-
mium statements).
* * * * *
(4) Filer. For purposes of this sec-
tion the term filer means a person that is
required to furnish a payee statement as
defined in paragraph (e)(2) and (3) of this
section under the applicable information
reporting section described in paragraph
(e)(2) and (3) of this section.
(f) Adjustment for inflation. Each of the
dollar amounts under paragraphs (a), (b),
and (c) of this section and paragraphs (a),
(b), (d)(1), and (e) of section 6722 will be
adjusted for inflation pursuant to section
6722(f).
(g) Applicability date. This section
applies with respect to payee statements
required to be furnished on or after Jan-
uary 1, 2024. See 26 CFR 301.6722-1, as
revised April 1, 2023, for rules applicable
prior to January 1, 2024.
Par. 7. Section 301.6724-1 is amended
by:
1. Revising paragraphs (a)(1) and (a)(2)
(ii);
2. Designating the undesignated para-
graph following paragraph (a)(2)(ii)
as paragraph (a)(2)(iii) and revising
newly designated paragraph (a)(2)
(iii);
3. Revising paragraphs (b) introductory
text and (b)(2)(i) and (ii);
4. Designating the undesignated para-
graph following paragraph (b)(2)(ii)
as paragraph (b)(3);
5. In paragraph (c)(1)(iii), adding
“(IRS)” after “Internal Revenue Ser-
vice”;
6. Revising paragraph (c)(3)(ii);
7. In paragraphs (c)(4) and (c)(6)(ii),
removing “Internal Revenue Service”
and adding “IRS” in its place;
8. Revising paragraphs (e)(1) introduc-
tory text and (e)(1)(i) and the first
sentence of paragraph (e)(1)(vi)(A);
9. Removing paragraph (e)(1)(vi)(E);
10. Redesignating paragraphs (e)(1)(vi)
(F) and (G) as paragraphs (e)(1)(vi)
(E) and (F) and revising newly redes-
ignated paragraphs (e)(1)(vi)(E) and
(F);
11. In paragraphs (e)(2)(i)(A) and (e)(2)
(ii)(C) and (E), removing “Internal
Revenue Service” and adding “IRS”
in its place;
12. Revising paragraphs (f)(1) introduc-
tory text and (f)(1)(i);
13. In paragraph (f)(1)(ii), removing
“Internal Revenue Service” and add-
ing “IRS” in its place;
14. Revising paragraphs (f)(5)(i) and (ii),
(g), (h), (k), (m) introductory text,
and (m)(1);
15. In paragraphs (m)(2) and (3), remov-
ing the comma at the end of the para-
graphs and adding a semicolon in its
place;
16. In paragraph (n), removing “Internal
Revenue Service” and adding “IRS”
in its place; and
17. Adding paragraph (o).
The revisions and additions read as fol-
lows:
§301.6724-1 Reasonable cause.
(a) * * *
(1) General rule. The penalty for a fail-
ure relating to an information reporting
requirement as defined in paragraph (j) of

January 16, 2024 400 Bulletin No. 2024–3
this section is waived if the failure is due
to reasonable cause and is not due to will-
ful neglect.
(2) * * *
(ii) The failure arose from events
beyond the filer’s control (impediment),
as described in paragraph (c) of this sec-
tion.
(iii) Moreover, the filer must establish
that the filer acted in a responsible man-
ner, as described in paragraph (d) of this
section, both before and after the failure
occurred. Thus, if the filer establishes
that there are significant mitigating fac-
tors for a failure but is unable to estab-
lish that the filer acted in a responsible
manner, the mitigating factors will not be
sufficient to obtain a waiver of the pen-
alty. Similarly, if the filer establishes that
a failure arose from an impediment but
is unable to establish that the filer acted
in a responsible manner, the impediment
will not be sufficient to obtain a waiver of
the penalty. See paragraph (g) of this sec-
tion for the reasonable cause safe harbor
for persons who exercise due diligence.
See paragraph (h) of this section for the
reasonable cause safe harbor after an
election under section 6722(c)(3)(B) and
§301.6722-1(d)(3).
(b) Significant mitigating factors. In
order to establish reasonable cause under
this paragraph (b), the filer must satisfy
paragraph (d) of this section and must
show that there are significant mitigating
factors for the failure. See paragraph (c)
(5) of this section for the application of
this paragraph (b) to failures attributable
to the actions of a filer’s agent. The appli-
cable mitigating factors include, but are
not limited to—
* * * * *
(2) * * *
(i) Whether the filer has incurred any
penalty under §301.6721-1, §301.6722-1,
or §301.6723-1 in prior years for the fail-
ure; and
(ii) If the filer has incurred any such
penalty in prior years, the extent of the fil-
er’s success in lessening its error rate from
year to year.
* * * * *
(c) * * *
(3) * * *
(ii) The cost of filing on magnetic
media or in electronic form was prohibi-
tive as determined at least 45 days before
the due date of the returns (without regard
to extensions);
* * * * *
(e) * * *
(1) In general. A filer that is seek-
ing a waiver for reasonable cause under
paragraph (c)(6) of this section will sat-
isfy paragraph (d)(2) of this section with
respect to establishing that a failure to
include a TIN on an information return
resulted from the failure of the payee to
provide information to the filer (that is,
a missing TIN) only if the filer makes
the initial and, if required, the annual
solicitations described in this paragraph
(e) (required solicitations). For purposes
of this section, a number is treated as a
missing TIN if the number does not con-
tain nine digits or includes one or more
alpha characters (a character or symbol
other than an Arabic numeral) as one of
the nine digits. A solicitation means a
request by the filer for the payee to fur-
nish a correct TIN. See paragraph (f) of
this section for the rules that a filer must
follow to establish that the filer acted
in a responsible manner with respect to
providing incorrect TINs on information
returns. See paragraph (e)(1)(vi)(A) of
this section for alternative solicitation
requirements. See paragraph (g) of this
section for the safe harbor due diligence
rules.
(i) Initial solicitation. An initial solic-
itation for a payee’s correct TIN must be
made at the time an account is opened.
The term account includes accounts, rela-
tionships, and other transactions. How-
ever, a filer is not required to make an
initial solicitation under this paragraph (e)
(1)(i) with respect to a new account if the
filer has the payee’s TIN and uses that TIN
for all accounts of the payee. For exam-
ple, see §31.3406(h)-3(a) of this chapter.
If the account is opened in person, the
initial solicitation may be made by oral or
written request, such as on an account cre-
ation document. If the account is opened
by mail, telephone, or other electronic
means, the TIN may be requested through
such communications. If the account is
opened by the payee’s completing and
mailing an application furnished by the
filer that requests the payee’s TIN, the ini-
tial solicitation requirement is considered
met. If a TIN is not received as a result
of an initial solicitation, the filer may be
required to make additional solicitations
(annual solicitations).
* * * * *
(vi) * * *
(A) The solicitation requirements
under this paragraph (e) do not apply to
the extent an information reporting provi-
sion under which a return, as defined in
paragraph (h) of §301.6721-1, is filed pro-
vides specific requirements relating to the
manner or the time period in which a TIN
must be solicited. * * *
* * * * *
(E) A filer is not required to make
annual solicitations by mail on accounts
with respect to which the filer has an
undeliverable address, that is, where
other mailings to that address have been
returned to the filer because the address
was incorrect and no new address has
been provided to the filer.
(F) Except as provided in paragraphs
(e)(1)(vi)(A) and (C) of this section, no
more than two annual solicitations are
required under this paragraph (e) in order
for a filer to establish reasonable cause.
* * * * *
(f) * * *
(1) In general. A filer that is seek-
ing a waiver for reasonable cause under
paragraph (c)(6) of this section will
satisfy paragraph (d)(2) of this section
with respect to establishing that a failure
resulted from incorrect information pro-
vided by the payee or any other person
(that is, inclusion of an incorrect TIN)
on an information return only if the filer
makes the initial and annual solicitations
described in this paragraph (f). See para-
graph (e)(1) of this section for the defini-
tion of the term solicitation. See paragraph
(f)(5)(i) of this section for alternative
solicitation requirements. See paragraph
(g) of this section for the safe harbor due
diligence rules.
(i) Initial solicitation. An initial solic-
itation for a payee’s correct TIN must be
made at the time the account is opened.
The term account includes accounts, rela-
tionships, and other transactions. How-
ever, a filer is not required to make an
initial solicitation under this paragraph (f)
(1)(i) with respect to a new account if the
filer has the payee’s TIN and uses that TIN
for all accounts of the payee. For example,
see §31.3406(h)-3(a) of this chapter. No
additional solicitation is required after the

Bulletin No. 2024–3 401 January 16, 2024
filer receives the TIN unless the IRS or, in
some cases, a broker notifies the filer that
the TIN is incorrect. Following such noti-
fication the filer may be required to make
an annual solicitation to obtain the correct
TIN as provided in paragraphs (f)(1)(ii)
and (iii) of this section.
* * * * *
(5) * * *
(i) The solicitation requirements under
this paragraph (f) do not apply to the
extent that an information reporting pro-
vision under which a return, as defined in
§301.6721-1(h), is filed provides specific
requirements relating to the manner or
the time period in which a TIN must be
solicited. In that event, the requirements
of this paragraph (f) will be satisfied only
if the filer complies with the manner and
time period requirement under the specific
information reporting provisions and this
paragraph (f), to the extent applicable.
(ii) An annual solicitation is not
required to be made for a year under this
paragraph (f) with respect to an account
if no payments are made to the account
for such year or if no return as defined in
§301.6721-1(h) is required to be filed for
the account for such year.
* * * * *
(g) Due diligence safe harbor—(1) In
general. A filer may establish reasonable
cause with respect to a failure relating to
an information reporting requirement as
described in paragraph (j) of this section
if the filer exercises due diligence with
respect to failures described in sections
6721 through 6723. Paragraphs (g)(2)
through (7) of this section provide spe-
cial rules on the exercise of due diligence
with respect to TINs for an exception to a
penalty under sections 6721 through 6723
for—
(i) A failure to provide a correct TIN
on any—
(A) Information return as defined in
§301.6721-1(h);
(B) Payee statement as defined in
§301.6722-1(e)(2) and (3); or
(C) Document as described in
§301.6723-1(a)(4); or
(ii) The failure merely to provide a TIN
as described in §301.6723-1(a)(4)(ii).
(2) General rule. A filer is not subject
to a penalty for failure to provide the
payee’s correct TIN on an information
return, if the payee has certified, under
penalties of perjury, that the TIN pro-
vided to the filer was the payee’s correct
TIN, and the filer included such TIN on
the information return before being noti-
fied by the IRS (or a broker) that such
TIN is incorrect.
(3) Due diligence defined for accounts
opened and instruments acquired after
December 31, 1983—(i) In general. For
a filer of a reportable interest or dividend
payment (other than in a window transac-
tion) to be considered to have exercised
due diligence in furnishing the correct
TIN of a payee with respect to an account
opened or an instrument acquired after
December 31, 1983 (that is, an account or
instrument that is not a pre-1984 account
nor a window transaction), the filer must
use a TIN provided by the payee under
penalties of perjury on information returns
filed with the IRS. Therefore, if a filer per-
mits a payee to open an account without
obtaining the payee’s TIN under penal-
ties of perjury and files an information
return with the IRS with a missing or an
incorrect TIN, the filer will be liable for
the $250 penalty for the year with respect
to which such information return is filed.
However, in its administrative discretion,
the IRS will not enforce the penalty with
respect to a calendar year if the certi-
fied TIN is obtained after the account is
opened and before December 31 of such
year, provided that the filer exercises due
diligence in processing such number, that
is, the filer uses the same care in process-
ing the TIN provided by the payee that a
reasonably prudent filer would use in the
course of the filer’s business in handling
account information such as account num-
bers and balances.
(ii) Notification of incorrect TIN. Once
notified by the IRS (or a broker) that a
number is incorrect, a filer is liable for
the penalty for all prior years in which
an information return was filed with that
particular incorrect number if the filer has
not exercised due diligence with respect
to such years. A pre-existing certified TIN
does not constitute an exercise of due
diligence after the IRS or a broker noti-
fies the filer that the number is incorrect
unless the filer undertakes the actions
described in §31.3406(d)-5(d)(2)(i) of this
chapter with respect to accounts receiving
reportable payments described in section
3406(b)(1) and reported on information
returns described in sections 6724(d)(1)
(A)(i) through (iv).
(iii) Inadvertent processing. A filer
described in this paragraph (g)(3) is lia-
ble for the penalty if the filer obtained a
certified TIN for a payee but inadvertently
processed the TIN or name incorrectly
on the information return unless the filer
exercised that degree of care in process-
ing the TIN and name and in furnishing
it on the information return that a reason-
ably prudent filer would use in the course
of the filer’s business in handling account
information, such as account numbers and
account balances.
(4) Instruments not transferred with
assistance of broker—(i) In general. If
a filer files an information return with a
missing or an incorrect TIN with respect
to an instrument transferred without the
assistance of a broker, the filer will be
considered to have exercised due dili-
gence with respect to a readily tradable
instrument that is not part of a pre-1984
account with the filer if the filer records
on its books a transfer in which the filer
was not a party. This paragraph (g)(4)(i)
applies until the calendar year in which
the filer receives a certified TIN from the
payee.
(ii) Solicitation of TIN not required.
A filer described in paragraph (g)(4)(i)
of this section is not required to solicit
the TIN of a payee of an account with a
missing TIN in order to be considered as
having exercised due diligence in a sub-
sequent calendar year under the rule set
forth in paragraph (g)(4)(i) of this section.
(iii) Payee provides incorrect TIN. If
a payee provides a TIN (whether or not
certified) to a filer described in paragraph
(g)(4)(i) of this section who records on
its books a transfer in which it was not a
party, the filer is considered to have exer-
cised due diligence under the rule set forth
in paragraph (g)(4)(i) of this section if the
transfer is accompanied with a TIN pro-
vided that the filer uses the same care in
processing the TIN provided by a payee
that a reasonably prudent filer would use
in the course of the filer’s business in han-
dling account information, such as account
numbers and account balances. Thus,
a filer will not be liable for the penalty
if the filer uses the TIN provided by the
payee on information returns that it files,
even if the TIN provided by the payee is

January 16, 2024 402 Bulletin No. 2024–3
later determined to be incorrect. However,
a filer will not be considered as having
exercised due diligence under paragraph
(g)(4)(i) of this section after the IRS or
a broker notifies the filer that the number
is incorrect unless the filer undertakes the
required additional actions described in
paragraph (g)(2) of this section.
(5) Filer incurred an undue hard-
ship—(i) In general. A filer of a post-1983
account or instrument is not liable for a
penalty under section 6721(a) for filing
an information return with a missing or
an incorrect TIN if the IRS determines
that the filer could have satisfied the due
diligence requirements but for the fact
that the filer incurred an undue hardship.
An undue hardship is an extraordinary or
unexpected event such as the destruction
of records or place of business of the filer
by fire or other casualty (or the place of
business of the filer’s agent who under a
pre-existing written contract had agreed
to fulfill the filer’s due diligence obliga-
tions with respect to the account subject
to the penalty and there was no means
for the obligations to be performed by
another agent or the filer). Undue hardship
will also be found to exist if the filer could
have met the due diligence requirements
only by incurring an extraordinary cost.
(ii) Only IRS makes undue hardship
determinations. A filer must obtain a
determination from the IRS to establish
that the filer satisfies the undue hardship
exception to the penalty under section
6721(a) for the failure to include the
correct TIN on an information return for
the year with respect to which the filer is
subject to the penalty. A determination of
undue hardship may be established only
by submitting a written statement to the
IRS signed under penalties of perjury that
sets forth all the facts and circumstances
that make an affirmative showing that the
filer could have satisfied the due diligence
requirements but for the occurrence of an
undue hardship. Thus, the statement must
describe the undue hardship and make an
affirmative showing that the filer either was
in the process of exercising or stood ready
to exercise due diligence when the undue
hardship occurred. A filer may request an
undue hardship determination by submit-
ting a written statement to the address pro-
vided with the notice proposing penalty
assessment (for example, Notice 972CG)
or the notice of penalty assessment (for
example, CP15 or CP215), or as otherwise
directed by the IRS in forms, instructions,
or publications.
(6) Acquisitions of pre-1984 accounts
or instruments—(i) In general. A pre-
1984 account or instrument of a filer that is
exchanged for an account or instrument of
another filer pursuant to a statutory merger
of the other filer or the acquisition of the
accounts or instruments of such filer is
not transformed into a post-1983 account
or instrument if the merger or acquisition
occurs after December 31, 1983, because
the exchange occurs without the participa-
tion of the payee.
(ii) Establishing due diligence was
exercised for accounts or instruments.
The acquiring taxpayer described in this
paragraph (g)(6) may rely upon the busi-
ness records and past procedures of the
merged filer or the filer whose accounts
or instruments were acquired in order to
establish that due diligence has been exer-
cised on the acquired pre-1984 and post-
1983 accounts or instruments to avoid the
penalty under section 6721(a) with respect
to information returns that have been or
will be filed.
(7) Limited reliance on certain pre-
2001 rules. A filer may rely on the due dil-
igence rules set forth in 26 CFR 35a.9999-
1, 35a.9999-2, and 35a.9999-3 in effect
prior to January 1, 2001 (see 26 CFR
35a.9999-1, 35a.9999-2, and 35a.9999-
3, revised April 1, 1999), solely for the
definitions of terms or phrases used in this
paragraph (g).
(h) Reasonable cause safe harbor after
election under section 6722(c)(3)(B). A
filer may establish reasonable cause with
respect to a failure relating to an informa-
tion reporting requirement as described
in paragraph (j) of this section under this
paragraph (h) if the failure is a result of
an election under §301.6722-1(d)(3)(i)
and the presence of a de minimis error
or errors as described in sections 6721(c)
(3) and 6722(c)(3) and §§301.6721-1(e)
and 301.6722-1(d) on a filed informa-
tion return or furnished payee statement.
This paragraph (h) applies only if the
safe harbor exceptions provided for by
§301.6721-1(e)(1) or §301.6722-1(d)(1)
would have applied, but for an election
under §301.6722-1(d)(3)(i). To establish
reasonable cause and not willful neglect
under this paragraph (h), the filer must
file a corrected information return or fur-
nish a corrected payee statement, or both,
as applicable, within 30 days of the date
of the election under §301.6722-1(d)(3)
(i). Where specific rules provide for addi-
tional time in which to furnish a corrected
payee statement and file a corrected infor-
mation return, the 30-day rule does not
apply and the specific rules will apply. See
for example §§31.6051-1(c) through (d)
and 31.6051-2(b). If the filer rectifies the
failure outside of this 30-day period, the
determination of reasonable cause will be
on a case-by-case basis.
* * * * *
(k) Examples. The provisions of this
section may be illustrated by the follow-
ing examples:
(1) Example 1—(i) Facts. On August 1, 2023,
Individual A, an independent contractor, establishes
a relationship (account) with Institution L, which
pays A amounts reportable under section 6041.
When A opens the account L requests that A supply
his TIN on the account creation document. A fails
to provide his TIN. On October 2, 2023, L mails
a solicitation for A’s TIN that satisfies the require-
ment of paragraph (e)(1)(ii) of this section. A does
not provide a TIN to L during 2023. L timely files
an information return subject to section 6721, that
does not contain A’s TIN, for payments made during
the 2023 calendar year with respect to A’s account. A
penalty is imposed on L, pursuant to §301.6721-1(a)
(2), for L’s failure to file a correct information return
because A’s TIN was not shown on the return. The
penalty will be waived, however, if L establishes that
the failure was due to reasonable cause as defined in
this section.
(ii) Analysis. To establish reasonable cause under
this section, L must satisfy both paragraphs (c)(6)
and (d) of this section. The criteria for obtaining a
waiver under paragraphs (c)(6) and (d) of this section
are as follows:
(A) L acted in a responsible manner in attempt-
ing to satisfy the information reporting requirement
as described in paragraph (d) of this section; and
(B) L demonstrates that the failure arose from
events beyond L’s control, as described in paragraph
(c)(6) of this section.
(iii) Analysis (continued). Pursuant to paragraph
(d)(2) of this section, L may demonstrate that it acted
in a responsible manner only by complying with
paragraph (e) of this section. Paragraph (e) of this
section requires a filer to request a TIN at the time
the account is opened (the initial solicitation) and,
if the filer does not receive the TIN at that time, to
solicit the TIN on or before December 31 of the year
the account is opened (for accounts opened before
December) or January 31 of the following year (for
accounts in the preceding December) (the annual
solicitation). Because L has performed these solicita-
tions within the time and in the manner prescribed by
paragraph (e) of this section, L has acted in a respon-
sible manner as described in paragraph (d) of this
section. L satisfies paragraph (c)(6) of this section

Bulletin No. 2024–3 403 January 16, 2024
because under the facts, L can show that the failure
was caused by A’s failure to provide a TIN, an event
beyond L’s control. As a result, L has established rea-
sonable cause under paragraph (a)(2) of this section.
Therefore, the penalty imposed under §301.6721-
1(a)(2) for the failure on the 2023 information return
is waived. See section 3406(a)(1)(A), which requires
L to impose backup withholding on reportable pay-
ments to A if L has not received A’s TIN.
(2) Example 2—(i) Facts. On August 1, 2023,
Individual B opens an account with Bank M, which
pays B interest reportable under section 6049. When
B opens the account, M requests that B supply his
TIN on the account creation document. B provides
his TIN to M. On February 28, 2024, M includes the
TIN that B provided on the Form 1099-INT, Inter-
est Income, for the 2023 calendar year. In October
2024 the IRS, pursuant to section 3406(a)(1)(B),
notifies M that the 2023 return filed for B contains
an incorrect TIN. In April 2025 a penalty is imposed
on M, pursuant to §301.6721-1(a)(2), for M’s fail-
ure to file a correct information return for the 2023
calendar year, that is, the return did not contain B’s
correct TIN. The penalty will be waived, however, if
M establishes that the failure was due to reasonable
cause as defined in this section.
(ii) Analysis. To establish reasonable cause under
this section, M must satisfy the criteria in both para-
graphs (c)(6) and (d) of this section. Pursuant to
paragraph (d)(2) of this section, M can demonstrate
that it acted in a responsible manner only if M com-
plies with paragraph (f) of this section. Paragraph
(f) of this section requires a filer to request a TIN
at the time the account is opened, an initial solicita-
tion. Under paragraph (f)(4) of this section the initial
solicitation relates to failures on returns filed for the
year an account is opened. Because M performed the
initial solicitation in 2023 in the time and manner
prescribed in paragraph (f)(1)(i) of this section and
reflected the TIN received from B on the 2023 return
as required by paragraph (f)(1)(iv) of this section,
M has acted in a responsible manner as described in
paragraph (d) of this section. M satisfies paragraph
(c)(6) of this section because, under the facts, M can
show that the failure was caused by B’s failure to
provide a correct TIN, an event beyond M’s con-
trol. As a result, M has established reasonable cause
under paragraph (a)(2) of this section. Therefore, the
penalty imposed under §301.6721-1(a)(2) for the
failure on the 2023 information return is waived. See
section 3406(a)(1)(B), which requires M to impose
backup withholding on reportable payments to B if
M has not received B’s correct TIN.
(3) Example 3—(i) Table.
Table 1 to Paragraph (k)(3)(i)
20232/202410/20242/2025
Account opened (solicits TIN)2023 return filedB-notice with respect to 2023 return2024 return filed
4/202510/20252/20264/2026
6721 penalty notice for 2023 returnB-notice with respect to 2024 return2025 return filed6721 penalty notice for 2024
(ii) Facts. The facts are the same as in para-
graph (k)(2)(i) of this section (Example 2). Under
§31.3406(d)-5(d)(2)(i) of this chapter and para-
graph (f)(3) of this section, within 15 days of the
October 2024 notification of the incorrect TIN from
the IRS, M solicits the correct TIN from B. B fails
to respond. M timely files the return for 2024 with
respect to the account setting forth B’s incorrect
TIN. In October 2025 the IRS notifies M, pursu-
ant to section 3406(a)(1)(B), that the 2024 return
contains an incorrect TIN. In April 2026, a penalty
is imposed on M pursuant to §301.6721-1(a)(2) for
M’s failure to include B’s correct TIN on the return
for 2024. The penalty will be waived, if M estab-
lishes that the failure was due to reasonable cause
as defined in this section.
(iii) Analysis. M must satisfy the reasonable
cause criteria in paragraphs (c)(6) and (d) of this
section. M may demonstrate that it acted in a respon-
sible manner as required under paragraph (d) of this
section only by complying with paragraph (f) of
this section. Paragraph (f) of this section requires a
filer to make an initial solicitation for a TIN when
an account is opened. Further, a filer must make an
annual solicitation for a TIN by mail within 15 busi-
ness days after the date that the IRS notifies the filer
of an incorrect TIN pursuant to section 3406(a)(1)
(B). M made the initial solicitation for the TIN in
2023 and, after being notified of the incorrect TIN
in October 2024, the first annual solicitation within
the time and manner prescribed by §31.3406(d)-5(d)
(2)(i) of this chapter and paragraphs (f)(1)(ii) and (f)
(2) of this section. M acted in a responsible manner.
M satisfies paragraph (c)(6) of this section because,
under the facts, M can show that the failure was
caused by B’s failure to provide his correct TIN, an
event beyond M’s control. As a result M has estab-
lished reasonable cause under paragraph (a)(2) of
this section. Therefore, the penalty imposed under
§301.6721-1(a)(2) for the failure on the 2024 return
is waived due to reasonable cause.
(4) Example 4—(i) Table.
Table 2 to Paragraph (k)(4)(i)
20232/202410/20242/2025
Account opened (solicits TIN)2023 return filedB-notice with respect to 2023 return2024 return filed
4/202510/20252/20264/2026
6721 penalty notice for 2023 returnB-notice with respect to 2024 return2025 return filed6721 penalty notice for 2024 return
(ii) Facts. The facts are the same as in paragraph
(k)(3)(ii) of this section (Example 3). M timely solic-
its B’s TIN in October 2025, which B fails to pro-
vide. M files the return for 2025 with the incorrect
TIN. In April 2027 the IRS informs M that the 2025
return contains an incorrect TIN. M does not solicit a
TIN from B in 2026 and files a return for 2026 with
B’s incorrect TIN. M seeks a waiver of the penalty
under §301.6721-1(a)(2) for reasonable cause.
(iii) Analysis. M must satisfy the reasonable
cause criteria in paragraphs (c)(6) and (d) of this
section. Because M made the initial and two annual
solicitations as required by paragraph (f) of this sec-
tion, M has demonstrated that it acted in a responsible
manner and is not required to solicit B’s TIN in 2026.
See paragraph (f)(5)(vi) of this section. M satisfies
paragraph (c)(6) of this section because, under the
facts, M can show that the failure was caused by B’s
failure to provide his correct TIN, an event beyond
M’s control. Therefore, M has established reasonable
cause under paragraph (a)(2) of this section.
(5) Example 5—(i) Facts. In 2023, Mortgage
Finance Company N lends money to C to purchase
property in a transaction subject to reporting under
section 6050H. As part of the transaction, C gives N
a promissory note providing for repayment of princi-
pal and the payment of interest. At the time C incurs
the obligation N requests C’s TIN, as required under
§1.6050H-2(f) of this chapter. C fails to provide the
TIN as required by §1.6050H-2(f) of this chapter.
N sends solicitations by mail in 2023 and 2024 for
the missing TIN, which C fails to provide. However,
for 2025 N fails to send the solicitation required by
§1.6050H-2(f) of this chapter. N files returns for the
2023, 2024, and 2025 calendar years pursuant to sec-
tion 6050H without C’s TIN.
(ii) Analysis. Although N made the initial and
the first annual solicitations in 2023 and the second
annual solicitation in 2024, N did not solicit the TIN
in 2025 as required under section 6050H, which
requires continued annual solicitations until the TIN
is obtained. Therefore, under paragraph (e)(1)(vi)(A)
of this section the penalty imposed under §301.6721-
1(a) for the 2025 information return is not waived.
(6) Example 6—(i) Table.

January 16, 2024 404 Bulletin No. 2024–3
Table 3 to Paragraph (k)(6)(i)
10/20232/202410/20242/2025
Account opened. (solicits TIN)2023 return filedB-notice with respect to 2023 return2024 return filed
4/202510/20252/20264/2026
6721 penalty notice for 2023 returnB-notice with respect to 2024 return2025 return filed6721 penalty notice for 2024 return
(ii) Facts. On October 2, 2023, Individual E
opens an account with Institution R, which pays
E amounts reportable under section 6049. When
E opens the account, R requests that E supply his
TIN on an account creation document, which E
does. Pursuant to paragraph (f)(1)(iv) of this sec-
tion, R uses the TIN furnished by E on the infor-
mation return filed for the 2023 calendar year.
In October 2024 the IRS notifies R, pursuant to
section 3406(a)(1)(B), that the information return
filed for E for the 2023 calendar year contained
an incorrect TIN. At the time R receives this noti-
fication, E’s account contains the incorrect TIN.
On December 31, 2024, R telephones E pursuant
to paragraphs (f)(2) and (e)(2)(ii) of this section
and receives different TIN information from E.
R uses this information on the return that it files
timely for E for the 2024 calendar year, that is, in
February 2025. In April 2025, the IRS notifies R,
pursuant to §301.6721-1(a)(2), that the informa-
tion return filed for the 2023 calendar year con-
tains an incorrect TIN. The penalty will be waived,
however, if R establishes the failure was due to
reasonable cause as defined in this section.
(iii) Analysis. To establish reasonable cause
under this section, R must satisfy the criteria in both
paragraphs (c)(6) and (d)(2) of this section. Pursuant
to paragraph (d)(2) of this section, R can demon-
strate that it acted in a responsible manner only if it
complies with paragraph (f) of this section. R solic-
ited E’s TIN at the time the account was opened (ini-
tial solicitation). Under paragraphs (d)(2) and (f)(4)
of this section, the initial solicitation relates to fail-
ures on returns filed for the year in which an account
is opened (that is, 2023) and for subsequent years
until the calendar year in which the filer receives a
notification of an incorrect TIN pursuant to section
3406. Because E failed to provide the correct TIN
upon request, the failure arose from events beyond
R’s control as described in paragraph (c)(6) of this
section. Therefore, the penalty with respect to the
failure on the 2023 calendar year information return
is waived due to reasonable cause.
(7) Example 7—(i) Facts. The facts are the same
as in paragraph (k)(6)(ii) of this section (Example
6). In April 2026 the IRS notifies R, pursuant to
§301.6721-1(a)(2), that the information return filed
for the 2024 calendar year for E contained an incor-
rect TIN.
(ii) Analysis. To establish reasonable cause for
the failure under this section, R must satisfy the
criteria in both paragraphs (c)(6) and (d)(2) of this
section. Pursuant to paragraph (d)(2) of this sec-
tion, R may establish that it acted in a responsible
manner only by complying with paragraph (f) of
this section. Pursuant to paragraph (f)(1)(ii) of this
section, R must make an annual solicitation after
being notified of an incorrect TIN if the payee’s
account contains the incorrect TIN at the time of
the notification. Paragraph (f)(3) of this section
provides that if the filer is notified, pursuant to sec-
tion 3406(a)(1)(B), the time and manner of mak-
ing an annual solicitation is that required under
§31.3406(d)-5(g)(1)(ii) of this chapter. Section
31.3406(d)-5(g)(1)(ii) of this chapter requires R to
notify E by mail within 15 business days after the
date of the notice from the IRS, which R failed to
do. As a result, R has failed to act in a responsi-
ble manner with respect to the failure on the 2024
information return, and the penalty will not be
waived due to reasonable cause.
(8) Example 8—(i) Facts. On January 31,
2024, Institution Q timely furnishes Form 1099-
MISC, Miscellaneous Information, to Individual
F. Also on January 31, 2024, Q timely files a cor-
responding Form 1099-MISC with the IRS. On
March 15, 2024, Q becomes aware of de minimis
errors (within the meaning of §301.6722-1(d)(2))
made on the Form 1099-MISC furnished to F and
filed with the IRS. On March 20, 2024, F makes an
election under §301.6722-1(d)(3)(i) with respect
to the Form 1099-MISC that Q furnished to F. Q
furnishes a corrected Form 1099-MISC to F and
files a corrected Form 1099-MISC with the IRS by
April 19, 2024, which date is 30 days from March
20, 2024.
(ii) Analysis. The election by F and the pres-
ence of de minimis errors on the Forms 1099-
MISC make the penalties under sections 6721 and
6722 applicable to Q. See §§301.6721-1(e)(3) and
301.6722-1(d)(3). Q, however, rectified the fail-
ures within 30 days of March 20, 2024, the date F
made the election under §301.6722-1(d)(3)(i) with
respect to the Form 1099-MISC that Q furnished to
F. Therefore, under paragraph (h) of this section, Q
is considered to have established reasonable cause,
and under section 6724 and paragraph (a)(1) of this
section the penalties under sections 6721 and 6722
are waived.
(9) Example 9—(i) Facts. The facts are the same
as in paragraph (k)(8)(i) of this section (Example 8),
except that Q does not become aware of de minimis
errors made on the Form 1099-MISC furnished to F
and filed with the IRS until June 26, 2024. Addition-
ally, Q furnishes the corrected Form 1099-MISC to
F and files the corrected Form 1099-MISC with the
IRS after June 26, 2024, but by July 26, 2024, which
date is 30 days from June 26, 2024.
(ii) Analysis. As in the example in paragraph (k)
(8) of this section, the election by F and the presence
of de minimis errors on the Forms 1099-MISC make
the penalties under sections 6721 and 6722 applica-
ble to Q. Additionally, because Q did not furnish a
corrected Form 1099-MISC to F and file a corrected
Form 1099-MISC with the IRS within 30 days of
the date of F’s election under §301.6722-1(d)(3)(i),
paragraph (h) of this section does not apply. How-
ever, Q may be able to demonstrate reasonable cause
under the provisions of paragraph (a) of this section.
As part of this demonstration, for example, Q may
be able to demonstrate that Q acted in a responsi-
ble manner under paragraph (d)(1) of this section by
rectifying the failure (that is, the de minimis errors)
within 30 days of discovery.
* * * * *
(m) Procedure for seeking a waiver. In
seeking an administrative determination
that the failure was due to reasonable cause
and not willful neglect, the filer must sub-
mit a written statement to the address pro-
vided with the notice proposing penalty
assessment (for example, Notice 972CG)
or the notice of penalty assessment (for
example, CP15 or CP215), or as otherwise
directed by the IRS in forms, instructions
or publications. The statement must—
(1) State the specific provision under
which the waiver is being requested, that
is, paragraph (b) or under paragraphs (c)
(2) through (6) or paragraph (h) of this
section;
* * * * *
(o) Applicability dates—(1) In gen-
eral. Except as provided in paragraphs
(o)(2) and (3) of this section, this section
applies with respect to information returns
required to be filed and payee statements
required to be furnished on or after Janu-
ary 1, 2024. See 26 CFR 301.6724-1, as
revised April 1, 2023, for rules applicable
prior to January 1, 2024, except as pro-
vided in paragraphs (o)(2) and (3) of this
section.
(2) Paragraph (g). Paragraph (g) of this
section applies with respect to information
returns as defined in section 6724(d)(1)
required to be filed, payee statements as
defined in section 6724(d)(2) required to

Bulletin No. 2024–3 405 January 16, 2024
be furnished, and specified information as
described in section 6724(d)(3) required
to be reported on or after January 1, 2024.
See 26 CFR 301.6724-1(g), as revised
April 1, 2023, for rules applicable prior to
January 1, 2024.
(3) Paragraph (h). Paragraph (h) of
this section applies with respect to infor-
mation returns required to be filed and
payee statements required to be furnished
after January 4, 2017.
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
Approved: November 29, 2023.
Lily L. Batchelder,
Assistant Secretary of the Treasury (Tax
Policy).
(Filed by the Office of the Federal Register on
December 18, 2023, 8:45 a.m., and published in the
issue of the Federal Register for December 19, 2023,
88 FR 87696)

January 16, 2024 406 Bulletin No. 2024–3
Part III
Additional Interim Guidance Regarding the Appli-
cation of the Corporate Alternative Minimum Tax
under Sections 55, 56A, and 59 of the Internal Rev-
enue Code
Notice 2024-10
SECTION 1. OVERVIEW
This notice provides additional interim
guidance regarding the application of the
new corporate alternative minimum tax
(CAMT). The CAMT was added to the
Internal Revenue Code (Code)
1
by the
enactment of § 10101 of Public Law 117-
169, 136 Stat. 1818, 1818-1828 (August
16, 2022), commonly referred to as the
Inflation Reduction Act of 2022 (IRA),
effective for taxable years beginning
after December 31, 2022. Notice 2023-
7, 2023-3 I.R.B. 390, announced that the
Department of the Treasury (Treasury
Department) and the Internal Revenue
Service (IRS) intend to issue proposed
regulations (forthcoming proposed regu-
lations) addressing the application of the
CAMT. Notice 2023-7, Notice 2023-20,
2023-10 I.R.B. 523, and Notice 2023-
64, 2023-40 I.R.B. 974, each provided
interim guidance regarding the applica-
tion of the CAMT and indicated that the
Treasury Department and the IRS intend
to issue forthcoming proposed regulations
that would include proposed rules consis-
tent with such interim guidance. Each of
the notices further provided that taxpay-
ers may rely on such interim guidance
for taxable years ending on or before the
date forthcoming proposed regulations are
published in the Federal Register and, in
any event, for any taxable year that begins
before January 1, 2024. Notice 2023-42,
2023-26 I.R.B. 1085, provided relief from
the addition to tax under § 6655 in con-
nection with the application of the CAMT.
Section 2 of this notice provides a
summary of relevant law and other infor-
mation relevant to this notice. Section 3
of this notice provides additional interim
guidance regarding the application of
the CAMT to shareholders of controlled
foreign corporations that taxpayers may
rely on for Covered CFC Distributions
received on or before the date forthcom-
ing proposed regulations are published
in the Federal Register and, regardless of
when forthcoming proposed regulations
are published in the Federal Register,
for Covered CFC Distributions received
before January 1, 2024. Section 4 of this
notice modifies and clarifies the interim
guidance provided in Notice 2023-64
regarding the application of the CAMT to
an affiliated group of corporations filing a
consolidated return for any taxable year
(tax consolidated group). The Treasury
Department and the IRS intend to propose
rules in forthcoming proposed regulations
consistent with the interim guidance pro-
vided in, and modified and clarified by,
sections 3 and 4 of this notice. Section 5 of
this notice provides applicability dates and
requirements for relying on the interim
guidance provided in, and modified and
clarified by, this notice until the issuance
of forthcoming proposed regulations. Sec-
tion 6 of this notice requests comments
on the interim guidance provided in this
notice. Section 7 of this notice describes
the effect this notice has on other docu-
ments. Section 8 of this notice provides
drafting and contact information.
SECTION 2. BACKGROUND
.01 Overview of the CAMT. Sec-
tion 10101 of the IRA amended § 55 to
impose the CAMT based on the “adjusted
financial statement income” (AFSI) of an
applicable corporation for taxable years
beginning after December 31, 2022. A
corporation is an applicable corporation
subject to the CAMT for a taxable year
if it meets the average annual AFSI test
for one or more taxable years that (i) are
before that taxable year, and (ii) end after
December 31, 2021. Section 55(a) pro-
vides that, for the taxable year of an appli-
cable corporation, the amount of CAMT
imposed by § 55 equals the excess (if any)
of (i) the tentative minimum tax for the
taxable year, over (ii) the sum of the reg-
ular tax imposed by chapter 1 of the Code
(chapter 1), within the meaning of § 55(c),
for the taxable year plus the tax imposed
under § 59A for the taxable year. Section
55(b)(2)(A) provides that, in the case of an
applicable corporation, the tentative mini-
mum tax for the taxable year is the excess
of (i) 15 percent of AFSI for the taxable
year (as determined under § 56A), over
(ii) the CAMT foreign tax credit (CAMT
FTC) for the taxable year (as determined
under § 59(l)). In the case of any corpora-
tion that is not an applicable corporation,
§ 55(b)(2)(B) provides that the tentative
minimum tax for the taxable year is zero.
For additional background on the CAMT,
see section 2 of Notice 2023-7 and section
2 of Notice 2023-64.
.02 Definition of AFSI. Section 56A(a)
provides that, for purposes of §§ 55
through 59, the term AFSI means, with
respect to any corporation for any taxable
year, the net income or loss of the tax-
payer set forth on the taxpayer’s applica-
ble financial statement (AFS) for that tax-
able year, adjusted as provided in § 56A.
.03 AFSI adjustments with respect to
shareholders of foreign corporations.
(1) Section 56A(c)(2)(C) provides that,
in the case of any corporation that is not
included on a consolidated return with
the taxpayer, AFSI of the taxpayer with
respect to that other corporation is deter-
mined by only taking into account div-
idends received from that other corpora-
tion (reduced to the extent provided by the
Secretary of the Treasury or her delegate
(Secretary) in regulations or other guid-
ance) and other amounts that are inclu-
dible in gross income or deductible as a
loss under chapter 1 (other than amounts
required to be included under §§ 951 and
951A or such other amounts as provided
by the Secretary) with respect to that other
corporation.
(2) Section 56A(c)(3)(A) provides an
adjustment to the AFSI of a taxpayer for
any taxable year in which the taxpayer is
a United States shareholder (within the
meaning of § 951(b) or, if applicable,
§ 953(c)(1)(A)) (each such shareholder,
a U.S. Shareholder) of one or more con-
trolled foreign corporations (each within
the meaning of § 957 or, if applicable,
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

Bulletin No. 2024–3 407 January 16, 2024
§ 953(c)(1)(B)) (CFC). Under this rule,
the AFSI of the taxpayer with respect to
the CFC (as determined under § 56A(c)(2)
(C)) is adjusted to also take into account
the taxpayer’s pro rata share (determined
under rules similar to the rules under
§ 951(a)(2)) of items taken into account
in computing the net income or loss set
forth on the AFS (as adjusted under rules
similar to those that apply in determining
AFSI) of each CFC with respect to which
the taxpayer is a U.S. Shareholder. The
net income or loss of a CFC set forth on
its AFS (as adjusted under rules similar to
those that apply in determining AFSI) is
referred to in this notice as Adjusted Net
Income or Loss.
(3) In addition to the authority pro-
vided in § 56A(c)(2)(C) to reduce the
amounts of dividends received by a corpo-
ration taken into account under § 56A(c)
(2)(C), § 56A(c)(15) authorizes the Secre-
tary to issue regulations or other guidance
to provide for such adjustments to AFSI
as necessary to carry out the purposes of
§ 56A, including adjustments to prevent
the omission or duplication of any item.
(4) Taxpayers have expressed con-
cern that, in certain cases, distributions
by CFCs may result in earnings of CFCs
being included in the AFSI of a U.S.
Shareholder of the CFC more than once,
and that this result may cause CFCs to
defer making distributions until guidance
is issued. Specifically, a duplication of
items may result if the U.S. Shareholder
includes in AFSI, under § 56A(c)(2)(C),
the amount of a dividend received from
earnings associated with Adjusted Net
Income or Loss that the U.S. Shareholder
includes in AFSI under § 56A(c)(3). Under
§ 56A(c)(3), a U.S. Shareholder includes
in its AFSI items of an upper-tier CFC and
a lower-tier CFC. A duplication of items
may also result if the upper-tier CFC
includes in Adjusted Net Income or Loss
the amount of a dividend received from the
lower-tier CFC from earnings associated
with Adjusted Net Income or Loss that the
U.S. Shareholder includes in AFSI under
§ 56A(c)(3) with respect to the lower-tier
CFC. The guidance contained in section 3
of this notice is intended to address such
potential duplication of items.
.04 AFSI adjustments for tax con-
solidated groups. Section 56A(c)(2)(B)
provides that except as provided in reg-
ulations prescribed by the Secretary, if
the taxpayer is part of a tax consolidated
group, AFSI for such group for such tax-
able year takes into account items on the
group’s AFS that are properly allocable
to members of such group. Section 6 of
Notice 2023-64 provides guidance for
determining the net income or loss and
AFSI of a tax consolidated group when
the financial results of all members of the
tax consolidated group are included on a
single consolidated AFS.
.05 Determining an AFS.
(1) For purposes of § 56A, the term
AFS means, with respect to any taxable
year, an AFS, as defined in § 451(b)(3)
or as specified by the Secretary in regu-
lations or other guidance, that covers that
taxable year. See § 56A(b).
(2) Section 56A(c)(2)(A) provides that,
if the financial results of a taxpayer are
reported on the AFS for a group of entities
(AFS Group), rules similar to the rules of
§ 451(b)(5) apply. Section 451(b)(5) pro-
vides that in such a situation, the AFS for
the AFS Group is treated as the AFS of the
taxpayer.
(3) Section 4 of Notice 2023-64 pro-
vides guidance for determining a taxpay-
er’s AFS. Section 4.02 of Notice 2023-
64 generally provides that the term AFS
means the taxpayer’s financial statement
listed in section 4.02(1) of the notice that
has the highest priority, including the
priority within certain sections. Section
4.02(1) of the notice generally provides
that the financial statements are, in order
of descending priority: U.S. GAAP state-
ments, IFRS statements, other govern-
ment and regulatory statements, unaudited
external statements, and lastly, the taxpay-
er’s Federal income tax return or informa-
tion return filed with the IRS.
(4) Section 4.02(5) of Notice 2023-64
provides guidance for determining a tax-
payer’s AFS when the financial results of
the taxpayer are included in a financial
statement, including a Federal income tax
return, covering a group of entities (con-
solidated financial statement). Section
4.02(5)(a) generally provides that if a tax-
payer’s financial results are consolidated
with the financial results of one or more
other taxpayers on a consolidated financial
statement, the taxpayer’s AFS is the con-
solidated financial statement. However,
if the taxpayer’s financial results are also
separately reported on a separate financial
statement that is of equal or higher prior-
ity to the consolidated financial statement,
then the taxpayer’s AFS is the separate
financial statement.
(5) Section 4.02(5)(b) of Notice 2023-
64 provides two exceptions to the guid-
ance in section 4.02(5)(a) that would pri-
oritize the use of the taxpayer’s separate
financial statement over a consolidated
financial statement. Relevant to this notice
is the first exception in section 4.02(5)(b)
(i) of Notice 2023-64, which provides
that a corporation that is a member of a
tax consolidated group must use as its
AFS the consolidated financial statement
that contains the financial results of all
members of the tax consolidated group,
regardless of whether the corporation’s
financial results are also reported on a sep-
arate financial statement that is of equal or
higher priority to the consolidated finan-
cial statement.
(6) The exception in section 4.02(5)(b)
(i) of Notice 2023-64 was premised on the
understanding that the financial results of
all of the members of a tax consolidated
group would be included in a single con-
solidated financial statement that is not a
Federal income tax return. The Treasury
Department and the IRS have become
aware of circumstances in which not all
members of a tax consolidated group are
included in a single consolidated financial
statement that is not a Federal income tax
return. In this situation, section 4.02(5)
(b)(i) of Notice 2023-64 could be read to
permit the tax consolidated group to use
its consolidated Federal income tax return
as its AFS because there is no higher pri-
ority consolidated financial statement that
includes all members of the group. The
Treasury Department and the IRS have
determined that this result would frustrate
the purpose of the CAMT. The definition
of an AFS was broadened to include a
Federal income tax return for those enti-
ties that do not have a financial statement
that meets the criteria in sections 4.02(1)
(a) through (d) of Notice 2023-64 but that
are relevant to determine the AFSI of a
corporation for purposes of determining
whether that corporation is an applica-
ble corporation or has a CAMT liability.
This AFS category was not intended to be
used by a corporation that otherwise has
a financial statement that meets the crite-

January 16, 2024 408 Bulletin No. 2024–3
ria in sections 4.02(1)(a) through (d) of
Notice 2023-64. The modifications and
clarifications contained in section 4 of this
notice are intended to prevent this result
and are consistent with the original intent
of the exception.
(7) In addition, the guidance in sec-
tion 4.02(5)(b)(i) of Notice 2023-64 is not
entirely clear concerning which consoli-
dated financial statement is the AFS of a
member of a tax consolidated group when
the member has more than one consoli-
dated financial statement. The modifica-
tions and clarifications to Notice 2023-64
contained in section 4 of this notice also
provide guidance for determining the AFS
of a member of a tax consolidated group
in such a situation.
SECTION 3. COVERED CFC
DISTRIBUTIONS RECEIVED
FROM CONTROLLED FOREIGN
CORPORATIONS
.01 Purpose. This section 3 provides
interim guidance regarding Covered CFC
Distributions (as defined in section 3.02
of this notice) that may result in earnings
of CFCs being included in AFSI of a U.S.
Shareholder more than once. This section
3 does not provide guidance regarding the
treatment of distributions received from
a CFC that are not Covered CFC Distri-
butions, dispositions of stock of a CFC
(including the treatment of dividends under
§ 1248), or any other amounts that may
relate to ownership of stock of a CFC. The
Treasury Department and the IRS intend to
propose rules in forthcoming proposed reg-
ulations consistent with the interim guid-
ance provided in this section 3.
.02 Covered CFC Distributions. For
purposes of this section 3, a Covered CFC
Distribution means a distribution received
with respect to stock of a CFC to the
extent it is a dividend (within the meaning
of § 316), determined without taking into
account § 959(d).
.03 Treatment of Covered CFC Distri-
butions received by a U.S. Shareholder of
the distributing CFC. In determining the
amount included in AFSI under § 56A(c)
(2)(C) of a U.S. Shareholder of a CFC
resulting from a Covered CFC Distribu-
tion received with respect to stock of the
CFC, AFSI of the U.S. Shareholder is
determined by—
(1) Disregarding any items reported on
the U.S. Shareholder’s AFS resulting from
the receipt of the Covered CFC Distribu-
tion; and
(2) Including the U.S. Shareholder’s
items of income and deduction under
chapter 1 (for this purpose, taking into
account § 959(d) and excluding §§ 56A
and 78) resulting from the receipt of the
Covered CFC Distribution.
.04 Treatment of Covered CFC Distri-
butions received by a CFC from another
CFC. In determining the Adjusted Net
Income or Loss of a CFC for purposes of §
56A(c)(3) resulting from a Covered CFC
Distribution received with respect to stock
of another CFC, Adjusted Net Income or
Loss of the recipient CFC is determined
by—
(1) Disregarding any items reported on
the recipient CFC’s AFS resulting from
the receipt of the Covered CFC Distribu-
tion; and
(2) Including the recipient CFC’s items
of income under chapter 1 (excluding
§ 56A) resulting from the receipt of the
Covered CFC Distribution, determined
without regard to any exclusion under
chapter 1 (for example, § 954(b)(4)), and
then reduced to the extent the Covered
CFC Distribution is excluded from—
(a) Both—
(i) The recipient CFC’s foreign per-
sonal holding company income under
§ 954(c)(3) (relating to certain income
received from related persons) or § 954(c)
(6) (relating to certain amounts received
from related CFCs); and
(ii) The recipient CFC’s gross tested
income under § 1.951A-2(c)(1)(iv) (relat-
ing to dividends received from related
persons); or
(b) The recipient CFC’s gross income
under § 959(b).
SECTION 4. MODIFICATIONS
AND CLARIFICATIONS TO AFS
GUIDANCE IN SECTIONS 4 AND 6
OF NOTICE 2023-64
.01 Purpose. This section 4 modifies
and clarifies interim guidance provided
in sections 4.02(5)(b) and 6.02 of Notice
2023-64 and provides additional interim
guidance regarding the application of sec-
tions 5 and 6 of Notice 2023-64 in light
of such modifications and clarifications.
The Treasury Department and the IRS
intend to propose rules in forthcoming
proposed regulations consistent with the
interim guidance provided in this section
4. Solely for formatting purposes, section
4.02 of this notice also redesignates sec-
tion 4.02(5)(b)(ii) of Notice 2023-64 as
section 4.02(5)(b)(v) of Notice 2023-64
and restates it for completeness. Unless
otherwise provided, the definitions in
Notice 2023-64 apply for purposes of this
section 4.
.02 Modifications and clarifications to
section 4.02(5)(b) of Notice 2023-64. Sec-
tion 4.02(5)(b) of Notice 2023-64 is modi-
fied and clarified to read as follows:
(b) Exceptions to use of Separate AFS.
(i) Tax Consolidated AFS Member has
only one Consolidated AFS that contains
the financial results of all Tax Consoli-
dated AFS Members. Except as provided
in section 4.02(5)(b)(v) of this notice,
if a Tax Consolidated AFS Member, as
defined in section 6.03(1) of this notice,
has only one Consolidated AFS described
in section 4.02(1)(a) through (d) of this
notice that contains the financial results of
all the Tax Consolidated AFS Members,
the Tax Consolidated AFS Member must
use that Consolidated AFS as its AFS,
regardless of whether the Tax Consoli-
dated AFS Member’s financial results also
are reported on—
(A) A Separate AFS that is of equal or
higher priority to that Consolidated AFS;
or
(B) A different Consolidated AFS that
contains the financial results of some, but
not all, Tax Consolidated AFS Members,
and that is of equal or higher priority to
that Consolidated AFS.
(ii) Tax Consolidated AFS Member
has more than one Consolidated AFS
that contains the financial results of all
Tax Consolidated AFS Members. Except
as provided in section 4.02(5)(b)(v) of
this notice, if a Tax Consolidated AFS
Member, as defined in section 6.03(1) of
this notice, has more than one Consoli-
dated AFS described in section 4.02(1)(a)
through (d) of this notice that contains the
financial results of all Tax Consolidated
AFS Members, the Tax Consolidated AFS
Member must use as its AFS the Consoli-
dated AFS with the highest priority under
section 4.02(1)(a) through (d) of this
notice that contains the financial results

Bulletin No. 2024–3 409 January 16, 2024
of all Tax Consolidated AFS Members,
regardless of whether the Tax Consoli-
dated AFS Member’s financial results also
are reported on—
(A) A Separate AFS that is of equal or
higher priority to that Consolidated AFS;
or
(B) A different Consolidated AFS that
contains the financial results of some, but
not all, Tax Consolidated AFS Members,
and that is of equal or higher priority to
that Consolidated AFS.
(iii) Tax Consolidated AFS Member
has only one Consolidated AFS that
contains its results but does not con-
tain results of all Tax Consolidated AFS
Members. Except as provided in sec-
tion 4.02(5)(b)(v) of this notice, if a Tax
Consolidated AFS Member, as defined
in section 6.03(1) of this notice, is not
described in section 4.02(5)(b)(i) or (ii)
of this notice and has only one Consoli-
dated AFS described in section 4.02(1)(a)
through (d) of this notice that contains its
financial results and the financial results
of some, but not all, Tax Consolidated
AFS Members, the Tax Consolidated
AFS Member must use that Consolidated
AFS as its AFS, regardless of whether the
Tax Consolidated AFS Member’s finan-
cial results also are reported on a Sepa-
rate AFS that is of equal or higher prior-
ity to that Consolidated AFS.
(iv) Tax Consolidated AFS Member
has more than one Consolidated AFS
that contains its results but does not
contain results of all Tax Consolidated
AFS Members. Except as provided in
section 4.02(5)(b)(v) of this notice, if
a Tax Consolidated AFS Member, as
defined in section 6.03(1) of this notice,
is not described in section 4.02(5)(b)(i)
or (ii) of this notice and has more than
one Consolidated AFS described in sec-
tion 4.02(1)(a) through (d) of this notice
that contains its financial results and the
financial results of some, but not all, Tax
Consolidated AFS Members, the Tax
Consolidated AFS Member must use as
its AFS the Consolidated AFS that con-
tains its financial results and the finan-
cial results of the greatest number of Tax
Consolidated AFS Members (if there is
more than one such Consolidated AFS,
the Tax Consolidated AFS Member must
use the Consolidated AFS from among
them with the highest priority under sec-
tion 4.02(1)(a) through (d) of this notice),
regardless of whether the Tax Consol-
idated AFS Member’s financial results
also are reported on—
(A) A Separate AFS that is of equal or
higher priority to that Consolidated AFS;
or
(B) A different Consolidated AFS that
contains the financial results of fewer Tax
Consolidated AFS Members, and that is
of equal or higher priority to that Consol-
idated AFS.
(v) Members of a FPMG. If a Tax-
payer is a member of a FPMG and if the
FPMG Common Parent (as defined in
section 2.04(3) of this notice) prepares
a Consolidated AFS (FPMG Consoli-
dated AFS) that includes the Taxpayer,
the Taxpayer must use the FPMG Con-
solidated AFS, regardless of whether
the Taxpayer’s financial results also
are reported on a Separate AFS that is
of equal or higher priority to the FPMG
Consolidated AFS.
.03 Modification to section 6.02 of
Notice 2023-64. The cross-reference pro-
vided in section 6.02 of Notice 2023-64 is
modified and clarified to read as follows:
.02 Priority of Consolidated AFS. For
rules regarding the priority of the Consol-
idated AFS of a Tax Consolidated Group,
see section 4.02(5)(b)(i) through (iv) of
this notice.
.04 Application of Sections 5 and 6 of
Notice 2023-64. If after the application
of section 4.02(5)(b)(i) through (iv) of
Notice 2023-64, as modified and clarified
by this notice, the AFS of each Tax Con-
solidated AFS Member is not the same
Consolidated AFS, then for purposes of
applying sections 5 and 6 of Notice 2023-
64, the Tax Consolidated Group must
combine the financial results reflected
on the different AFSs of the Tax Consol-
idated AFS Members to form one Consol-
idated AFS that is treated as the AFS of
the Tax Consolidated Group (Tax Consol-
idated Group AFS). For purposes of the
preceding sentence, the financial results of
each Tax Consolidated AFS Member may
not be included in the Tax Consolidated
Group AFS more than once, and the Tax
Consolidated Group must make any AFS
Consolidation Entries described in section
5.02(3)(c)(iii) of Notice 2023-64 not oth-
erwise reflected in the AFS of any member
that would have been made if such a Tax
Consolidated Group AFS had otherwise
been prepared.
SECTION 5. APPLICABILITY DATES
AND RELIANCE
.01 Section 3 of this notice. Taxpay-
ers may rely on the interim guidance
described in section 3 of this notice for
Covered CFC Distributions received on
or before the date forthcoming proposed
regulations are published in the Federal
Register. However, regardless of when
forthcoming proposed regulations are
published in the Federal Register, a tax-
payer may rely on the interim guidance
described in section 3 of this notice for
Covered CFC Distributions received
before January 1, 2024.
.02 Section 4 of this notice. Taxpay-
ers may rely on the interim guidance
described in section 4.02(5)(b) of Notice
2023-64, as modified by section 4.02 of
this notice, section 6.02 of Notice 2023-
64, as modified by section 4.03 of this
notice, and section 4.04 of this notice
for taxable years ending before the date
forthcoming proposed regulations are
published in the Federal Register. How-
ever, regardless of when forthcoming
proposed regulations are published in the
Federal Register, a taxpayer may rely on
the interim guidance described in section
4.02(5)(b) of Notice 2023-64, as modified
by section 4.02 of this notice, section 6.02
of Notice 2023-64, as modified by section
4.03 of this notice, and section 4.04 of
this notice for any taxable year beginning
before January 1, 2024. A taxpayer may
not rely on the unmodified text of sections
4.02(5)(b)(i) or 6.02 of Notice 2023-64
for any tax return filed on or after Decem-
ber 15, 2023.
SECTION 6. REQUEST FOR
COMMENTS
.01 Comments regarding interim guid-
ance provided in this notice. The Treasury
Department and the IRS request com-
ments on any questions arising from the
interim guidance provided in this notice.
.02 Procedures for Submitting Com-
ments.
(1) Deadline. Written comments
should be submitted by January 15, 2024.
Consideration will be given, however, to

January 16, 2024 410 Bulletin No. 2024–3
any written comment submitted after Jan-
uary 15, 2024, if such consideration will
not delay the issuance of forthcoming pro-
posed regulations.
(2) Form and manner. The subject
line for the comments should include a
reference to Notice 2024-10. All com-
menters are strongly encouraged to sub-
mit comments electronically. However,
comments may be submitted in one of
two ways:
(a) Electronically via the Federal
eRulemaking Portal at https://www.reg-
ulations.gov (type IRS-2023-0064 in the
search field on the www.regulations.gov
homepage to find this notice and submit
comments); or
(b) By mail to: Internal Revenue Ser-
vice, CC:PA:LPD:PR (Notice 2024-10),
Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, D.C., 20044.
(3) Publication of comments. The Trea-
sury Department and the IRS will publish
for public availability any comment sub-
mitted electronically and on paper to the
IRS’s public docket on www.regulations.
gov.
SECTION 7. EFFECT ON OTHER
DOCUMENTS
Sections 4 and 6 of Notice 2023-64 are
modified and clarified.
SECTION 8. DRAFTING AND
CONTACT INFORMATION
The principal authors of this notice
are Madeline Padner of the Office of the
Associate Chief Counsel (Income Tax
and Accounting) and Dylan Steiner of
the Office of the Associate Chief Counsel
(International). Other personnel from the
Treasury Department and the IRS par-
ticipated in its development. For further
information regarding section 3 of this
notice, contact Mr. Steiner at (202) 317-
5477 (not a toll-free number). For further
information regarding all other aspects of
this notice, contact Ms. Padner at (202)
317-6313 (not a toll-free number).

Bulletin No. 2024–3 411 January 16, 2024
Part IV
Section 45X Advanced
Manufacturing Production
Credit
REG-107423-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and public hearing.
SUMMARY: This document contains
proposed regulations to implement the
advanced manufacturing production
credit established by the Inflation Reduc-
tion Act of 2022 to incentivize the pro-
duction of eligible components within
the United States. Eligible components
include certain solar energy components,
wind energy components, inverters, qual-
ifying battery components, and applicable
critical minerals. The proposed regula-
tions would affect eligible taxpayers who
produce and sell eligible components and
intend to claim the benefit of an advanced
manufacturing production credit, includ-
ing by making elective payment or credit
transfer elections. This document also
provides notice of a public hearing on the
proposed regulations.
DATES: Written or electronic comments
must be received by February 13, 2024.
A public hearing on this proposed regula-
tion has been scheduled for February 22,
2024, at 10 a.m. ET. Requests to speak
and outlines of topics to be discussed
at the public hearing must be received
by February 13, 2024. If no outlines are
received by February 13, 2024, the public
hearing will be cancelled.
Requests to attend the public hearing must
be received by 5 p.m. ET on February 20,
2024. The public hearing will be made
accessible to people with disabilities.
Requests for special assistance during the
public hearing must be received by 5 p.m.
ET on February 16, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at https://www.regulations.gov
(indicate IRS and REG-107423-23) by
following the online instructions for sub-
mitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Public Hearing”
section. Once submitted to the Federal
eRulemaking Portal, comments cannot be
edited or withdrawn. The Department of
the Treasury (Treasury Department) and
the IRS will publish for public availabil-
ity any comments submitted to the IRS’s
public docket. Send paper submissions to:
CC:PA:01:PR (REG-107423-23), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Mindy Chou, John Deininger,
or Alexander Scott at (202) 317-6853 (not
a toll-free number); concerning submis-
sions of comments or the public hearing,
Vivian Hayes at (202) 317–6901 (not a
toll-free number) or by email to publi-
chearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) to implement section
45X of the Internal Revenue Code (Code).
Section 45X was added to the Code on
August 16, 2022, by section 13502(a)
of Public Law 117-169, 136 Stat. 1818,
1971, commonly referred to as the Infla-
tion Reduction Act of 2022 (IRA). Section
13502(c) of the IRA provides that section
45X applies to components produced and
sold after December 31, 2022.
I. Overview of Section 45X
Section 45X(a)(1) provides that, for
purposes of the general business credit
under section 38 of the Code, the advanced
manufacturing production credit (sec-
tion 45X credit) for any taxable year is
an amount equal to the sum of the credit
amounts determined under section 45X(b)
with respect to each eligible component,
as defined in section 45X(c)(1), which is
produced by the taxpayer, and during the
taxable year, sold by such taxpayer to an
unrelated person. Section 45X(a)(2) pro-
vides that any eligible component pro-
duced and sold by the taxpayer is taken
into account only if the production and
sale is in a trade or business of the tax-
payer.
Section 45X(a)(3) provides rules
regarding the sale of components to an
unrelated person, and generally provides
a special rule that, for purposes of sec-
tion 45X(a), treats a taxpayer as selling a
component to an unrelated person if that
component is sold to the unrelated person
by a person related to the taxpayer. Under
section 45X(a)(3)(B), if a taxpayer makes
an election in the form and manner pre-
scribed by the Secretary of the Treasury or
her delegate (Secretary), a sale of compo-
nents by the taxpayer to a related person
will be treated as if made to an unrelated
person for purposes of section 45X(a)
(Related Person Election). As a condition
of, and prior to, a taxpayer making the
Related Person Election, the Secretary
may require such information or regis-
tration as the Secretary deems necessary
for purposes of preventing duplication,
fraud, or any improper or excessive credit
amount.
Section 45X(b)(1)(A) through (M)
and section 45X(b)(2) set forth the credit
amounts for each type of eligible compo-
nent, which amounts, except for purposes
of determining the credit amount for any
applicable critical mineral, are subject to
phase out rules set forth in section 45X(b)
(3). For any eligible component (except
applicable critical minerals) sold after
December 31, 2029, the credit amount for
such component equals the product of the
amount determined under section 45X(b)
(1) for such component multiplied by the
applicable phase out percentage under sec-

January 16, 2024 412 Bulletin No. 2024–3
tion 45X(b)(3)(B)(i) through (iv). In the
case of an eligible component sold during
calendar year 2030, 2031, and 2032, the
phase out percentages are 75 percent, 50
percent, and 25 percent, respectively. In
the case of an eligible component sold
after December 31, 2032, the phase out
percentage is zero percent. Thus, current
law provides no section 45X credit after
2032 for eligible components other than
for applicable critical minerals.
Section 45X(b)(4) provides capacity
limitations used to compute the credit
amount for eligible battery cells and bat-
tery modules under sections 45X(b)(1)
(K)(ii) and (L)(ii). To compute the credit
for these eligible components, section
45X(b)(4)(A) provides that the capac-
ity determined with respect to a battery
cell or battery module must not exceed a
capacity-to-power-ratio of 100:1. Section
45X(b)(4)(B) defines the term “capac-
ity-to-power-ratio” as the ratio of the
capacity of a battery cell or battery mod-
ule to the maximum discharge amount of
such cell or module.
Section 45X(c)(1)(A) defines the term
“eligible component” to mean any solar
energy component, any wind energy com-
ponent, any inverter described in section
45X(c)(2)(B) through (G), any qualifying
battery component, and any applicable
critical mineral. Section 45X(c)(1)(B)
clarifies that the term “eligible compo-
nent” does not include any property that
is produced at a facility if the basis of
any property that is part of such facility
is taken into account for purposes of the
qualifying advanced energy project credit
allowed under section 48C after August
16, 2022 (the date of enactment of the
IRA).
Section 45X(c)(2)(A) generally defines
an “inverter” as an end product that is suit-
able to convert direct current (DC) elec-
tricity from one or more solar modules or
certified distributed wind energy systems
into alternating current (AC) electricity.
Section 45X(c)(2)(B) through (G) define
the following different types of eligible
inverters: central inverter, commercial
inverter, distributed wind inverter, micro-
inverter, residential inverter, and utility
inverter.
Section 45X(c)(3)(A) defines a “solar
energy component” as a solar module,
photovoltaic cell, photovoltaic wafer,
solar grade polysilicon, torque tube, struc-
tural fastener, or polymeric backsheet.
Section 45X(c)(3)(B) defines these differ-
ent types of eligible solar energy compo-
nents as well as the term “solar tracker.”
Section 45X(c)(4)(A) defines a “wind
energy component” as blades, nacelles,
towers, offshore wind foundations, and
related offshore wind vessels. Section
45X(c)(4)(B) defines these different types
of eligible wind energy components.
Section 45X(c)(5)(A) defines a “qual-
ifying battery component” as electrode
active materials, battery cells, and battery
modules. Section 45X(c)(5)(B) defines
these different types of qualifying battery
components.
Section 45X(c)(6) provides the fol-
lowing list of 50 minerals that if con-
verted or purified to specified purities
are considered an “applicable critical
mineral” for purposes of the section 45X
credit: aluminum, antimony, arsenic, bar-
ite, beryllium, bismuth, cerium, cesium,
chromium, cobalt, dysprosium, erbium,
europium, fluorspar, gadolinium, gal-
lium, germanium, graphite, hafnium, hol-
mium, indium, iridium, lanthanum, lith-
ium, lutetium, magnesium, manganese,
neodymium, nickel, niobium, palladium,
platinum, praseodymium, rhodium, rubid-
ium, ruthenium, samarium, scandium,
tantalum, tellurium, terbium, thulium, tin,
titanium, tungsten, vanadium, ytterbium,
yttrium, zinc, and zirconium.
Section 45X(d) provides special rules
that are applicable to the section 45X
credit. Section 45X(d)(1) provides that
persons are treated as related to each
other if they would be treated as a single
employer under the regulations prescribed
under section 52(b) of the Code. Section
52(b) generally provides that trades or
businesses that are partnerships, trusts,
estates, corporations, or sole proprietor-
ships under common control are members
of a controlled group and are treated as a
single employer. See §1.52-1(b). Section
52(b) requires the regulations under sec-
tion 52(b) to be based on principles sim-
ilar to the principles that apply for pur-
poses of section 52(a), which generally
provides that corporations that are mem-
bers of a controlled group of corporations
are treated as a single employer. Section
52(a) provides that a controlled group of
corporations is defined with reference to
section 1563(a) of the Code. Section 52(b)
and §1.52-1 provide rules similar to those
under section 52(a), but with certain mod-
ifications to account for different types of
ownership interests.
Section 45X(d)(2) provides that sales of
eligible components are taken into account
under section 45X only for eligible compo-
nents that are produced within the United
States (including continental shelf areas
described in section 638(1) of the Code), or
a U.S. territory (including continental shelf
areas described in section 638(2)). (For
purposes of this document, the term “U.S.
territory” has the meaning of the term “pos-
session” as defined in section 638(2).) Sec-
tion 45X(d)(3) directs the Secretary to pro-
mulgate regulations adopting rules similar
to the rules of section 52(d) to apportion
credit amounts between estates or trusts
and their beneficiaries on the basis of the
income of the estates or trusts allocable
to each, and to pass-thru any apportioned
credit amounts to the beneficiaries. Section
45X(d)(4) provides that for purposes of
the section 45X credit, a person is treated
as having sold an eligible component to
an unrelated person if such component is
integrated, incorporated, or assembled into
another eligible component that is sold to
an unrelated person.
II. Notice 2022-47
On October 24, 2022, the Treasury
Department and the IRS published Notice
2022-47, 2022-43 I.R.B. 312. The notice
requested general comments on issues
arising under section 45X, as well as spe-
cific comments concerning: (1) definitions
(including the definitions of eligible com-
ponents); (2) the Related Person Election;
(3) capacity-to-power ratios for battery
cells or battery modules; (4) credit amount
for components used in systems of vary-
ing capacity; (5) offshore wind vessels; (6)
applicable critical minerals; and (7) appor-
tionment and pass-thru of credit amounts
to beneficiaries of estates or trusts. The
Treasury Department and the IRS received
over 300 comments from industry partici-
pants and other stakeholders. The Treasury
Department and the IRS appreciate the
commenters’ interest and engagement on

Bulletin No. 2024–3 413 January 16, 2024
these issues. These comments have been
carefully considered in the preparation of
these proposed regulations.
III. Notices 2023-18 and 2023-44
On March 6, 2023, the Treasury
Department and the IRS published Notice
2023-18, 2023-10 I.R.B. 508, to establish
the qualifying advanced energy projects
program (section 48C(e) program). On
June 20, 2023, the Treasury Department
and the IRS published Notice 2023-44,
2023-25 I.R.B. 924, to provide additional
guidance on the section 48C(e) program,
including rules for the interaction between
sections 45X and 48C. The rules regard-
ing the interaction between sections 45X
and 48C provided in Notices 2023-18 and
2023-44 have been incorporated into these
proposed regulations and upon finalization
of this rulemaking, section 5.05 of Notice
2023-18 and section 3 of Notice 2023-44
will be superseded.
Explanation of Provisions
I. Overview of Proposed Regulations
Consistent with section 45X(a)(1),
these proposed regulations would pro-
vide that for purposes of section 38, the
section 45X credit for any taxable year is
an amount equal to the sum of the credit
amounts determined under section 45X(b)
with respect to each eligible component,
as defined in section 45X(c), produced
by the taxpayer, and, during the taxable
year, sold by that taxpayer to an unrelated
person. Consistent with section 45X(a)
(2), only eligible components that are
produced and sold in a trade or business
of the taxpayer are taken into account for
purposes of the section 45X credit.
These proposed regulations are
organized into four sections, proposed
§§1.45X-1 through 1.45X-4. Proposed
§1.45X-1 would provide general rules
applicable to the section 45X credit,
including the definition of the term “pro-
duced by the taxpayer” for both primary
and secondary production. Primary pro-
duction involves producing an eligible
component using non-recycled materi-
als while secondary production involves
producing an eligible component using
recycled materials. Proposed §1.45X-2
would provide rules for sales to unrelated
persons through a person related to the
taxpayer, including the rules for a tax-
payer to make an election to treat sales
of eligible components to related persons
(Related Person Election) as if made to
unrelated persons. Proposed §1.45X-3
would provide definitions and credit
amounts for certain eligible components,
including solar energy components, wind
energy components, inverters, and quali-
fying battery components, and phase-out
rules. Proposed §1.45X-4 would provide
definitions and credit amounts for appli-
cable critical minerals that are eligible
components.
II. General rules applicable to the
advanced manufacturing production
credit
A. Overview
Proposed §1.45X-1(a) would provide
an overview of the general rules regarding
the advanced manufacturing production
credit under section 45X.
B. Credit amount
Proposed §1.45X-1(b) would explain
how to calculate the amount of the credit
provided under section 45X for any tax-
able year.
C. Definition of produced by the taxpayer
Proposed §1.45X-1(c) would define
the term “produced by the taxpayer” for
both primary and secondary production.
Proposed §1.45X-1(c)(1) would provide
the general definition of the term. Pro-
posed §1.45X-1(c)(1)(i) would state that
partial transformation that does not result
in a substantial transformation of inputs
into a complete and distinct eligible com-
ponent is not included in the definition
of “produced by the taxpayer.” Proposed
§1.45X-1(c)(1)(ii) would state that neither
minor assembly of constituent inputs nor
superficial modification of a final eligible
component are included in the definition
of “produced by the taxpayer.” Proposed
§1.45X-1(c)(1)(iii) would provide exam-
ples illustrating the definition of “pro-
duced by the taxpayer.” Proposed §1.45X-
1(c)(2) would provide a special rule for
applying the definition of “produced by
the taxpayer” for solar grade polysilicon,
electrode active materials, and applicable
critical minerals.
Proposed §1.45X-1(c)(3)(i) would
state that the taxpayer claiming a sec-
tion 45X credit with respect to an eligi-
ble component must be the person that
performs the actual production activities
that bring about a substantial transforma-
tion resulting in the eligible component
and that sells such eligible component to
an unrelated person. Proposed §1.45X-
1(c)(3)(ii)(A) would provide that if the
production of an eligible component is
performed in whole or in part subject to
a contract that is a contract manufactur-
ing arrangement, then the party to such
contract that may claim the section 45X
credit with respect to such eligible com-
ponent, provided all other requirements
in section 45X are met, is the taxpayer
that performs the actual production activ-
ities that bring about a substantial trans-
formation resulting in the eligible com-
ponent. This proposed rule is intended to
provide an administrable rule that pro-
vides taxpayers clarity and certainty in
determining which taxpayer may claim
the section 45X credit in a contract man-
ufacturing arrangement.
Proposed §1.45X-1(c)(3)(ii)(B) would
define the term “contract manufacturing
arrangement” to mean any agreement pro-
viding for the production of an eligible
component if the agreement is entered into
before the production of the eligible com-
ponent to be delivered under the contract
is completed. Proposed §1.45X-1(c)(3)(ii)
(B) would further provide that a routine
purchase order for off-the-shelf property
is not treated as a contract manufactur-
ing arrangement for purposes of proposed
§1.45X-1(c)(3). Proposed §1.45X-1(c)(3)
(ii)(B) would also provide that an agree-
ment will be treated as a routine purchase
order for off-the-shelf property if the con-
tractor is required to make no more than
de minimis modifications to the property
to tailor it to the customer’s specific needs,
or if at the time the agreement is entered
into, the contractor knows or has reason
to know that the contractor can satisfy the
agreement out of existing stocks or nor-

January 16, 2024 414 Bulletin No. 2024–3
mal production of finished goods. This
definition of the term “routine purchase
order” is based on the definition found in
§1.263A-2(a)(1)(ii)(B)(2)(ii). The Trea-
sury Department and the IRS request com-
ments on whether this definition should be
further clarified or modified.
Proposed §1.45X-1(c)(3)(iii) would
explain the special rule allowing parties
to a contract manufacturing arrangement
to agree on which party to the contract
will claim the section 45X credit for
eligible components produced subject
to such contract. Proposed §1.45X-1(c)
(3)(iv) would explain the certification
requirements for the special rule. Pro-
posed §1.45X-1(c)(3)(v) would provide
examples illustrating the application of
the special rule.
Proposed §1.45X-1(c)(4)(i) would
explain the requirements for the timing
of production and sale of eligible compo-
nents. Proposed §1.45X-1(c)(4)(ii) would
provide an example illustrating the appli-
cation of these requirements.
D. Produced in the United States
Proposed §1.45X-1(d)(1) would state
that sales are taken into account for pur-
poses of the section 45X credit only for
eligible components produced within the
United States, as defined in section 638(1)
of the Code, or a United States territory,
which for purposes of section 45X has
the meaning of the term “possession”
provided in section 638(2) of the Code.
Proposed §1.45X-1(d)(2) would clarify
that constituent elements, materials and
subcomponents used in the production of
eligible components are not subject to the
domestic production rule. It would also be
permissible for elements, materials, and
subcomponents used in the production of
eligible components to be recycled rather
than newly created elements, materials,
and subcomponents.
E. Production and sale in a trade or
business
Proposed §1.45X-1(e) would state that
an eligible component must be produced
and sold in a trade or business of the tax-
payer, with the term “trade or business”
defined as a trade or business within the
meaning of section 162 of the Code.
F. Integrated, incorporated, or assembled
Proposed §1.45X-1(f)(1) would state
that a taxpayer is treated as having pro-
duced and sold an eligible component to
an unrelated person if such component
is integrated, incorporated, or assembled
into another eligible component that is
then sold to an unrelated person. This pro-
posed rule would further define the term
“integrated, incorporated, or assembled”
to mean the production activities by which
eligible components that are constituent
elements, materials, or subcomponents
are substantially transformed into another
complete and distinct eligible component
functionally different from that which
would result from mere assembly or super-
ficial modification of the eligible compo-
nents used as elements, materials or sub-
components and other elements, materials
or subcomponents. Proposed §1.45X-1(f)
(2)(i) would clarify that a taxpayer may
claim a section 45X credit for each eligi-
ble component the taxpayer produces and
sells to an unrelated person, including any
eligible component the taxpayer produces
that was used as a constituent element,
material, or subcomponent and integrated,
incorporated, or assembled into another
complete and distinct eligible component
or another complete and distinct product
that the taxpayer also produces and sells
to an unrelated person. Proposed §1.45X-
1(f)(2)(ii) would provide an example of
the credit eligibility of a sale of a product
with incorporated eligible components to
an unrelated person.
G. Interaction between sections 48C and
45X
Proposed §1.45X-1(g)(1) would, con-
sistent with section 45X(c)(1)(B), provide
that for purposes of section 45X, an eli-
gible component must be produced at a
section 45X facility and does not include
any property (produced property) that is
produced at a facility if the basis of any
property that is part of the production unit
that produces the produced property is eli-
gible property that is included in a section
48C facility and is taken into account for
purposes of a credit allowed under section
48C (section 48C credit) after August 16,
2022. Proposed §1.45X-1(g)(2)(i) would
define a section 45X facility to include
all tangible property that comprises an
independently functioning production
unit that produces one or more eligible
components. Proposed §1.45X-1(g)(2)
(ii) would provide that a production unit
is comprised of the tangible property that
substantially transforms material inputs to
complete the production process of an eli-
gible component. Proposed §1.45X-1(g)
(3)(i) would define a section 48C facility
to include all eligible property included in
a qualifying advanced energy project for
which a taxpayer receives an allocation
of section 48C credits and claims such
credits after August 16, 2022. Proposed
§1.45X-1(g)(3)(ii) would define eligible
property included in a section 48C facil-
ity. Proposed §1.45X-1(g)(4) would pro-
vide examples to illustrate the application
of these rules.
H. Pass-thru from estates and trusts
The Treasury Department and the IRS
intend to provide rules addressing how
the section 45X credit applies in the case
of pass-thru from estates and trusts. The
Treasury Department and the IRS request
comments on how such rules should be
implemented and whether there are any
special considerations for estates and
trusts claiming the section 45X credit.
Proposed §1.45X-1(h) is reserved for this
purpose.
I. Anti-abuse rule
Proposed §1.45X-1(i)(1) provides a
general anti-abuse rule that would make
the section 45X credit unavailable in
extraordinary circumstances in which,
based on a consideration of all the facts
and circumstances, the primary purpose
of the production and sale of an eligible
component is to obtain the benefit of the
section 45X credit in a manner that is
wasteful, such as discarding, disposing
of, or destroying the eligible component
without putting it to a productive use.
In cases where the cost of producing
certain eligible components is less than
the amount of the section 45X credit that
would be available, the Treasury Depart-
ment and the IRS are concerned that tax-
payers may have an incentive to produce
such components solely for the purpose of
exploiting the section 45X credit in a man-

Bulletin No. 2024–3 415 January 16, 2024
ner that is inconsistent with a purpose of
section 45X, which is to provide an incen-
tive to produce eligible components that
contribute to the development of secure
and resilient supply chains. Producing and
selling eligible components with the pri-
mary purpose of obtaining the benefit of
the section 45X credit in a wasteful man-
ner would not satisfy the requirement for
the eligible component to be produced and
sold in a trade or business of the taxpayer
under section 45X(a)(2) in certain circum-
stances. Proposed §1.45X-1(i)(2) would
provide an example illustrating this anti-
abuse rule.
III. Sale to an unrelated person
Proposed §1.45X-2(a) would state the
general rule that the amount of the section
45X credit for any taxable year is equal to
the sum of the credit amounts determined
under section 45X(b) (and described in
§§1.45X-3 and 1.45X-4) with respect to
each eligible component that is produced
by the taxpayer and, during the taxable
year, sold by the taxpayer to an unrelated
person (as defined in section 45X(a)(3)
and described in §1.45X-2(b)(3)).
A. Definitions
Section 45X(d)(1) provides that per-
sons are treated as related to each other
if such persons would be treated as a
single employer under the regulations
prescribed under section 52(b). Proposed
§1.45X-2(b) would provide definitions of
the terms “person,” “related person,” and
“unrelated person” for purposes of the
section 45X credit.
B. Special rule for sale to related person
Section 45X(a)(3)(A) provides a spe-
cial rule for purposes of section 45X that a
taxpayer is treated as selling components
to an unrelated person if such component
is sold to such person by a person related
to the taxpayer. Proposed §1.45X-2(c)
would provide this rule and an example to
illustrate its application.
C. Related person election
Section 45X(a)(3)(B)(i) provides that
at the election of the taxpayer (in such
form and manner as the Secretary may
prescribe), a sale of components by such
taxpayer to a related person is treated as
if made by the taxpayer to an unrelated
person for purposes of section 45X(a)
(Related Person Election). Thus, the
Related Person Election is only avail-
able if an eligible component is sold by a
taxpayer to a related person. The Related
Person Election is not available if a tax-
payer does not actually sell the eligible
component to another person, for exam-
ple, if an eligible component is trans-
ferred between a person and an entity
that is not regarded as separate from the
person under §301.7701-3 of the Proce-
dure and Administration Regulations (26
CFR part 301) or between divisions of a
single corporation. Section 45X(a)(3)(B)
(ii) provides that as a condition of, and
prior to, any election described in clause
(i), the Secretary may require such infor-
mation or registration as the Secretary
deems necessary for purposes of prevent-
ing duplication, fraud, or any improper or
excessive amount determined under sec-
tion 45X(a)(1).
Proposed §1.45X-2(d)(1) would pro-
vide that the Related Person Election
must be made in the form and manner
prescribed in guidance. The term “guid-
ance” is defined as guidance published
in the Federal Register or Internal Rev-
enue Bulletin, as well as administrative
guidance such as forms, instructions, pub-
lications, or other guidance on the IRS.
gov website. See §§ 601.601 and 601.602
of the Statement of Procedural Rules (26
CFR part 601). For members of a consol-
idated group (as defined in §1.1502-1(h)),
the election is made by each member, in
the manner set forth in proposed §1.45X-
2(d)(3)(ii). In addition, if a member of a
consolidated group sells eligible compo-
nents to another member of the group, the
selling member may make the Related
Person Election to claim the section 45X
credit in the taxable year of sale. Proposed
§1.45X-2(d)(1) would also provide that
as a condition of, and prior to, a taxpayer
making a Related Person Election, the
Secretary may require such information
or registration as the Secretary deems nec-
essary for purposes of preventing duplica-
tion, fraud, or any improper or excessive
credit amount determined under section
45X(a)(1).
Proposed §1.45X-2(d)(2) would pro-
vide the time and manner for a taxpayer
to make the Related Person Election.
Proposed §1.45X-2(d)(2)(i) would state
that a taxpayer must make an affirma-
tive Related Person Election annually in
the form and manner prescribed in guid-
ance (currently Form 7207, Advanced
Manufacturing Production Credit, and
its instructions), and filed with the tax-
payer’s timely filed original Federal
income tax return, including extensions.
Proposed §1.45X-2(d)(2)(i) would also
provide that the Related Person Election
will be applicable to all sales of eligible
components to related persons by the tax-
payer for each trade or business that the
taxpayer engages in during the taxable
year that resulted in a credit claim and for
which the taxpayer has made the Related
Person Election. Proposed §1.45X-2(d)
(2)(ii) would provide the required infor-
mation to make a Related Person Elec-
tion.
Proposed §1.45X-2(d)(3) would
describe the scope and effect of the
Related Person Election and provide that
a separate Related Person Election must
be made with respect to related person
sales made by a taxpayer in each eligible
trade or business of the taxpayer. Pro-
posed §1.45X-2(d)(3) would also provide
that a Related Person Election applies to
all sales to related persons (including
between members of the same consoli-
dated group, notwithstanding the rules
provided in §1.1502-13) of eligible com-
ponents produced by the taxpayer during
the taxable year for which that election is
made and is irrevocable for that taxable
year. Additionally, proposed §1.45X-2(d)
(3) would provide that a Related Person
Election applies solely for purposes of
the section 45X credit, the provisions of
proposed §§1.45X-1 through 1.45X-4,
and so much of sections 6417 and 6418
and the regulations under sections 6417
and 6418 related to the section 45X
credit.
Proposed §1.45X-2(d)(3)(ii) and (iii)
would apply the provisions of proposed
§1.45X-2(d)(2) and (d)(3)(i) to consol-
idated groups and partnerships. Pro-
posed §1.45X-2(d)(3)(ii) would apply
the provisions of proposed §1.45X-2(d)
(2) and (d)(3)(i) to consolidated groups
by providing that for a trade or business

January 16, 2024 416 Bulletin No. 2024–3
of a consolidated group (as defined in
§1.1502-1(h)), a Related Person Election
is made by the agent for the group on
behalf of the member claiming the sec-
tion 45X credit and filed with the group’s
timely filed original Federal income tax
return, including extensions, with respect
to each trade or business that the consol-
idated group conducts. See §1.1502-77
(providing rules regarding the status of
the common parent as agent for its mem-
bers). A separate election must be filed on
behalf of each member claiming the sec-
tion 45X credit, and each election must
include the name and employer identifi-
cation number (EIN) of the agent for the
group and the member on whose behalf
the form is being filed.
Proposed §1.45X-2(d)(3)(iii) would
apply the provisions of proposed §1.45X-
2(d)(2) and (d)(3)(i) to partnerships by
stating that an election for a partnership
must be filed with the partnership’s timely
filed original Federal income tax return,
including extensions, with respect to each
trade or business that the partnership con-
ducts. Additionally, proposed §1.45X-
2(d)(3)(iii) provides that an election by a
partnership does not apply to any trade or
business conducted by a partner outside
the partnership.
Proposed §1.45X-2(d)(4) would pro-
vide an anti-abuse rule for the Related
Person Election that is necessary for
preventing duplication, fraud, or any
improper or excessive amount of the
section 45X credit. This anti-abuse rule
would make the Related Person Election
unavailable in extraordinary cases where
a taxpayer seeks to use the Related Per-
son Election to exploit the section 45X
credit in an improper and wasteful man-
ner or sell defective components to a
related person. Proposed §1.45X-2(d)(4)
(i) would provide that a Related Person
Election may not be made if the taxpayer
fails to provide the information required
by proposed §1.45X-2(d)(2) with respect
to the relevant eligible components, the
taxpayer provides information that shows
such components were put to an improper
use or were defective, or such components
were actually put to an improper use or
were defective.
Proposed §1.45X-2(d)(4)(ii) would
provide that an eligible component is put
to an improper use if it is so used by the
related person to which the eligible com-
ponent is sold. The term “improper use”
would mean a use that is wasteful, such as
discarding, disposing of, or destroying the
eligible component without putting it to a
productive use.
As discussed previously, in cases in
which the cost of producing certain eli-
gible components may be less than the
amount of the section 45X credit that is
available, the Treasury Department and
the IRS are concerned that taxpayers may
have an incentive to produce such com-
ponents solely for the purpose of exploit-
ing the section 45X credit without putting
such components to a productive use. In
such cases, the Related Person Election
would remove an important safeguard
against the improper and wasteful pro-
duction of eligible components that an
unrelated-person-sale requirement would
provide. The Treasury Department and
the IRS request comments on this defi-
nition of the term “improper use” and
whether any clarifications to its scope are
necessary.
Proposed §1.45X-2(d)(4)(iii) would
provide that an eligible component is
“defective” if it does not meet the require-
ments of section 45X. The Treasury
Department and the IRS are concerned that
the Related Person Election may be used
by taxpayers to claim a credit for eligible
components that are defective, not capable
of being used for its intended purpose, do
not meet the requirements for the section
45X credit, and therefore are not eligible
for the section 45X credit. For example, a
taxpayer that mass produces a large quan-
tity of an eligible component may find that
some of those components are defective,
cannot be used for its intended purposes,
and are not eligible for the section 45X.
Such components could also be difficult
to sell to an unrelated person because they
are defective. In such cases, the Related
Person Election would remove an import-
ant safeguard against improper credit
claims for defective components that an
unrelated-person-sale requirement would
provide. The Treasury Department and
the IRS request comments on the defini-
tion of the term “defective components”
and whether clarifications to its scope are
necessary.
D. Related person sale of integrated
components
Section 45X(d)(4) provides that for
purposes of section 45X, a person is
treated as having sold an eligible compo-
nent to an unrelated person if such compo-
nent is integrated, incorporated, or assem-
bled into another eligible component that
is sold to an unrelated person. See part II.F
of this Explanation of Provisions for rules
applicable to eligible components that are
integrated, incorporated or assembled into
other eligible components and sold to an
unrelated person.
Proposed §1.45X-2(e)(1) would pro-
vide that a taxpayer that produces and
then sells an eligible component to a
related person who then integrates, incor-
porates, or assembles the taxpayer’s eli-
gible component into another complete
and distinct eligible component that is
subsequently sold to an unrelated person
may claim a section 45X credit in the
taxable year of the sale to the unrelated
person. Proposed §1.45X-2(e)(2) would
provide examples to illustrate the treat-
ment of sales of multiple incorporated
eligible components to related and unre-
lated persons.
Proposed §1.45X-2(e)(3)(i) would
provide that if a taxpayer makes the
Related Person Election and produces and
sells an eligible component to a related
person who then integrates, incorporates,
or assembles the taxpayer’s eligible com-
ponent into another complete and distinct
eligible component that is subsequently
sold to an unrelated person, the taxpay-
er’s sale of the eligible component to
the related person would be treated as if
made to an unrelated person in the tax-
able year in which the sale to the related
person occurs. Proposed §1.45X-2(e)(3)
(ii) would provide an example to illus-
trate the treatment of sales of multiple
integrated eligible components to related
and unrelated persons with a Related Per-
son Election.
IV. Eligible components
For solar energy components, wind
energy components, inverters, and qual-
ifying battery components, proposed
§1.45X-3 would provide definitions, rules

Bulletin No. 2024–3 417 January 16, 2024
for determining the credit amount, and
documentation requirements. Proposed
§1.45X-3 would also provide rules for
applying the phase out of the section 45X
credit. Proposed §1.45X-4 would provide
such information for applicable critical
minerals (other than rules for applying the
phase out which do not apply to applicable
critical minerals).
A. Eligible Components Generally
Proposed §1.45X-3(a) defines the term
“eligible component” as any solar energy
component, any wind energy component,
any inverter, any qualifying battery com-
ponent, and any applicable critical min-
eral.
B. Solar
Proposed §1.45X-3(b) would define
the term “solar energy component” as a
solar module, photovoltaic cell, photovol-
taic wafer, solar grade polysilicon, torque
tube, structural fastener, or polymeric
backsheet. Proposed §1.45X-3(b) would
clarify the definition of each type of solar
energy component.
Proposed §1.45X-3(b) would also clar-
ify the calculation of the credit amount
for each type of solar energy component.
Proposed §1.45X-3(b)(1)(ii) and (b)(5)(ii)
would require the capacity of a solar mod-
ule or photovoltaic cell to be determined
by the nameplate capacity in direct current
watts using Standard Test Conditions, as
defined by the International Electrotechni-
cal Commission.
Proposed §1.45X-3(b) would also
require taxpayers to maintain specific
documentation with respect to certain
solar energy components. For example,
for structural fasteners to be eligible for
the section 45X credit, section 45X(c)(3)
(B)(vii)(II) provides that structural fas-
teners must be used (1) to connect the
mechanical and drive system components
of a solar tracker to the foundation of such
solar tracker, (2) to connect torque tubes
to drive assemblies, or (3) to connect seg-
ments of torque tubes to one another. Pro-
posed §1.45X-3(b)(8)(iii) would require
taxpayers to document that a structural
fastener meets this use requirement with
a bill of sale, or other similar documen-
tation that explicitly describes such use.
Proposed §1.45X-3(b)(7)(iii) would apply
similar documentation rules to torque
tubes because section 45X(c)(3)(B)(vii)(I)
(aa) requires a torque tube to be “part of a
solar tracker” to be eligible for the section
45X credit.
C. Wind
Proposed §1.45X-3(c) would define the
term “wind energy component” as a blade,
nacelle, tower, offshore wind foundation,
or related offshore wind vessel. Proposed
§1.45X-3(c) would clarify the definition
of each type of wind energy component.
Proposed §1.45X-3(c)(4)(i) would
clarify the definition of the term “related
offshore wind vessel.” Section 45X(c)(4)
(B)(iv) defines the term “related offshore
wind vessel” as any vessel that is pur-
pose-built or retrofitted for purposes of the
development, transport, installation, oper-
ation, or maintenance of offshore wind
energy components. Proposed §1.45X-
3(c)(4)(i) would clarify that a vessel is
purpose-built for development, transport,
installation, operation, or maintenance of
offshore wind energy components if it is
built to be capable of performing such
functions and it is of a type that is com-
monly used in the offshore wind industry.
Proposed §1.45X-3(c)(4)(i) would further
clarify that a vessel is retrofitted for devel-
opment, transport, installation, operation,
or maintenance of offshore wind energy
components if such vessel was incapa-
ble of performing such functions prior to
being retrofitted, the retrofit causes the
vessel to be capable of performing such
functions, and the retrofitted vessel is of a
type that is commonly used in the offshore
wind industry.
Proposed §1.45X-3(c) would also clar-
ify the calculation of the credit amount for
each type of wind energy component. The
credit amount for a blade, nacelle, tower,
or offshore wind foundation is based on
the total rated capacity of the completed
wind turbine for which such component is
designed. Proposed §1.45X-3(c)(6) would
define “total rated capacity of the com-
pleted wind turbine” as, for the completed
wind turbine for which a blade, nacelle,
offshore wind foundation, or tower was
manufactured and sold, the nameplate
capacity at the time of sale as certified to
the relevant national or international stan-
dards, such as International Electrotech-
nical Commission (IEC) 61400, or ANSI/
ACP 101-1-2021, the Small Wind Turbine
Standard. Certification of the turbine to
such standards must be documented by a
certificate issued by an accredited certifi-
cation body. The total rated capacity of a
wind turbine must be expressed in watts.
For a related offshore wind vessel, the
credit amount is equal to 10 percent of
the sales price of the vessel. The sales
price of the vessel does not include the
price of maintenance or other services
that may be sold with the vessel. Pro-
posed §1.45X-3(c)(4)(ii) would confirm
that, for a related offshore wind vessel
with respect to which a Related Person
Election (as discussed in part III.C of
this Explanation of Provisions) has been
made, the effect of the election is lim-
ited to allowing the related person sale
to qualify for a credit under section 45X
(despite the fact that it is not actually
between unrelated persons) and, there-
fore, the election does not also treat the
sale price as an arm’s length price that
was determined between uncontrolled
taxpayers for purposes of section 482 of
the Code and the regulations thereunder.
For blades, nacelles, offshore wind
foundations, or towers, proposed §1.45X-
3(c)(7) would require a taxpayer to doc-
ument the turbine model for which such
component is designed and the total rated
capacity of the completed wind turbine in
technical documentation associated with
the sale of such component.
D. Inverters
Proposed §1.45X-3(d) would define
the term “inverter” as an end product that
is suitable to convert DC electricity from
one or more solar modules or certified
distributed wind energy systems into AC
electricity. An end product is suitable to
convert DC electricity from one or more
solar modules or certified distributed
wind energy systems into AC electricity
if, in the form sold by the manufacturer,
it is able to connect with such modules
or systems and convert DC electricity
to AC electricity from such connected
source. For purposes of section 45X, the

January 16, 2024 418 Bulletin No. 2024–3
term inverter includes a central inverter,
commercial inverter, distributed wind
inverter, microinverter, or residential
inverter. Proposed §1.45X-3(d) would
clarify the definition of each of these
types of inverters.
Section 45X(c)(2) requires certain
types of inverters be “suitable to” or
“suitable for” a statutorily required use or
application to be considered an eligible
component. For example, section 45X(c)
(2)(B) requires a central inverter to be
“suitable for large utility-scale systems.”
Proposed §1.45X-3(d)(2)(i) would clarify
that an inverter is suitable for large utili-
ty-scale systems if, in the form sold by the
manufacturer, it is capable of serving as a
component in a large utility-scale system
and meets the core engineering specifica-
tions for such application.
Proposed §1.45X-3(d)(5) would clar-
ify that a direct current optimized inverter
system (DC optimized inverter system)
may qualify as a microinverter. Proposed
§1.45X-3(d)(5)(i) would define a micro-
inverter as an inverter that is suitable to
connect with one solar module, has a rated
output of 120 or 240 volt single-phase
power, or 208 or 480 volt three-phase
power, and has a capacity, expressed on
an AC watt basis, that is not greater than
650 watts. Proposed §1.45X-3(d)(5)(iii)
(A) would clarify that an inverter is suit-
able to connect to one solar module if, in
the form sold by the manufacturer, it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity. Proposed §1.45X-
3(d)(5)(iii)(B) would provide that a DC
optimized inverter system is an inverter
that is comprised of an inverter connected
to multiple DC optimizers that are each
designed to connect to one solar module.
Proposed §1.45X-3(d)(5)(iv)(B)
would clarify how to determine the credit
amount for a DC optimized inverter sys-
tem that qualifies as a microinverter. For
a DC optimized inverter system to qualify
as a microinverter, the inverter must meet
the requirements of section 45X(c)(2)(E)
and a taxpayer must produce and sell the
inverter and the DC optimizers in the DC
optimized inverter system together as a
single end product.
Proposed §1.45X-3(d)(5) would
clarify that, similar to a DC optimized
inverter system, a multi-module inverter
may also qualify as a microinverter. The
term “multi-module inverter” means an
inverter that is comprised of an inverter
with independent connections and DC
optimizing components for two or more
modules. Proposed §1.45X-3(d)(5)(iv)(C)
would provide that the credit amount for
a multi-module inverter that qualifies as
a microinverter is equal to the product of
11 cents multiplied by the total alternat-
ing current capacity of the DC optimizers
in the multi-module inverter when paired
with the inverter in the multi-module
inverter.
Proposed §1.45X-3(d) would also clar-
ify the calculation of the credit amount for
each type of inverter. In general, the credit
amount for each type of inverter would be
equal to the product of the inverter’s total
rated capacity and the amount prescribed
in section 45X(b)(2)(B) for such inverter.
Proposed §1.45X-3(d) would generally
require taxpayers to document whether
an inverter is suitable to or suitable for a
statutorily required use or application, the
inverter’s rated output, and the inverter’s
capacity, as applicable, in a specification
sheet, bill of sale, or other similar docu-
mentation.
E. Battery components
Proposed §1.45X-3(e)(1) would
define the term “qualifying battery com-
ponent” as electrode active materials,
battery cells, or battery modules. Pro-
posed §1.45X-3(e)(2)(i)(A) would define
the term “electrode active materials”
to include cathode electrode materials,
anode electrode materials, and electro-
chemically active materials that con-
tribute to the electrochemical processes
necessary for energy storage. In general,
electrode active materials are materials
that are capable of being used within a
battery for energy storage. Proposed
§1.45X-3(e)(2)(i)(A) would also provide
that the following materials in a battery
or vehicle would not qualify for the sec-
tion 45X credit as an electrode active
material: battery management systems,
terminal assemblies, cell containments,
gas release valves, module containments,
module connectors, compression plates,
straps, pack terminals, bus bars, thermal
management systems, and pack jackets.
Proposed §1.45X-3(e)(2)(i)(B) would
define “cathode electrode materials” to
mean the materials that comprise the
cathode of a commercial battery tech-
nology, such as binders, and current col-
lectors (that is, cathode foils). Proposed
§1.45X-3(e)(2)(i)(C) would define “anode
electrode materials” to mean the materials
that comprise the anode of a commercial
battery technology, including anode foils.
Proposed §1.45X-3(e)(2)(i)(D) would
define “electrochemically active materi-
als that contribute to the electrochemical
processes necessary for energy storage”
to mean the battery-grade materials that
enable the electrochemical storage within
a commercial battery technology. In addi-
tion to the list of electrochemically active
materials provided in section 45X(c)(5)
(B)(i) (solvents, additives, and electro-
lytic salts), these may include electrolytes,
catholytes, anolytes, separators, and metal
salts and oxides. Proposed §1.45X-3(e)(2)
(i)(E) would also include an example illus-
trating this concept. Proposed §1.45X-
3(e)(2)(i)(F) would define “battery-grade
materials” to mean the processed materi-
als found in a final battery cell or an anal-
ogous unit, or the direct battery-grade pre-
cursors to those processed materials.
Proposed §1.45X-3(e)(2)(v) would
clarify that a taxpayer may claim only
one section 45X credit with respect to a
material that qualifies as both an electrode
active material and an applicable critical
mineral.
F. Production costs incurred
Proposed §1.45X-3(e)(2)(ii) would
provide that for an electrode active mate-
rial the credit amount is equal to 10 per-
cent of the costs incurred by the taxpayer
with respect to production of such mate-
rials. Proposed §1.45X-3(e)(2)(iii) would
also provide the definition of purified and
converted with respect to electrode active
materials. Proposed §1.45X-3(e)(2)(iv)
would clarify that the costs incurred for
purposes of determining the credit amount
includes costs as defined in §1.263A-1(e)
that are paid or incurred within the mean-
ing of section 461 of the Code by the tax-

Bulletin No. 2024–3 419 January 16, 2024
payer for the production of an electrode
active material only. Thus, production
costs with respect to an electrode active
material would not include any costs
incurred after the production of the elec-
trode active material. For example, the
costs to incorporate the electrode active
material into a battery component would
not be taken into account as costs incurred
in producing the electrode active material.
These proposed regulations apply section
263A and the regulations under section
263A (section 263A regulations) solely to
identify the types of costs that are includi-
ble in production costs incurred for pur-
poses of computing the amount of the sec-
tion 45X credit, but do not apply section
263A or the section 263A regulations for
any other purposes, such as to determine
whether a taxpayer is engaged in produc-
tion activities.
Direct material costs as defined in
§1.263A-1(e)(2)(i)(A), or indirect mate-
rial costs as defined in §1.263A-1(e)(3)(ii)
(E), and any costs related to the extraction
or acquisition of raw materials would not
be taken into account as production costs.
A wide range of costs that are attributable
to the production of an electrode active
material would be taken into account as
a cost incurred in producing the electrode
active material, including, but not limited
to, labor, electricity used in the production
of the electrode active material, storage
costs, depreciation or amortization, recy-
cling, and overhead. However, the cost
of acquiring the raw material used to pro-
duce the electrode active material, the cost
of materials used for conversion, purifica-
tion, or recycling of the raw material, and
other material costs related to the produc-
tion of the electrode active material would
not be taken into account.
The Treasury Department and the IRS
seek to appropriately provide a credit
for the costs associated with production
activities that add value to the electrode
active material and are conducted by
the taxpayer that produces the electrode
active material. Merely purchasing raw
materials may enable a taxpayer to pro-
duce an electrode active material but it is
not by itself an activity that adds value.
Excluding material costs would also mit-
igate the risk of crediting the same costs
multiple times. For example, if material
costs are included in production costs for
electrode active materials, the costs of
producing an applicable critical mineral
that is later incorporated into an elec-
trode active material could be credited
more than once, and such material costs
could make up a significant share of the
cost of producing the electrode active
material.
The Treasury Department and the
IRS recognize that a wide range of costs
are incurred in the production of elec-
trode active materials. The Treasury
Department and the IRS request com-
ments on this proposed rule for deter-
mining the costs incurred with respect
to the production of electrode active
materials, specifically whether and
how extraction and other similar val-
ue-added activities in the production of
raw materials used in electrode active
materials should be taken into account.
The Treasury Department and the IRS
welcome an assessment of the magni-
tude of extraction costs and other direct
and indirect material costs relative to the
overall costs incurred in the production
of an electrode active material, and the
extent to which these costs are incurred
by the taxpayer that also produces the
electrode active material and add value
to the electrode active material. The
Treasury Department and the IRS also
welcome comments on how extraction
should be defined for this purpose, and
whether it should be defined consistent
with proposed §1.30D-3(c)(8).
The Treasury Department and the IRS
are considering including in production
costs the costs of extraction and other
similar value-added activities in the pro-
duction of raw materials used in electrode
active materials. However, such costs
would only be included if the IRS could
effectively administer such an approach
and there are sufficient assurances that
adopting such an approach would pose
a limited risk of (i) crediting the same
production costs multiple times and (ii)
increasing other forms of fraud, waste,
and abuse. The Treasury Department and
the IRS request comments on whether and
to what extent including these costs might
raise such risks.
The Treasury Department and the IRS
intend for the production cost incurred
rules in proposed §1.45X-3(e)(2) to
apply to a credit claimant in a contract
manufacturing arrangement. The Trea-
sury Department and the IRS request
comments on whether the proposed rules
need further clarification or modifica-
tion as applied to contract manufacturing
arrangements.
G. Battery cells and modules
Proposed §1.45X-3(e)(3) and (4)
would provide definitions, rules for
measuring capacity, and documentation
requirements for battery cells and bat-
tery modules. Proposed §1.45X-3(e)(4)
(i) would define a “battery module” as a
module, in the case of a module using bat-
tery cells, with two or more battery cells
that are configured electrically, in series
or parallel, to create voltage or current,
as appropriate, to a specified end use, or
a module with no battery cells, and, in
each case, with an aggregate capacity of
not less than 7 kilowatt-hours (or, in the
case of a module for a hydrogen fuel cell
vehicle, not less than 1 kilowatt-hour).
Proposed §1.45X-3(e)(4)(i)(A) would
define a “module using battery cells” as
a module with two or more battery cells
that are configured electrically, in series
or parallel, to create voltage or current
(as appropriate), to a specified end use,
meaning an end-use configuration of bat-
tery technologies. An end-use configura-
tion is the product that ultimately serves
a specified end use. It is the collection
of interconnected cells, configured to
that specific end-use and interconnected
with the necessary hardware and soft-
ware required to deliver the required
energy and power (voltage and current)
for that use. As applied to batteries com-
monly used in electric vehicles, proposed
§1.45X-3(e)(4)(i)(A) would permit a
credit for the production and sale of the
battery pack in the electric vehicle, but it
would not permit a credit for the produc-
tion of a module that is not the end-use
configuration. The Treasury Department
and the IRS request comments on this
proposed interpretation of the phrase “to
a specified end use” in section 45X(c)(5)
(B)(iii)(I)(aa).
Proposed §1.45X-3(e)(4)(i)(B) would
define the term “module with no battery

January 16, 2024 420 Bulletin No. 2024–3
cells” as a product with a standardized
manufacturing process and form that is
capable of storing and dispatching useful
energy, that contains an energy storage
medium that remains in the module (for
example, it is not consumed through com-
bustion), and that is not a custom-built
electricity generation or storage facility.
This proposed definition would allow
battery technologies such as flow batter-
ies and thermal batteries to be eligible for
the section 45X credit, but it would not
permit technologies that do not meet this
definition such as standalone fuel storage
tanks or fuel tanks connected to engines or
generation systems to qualify as a module
with no battery cells.
Proposed §1.45X-3(e) would clarify
how capacity must be determined for
battery cells and battery modules. Pro-
posed §1.45X-3(e)(3)(ii) would provide
that taxpayers must measure the capac-
ity of a battery cell in accordance with
a national or international standard, such
as IEC 60086-1 (Primary Batteries), or an
equivalent standard. Taxpayers can refer-
ence the United States Advanced Battery
Consortium (USABC) Battery Test Man-
ual for additional guidance. Proposed
§1.45X-3(e)(4)(ii)(A) would provide
that, for modules using battery cells, tax-
payers must measure the capacity of a
module using battery cells with a testing
procedure that complies with a national
or international standard published by
a recognized standard setting organiza-
tion. The capacity of a battery module
using battery cells may not exceed the
total capacity of the battery cells in the
module. Proposed §1.45X-3(e)(4)(ii)(B)
would provide that, for modules with no
battery cells, taxpayers must measure
the capacity using a testing procedure
that complies with a national or interna-
tional standard published by a recognized
standard setting organization. If no such
standard applies to a type of module with
no battery cells, taxpayers must measure
the capacity of such module as the Secre-
tary may prescribe in regulations or other
guidance. The Treasury Department and
the IRS request comments on what rec-
ognized national or international stan-
dards are currently available for measur-
ing capacity of modules with no battery
cells and whether further guidance may
be required.
H. Phase Out
Proposed §1.45X-3(f) would provide
the rules for the phase out of the section
45X credit. In the case of any eligible
component that is not an applicable crit-
ical mineral and is sold after December
31, 2029, the amount of the section 45X
credit determined with respect to such
eligible component would be equal to the
product of the amount determined under
proposed §1.45X-3 with respect to such
eligible component, multiplied by the
phase out percentage. Proposed §1.45X-
3(f)(2) would provide the phase out
percentages. The phase out percentage
would be equal to 75 percent for eligible
components sold during calendar year
2030; 50 percent for eligible components
sold during calendar year 2031; 25 per-
cent for eligible components sold during
calendar year 2032, and zero percent for
eligible components sold after calendar
year 2032. The phase out percentages
would be determined based on the year
the eligible component is sold rather than
the year in which the eligible component
is produced by the taxpayer. Proposed
§1.45X-3(f)(3) would clarify that the
phase out rules described in proposed
§1.45X-3(f) do not apply to applicable
critical minerals as defined in proposed
§1.45X-4(b).
V. Applicable critical minerals
A. In general
Section 45X(c)(6) defines applicable
critical minerals that are eligible com-
ponents for purposes of the section 45X
credit. Congress enacted section 45X to
incentivize the domestic production of
eligible components, including certain
applicable critical minerals, that are vital
to strengthening the country’s renewable
energy and energy storage supply chains.
In addition, Congress amended section
30D in the IRA to provide that section
30D credit eligibility and credit amount is
based in part on the sourcing of applicable
critical minerals contained in the battery of
new clean vehicles from secure and resil-
ient supply chains, with applicable criti-
cal minerals defined by cross-reference to
section 45X(c)(6). See section 30D(d)(7)
(A) and (e)(1). The Treasury Department
and the IRS interpret the applicable crit-
ical minerals described in section 45X(c)
(6) through this lens.
Proposed §1.45X-4(b) adopts, with
some clarifications, the definitions of
applicable critical minerals provided
in section 45X(c)(6). In particular, sec-
tion 45X(c)(6)(N) provides that the term
“graphite” means graphite (both natural
and synthetic) that is purified to a min-
imum purity of 99.9 percent graphitic
carbon by mass. Some stakeholders have
questioned whether this definition could
be interpreted to refer to a particular crys-
talline structure of carbon, that is, 99.9
percent carbon in a graphitic form. After
consulting with experts at the Department
of Energy, U.S. Geological Survey, and
Department of the Interior, the Treasury
Department and the IRS are unaware of a
current application in the energy sector for
graphite that is at least 99.9 percent carbon
in the graphitic form. However, graph-
ite that is at least 99.9 percent carbon by
mass is used in electric vehicle batteries
to facilitate the electrochemical processes
necessary for energy storage, as well as in
other energy sector applications. Consis-
tent with the general intent of section 45X,
proposed §1.45X-4(b)(14) would clarify
that the term “99.9 percent graphitic car-
bon by mass” means graphite that is 99.9
percent carbon by mass. This interpreta-
tion reflects that various forms of matter
are 99.9 percent carbon, such as carbon
black, so the word “graphitic” is provid-
ing additional clarification regarding the
particular application of the carbon. This
interpretation provides an incentive for the
domestic production of the type of graph-
ite that is used in the renewable energy
and energy storage industry, including
both synthetic and natural graphite for use
in electric vehicle batteries. This inter-
pretation also supports the secure supply
chain objectives expressed by Congress in
amendments to section 30D that cross-ref-
erence the section 45X definition of appli-
cable critical minerals.
Section 45X(c)(6)(A) provides that
aluminum that is converted from bauxite
to a minimum purity of 99 percent alu-
mina by mass or purified to a minimum
purity of 99.9 percent aluminum by mass,
qualifies as an applicable critical mineral.
Some stakeholders have requested clar-
ification whether commercial grade alu-

Bulletin No. 2024–3 421 January 16, 2024
minum that is 99.7 percent aluminum by
mass may qualify as an applicable critical
mineral under section 45X(c)(6)(A).
Section 45X(c)(6)(A) should be inter-
preted in light of the dynamics of the
aluminum industry and the role that crit-
ical materials like aluminum play in the
renewable energy and energy storage
industry. Aluminum oxide, commonly
known as alumina, is a form of aluminum
that is referred to in section 45X(c)(6)(A)
(i). Proposed §1.45X-4(b)(1) would inter-
pret section 45X(c)(6)(A) to mean alumi-
num, including commodity-grade alumi-
num, described in section 45X(c)(6)(A)(i)
and (ii). Proposed §1.45X-4(b)(1) would
define “commodity-grade aluminum” as
aluminum that has been produced directly
from aluminum that is described in pro-
posed §1.45X-4(b)(1)(i) or (ii) and is in
a form that is sold on international com-
modity exchanges, which would include
commercial grade aluminum that is 99.7
percent aluminum by mass.
Proposed §1.45X-4(b)(1) clarifies
that the term “commodity-grade alumi-
num” is limited to primary production
of unwrought forms by specifying that
commodity-grade aluminum must be
“produced directly” from certain forms
of aluminum. The Treasury Department
and the IRS currently understand that the
ability to ascertain and substantiate the
process or processes used in an earlier
point in the lifecycle of feedstock alumi-
num for secondary production is limited.
Such limitations would pose significant
substantiation and administrability issues
if secondary production were permitted
for commodity-grade aluminum under
proposed §1.45X-4(b)(1). Excluding sec-
ondary production would also avoid sig-
nificant administrability challenges that
would arise if the process or processes
used at previous points in the lifecycle of
feedstock aluminum used in secondary
production had to be verified to determine
eligibility for the section 45X credit.
The Treasury Department and the IRS
request comments on this interpretation of
section 45X(c)(6)(A).
B. Credit amount
Section 45X(b)(1) generally provides
the credit amount determined with respect
to any eligible component, including any
eligible component it incorporates, sub-
ject to the credit phase out provided at
section 45X(b)(3). Section 45X(b)(3)(C)
provides that the credit phase out does not
apply with respect to any applicable criti-
cal mineral.
Section 45X(b)(1)(M) provides that in
the case of any applicable critical mineral,
the credit amount is an amount equal to 10
percent of the costs incurred by the tax-
payer with respect to production of such
mineral.
Proposed §1.45X-4(c)(1) would pro-
vide that for an applicable critical mineral
the credit amount is equal to 10 percent
of the costs incurred by the taxpayer with
respect to production of such materials.
Proposed §1.45X-4(c)(2) would provide
definitions of production processes for
applicable critical minerals. Proposed
§1.45X-1(c)(2)(i) would provide that for
purposes of section 45X, the term “con-
version” means a chemical transformation
from one species to another. Proposed
§1.45X-1(c)(2)(ii) would provide that for
purposes of section 45X, the term “puri-
fication” means increasing the mass frac-
tion of a certain element.
C. Production costs incurred
Proposed §1.45X-4(c)(3) would clar-
ify that the costs incurred for purposes of
determining the credit amount includes
costs as defined in §1.263A-1(e) that are
paid or incurred within the meaning of
section 461 of the Code by the taxpayer
for the production of an applicable criti-
cal mineral only. Thus, production costs
with respect to an applicable critical min-
eral would not include any costs incurred
after the production of the applicable
critical mineral. For example, the costs to
incorporate the applicable critical min-
eral into another product would not be
taken into account as costs incurred in
producing the applicable critical mineral.
These proposed regulations apply sec-
tion 263A and the section 263A regula-
tions solely to identify the types of costs
that are includible in production costs
incurred for purposes of computing the
credit amount, but do not apply section
263A or the section 263A regulations for
any other purposes, such as to determine
whether a taxpayer is engaged in produc-
tion activities.
Direct or indirect materials costs as
defined in §1.263A-1(e)(2)(i)(A) and (e)
(3)(ii)(E), respectively, and any costs
related to the extraction or acquisition
of raw materials would not be taken into
account as production costs. A wide range
of costs that are attributable to the pro-
duction of an applicable critical mineral
would be taken into account as a cost
incurred in producing the applicable criti-
cal mineral, including, but not limited to,
labor, electricity used in the production
of the applicable critical mineral, stor-
age costs, depreciation or amortization,
recycling, and overhead. However, the
cost of acquiring the raw material used
to produce the applicable critical mineral,
the cost of materials used for conversion,
purification, or recycling of the raw mate-
rial, and other material costs related to the
production of the applicable critical min-
eral would not be taken into account.
The Treasury Department and the IRS
seek to appropriately provide a credit for
the costs associated with production activi-
ties that add value to the applicable critical
mineral and are conducted by the taxpayer
that produces the applicable critical mineral.
Merely purchasing raw materials may enable
a taxpayer to produce an applicable critical
mineral but it is not by itself an activity that
adds value. Excluding material costs would
also mitigate the risk of crediting the same
costs multiple times. For example, if mate-
rial costs are included in production costs for
an applicable critical mineral, the costs of
producing an applicable critical mineral that
is later incorporated into another applicable
critical mineral could be credited more than
once, and such material costs could make up
a significant share of the cost of producing
the applicable critical mineral. This might be
the case if, for instance, Taxpayer 1 produces
Applicable Critical Mineral 1 and then sells
it to Taxpayer 2 who uses it to create Appli-
cable Critical Mineral 2. The cost of produc-
ing Applicable Critical Mineral 1 would be
credited twice if material costs are included
in production costs, once by Taxpayer 1 for
the initial production of Applicable Critical
Mineral 1 and then again by Taxpayer 2
because Taxpayer 2 would include its cost
of purchasing Applicable Critical Mineral 1
in its production costs for Applicable Criti-
cal Mineral 2.
The Treasury Department and the IRS
recognize that a wide range of costs are

January 16, 2024 422 Bulletin No. 2024–3
incurred in the production of applicable
critical minerals. The Treasury Depart-
ment and the IRS request comments on
this proposed rule for determining the
costs incurred with respect to the produc-
tion of applicable critical minerals, spe-
cifically whether and how extraction and
other similar value-added activities in the
production of raw materials used in appli-
cable critical minerals should be taken into
account. The Treasury Department and the
IRS welcome an assessment of the mag-
nitude of extraction costs and other direct
and indirect material costs relative to the
overall costs incurred in the production
of an applicable critical mineral, and the
extent to which these costs are incurred by
the taxpayer that also produces the appli-
cable critical mineral and add value to the
applicable critical mineral. The Treasury
Department and the IRS also welcome
comments on how extraction should be
defined, and whether it should be defined
consistent with proposed §1.30D-3(c)(8).
The Treasury Department and the IRS
are considering including in production
costs the costs of extraction and other
similar value-added activities in the pro-
duction of raw materials used in applica-
ble critical minerals. However, such costs
would only be included if the IRS could
effectively administer such an approach
and there are sufficient assurances that
adopting such an approach would pose
a limited risk of (i) crediting the same
production costs multiple times and (ii)
increasing other forms of fraud, waste,
and abuse. The Treasury Department and
the IRS request comments on whether and
to what extent including these costs might
raise such risks.
Proposed §1.45X-4(c)(3) would also
provide that the rules regarding ownership
and property produced under a contract
with a taxpayer under §1.263A-2(a)(1)(ii)
that are used to determine whether a tax-
payer is engaged in production or resale
activities for purposes of section 263A
do not apply for purposes of determining
the taxpayer that is engaged in production
activities for purposes of section 45X and
the section 45X regulations.
D. Substantiation
Proposed §1.45X-4(c)(4) would require
the taxpayer to document that their product
meets the criteria for an applicable criti-
cal mineral as described in section 45X(c)
(6) with a certificate of analysis (COA)
provided by the taxpayer to the person
to which the taxpayer sold the applicable
critical mineral. The Treasury Department
and the IRS request comments on this sub-
stantiation requirement, including whether
a similar requirement should be applied to
electrode active materials.
VI. Substantiation required under section
6001
Section 6001 of the Code provides that
every person liable for any tax imposed
by the Code, or for the collection thereof,
must keep such records as the Secretary
may from time to time prescribe. Section
1.6001-1(a) provides that any person sub-
ject to income tax must keep such perma-
nent books of account or records as are
sufficient to establish the amount of gross
income, deductions, credits, or other mat-
ters required to be shown by such person
in any return of such tax. Section 1.6001-
1(e) provides that the books and records
required by §1.6001-1 must be retained so
long as the contents thereof may become
material in the administration of any inter-
nal revenue law. Various provisions under
proposed §§1.45X-1 through 1.45X-4
would require taxpayers to maintain spe-
cific documentation regarding certain eli-
gible components that are produced by a
taxpayer. These requirements would be
part of the general recordkeeping require-
ments under section 6001 and the regula-
tions under section 6001.
Severability
If any provision in this proposed
rulemaking is held to be invalid or unen-
forceable facially, or as applied to any per-
son or circumstance, it shall be severable
from the remainder of this rulemaking,
and shall not affect the remainder thereof,
or the application of the provision to other
persons not similarly situated or to other
dissimilar circumstances.
Effect on Other Documents
Section 5.05 of Notice 2023-18 and
section 3 of Notice 2023-44, which relate
to the interaction between sections 45X
and 48C, will be superseded upon the
publication in the Federal Register of a
Treasury Decision addressing the interac-
tion between sections 45X and 48C.
Proposed Applicability Dates
Each of proposed §§1.45X-1 through
1.45X-4 is proposed to apply to eligible
components for which production is com-
pleted and sales occur after December 31,
2022, and during taxable years ending on
or after the date of publication of the final
regulations in the Federal Register.
Special Analyses
I. Regulatory Planning and Review—
Economic Analysis
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain
the approval of the Office of Manage-
ment and Budget (OMB) before collect-
ing information from the public, whether
such collection of information is manda-
tory, voluntary, or required to obtain or
retain a benefit. The collections of infor-
mation in these proposed regulations
contain reporting and recordkeeping
requirements that are required to val-
idate eligibility to claim a section 45X
credit. These collections of information
would generally be used by the IRS for
tax compliance purposes and by tax-
payers to facilitate proper reporting and
compliance. The general recordkeeping
requirements mentioned within these
proposed regulations are considered
general tax records under §1.6001-1(e).
Specific certification statements under
§1.45X-1(c)(3) are considered general
tax records and are required for the IRS
to validate the taxpayer that may claim
a section 45X credit. For PRA purposes,

Bulletin No. 2024–3 423 January 16, 2024
general tax records are already approved
by OMB under 1545-0074 for individu-
als, 1545-0123 for business entities, and
under 1545-0092 for trust and estate fil-
ers.
These proposed regulations also pro-
vide reporting requirements related to
making the Related Person Election as
described in §1.45X-2(d) and calculat-
ing the section 45X credit amount as
described in §1.45X-1. The Related Per-
son Election will be made by taxpayers
with Forms 1040, 1041, 1120-S, 1065,
and 1120, on Form 7207 (or any succes-
sor forms); and credit calculations will be
made on Form 3800 and supporting forms
including Form 7207 (and any successor
forms). These forms are approved under
1545-0074 for individuals, 1545-0123 for
business entities, 1545-2306 for trust and
estate filers of Form 7207, and 1545-0895
for trust and estate filers of Form 3800.
These proposed regulations are not chang-
ing or creating new collection require-
ments not already approved by OMB or
will be approved under 5 CFR 1320.10 by
OMB.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes certain
requirements with respect to Federal rules
that are subject to the notice and comment
requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) and that are likely to have a
significant economic impact on a sub-
stantial number of small entities. Unless
an agency determines that a proposal is
not likely to have a significant economic
impact on a substantial number of small
entities, section 603 of the RFA requires
the agency to present an initial regula-
tory flexibility analysis (IRFA) of the
proposed rule. The Treasury Department
and the IRS have not determined whether
the proposed rule, when finalized, will
likely have a significant economic impact
on a substantial number of small entities.
This determination requires further study.
However, because there is a possibility of
significant economic impact on a substan-
tial number of small entities, an IRFA is
provided in these proposed regulations.
The Treasury Department and the IRS
invite comments on both the number of
entities affected and the economic impact
on small entities.
Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
of the Office of Advocacy of the Small
Business Administration for comment on
its impact on small business.
A. Need for and objectives of the rule
The proposed regulations would pro-
vide greater clarity to taxpayers that
intend to claim a section 45X credit. The
proposed regulations would provide nec-
essary definitions, the time and manner
to make the Related Person Election and
rules regarding the determination of credit
amounts. The Treasury Department and
the IRS intend and expect that giving tax-
payers guidance that allows them to claim
the section 45X credit will beneficially
impact various industries. In particular,
the section 45X credit encourages the
domestic production of eligible compo-
nents and incentivizes taxpayers to invest
in clean energy projects that generate eli-
gible credits.
B. Affected small entities
The RFA directs agencies to provide
a description of, and if feasible, an esti-
mate of, the number of small entities that
may be affected by the proposed rules,
if adopted. The Small Business Admin-
istration’s Office of Advocacy estimates
in its 2023 Frequently Asked Questions
that 99.9 percent of American businesses
meet its definition of a small business.
The applicability of these proposed regu-
lations does not depend on the size of the
business, as defined by the Small Business
Administration.
As described more fully in the pream-
ble to this proposed regulation and in this
IRFA, section 45X and these proposed
regulations may affect a variety of differ-
ent entities across several different clean
energy industries as multiple types of eli-
gible components are provided for under
the statute and manufacturers may pro-
duce more than one type. Although there
is uncertainty as to the exact number of
small businesses within this group, the
current estimated number of respondents
to these proposed rules is 13,450 taxpay-
ers. The estimated total annual reporting
burden and estimated average annual
burden per respondent will be computed
when Form 7207 and the instructions to
Form 7207 are updated to reflect these
proposed regulations.
The Treasury Department and the IRS
expect to receive more information on
the impact on small businesses through
comments on this proposed rule and after
taxpayers start to claim the section 45X
credit using the guidance and procedures
provided in these proposed regulations.
C. Impact of the rules
The proposed regulations provide rules
for how taxpayers can claim the section
45X credit. Taxpayers that claim the sec-
tion 45X credit will have administrative
costs related to reading and understand-
ing the rules as well as recordkeeping
and reporting requirements because of
the Related Person Election, computation
of the section 45X credit and tax return
requirements. The costs will vary across
different-sized entities and across the type
of production activities in which such
entities are engaged.
The Related Person Election allows
a taxpayer to make an irrevocable elec-
tion annually with their Federal income
tax return by providing the information
required on Form 7207 (or any successor
form), including, for example, the name,
EIN of the taxpayer; a description of the
taxpayer’s trade or business; the name,
address and EINs of all related persons;
a list of the eligible components that are
sold, and the intended purpose of the eligi-
ble components sold by the related person.
To make the Related Person Election and
claim the section 45X credit, the taxpayer
must file an annual Federal income tax
return. The reporting and recordkeeping
requirements for that Federal income tax
return would be required for any taxpayer
that is claiming a general business credit,
regardless of whether the taxpayer was
making a Related Person Election under
section 45X.
D. Alternatives considered
The Treasury Department and the IRS
considered alternatives to the proposed
regulations. For example, the Treasury

January 16, 2024 424 Bulletin No. 2024–3
Department and the IRS considered
whether to impose certain pre-return filing
requirements as a condition of making the
Related Person Election as authorized in
section 45X(a)(3)(B)(ii) to prevent dupli-
cation, fraud, or improper or excessive
credits. The proposed regulations were
designed to minimize burdens for taxpay-
ers while ensuring that the IRS has suffi-
cient information to determine eligibility
for the section 45X credit. The Treasury
Department and the IRS determined that
requiring registration before a taxpayer
makes the Related Person Election is
unnecessary at this time. The proposed
regulations would allow taxpayers to
make an irrevocable Related Person Elec-
tion annually with their Federal income
tax return by providing the information
required on Form 7207 (or any successor
form), which would provide the IRS with
sufficient information to assist in prevent-
ing duplication, fraud, or the claiming of
improper or excessive credits if eligible
components are produced and then sold to
related persons.
Comments are requested on the
requirements in the proposed regulations,
including specifically, whether there are
less burdensome alternatives that ensure
the IRS has sufficient information to
administer the advanced manufacturing
production credit.
E. Duplicative, overlapping, or
conflicting Federal rules
The proposed rule would not duplicate,
overlap, or conflict with any relevant Fed-
eral rules. As discussed above, the pro-
posed rule would merely provide proce-
dures and definitions to allow taxpayers to
claim the section 45X credit. The Treasury
Department and the IRS invite input from
interested members of the public about
identifying and avoiding overlapping,
duplicative, or conflicting requirements.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Indian Tribal government, in the
aggregate, or by the private sector, of $100
million (updated annually for inflation).
This proposed rule does not include any
Federal mandate that may result in expen-
ditures by State, local, or Indian Tribal
governments, or by the private sector in
excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Execu-
tive order. This proposed rule does not
have federalism implications and does
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
VI. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consulta-
tion and Coordination With Indian Tribal
Governments) prohibits an agency from
publishing any rule that has Tribal impli-
cations if the rule either imposes substan-
tial, direct compliance costs on Indian
Tribal governments, and is not required
by statute, or preempts Tribal law, unless
the agency meets the consultation and
funding requirements of section 5 of the
Executive order. This proposed rule does
not have substantial direct effects on
one or more federally recognized Indian
tribes and does not impose substantial
direct compliance costs on Indian Tribal
governments within the meaning of the
Executive order.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final regula-
tions, consideration will be given to com-
ments regarding the notice of proposed
rulemaking that are submitted timely to
the IRS as prescribed in this preamble
under the ADDRESSES section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. All comments will be made
available at https://www.regulations.gov.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited or
withdrawn.
A public hearing with respect to this
notice of proposed rulemaking has been
scheduled for February 22, 2024, begin-
ning at 10 a.m. ET, in the Auditorium at
the Internal Revenue Building, 1111 Con-
stitution Avenue, NW., Washington, D.C.
Due to building security procedures, vis-
itors must enter at the Constitution Ave-
nue entrance. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. Partic-
ipants may alternatively attend the public
hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the public hearing. Persons who
wish to present oral comments at the
public hearing must submit an outline of
the topics to be discussed and the time
to be devoted to each topic by February
13, 2024. A period of 10 minutes will be
allotted to each person for making com-
ments. An agenda showing the scheduling
of the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available
free of charge at the public hearing. If no
outline of the topics to be discussed at the
public hearing is received by February 13,
2024, the public hearing will be cancelled.
If the public hearing is cancelled, a notice
of cancellation of the public hearing will
be published in the Federal Register.
Individuals who want to testify in
person at the public hearing must send
an email to publichearings@irs.gov to
have your name added to the building
access list. The subject line of the email
must contain the regulation number REG-
107423-23 and the language TESTIFY In
Person. For example, the subject line may
say: Request to TESTIFY In Person at
Hearing for REG-107423-23.
Individuals who want to testify by
telephone at the public hearing must
send an email to publichearings@irs.
gov to receive the telephone number and

Bulletin No. 2024–3 425 January 16, 2024
access code for the public hearing. The
subject line of the email must contain the
regulation number REG-107423-23 and
the language TESTIFY Telephonically.
For example, the subject line may say:
Request to TESTIFY Telephonically at
Hearing for REG-107423-23.
Individuals who want to attend the
public hearing in person without testify-
ing must also send an email to publichear-
ings@irs.gov to have your name added to
the building access list. The subject line
of the email must contain the regulation
number REG-107423-23 and the language
ATTEND In Person. For example, the
subject line may say: Request to ATTEND
Hearing In Person for REG-107423-23.
Requests to attend the public hearing must
be received by 5 p.m. ET on February 20,
2024.
Individuals who want to attend the pub-
lic hearing by telephone without testifying
must also send an email to publichear-
ings@irs.gov to receive the telephone
number and access code for the public
hearing. The subject line of the email
must contain the regulation number REG-
107423-23 and the language ATTEND
Hearing Telephonically. For example, the
subject line may say: Request to ATTEND
Hearing Telephonically for REG-107423-
23. Requests to attend the public hearing
must be received by 5 p.m. ET on Febru-
ary 20, 2024.
Public hearings will be made accessi-
ble to people with disabilities. To request
special assistance during a public hearing
please contact the Publications and Regu-
lations Branch of the Office of Associate
Chief Counsel (Procedure and Admin-
istration) by sending an email to publi-
chearings@irs.gov (preferred) or by tele-
phone at (202) 317-6901 (not a toll-free
number) and must be received by 5 p.m.
ET on February 16, 2024.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal authors of these pro-
posed regulations are Mindy Chou, John
Deininger and Alexander Scott, Office of
the Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the Treasury Department
and the IRS participated in their develop-
ment.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
in numerical order for §§1.45X-1 through
1.45X-4 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.45X-1 also issued under 26
U.S.C. 45X.
Section 1.45X-2 also issued under 26
U.S.C. 45X(b) and (d) and 1502.
Section 1.45X-3 also issued under 26
U.S.C. 45X(b) and (c).
Section 1.45X-4 also issued under 26
U.S.C. 45X(b) and (c).
* * * * *
Par. 2. Sections 1.45X-0 through
1.45X-4 are added to read as follows:
Sec.
* * * * *
1.45X-0 Table of contents.
1.45X-1 General rules applicable to
the advanced manufacturing production
credit.
1.45X-2 Sale to unrelated person.
1.45X-3 Eligible components.
1.45X-4 Applicable critical minerals.
* * * * *
§1.45X-0 Table of contents.
This section lists the captions contained
in §§1.45X-1 through 1.45X-4.
§1.45X-1 General rules applicable to
the advanced manufacturing production
credit.
(a) Overview.
(b) Credit amount.
(c) Definition of produced by the tax-
payer.
(d) Produced in the United States.
(e) Production and sale in a trade or
business.
(f) Sale of integrated components.
(g) Interaction between sections 45X
and 48C.
(h) [Reserved]
(i) Anti-abuse rule.
(j) Severability.
(k) Applicability date.
§1.45X-2 Sale to unrelated person.
(a) In general.
(b) Definitions.
(c) Special rule for sale to related per-
son.
(d) Related person election.
(e) Sales of integrated components to
related person.
(f) Severability.
(g) Applicability date.
§1.45X-3 Eligible components.
(a) In general.
(b) Solar energy components.
(c) Wind energy components.
(d) Inverters.
(e) Qualifying battery component.
(f) Phase out rule.
(g) Severability.
(h) Applicability date.
§1.45X-4 Applicable critical minerals.
(a) In general.
(b) Definitions.
(c) Credit amount.
(d) Severability.
(e) Applicability date.
§1.45X-1 General rules applicable
to the advanced manufacturing
production credit.
(a) Overview—(1) In general. This
section provides general rules regarding

January 16, 2024 426 Bulletin No. 2024–3
the advanced manufacturing production
credit determined under section 45X of
the Code (section 45X credit). Paragraph
(a)(2) of this section provides definitions
of certain terms that apply for purposes of
section 45X and the section 45X regula-
tions (defined in paragraph (a)(2)(xiv) of
this section). Paragraphs (b) through (j) of
this section provide the basic rules regard-
ing the section 45X credit, including the
definition of the term produced by the tax-
payer, and rules to determine the taxpayer
that produces an eligible component and
whether such taxpayer is entitled to claim
a section 45X credit in contract manufac-
turing arrangements; where the produc-
tion of eligible components must occur;
the treatment of integrated, incorporated
or assembled eligible components; and
the interaction between sections 45X and
48C of the Code. See §1.45X-2 for rules
regarding sales to unrelated persons, sales
to related persons, and the Related Person
Election, including rules regarding the
time, place, and manner of making the
Related Person Election. See §1.45X-3 for
the definitions of all eligible components
(except applicable critical minerals) and
the credit amounts available for each of
these eligible components, including cer-
tain phase-out percentages. See §1.45X-4
for the definitions of applicable critical
minerals and the rules regarding the deter-
mination of the credit amount for applica-
ble critical minerals.
(2) Generally applicable definitions.
This paragraph (a)(2) provides definitions
of terms that apply for purposes of section
45X and the section 45X regulations.
(i) Applicable critical mineral. The
term applicable critical mineral means
any of the minerals that are listed in sec-
tion 45X(c)(6) and defined in §1.45X-
4(b).
(ii) Code. The term Code means the
Internal Revenue Code.
(iii) Contract manufacturing arrange-
ment. The term contract manufacturing
arrangement is defined in paragraph (c)
(3)(ii)(B) of this section.
(iv) Electrode active materials. The
term electrode active materials is defined
in §1.45X-3(e)(2).
(v) Eligible component. The term eli-
gible component is defined in section
45X(c)(1)(A) and described in §§1.45X-3
and 1.45X-4.
(vi) Eligible taxpayer. The term eligi-
ble taxpayer is defined in paragraph (c)(3)
of this section.
(vii) Guidance. The term guidance
means guidance published in the Federal
Register or Internal Revenue Bulletin, as
well as administrative guidance such as
forms, instructions, publications, or other
guidance on the IRS.gov website. See
§§ 601.601 and 601.602 of this chapter.
(viii) IRA. The term IRA means Public
Law 117-169, commonly known as the
Inflation Reduction Act of 2022.
(ix) IRS. The term IRS means the Inter-
nal Revenue Service.
(x) Produced by the taxpayer. The
term produced by the taxpayer is defined
in paragraph (c) of this section, and the
related terms production activities and
production process have the meaning
given those terms in paragraph (c) of this
section.
(xi) Related person. The term related
person is defined in §1.45X-2(b)(2).
(xii) Related Person Election. The
term Related Person Election is defined in
§1.45X-2(d)(1).
(xiii) Secretary. The term Secretary
means the Secretary of the Treasury or her
delegate.
(xiv) Section 45X regulations. The term
section 45X regulations means the provi-
sions of this section, §§1.45X-2 through
1.45X-4, and the regulations in this chap-
ter under sections 6417 and 6418 of the
Code that relate to the section 45X credit.
(xv) Unrelated person. The term unre-
lated person is defined in section 45X(a)
(3) and described in §1.45X-2(b)(3).
(b) Credit amount. Except as other-
wise provided in section 45X(b)(3) and
§1.45X-3(f), for purposes of section 38
of the Code, the amount of the section
45X credit for any taxable year is equal
to the sum of the credit amounts provided
under section 45X(b) and described in
§§1.45X-3 and 1.45X-4 with respect to
each eligible component that is produced
by the taxpayer and, within the taxable
year, sold by the taxpayer to an unrelated
person. See §1.45X-2 for rules regarding
sales of eligible components to related
persons that may be treated as if sold to
unrelated persons for purposes of section
45X(a).
(c) Definition of produced by the tax-
payer—(1) In general. The term produced
by the taxpayer means a process con-
ducted by the taxpayer that substantially
transforms constituent elements, materi-
als, or subcomponents into a complete and
distinct eligible component that is func-
tionally different from that which would
result from mere assembly or superficial
modification of the elements, materials, or
subcomponents.
(i) Partial transformation. The term
produced by the taxpayer does not include
partial transformation that does not result
in substantial transformation of constitu-
ent elements, materials, or subcomponents
into a complete and distinct eligible com-
ponent as described in this paragraph (c)
(1).
(ii) Mere assembly or superficial mod-
ification. The term produced by the tax-
payer does not include minor assembly of
two or more constituent elements, materi-
als, or subcomponents, or superficial mod-
ification of the final eligible component, if
the taxpayer does not also engage in the
process resulting in a substantial transfor-
mation described in this paragraph (c)(1).
(iii) Examples. The following exam-
ples illustrate the application of this para-
graph (c)(1).
(A) Example 1. Taxpayers X, Y, and Z each
produce one of three sections of a wind tower that
together make up the wind tower. No taxpayer has
produced an eligible component within the meaning
of section 45X(a)(1)(A) because no taxpayer has
produced all sections of the wind tower.
(B) Example 2. Same facts as paragraph (c)(1)
(iii)(A) of this section (Example 1), but taxpayers X,
Y, and Z instead form Partnership XYZ. Partnership
XYZ produces all three sections of the wind tower.
Partnership XYZ has produced an eligible compo-
nent within the meaning of section 45X(a)(1)(A).
(C) Example 3. Taxpayer V puts the external
casing on a battery module (within the meaning of
§1.45X-3(e)(4)(i)(A)) that already had cells, bat-
tery management systems, and other components
integrated into it. Taxpayer V has engaged in minor
assembly and has not produced an eligible compo-
nent within the meaning of section 45X(a)(1)(A).
(D) Example 4. Taxpayer U purchases two fin-
ished halves of a wind turbine nacelle and combines
them into a single nacelle. Taxpayer U has engaged
in minor assembly and has not produced an eligible
component within the meaning of section 45X(a)(1)
(A).
(E) Example 5. Taxpayer T purchases a dry cell
battery and fills the electrolyte of the battery. Tax-
payer T has engaged in minor assembly and has not
produced an eligible component within the meaning
of section 45X(a)(1)(A).
(F) Example 6. Taxpayer W purchases a prefab-
ricated wind turbine blade and applies paint and fin-
ishes. Taxpayer W has engaged in superficial modifi-
cation of the blade and has not produced an eligible

Bulletin No. 2024–3 427 January 16, 2024
component within the meaning of section 45X(a)(1)
(A).
(2) Special rule for certain eligible
components. For solar grade polysilicon,
electrode active materials, and applicable
critical minerals, the term produced by
the taxpayer means processing, conver-
sion, refinement, or purification of source
materials, such as brines, ores, or waste
streams, to derive a distinct eligible com-
ponent.
(3) Eligible taxpayer—(i) In general.
Except as otherwise provided in para-
graph (c)(3)(iii) of this section, a taxpayer
claiming a section 45X credit with respect
to an eligible component must be the tax-
payer that directly performs the produc-
tion activities that bring about a substan-
tial transformation resulting in the eligible
component, and must sell such eligible
component to an unrelated person.
(ii) Contract manufacturing arrange-
ment—(A) In general. If the production
of an eligible component is performed in
whole or in part pursuant to a contract that
is a contract manufacturing arrangement,
then, provided the other requirements of
section 45X are met, the party to such con-
tract that may claim the section 45X credit
with respect to such eligible component is
the party that performs the actual produc-
tion activities that bring about a substan-
tial transformation resulting in the eligible
component.
(B) Contract manufacturing arrange-
ment defined. The term contract manufac-
turing arrangement means any agreement
(or agreements) providing for the production
of an eligible component if the agreement is
entered into before the production of the eli-
gible component to be delivered under the
contract is completed. A routine purchase
order for off-the-shelf property is not treated
as a contract manufacturing arrangement
for purposes of this paragraph (c)(3). An
agreement will be treated as a routine pur-
chase order for off-the-shelf property if the
contractor is required to make no more than
de minimis modifications to the property to
tailor it to the customer’s specific needs, or
if at the time the agreement is entered into,
the contractor knows or has reason to know
that the contractor can satisfy the agreement
out of existing stocks or normal production
of finished goods.
(iii) Special rule for contract manu-
facturing arrangements. If an eligible
component is produced by a taxpayer
pursuant to a contract manufacturing
arrangement, the parties to such agree-
ment may determine by agreement the
party that may claim the section 45X
credit. If a taxpayer enters into contract
manufacturing arrangements with mul-
tiple fabricators to produce an eligible
component, the parties to such agree-
ments may determine by agreement the
party that may claim the section 45X
credit. The IRS will not challenge the
agreement of the parties provided all the
parties submit signed certification state-
ments (as described in paragraph (c)(3)
(iv) of this section) indicating that all
parties agree as to the party that may
claim the section 45X credit.
(iv) Certification statement require-
ments. A certification statement indicating
that all parties to a contract manufactur-
ing arrangement agree as to the party that
will claim the section 45X credit must
include—
(A) All required information set forth
in guidance; and
(B) A properly signed penalty of per-
jury statement.
(v) Examples. The following examples
illustrate the application of this paragraph
(c)(3).
(A) Example 1: Contract manufacturing with
sale. Taxpayers X, Y and Z are unrelated C corpora-
tions that have calendar year taxable years. In 2024,
pursuant to a contract manufacturing arrangement as
described in paragraph (c)(3)(ii)(B) of this section, X
hires Y to produce a solar module. The contract is a
tolling arrangement and provides that Y will produce
the solar module according to X’s designs and speci-
fications and using the materials and subcomponents
that X provides. X and Y enter an agreement provid-
ing that X is the sole party that may claim a section
45X credit for the production and sale of the solar
module, and X and Y each sign a certification state-
ment as described in paragraph (c)(3)(iv) of this sec-
tion reflecting this agreement. In 2025, Y produces
and delivers the solar module to X, and in 2026, X
sells the solar module to Z. X may claim a section
45X credit in taxable year 2026 for the solar mod-
ule it sold to Z provided all other requirements of
section 45X are met and the certification statements
signed by X and Y meet the requirements described
in paragraph (c)(3)(iv) of this section and are prop-
erly submitted by X. Similarly, Y could claim a sec-
tion 45X credit if the agreement between X and Y
had designated Y as the sole party that could claim
a section 45X credit for the production and sale of
the solar module provided all other requirements of
section 45X are met and the certification statements
signed by X and Y meet the requirements described
in paragraph (c)(3)(iv) of this section and are prop-
erly submitted by Y.
(B) Example 2: Contract manufacturing with no
sale. Assume the facts are the same as in paragraph
(c)(3)(v)(A) of this section (Example 1), except that
X does not sell the solar module and instead X uses
it to generate electricity for use in X’s trade or busi-
ness. Because there has been no sale, neither X nor Y
may claim a section 45X credit for the solar module
regardless of whether X and Y submit signed certi-
fication statements described in paragraph (c)(3)(iv)
of this section.
(C) Example 3: Multiple contract manufactur-
ing arrangements. Taxpayers V, W, X, Y and Z are
unrelated C corporations that have calendar year
taxable years. In 2024, pursuant to three separate
contract manufacturing arrangements as described
in paragraph (c)(3)(ii)(B) of this section, V hires
W, X, and Y to produce the bottom, middle and top
segments, respectively, of a single wind tower that
V designed. W, X, Y and V enter into an agreement
providing that V is the sole party that may claim a
section 45X credit for the production and sale of the
wind tower, and W, X, Y and V each sign a certifi-
cation statement as described in paragraph (c)(3)(iv)
of this section reflecting this agreement. In 2024, W
and X both produce and deliver their respective wind
tower segments to the installation site, and in 2025,
Y produces and delivers its wind tower segment to
the installation site. In 2026, V sells the completed
wind tower to Z. V may claim a section 45X credit in
taxable year 2026 for the wind tower it sold to Z pro-
vided all other requirements of section 45X are met
and the certification statements signed by V, W, X
and Y meet the requirements described in paragraph
(c)(3)(iv) of this section and are properly submitted
by V. Similarly, W or X or Y could be the party that
could claim a section 45X credit if the agreement
between V, W, X and Y had designated W or X or Y
as the sole party that could claim a section 45X credit
for the production and sale of the wind tower pro-
vided all other requirements of section 45X are met
and the certification statements signed by V, W, X
and Y meet the requirements described in paragraph
(c)(3)(iv) of this section and are properly submitted
by the party designated as the sole party that could
claim a section 45X credit.
(4) Timing of production and sale—(i)
In general. Production of eligible com-
ponents for which a taxpayer is claiming
a section 45X credit may begin before
December 31, 2022. Production of eligi-
ble components must be completed, and
sales of eligible components must occur,
after December 31, 2022.
(ii) Example. Taxpayer X has a calen-
dar year taxable year. Taxpayer X begins
production of a related offshore wind
vessel (as defined in section 45X(4)(B)
(iv) and described in §1.45X-3(c)(4)) in
January 2022. Production is completed in
December 2024 and the sale to an unre-
lated person occurs in 2025. Taxpayer X
is eligible to claim the section 45X credit
in 2025, assuming that all other require-
ments of section 45X are met.

January 16, 2024 428 Bulletin No. 2024–3
(d) Produced in the United States—(1)
In general. Sales are taken into account
for purposes of the section 45X credit only
for eligible components that are produced
within the United States, as defined in sec-
tion 638(1) of the Code, or a United States
territory, which for purposes of section
45X and the section 45X regulations has
the meaning of the term possession pro-
vided in section 638(2).
(2) Subcomponents. Constituent ele-
ments, materials, and subcomponents used
in the production of eligible components
are not subject to the domestic production
requirement provided in paragraph (d)(1)
of this section.
(e) Production and sale in a trade or
business. An eligible component pro-
duced and sold by the taxpayer is taken
into account for purposes of the section
45X credit only if the production and
sale are in a trade or business (within the
meaning of section 162 of the Code) of
the taxpayer.
(f) Sale of integrated components—(1)
In general. For purposes of the section
45X credit, section 45X(d)(4) provides
that a taxpayer is treated as having pro-
duced and sold an eligible component to
an unrelated person if such component
is integrated, incorporated, or assembled
into another eligible component that is
then sold to an unrelated person.
(i) Integrated, incorporated, or assem-
bled. The term integrated, incorporated,
or assembled means the production activ-
ities by which an eligible component that
is a constituent element, material, or sub-
component is substantially transformed
into another complete and distinct eligible
component that is not solar grade polysil-
icon, an electrode active material, or an
applicable critical mineral. The term inte-
grated, incorporated, or assembled does
not mean the mere assembly or superficial
modification of an eligible component
used as an element, material, or subcom-
ponent and other elements, materials, or
subcomponents that results in a distinct
product.
(ii) Special rule for eligible compo-
nents resulting in solar grade polysili-
con, electrode active materials, or appli-
cable critical minerals. For solar grade
polysilicon, electrode active material,
and applicable critical minerals, the term
integrated, incorporated, or assembled
means the production activities in which
an eligible component is processed, con-
verted, refined, or purified to derive a dis-
tinct eligible component that is solar grade
polysilicon, an electrode active material,
or an applicable critical mineral. The term
integrated, incorporated, or assembled
does not mean mere assembly or superfi-
cial modification of an eligible component
used as an element, material, or subcom-
ponent and other elements, materials, or
subcomponents that results in a distinct
product.
(2) Application—(i) In general. A
taxpayer may claim a section 45X credit
for each eligible component the taxpayer
produces and sells to an unrelated person,
including any eligible component the tax-
payer produces that was used as a constit-
uent element, material, or subcomponent
and integrated, incorporated, or assembled
into another complete and distinct eligible
component or another complete and dis-
tinct product (that is not itself an eligible
component) that the taxpayer also pro-
duces and sells to an unrelated person.
(ii) Example: Sale of product with
incorporated eligible components to unre-
lated person. In 2022, X, a domestic cor-
poration that has a calendar year taxable
year, begins production of electrode active
materials (EAMs) that are completed in
2023 and incorporated into battery cells
that X also produces. In 2024, X incor-
porates those battery cells into battery
modules (within the meaning of §1.45X-
3(e)(4)(i)(A)) and integrates the battery
modules into electric vehicles. X sells the
electric vehicles to Z, an unrelated person,
in 2024. X may claim a section 45X credit
for the EAMs, the battery cells, and the
battery modules in 2024.
(g) Interaction between sections 45X
and 48C—(1) In general. For purposes
of the section 45X credit, consistent with
section 45X(c)(1)(B), an eligible compo-
nent—
(i) Must be produced by a section 45X
facility; and
(ii) Does not include any property (pro-
duced property) that is produced at a facil-
ity if the basis of any property that is part
of the production unit (within the meaning
of paragraph (g)(2)(ii) of this section) that
produces the produced property—
(A) Is eligible property that is included
in a section 48C facility; and
(B) Is taken into account for purposes
of the credit allowed under section 48C
(section 48C credit) after August 16, 2022.
(2) Section 45X facility—(i) In general.
A section 45X facility includes all tangible
property that comprises an independently
functioning production unit that produces
one or more eligible components.
(ii) Production unit. The production
unit is the tangible property that substan-
tially transforms the material inputs to
complete the production process of an eli-
gible component.
(3) Section 48C facility—(i) In gen-
eral. A section 48C facility includes all
eligible property included in a qualify-
ing advanced energy project for which a
taxpayer receives an allocation of section
48C credits under the allocation program
established under section 48C(e) and
claims such credits after August 16, 2022.
(ii) Eligible property. Eligible property
is property that—
(A) Is necessary for the production
or recycling of property described in
section 48C(c)(1)(A)(i), re-equipping
an industrial or manufacturing facility
described in section 48C(c)(1)(A)(ii), or
re-equipping, expanding, or establishing
an industrial facility described in sec-
tion 48C(c)(1)(A)(iii);
(B) Is tangible personal property, or
other tangible property (not including a
building or its structural components), but
only if such property is used as an inte-
gral part of the qualified investment credit
facility; and
(C) With respect to which depreciation
(or amortization in lieu of depreciation) is
allowable.
(4) Examples. The following examples
illustrate the application of this paragraph
(g):
(i) Example 1: Two independent production
units—(A) Facts. Taxpayer owns and operates a
manufacturing site that contains Production Unit
A and Production Unit B, each of which function
independently and are arranged in serial fashion.
Photovoltaic wafers produced by Production Unit
A are utilized in Production Unit B to manufacture
photovoltaic cells. Taxpayer was allocated a sec-
tion 48C credit under the section 48C(e) program for
a section 48C facility that includes Production Unit A
and subsequently placed the section 48C facility and
Production Unit A in service in taxable year 2026.
Taxpayer claimed a section 48C credit for Produc-
tion Unit A for taxable year 2026.
(B) Analysis. Production Unit A is eligible prop-
erty that is include in Taxpayer’s section 48C facil-
ity. Therefore, Production Unit A cannot qualify as

Bulletin No. 2024–3 429 January 16, 2024
a section 45X facility under section 45X(c)(1)(B)
and paragraph (g)(2) of this section. Production Unit
B, however, is tangible property that comprises an
independently functioning production unit that pro-
duces eligible components. Production Unit B can be
treated as a section 45X facility because the tangible
property comprising Production Unit B is not eligi-
ble property that is included in a section 48C facility.
(ii) Example 2: Single production unit—(A)
Facts. Taxpayer owns and operates two manufac-
turing sites. Manufacturing Site 1 includes tangible
property that forms ingots from polysilicon to par-
tially produce photovoltaic wafers. Manufacturing
Site 2 completes the production process of the photo-
voltaic wafers. Taxpayer was allocated a section 48C
credit under the section 48C(e) program for tangible
property that is used to produce the ingots at Manu-
facturing Site 1.
(B) Analysis. Manufacturing Site 1 and Manu-
facturing Site 2 comprise a single production unit.
As a result, Taxpayer may not claim the section 45X
credit for the photovoltaic wafers it produced at
Manufacturing Site 1 and Manufacturing Site 2
because Taxpayer claimed the section 48C credit for
the tangible property that was used to produce the
ingots at Manufacturing Site 1, which is part of a sin-
gle production unit.
(iii) Example 3: Independent production units
and production of subcomponent—(A) Facts. Tax-
payer owns and operates two manufacturing sites.
Manufacturing Site 1 contains Production Unit A and
Production Unit B, which are arranged in parallel
fashion and each produce photovoltaic cells. Manu-
facturing Site 2 contains Production Unit C and Pro-
duction Unit D, which are arranged in serial fashion.
Production Unit C produces photovoltaic cells. Pro-
duction Unit D produces solar modules, in part, by
combining the photovoltaic cells produced by Pro-
duction Units A, B and C. Taxpayer was allocated a
section 48C credit under the section 48C(e) program
for a section 48C facility that includes Production
Unit C. Subsequently, Taxpayer places the section
48C facility and Production Unit C in service in
taxable year 2026. Taxpayer claimed a section 48C
credit for Production Unit C in taxable year 2026.
(B) Analysis. Production Units A and B each
comprise a single production unit that produces eli-
gible components. Production Units A and B can be
treated as a section 45X facility because the tangi-
ble property comprising Production Units A and B
are not eligible property that is included in a sec-
tion 48C facility. Production Unit C cannot qual-
ify as a section 45X facility under section 45X(c)
because Production Unit C is eligible property that is
included in a section 48C facility. Production Unit D
is tangible property that comprises an independently
functioning production unit that produces eligible
components utilizing subcomponents produced by
Taxpayer in a separate, independently functioning
production unit. Therefore, Production Unit D can be
treated as a section 45X facility because the tangible
property comprising Production Unit D is not eligi-
ble property that is included in a section 48C facility.
(iv) Example 4: Two independent production
units manufacturing under a contract manufactur-
ing arrangement—(A) Facts. X is hired by Y to
manufacture photovoltaic cells. X owns and oper-
ates a manufacturing site that contains Production
Unit A and Production Unit B. Production Unit A
and Production Unit B function independently and
are arranged in serial fashion. Photovoltaic wafers
produced by Production Unit A are utilized in Pro-
duction Unit B to manufacture photovoltaic cells.
X was allocated a section 48C credit under the sec-
tion 48C(e) program for a section 48C facility that
includes Production Unit A and subsequently placed
the section 48C Facility and Production Unit A in ser-
vice in taxable year 2026. X claimed a section 48C
credit for Production Unit A in taxable year 2026.
(B) Analysis. Production Unit A is eligible
property that is included in X’s section 48C facil-
ity. Therefore, Production Unit A cannot qualify
as a section 45X facility under section 45X(c)(1)
(B) and paragraph (g)(2) of this section and X does
not qualify for a section 45X credit with respect to
Production Unit A. Production Unit B is, however,
tangible property that comprises an independently
functioning production unit that produces eligible
components. Production Unit B can be treated as a
section 45X facility by X, the party who produces the
eligible components, because the tangible property
comprising Production Unit B is not eligible prop-
erty that is included in a section 48C facility.
(v) Example 5: Two independent production
units manufacturing under a contract manufactur-
ing arrangement—(A) Facts. Assume the facts are
the same as in paragraph (g)(4)(iv) of this section
(Example 4), except that Y owns Production Units A
and B and hires X to operate Production Units A and
B to produce the eligible components.
(B) Analysis. Production Unit A is eligible prop-
erty that is included in Y’s section 48C facility. Y
claimed a section 48C credit for Production Unit A
in taxable year 2026. Therefore, Production Unit A
cannot qualify as a section 45X facility under sec-
tion 45X(c)(1)(B) and paragraph (g)(2) of this sec-
tion and X does not qualify for a section 45X credit
with respect to Production Unit A. Production Unit
B, however, is tangible property that comprises an
independently functioning production unit that pro-
duces eligible components. Production Unit B can
be treated as a section 45X facility by X (and not Y)
because the tangible property comprising Production
Unit B is not eligible property that is included in a
section 48C facility.
(h) [Reserved]
(i) Anti-abuse rule—(1) In general.
The rules of section 45X and the sec-
tion 45X regulations must be applied in
a manner consistent with the purposes of
section 45X and the section 45X regula-
tions (and the regulations in this chapter
under sections 6417 and 6418 related to
the section 45X credit). A purpose of sec-
tion 45X and the section 45X regulations
(and the regulations in this chapter under
sections 6417 and 6418 related to the sec-
tion 45X credit) is to provide taxpayers
an incentive to produce eligible compo-
nents in a manner that contributes to the
development of secure and resilient sup-
ply chains. Accordingly, the section 45X
credit is not allowable if the primary pur-
pose of the production and sale of an eli-
gible component is to obtain the benefit
of the section 45X credit in a manner that
is wasteful, such as discarding, disposing
of, or destroying the eligible component
without putting it to a productive use.
A determination of whether the produc-
tion and sale of an eligible component is
inconsistent with the purposes of section
45X and the section 45X regulations (and
the regulations in this chapter under sec-
tions 6417 and 6418 related to the section
45X credit) is based on all facts and cir-
cumstances.
(2) Example—(i) Facts. Taxpayer is engaged in
the activity of producing and selling multiple units
of Eligible Component 1 (EC1). Taxpayer engages
in no other activities. The cost of producing each unit
of EC1 is less than the amount of the section 45X
credit that would be available if each EC1 qualified
for the section 45X credit. Taxpayer sells some of its
units of EC1 to related persons and makes a Related
Person Election pursuant to section 45X(a)(3)(B)
(i). Taxpayer also sells some of its units of EC1 to
unrelated persons. Taxpayer sells all units of EC1
at an amount equal to cost plus a markup to reflect
an anticipated accommodation fee and establishes
corresponding accounts receivable at the time of
the respective sales. In addition, Taxpayer knows or
reasonably expects that after acquiring the units of
EC1, the related and unrelated transferees will not
resell the units of EC1 or use them in their trades
or businesses. Taxpayer intends to obtain the benefit
from the section 45X credit by claiming such credits
itself or monetizing such credits through an election
under sections 6417 or 6418. Taxpayer eliminates
the aforementioned accounts receivable at the time
it claims the section 45X credit or receives related
payments attributable to the section 45X credit, and
further makes payments to the related and unrelated
transferees as accommodation fees computed as a
percentage of such benefits.
(ii) Analysis. Based on all of the facts and cir-
cumstances in paragraph (i)(2)(i) of this section, the
primary purpose of Taxpayer’s production and sale
of EC1 is to obtain the benefit of the section 45X
credit in a manner that is wasteful and will not be
treated as the production and sale of eligible compo-
nents in a trade or business of Taxpayer for purposes
of section 45X(a)(1) and (2). Taxpayer is not eligible
for the section 45X credit with respect to units of
EC1 that it produced and sold. See sections 6417(d)
(6) (excessive payments) and 6418(g)(2) (excessive
credit transfer).
(j) Severability. The provisions of this
section are separate and severable from
one another. If any provision of this sec-
tion is stayed or determined to be invalid,
it is the agencies’ intention that the remain-
ing provisions shall continue in effect.
(k) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a

January 16, 2024 430 Bulletin No. 2024–3
taxable year ending on or after [date of
publication of final regulations in the Fed-
eral Register].
§1.45X-2 Sale to unrelated person.
(a) In general. The amount of the sec-
tion 45X credit for any taxable year is
equal to the sum of the credit amounts
determined under section 45X(b) (and
described in §§1.45X-3 and 1.45X-4) with
respect to each eligible component that
is produced by the taxpayer and, during
the taxable year, sold by the taxpayer to
an unrelated person. Applicable Federal
income tax principles apply to determine
whether a transaction is in substance a
sale (or the provision of a service, or some
other disposition). See §1.45X-1(d) and
(e) for additional requirements relating to
sales.
(b) Definitions. This paragraph (b) pro-
vides definitions of terms that apply for
purposes of this section.
(1) Person. The term person means
an individual, a trust, estate, partnership,
association, company or corporation,
as provided in section 7701(a)(1) of the
Code. For purposes of this section, an
entity disregarded as separate from a per-
son (for example, under §301.7701-3 of
this chapter) is not a person.
(2) Related person. The term related
person means a person who is related to
another person if such persons would be
treated as a single employer under the
regulations in this chapter under section
52(b) of the Code.
(3) Unrelated person. The term unre-
lated person means a person who is not a
related person as defined in paragraph (b)
(2) of this section.
(c) Special rule for sale to related per-
son—(1) In general. For purposes of sec-
tion 45X(a), a taxpayer is treated as sell-
ing an eligible component to an unrelated
person if such component is sold to such
person by a person who is a related person
with respect to the taxpayer.
(2) Example. X and Y are members of a
group of trades or businesses under com-
mon control under section 52(b), and thus
are related persons under section 45X(d)
(1). Each of X and Y has a calendar year
taxable year. Z is an unrelated person. X
is in the trade or business of producing
and selling solar modules. X produces and
sells solar modules to Y in 2023. Y sells
the solar modules to Z in 2024. X may
claim a section 45X credit for the sale
of the solar modules in 2024, the taxable
year of X in which Y sells the solar mod-
ules to Z.
(d) Related person election—(1) Avail-
ability of election—(i) In general. In such
form and manner as the Secretary may
prescribe, a taxpayer may make an elec-
tion under section 45X(a)(3)(B) (Related
Person Election), to treat a sale of eligible
components by such taxpayer to a related
person as if made to an unrelated person.
As a condition of, and prior to, a tax-
payer making a Related Person Election
(as described in paragraph (d)(2) of this
section), the Secretary may require such
information or registration as the Secretary
deems necessary for purposes of prevent-
ing duplication, fraud, or any improper or
excessive credit amount determined under
section 45X(a)(1).
(ii) Members of a consolidated group. A
Related Person Election is made by a mem-
ber of a consolidated group (as defined in
§1.1502-1(h)) in the manner described
in paragraph (d)(3)(ii) of this section. A
member of a consolidated group that sells
eligible components in an intercompany
transaction (as defined in §1.1502-13(b)
(1)) may make the Related Person Election
to claim the section 45X credit in the year
of the intercompany sale. For the treatment
of the selling member’s gain or loss from
that sale, see §1.1502-13.
(2) Time and manner of making elec-
tion—(i) In general. A taxpayer must
make an affirmative Related Person Elec-
tion annually on the taxpayer’s timely filed
original Federal income tax return, includ-
ing extensions in such form and in such
manner as may be prescribed in Internal
Revenue Service forms or instructions
or in publications or guidance published
in the Internal Revenue Bulletin. See
§601.601 of this chapter. The Related Per-
son Election will be applicable to all sales
of eligible components to related persons
by the taxpayer for each trade or business
that the taxpayer engages in during the
taxable year that resulted in a credit claim
and for which the taxpayer has made the
Related Person Election.
(ii) Required information. For all sales
of eligible components to related persons,
the taxpayer must provide all required
information set forth in guidance. Such
information may include, for example, the
taxpayer’s name, employer identification
number (EIN), a description of the taxpay-
er’s trade or business (including principal
business activity code); the name(s) and
EINs of all related persons; a listing of the
eligible components that are sold; and the
intended purpose of any sales of eligible
components to or from related persons.
(3) Scope and effect of election—(i) In
general. A separate Related Person Elec-
tion must be made with respect to related
person sales made by a taxpayer for each
eligible trade or business of the taxpayer.
The election applies only to such trade
or business for which the Related Person
Election is made. An election under this
section applies to all sales to related per-
sons (including between members of the
same consolidated group) of eligible com-
ponents produced by the taxpayer during
the taxable year with respect to each trade
or business for which the Related Person
Election is made and is irrevocable for
the taxable year for which the election is
made. An election under paragraph (d)(2)
(i) of this section applies solely for pur-
poses of the section 45X credit and the
section 45X regulations (and the regula-
tions in this chapter under sections 6417
and 6418 related to the section 45X credit).
(ii) Application to consolidated groups.
For a trade or business of a consolidated
group, a Related Person Election must be
made by the agent for the group on behalf
of the members claiming the section 45X
credit and filed with the group’s timely
filed original Federal income tax return,
including extensions, with respect to each
trade or business that the consolidated
group conducts. See §1.1502-77 (provid-
ing rules regarding the status of the com-
mon parent as agent for its members). A
separate election must be filed on behalf
of each member claiming the section 45X
credit, and each election must include the
name and EIN of the agent for the group
and the member on whose behalf the elec-
tion is being made.
(iii) Application to partnerships. The
Related Person Election for a partnership
must be made on the partnership’s timely
filed original Federal income tax return,
including extensions, with respect to each
trade or business that the partnership con-
ducts. The election applies only to such

Bulletin No. 2024–3 431 January 16, 2024
trade or business for which the Related
Person Election is made. An election by
a partnership does not apply to any trade
or business conducted by a partner outside
the partnership.
(4) Anti-abuse rule—(i) In general. A
Related Person Election may not be made
if, with respect to the eligible components
relevant to such election, the taxpayer fails
to provide the information described in
paragraph (d)(2) of this section, provides
information described in paragraph (d)(2)
of this section that shows that such com-
ponents are described in paragraph (d)(4)
(ii) or (iii) of this section, or such compo-
nents are described in paragraph (d)(4)(ii)
or (iii) of this section.
(ii) Improper use. For purposes of this
paragraph (d)(4) the term improper use
means a use that is wasteful, such as dis-
carding, disposing of, or destroying the
eligible component without putting it to
a productive use by the related person to
which the eligible component is sold.
(iii) Defective components. The term
defective component means a component
that does not meet the requirements of
section 45X and the section 45X regula-
tions.
(e) Sales of integrated components to
related person—(1) In general. For pur-
poses of section 45X and the section 45X
regulations (and the regulations in this
chapter under sections 6417 and 6418
related to the section 45X credit), a tax-
payer that produces and then sells an eli-
gible component to a related person, who
then integrates, incorporates, or assembles
the taxpayer’s eligible component into
another complete and distinct eligible
component that is subsequently sold to an
unrelated person, may claim a section 45X
credit (or make an election under section
6417 or 6418) with respect to the taxable
year in which the related person’s sale to
the unrelated person occurs.
(2) Examples. The following examples
illustrate the rules provided in paragraph
(e)(1) of this section.
(i) Example 1: Sales of multiple incorporated eli-
gible components to related persons. X and Y are C
corporations that are members of a group of trades
or businesses under common control under section
52(b), and thus are related persons under section
45X(d)(1) and paragraph (b)(2) of this section. Each
of X and Y has a calendar year taxable year. Z is an
unrelated person. X and Y are in the trade or business
of producing and selling photovoltaic wafers and
cells. X produces and sells photovoltaic wafers to Y
in 2023. Y incorporates the photovoltaic wafers into
photovoltaic cells and sells the photovoltaic cells to
Z in 2024. X may claim a section 45X credit for the
sale of the photovoltaic wafers in 2024, the taxable
year of X in which Y sells the photovoltaic cells to Z.
(ii) Example 2: Sales of multiple incorporated
eligible components to related and unrelated per-
sons. W, X, and Y are domestic C corporations that
are members of a group of trades or businesses under
common control under section 52(b), and thus are
related persons under section 45X(d)(1) and para-
graph (b)(2) of this section. Each of W, X, and Y has
a calendar year taxable year. W produces electrode
active materials (EAMs) and sells the EAMs to X in
2023. In 2024, X incorporates the EAMs into battery
cells that it produces and sells the battery cells to Y.
In 2025, Y incorporates the battery cells into battery
modules (within the meaning of §1.45X-3(e)(4)(i)
(A)) that it produces and sells the battery modules to
Z, an unrelated person. W may claim a section 45X
credit for EAMs sold to X, X may claim a section
45X credit for the battery cells sold to Y, and Y may
claim a section 45X credit for the battery modules
sold to Z in 2025, the taxable year of each of W, X,
and Y in which the battery modules are sold to Z.
(3) Special rules applicable to related
person election—(i) In general. If a tax-
payer makes a valid Related Person Elec-
tion under section 45X(a)(3)(B)(i) and
paragraph (d)(2) of this section, and the
taxpayer produces and then sells an eli-
gible component to a related person, who
then integrates, incorporates, or assem-
bles the taxpayer’s eligible component
into another complete and distinct eligible
component that is subsequently sold to
an unrelated person, the taxpayer’s sale
of the eligible component to the related
person is treated (solely for purposes of
the section 45X credit and the section
45X regulations, and the regulations in
this chapter under sections 6417 and 6418
related to the section 45X credit) as if
made to an unrelated person in the taxable
year in which the sale to the related person
occurs.
(ii) Example: Sales of multiple inte-
grated eligible components to related and
unrelated persons with a related person
election. W, X, and Y are domestic C cor-
porations that are members of a group of
trades or businesses under common con-
trol and thus are related persons under
section 45X(d)(1) and paragraph (b)(2) of
this section. Each of W, X, and Y has a cal-
endar year taxable year. W produces elec-
trode active materials (EAMs) and sells
the EAMs to X in 2023. W makes a valid
Related Person Election under paragraph
(d)(2) of this section in 2023 with regard
to the sale. In 2024, X incorporates the
EAMs into battery cells that it produces
and sells the battery cells to Y. X makes a
valid Related Person Election under para-
graph (d)(2) of this section in 2024 with
regard to the sale. In 2025, Y incorporates
the battery cells into battery modules that
it produces and sells the battery modules
to Z, an unrelated person. W may claim a
section 45X credit for the sale of the EAMs
in 2023 because the sale to X is treated as
if made to an unrelated person solely for
purposes of section 45X(a). X may claim
a section 45X credit for the sale of the bat-
tery cells in 2024 because the sale to Y is
treated as if made to an unrelated person
solely for purposes of section 45X(a). Y
may claim a section 45X credit for the sale
of battery modules in 2025 because Z is an
unrelated person.
(f) Severability. The provisions of this
section are separate and severable from
one another. If any provision of this sec-
tion is stayed or determined to be invalid,
it is the agencies’ intention that the remain-
ing provisions shall continue in effect.
(g) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after [date of
publication of the final regulations in the
Federal Register].
§1.45X-3 Eligible components.
(a) In general. For purposes of the sec-
tion 45X credit, eligible component means
any solar energy component (as defined in
paragraph (b) of this section), any wind
energy component (as defined in para-
graph (c) of this section), any inverter (as
defined in paragraph (d) of this section),
any qualifying battery component (as
defined in paragraph (e) of this section),
and any applicable critical mineral (as
defined in §1.45X-4(b)). See paragraph (f)
of this section for certain phase-out rules
applicable to eligible components other
than applicable critical minerals.
(b) Solar energy components. Solar
energy component means a solar mod-
ule, photovoltaic cell, photovoltaic wafer,
solar grade polysilicon, torque tube, struc-
tural fastener, or polymeric backsheet,
each as defined in this paragraph (b).

January 16, 2024 432 Bulletin No. 2024–3
(1) Photovoltaic cell—(i) Definition.
Photovoltaic cell means the smallest
semiconductor element of a solar module
that performs the immediate conversion
of light into electricity that is either a thin
film photovoltaic cell or a crystalline pho-
tovoltaic cell.
(ii) Credit amount. For a photovoltaic
cell, the credit amount is equal to the prod-
uct of 4 cents multiplied by the capacity
of such photovoltaic cell. The capacity of
each photovoltaic cell is expressed on a
direct current watt basis. Capacity is the
nameplate capacity in direct current watts
using Standard Test Conditions, as defined
by the International Electrotechnical Com-
mission. In the case of a tandem technology
produced in serial fashion, such as a mono-
lithic multijunction cell composed of two
or more sub-cells, capacity must be mea-
sured at the point of sale at the end of the
single cell production unit. In the case of a
four-terminal tandem technology produced
by mechanically stacking two distinct cells
or interconnected layers, capacity must be
measured for each cell at each point of sale.
(iii) Substantiation. The taxpayer must
document the capacity of a photovoltaic
cell in a bill of sale or design documenta-
tion, such as an International Electrotech-
nical Commission certification (for exam-
ple, IEC 61215 or IEC 60904).
(2) Photovoltaic wafer—(i) Definition.
Photovoltaic wafer means a thin slice,
sheet, or layer of semiconductor material
of at least 240 square centimeters that com-
prises the substrate or absorber layer of one
or more photovoltaic cells. A photovoltaic
wafer must be produced by a single man-
ufacturer by forming an ingot from mol-
ten polysilicon (for example, Czochralski
method) and then subsequently slicing it
into wafers, forming molten or evaporated
polysilicon into a sheet or layer, or depos-
iting a thin-film semiconductor photon
absorber into a sheet or layer (that is, thin-
film deposition).
(ii) Credit amount. For a photovoltaic
wafer, the credit amount is $12 per square
meter.
(3) Polymeric backsheet—(i) Defini-
tion. Polymeric backsheet means a sheet
on the back of a solar module that acts as
an electric insulator and protects the inner
components of such module from the sur-
rounding environment.
(ii) Credit amount. For a polymeric
backsheet, the credit amount is 40 cents
per square meter.
(4) Solar grade polysilicon—(i) Defini-
tion. Solar grade polysilicon means sili-
con that is suitable for use in photovoltaic
manufacturing and purified to a minimum
purity of 99.999999 percent silicon by
mass.
(ii) Credit amount. For solar grade
polysilicon, the credit amount is $3 per
kilogram.
(5) Solar module—(i) Definition. Solar
module means the connection and lamina-
tion of photovoltaic cells into an environ-
mentally protected final assembly that is—
(A) Suitable to generate electricity
when exposed to sunlight; and
(B) Ready for installation without an
additional manufacturing process.
(ii) Credit amount. For a solar module,
the credit amount is equal to the product of
7 cents multiplied by the capacity of such
module. The capacity of each solar mod-
ule is expressed on a direct current watt
basis. Capacity is the nameplate capacity
in direct current watts using Standard Test
Conditions, as defined by the International
Electrotechnical Commission.
(iii) Substantiation. The taxpayer must
document the capacity of a solar module
in a bill of sale or design documentation,
such as an International Electrotechnical
Commission certification (for example,
IEC 61215 or IEC 61646).
(6) Solar tracker. Solar tracker means
a mechanical system that moves solar
modules according to the position of
the sun and to increase energy output. A
torque tube (as defined in paragraph (b)
(7) of this section) or structural fastener
(as defined in paragraph (b)(8) of this sec-
tion) are solar tracker components that are
eligible components for purposes of the
section 45X credit.
(7) Torque tube—(i) Definition. Torque
tube means a structural steel support ele-
ment (including longitudinal purlins) that—
(A) Is part of a solar tracker;
(B) Is of any cross-sectional shape;
(C) May be assembled from individu-
ally manufactured segments;
(D) Spans longitudinally between
foundation posts;
(E) Supports solar panels and is con-
nected to a mounting attachment for solar
panels (with or without separate module
interface rails); and
(F) Is rotated by means of a drive sys-
tem.
(ii) Credit amount. For a torque tube,
the credit amount is 87 cents per kilogram.
(iii) Substantiation. The taxpayer must
document that a torque tube is part of a
solar tracker with a specification sheet,
bill of sale, or other similar documentation
that explicitly describes its application as
part of a solar tracker.
(8) Structural fastener—(i) Definition.
Structural fastener means a component
that is used—
(A) To connect the mechanical and
drive system components of a solar tracker
to the foundation of such solar tracker;
(B) To connect torque tubes to drive
assemblies; or
(C) To connect segments of torque
tubes to one another.
(ii) Credit amount. For a structural fas-
tener, the credit amount is $2.28 per kilo-
gram.
(iii) Substantiation. The taxpayer must
document that a structural fastener is used
in a manner described in paragraph (b)(8)
(i)(A), (B), or (C) of this section with a bill
of sale or other similar documentation that
explicitly describes such use.
(c) Wind energy components. Wind
energy component means a blade, nacelle,
tower, offshore wind foundation, or related
offshore wind vessel, each as defined in
this paragraph (c).
(1) Blade—(i) Definition. Blade means
an airfoil-shaped blade that is responsible
for converting wind energy to low-speed
rotational energy.
(ii) Credit amount. For a blade, the
credit amount is equal to the product of 2
cents multiplied by the total rated capacity
of the completed wind turbine for which
the blade is designed.
(2) Offshore wind foundation—(i) Defi-
nition. Offshore wind foundation means
the component (including transition piece)
that secures an offshore wind tower and
any above-water turbine components to
the seafloor using—
(A) Fixed platforms, such as offshore
wind monopiles, jackets, or gravity-based
foundations; or
(B) Floating platforms and associated
mooring systems.

Bulletin No. 2024–3 433 January 16, 2024
(ii) Credit amount. For a fixed off-
shore wind foundation platform, the credit
amount is equal to the product of 2 cents
multiplied by the total rated capacity of
the completed wind turbine for which the
fixed offshore wind foundation platform
is designed. For a floating offshore wind
foundation platform, the credit amount is
equal to the product of 4 cents multiplied
by the total rated capacity of the com-
pleted wind turbine for which the float-
ing offshore wind foundation platform is
designed.
(3) Nacelle—(i) Definition. Nacelle
means the assembly of the drivetrain and
other tower-top components of a wind tur-
bine (with the exception of the blades and
the hub) within their cover housing.
(ii) Credit amount. For a nacelle, the
credit amount is equal to the product of 5
cents multiplied by the total rated capacity
of the completed wind turbine for which
the nacelle is designed.
(4) Related offshore wind vessel—(i)
Definition. Related offshore wind vessel
means any vessel that is purpose-built or
retrofitted for purposes of the develop-
ment, transport, installation, operation,
or maintenance of offshore wind energy
components. A vessel is purpose-built
for development, transport, installation,
operation, or maintenance of offshore
wind energy components if it is built to
be capable of performing such functions
and it is of a type that is commonly used
in the offshore wind industry. A vessel
is retrofitted for development, transport,
installation, operation, or maintenance of
offshore wind energy components if such
vessel was incapable of performing such
functions prior to being retrofitted, the ret-
rofit causes the vessel to be capable of per-
forming such functions, and the retrofitted
vessel is of a type that is commonly used
in the offshore wind industry.
(ii) Credit amount. For a related off-
shore wind vessel, the credit amount is
equal to 10 percent of the sales price of
the vessel. The sales price of the vessel
does not include the price of maintenance,
services, or other similar items that may
be sold with the vessel. For a related off-
shore wind vessel with respect to which
an election under section 45X(a)(3)(B)
(i) has been made, such election shall not
cause the sale price of such vessel to be
treated as having been determined with
respect to a transaction between uncon-
trolled taxpayers for purposes of section
482 of the Code and the regulations in
this chapter.
(5) Tower—(i) Definition. Tower means
a tubular or lattice structure that supports
the nacelle and rotor of a wind turbine.
(ii) Credit amount. For a tower, the
credit amount is equal to the product of 3
cents multiplied by the total rated capacity
of the completed wind turbine for which
the tower is designed.
(6) Total rated capacity of the com-
pleted wind turbine. For purposes of this
section, total rated capacity of the com-
pleted wind turbine means, for the com-
pleted wind turbine for which a blade,
nacelle, offshore wind foundation, or
tower was manufactured and sold, the
nameplate capacity at the time of sale as
certified to the relevant national or inter-
national standards, such as International
Electrotechnical Commission (IEC)
61400, or ANSI/ACP 101-1-2021, the
Small Wind Turbine Standard. Certifica-
tion of the turbine to such standards must
be documented by a certificate issued by
an accredited certification body. The total
rated capacity of a wind turbine must be
expressed in watts.
(7) Substantiation. Taxpayers must
maintain specific documentation regard-
ing wind energy components for which a
section 45X credit is claimed. For blades,
nacelles, offshore wind foundations, or
towers, a taxpayer must document the tur-
bine model for which such component is
designed and the total rated capacity of the
completed wind turbine in technical docu-
mentation associated with the sale of such
component.
(d) Inverters—(1) In general.
Inverter means an end product that is
suitable to convert direct current (DC)
electricity from 1 or more solar modules
or certified distributed wind energy sys-
tems into alternating current electricity.
An end product is suitable to convert DC
electricity from 1 or more solar modules
or certified distributed wind energy sys-
tems into alternating current electricity
if, in the form sold by the manufacturer,
it is able to connect with such modules
or systems and convert DC electricity to
alternating current electricity from such
connected source. The term inverter
includes a central inverter, commer-
cial inverter, distributed wind inverter,
microinverter, or residential inverter.
Only an inverter that meets at least one
of the requirements in paragraphs (d)(2)
through (7) of this section is an eligible
component for purposes of the section
45X credit.
(2) Central inverter—(i) Definition.
Central inverter means an inverter that
is suitable for large utility-scale systems
and has a capacity that is greater than
1,000 kilowatts. The capacity of a cen-
tral inverter is expressed on an alternating
current watt basis. An inverter is suitable
for large utility-scale systems if, in the
form sold by the manufacturer, it is capa-
ble of serving as a component in a large
utility-scale system and meets the core
engineering specifications for such appli-
cation.
(ii) Credit amount. For a central
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 0.25 cents multiplied by the
total rated capacity of the central inverter.
(iii) Substantiation. The taxpayer must
document that a central inverter meets the
core engineering specifications for use
in a large utility-scale system and has a
capacity that is greater than 1,000 kilo-
watts with a specification sheet, bill of
sale, or other similar documentation that
explicitly describes such specifications
and capacity.
(3) Commercial inverter—(i) Defi-
nition. Commercial inverter means an
inverter that—
(A) Is suitable for commercial or utili-
ty-scale applications;
(B) Has a rated output of 208, 480, 600,
or 800 volt three-phase power; and
(C) Has a capacity expressed on an
alternating current watt basis that is not
less than 20 kilowatts and not greater than
125 kilowatts.
(ii) Suitable for commercial or util-
ity-scale applications. An inverter is
suitable for commercial or utility-scale
applications if, in the form sold by the
manufacturer, it is capable of serving as a
component in commercial or utility-scale
systems and meets the core engineering
specifications for such application.

January 16, 2024 434 Bulletin No. 2024–3
(iii) Credit amount. For a commercial
inverter the total rated capacity of which
is expressed on an alternating current
watt basis, the credit amount is equal to
the product of 2 cents multiplied by the
total rated capacity of the commercial
inverter.
(iv) Substantiation. The taxpayer must
document that a commercial inverter
meets the core engineering specifications
for use in commercial or utility-scale
applications, the inverter’s rated output,
and the inverter’s capacity in a specifi-
cation sheet, bill of sale, or other similar
documentation.
(4) Distributed wind inverter—(i) In
general. Distributed wind inverter means
an inverter that is used in a residential or
non-residential system that utilizes 1 or
more certified distributed wind energy
systems and has a total rated output,
expressed on an alternating current watt
basis, of not greater than 150 kilowatts.
(ii) Certified distributed wind energy
system. Certified distributed wind energy
system means a wind energy system that
is certified by an accredited certification
agency to meet Standard 9.1-2009 of
the American Wind Energy Association;
International Electrotechnical Commis-
sion 61400-1, 61400-2, 61400-11, 61400-
12; or ANSI/ACP 101-1-2021, the Small
Wind Turbine Standard, including any
subsequent revisions to or modifications
of such Standard that have been approved
by the American National Standards Insti-
tute.
(iii) Credit amount. For a distributed
wind inverter the total rated capacity of
which is expressed on an alternating cur-
rent watt basis, the credit amount is equal
to the product of 11 cents multiplied by
the total rated capacity of the distributed
wind inverter.
(iv) Substantiation. The taxpayer must
document that a distributed wind inverter
is used in a residential or non-residential
system that utilizes one or more certified
distributed wind energy systems with a
specification sheet, bill of sale, or other
similar documentation that explicitly
describes such use and the total rated out-
put of the inverter on an alternating cur-
rent watt basis.
(5) Microinverter—(i) Definition.
Microinverter means an inverter that—
(A) Is suitable to connect with one
solar module;
(B) Has a rated output described in
paragraph (d)(5)(ii) of this section; and
(C) Has a capacity, expressed on an
alternating current watt basis, that is not
greater than 650 watts.
(ii) Rated output. For purposes of para-
graph (d)(5)(i)(B) of this section, for an
inverter to be a microinverter, the inverter
must have a rated output of—
(A) 120 or 240 volt single-phase
power; or
(B) 208 or 480 volt three-phase power.
(iii) Suitable to connect to one solar
module—(A) In general. An inverter is
suitable to connect to one solar module if,
in the form sold by the manufacturer, it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity.
(B) Application to direct current (DC)
optimized inverter systems. A DC opti-
mized inverter system means an inverter
that is comprised of an inverter connected
to multiple DC optimizers that are each
designed to connect to one solar module.
A DC optimized inverter system is suit-
able to connect with one solar module if,
in the form sold by the manufacturer, it is
capable of connecting to one or more solar
modules and regulating the DC electricity
from each module independently before
that electricity is converted into alternat-
ing current electricity.
(C) Application to multi-module invert-
ers. A multi-module inverter means an
inverter that is comprised of an inverter
with independent connections and DC
optimizing components for two or more
modules. A multi-module microinverter
is suitable to connect with one solar mod-
ule if it is capable of connecting to one
or more solar modules and regulating the
DC electricity from each module inde-
pendently before that electricity is con-
verted into alternating current electricity.
(iv) Credit amount—(A) In general.
For a microinverter the total rated capac-
ity of which is expressed on an alternating
current watt basis, the credit amount is
equal to the product of 11 cents multiplied
by the total rated capacity of the microin-
verter.
(B) DC optimized inverter systems. A
DC optimized inverter system qualifies as
a microinverter if it meets the requirements
of paragraph (d)(5)(i) of this section. For
purposes of paragraph (d)(5)(i)(C) of this
section, a DC optimized inverter system’s
capacity is determined separately for each
DC optimizer paired with the inverter in
a DC optimized inverter system. If each
DC optimizer paired with the inverter in
a DC optimized inverter system meets
the requirements of paragraph (d)(5)(i)
of this section, then the DC optimized
inverter system qualifies as a microin-
verter. The credit amount for a DC opti-
mized inverter system that qualifies as a
microinverter is equal to the product of
11 cents multiplied by the lesser of the
sum of the alternating current capacity of
each DC optimizer when paired with the
inverter in the DC optimized inverter sys-
tem or the alternating current capacity of
the inverter in the DC optimized inverter
system. For purposes of this paragraph
(d)(5)(iv)(B), capacity must be measured
in watts of alternating current converted
from DC electricity by the inverter in a
DC optimized inverter system. For a DC
optimized inverter system to qualify as a
microinverter, a taxpayer must produce
and sell the inverter and the DC optimiz-
ers in the DC optimized inverter system
together as a combined end product.
(C) Multi-module inverters. A
multi-module inverter qualifies as a micro-
inverter if it meets the requirements of para-
graph (d)(5)(i) of this section. For purposes
of paragraph (d)(5)(i)(C) of this section, a
multi-module inverter’s capacity is deter-
mined separately for each internal DC opti-
mizer paired with the inverter. The credit
amount for a multi-module inverter is equal
to the product of 11 cents multiplied by the
total alternating current capacity of the DC
optimizers in the multi-module inverter
when paired with the inverter in the sys-
tem. For purposes of this paragraph (d)(5)
(iv)(C), capacity must be measured in watts
of alternating current converted from DC
electricity by the inverter in a multi-module
microinverter.
(v) Substantiation. The taxpayer must
document that a microinverter meets the
core engineering specifications to be suit-
able to connect with one solar module, the
inverter’s rated output, and the inverter’s

Bulletin No. 2024–3 435 January 16, 2024
capacity in a specification sheet, bill of
sale, or other similar documentation. In
the case of a DC optimized inverter sys-
tem, the taxpayer must also document that
the DC optimizers and the inverter in such
system were sold as a combined end prod-
uct.
(6) Residential inverter—(i) Definition.
Residential inverter means an inverter
that—
(A) Is suitable for a residence;
(B) Has a rated output of 120 or 240
volt single-phase power; and
(C) Has a capacity expressed on an
alternating current watt basis that is not
greater than 20 kilowatts.
(ii) Suitable for a residence. An inverter
is suitable for a residence if, in the form
sold by the manufacturer, it is capable of
serving as a component in a residential
system and meets the core engineering
specifications for such application.
(iii) Credit amount. For a residential
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 6.5 cents multiplied by the total
rated capacity of the residential inverter.
(iv) Substantiation. The taxpayer must
document that a residential inverter meets
the core engineering specifications for use
in a residence, the inverter’s rated output,
and the inverter’s capacity in a specifi-
cation sheet, bill of sale, or other similar
documentation.
(7) Utility inverter—(i) Definition.
Utility inverter means an inverter that—
(A) Is suitable for commercial or utili-
ty-scale systems;
(B) Has a rated output of not less than
600 volt three-phase power; and
(C) Has a capacity expressed on an
alternating current watt basis that is
greater than 125 kilowatts and not greater
than 1000 kilowatts.
(ii) Suitable for commercial or utili-
ty-scale systems. An inverter is suitable
for commercial or utility-scale systems if,
in the form sold by the manufacturer, it is
capable of serving as a component in such
systems and meets the core engineering
specifications for such application.
(iii) Credit amount. For a utility
inverter the total rated capacity of which
is expressed on an alternating current watt
basis, the credit amount is equal to the
product of 1.5 cents multiplied by the total
rated capacity of the utility inverter.
(iv) Substantiation. The taxpayer must
document that a utility inverter meets the
core engineering specifications for use in
commercial or utility-scale systems, the
inverter’s rated output, and the inverter’s
capacity in a specification sheet, bill of
sale, or other similar documentation.
(e) Qualifying battery component—(1)
In general. Qualifying battery component
means electrode active materials, battery
cells, or battery modules, each as defined
in this paragraph (e).
(2) Electrode active materials—(i)
Definitions—(A) Electrode active mate-
rials. Electrode active materials means
cathode electrode materials, anode elec-
trode materials, and electrochemically
active materials that contribute to the
electrochemical processes necessary for
energy storage. Electrode active materi-
als do not include battery management
systems, terminal assemblies, cell con-
tainments, gas release valves, module
containments, module connectors, com-
pression plates, straps, pack terminals,
bus bars, thermal management systems,
and pack jackets.
(B) Cathode electrode materials.
Cathode electrode materials means the
materials that comprise the cathode of a
commercial battery technology, such as
binders, and current collectors (for exam-
ple, cathode foils).
(C) Anode electrode materials. Anode
electrode materials means the materials
that comprise the anode of a commercial
battery technology, including anode foils.
(D) Electrochemically active materi-
als. Electrochemically active materials
that contribute to the electrochemical
processes necessary for energy storage
means battery-grade materials that enable
the electrochemical storage within a com-
mercial battery technology. In addition to
solvents, additives, and electrolyte salts,
electrochemically active materials that
contribute to the electrochemical pro-
cesses necessary for energy storage may
include electrolytes, catholytes, anolytes,
separators, and metal salts and oxides.
(E) Example. A commercial battery
technology contains Cathode Active
Material (CAM), which is a powder
used in the battery that is made by pro-
cessing and combining Battery-Grade
Materials A and B. Battery-Grade Mate-
rial A is a derivative of Material C,
which has been refined to the necessary
level to enable electrochemical storage.
The production costs for CAM and its
direct inputs (Battery-Grade Material A
and Battery-Grade Material B) are eligi-
ble for the section 45X credit for elec-
trode active materials, but the unrefined
Material C is not.
(F) Battery-grade materials. Bat-
tery-grade materials means the processed
materials found in a final battery cell or an
analogous unit, or the direct battery-grade
precursors to those processed materials.
(ii) Credit amount. For an electrode
active material, the credit amount is equal
to 10 percent of the costs incurred by the
taxpayer with respect to production of
such materials.
(iii) Production processes for electrode
active materials—(A) Conversion. For
purposes of section 45X, the term con-
version means a chemical transformation
from one species to another.
(B) Purification. For purposes of sec-
tion 45X, the term purification means
increasing the mass fraction of a certain
element.
(iv) Production costs incurred. Costs
incurred by the taxpayer with respect
to production of electrode active mate-
rials includes all costs as defined in
§1.263A-1(e) that are paid or incurred
within the meaning of section 461 of
the Code by the taxpayer for the produc-
tion of an electrode active material only,
except direct materials costs as defined
in §1.263A-1(e)(2)(i)(A), or indirect
materials costs as defined in §1.263A-
1(e)(3)(ii)(E), and any costs related to
the extraction of raw materials. Section
263A of the Code and the regulations in
this chapter under section 263A apply
solely to identify the types of costs
that are includible in production costs
incurred for purposes of computing the
amount of the section 45X credit, but do
not apply for any other purpose, such
as to determine whether a taxpayer is
engaged in production activities.
(v) Materials that are both electrode
active materials and applicable critical
minerals—(A) In general. A material that
qualifies as an electrode active material

January 16, 2024 436 Bulletin No. 2024–3
and an applicable critical material is eli-
gible for the section 45X credit. A tax-
payer may claim the section 45X credit
with respect to such material either as an
electrode active material or an applicable
critical material, but not both.
(B) Example. Lithium carbonate is an
electrode active material because it is a
direct battery-grade precursor to electro-
lyte salts, which are processed materials
found in a final battery cell. Lithium car-
bonate is also eligible for the 45X critical
minerals credit. A taxpayer who produces
and sells lithium carbonate may claim
either the electrode active material credit
or the critical mineral credit for its produc-
tion and sale of lithium carbonate but may
not take both credits.
(3) Battery cells—(i) Definition. Bat-
tery cell means an electrochemical cell—
(A) Comprised of one or more positive
electrodes and one or more negative elec-
trodes;
(B) With an energy density of not less
than 100 watt-hours per liter; and
(C) Capable of storing at least 12 watt-
hours of energy.
(ii) Capacity measurement. Taxpayers
must measure the capacity of a battery cell
in accordance with a national or interna-
tional standard, such as IEC 60086-1 (Pri-
mary Batteries), or an equivalent standard.
Taxpayers can reference the United States
Advanced Battery Consortium (USABC)
Battery Test Manual for additional guid-
ance.
(iii) Credit amount. For a battery cell,
the credit amount is equal to the product
of $35 multiplied by the capacity of such
battery cell, subject to the limitation pro-
vided in paragraph (e)(5) of this section.
The capacity of a battery cell is expressed
on a kilowatt-hour basis.
(4) Battery module definitions and
applicable rules—(i) Battery module
defined. The term battery module means
a module described in paragraph (e)(4)(i)
(A) or (B) of this section with an aggregate
capacity of not less than 7 kilowatt-hours
(or, in the case of a module for a hydro-
gen fuel cell vehicle, not less than 1 kilo-
watt-hour).
(A) Modules using battery cells. A
module using battery cells, is a module
with two or more battery cells that are
configured electrically, in series or paral-
lel, to create voltage or current, as appro-
priate, to a specified end use, meaning an
end-use configuration of battery technolo-
gies. An end-use configuration is the prod-
uct that ultimately serves a specified end
use. It is the collection of interconnected
cells, configured to that specific end-use
and interconnected with the necessary
hardware and software required to deliver
the required energy and power (voltage
and current) for that use.
(B) Modules with no battery cells.
A module with no battery cells means a
product with a standardized manufactur-
ing process and form that is capable of
storing and dispatching useful energy, that
contains an energy storage medium that
remains in the module (for example, it is
not consumed through combustion), and
that is not a custom-built electricity gen-
eration or storage facility. For example,
neither standalone fuel storage tanks nor
fuel tanks connected to engines or gener-
ation systems qualify as modules with no
battery cells.
(ii) Capacity measurement—(A) Mod-
ules using battery cells. Taxpayers must
measure the capacity of a module using
battery cells with a testing procedure that
complies with a national or international
standard published by a recognized stan-
dard setting organization. The capacity of
a battery module may not exceed the total
capacity of the battery cells in the mod-
ule. Taxpayers must measure the capac-
ity of a battery cell in accordance with a
national or international standard, such as
IEC 60086-1 (Primary Batteries), or an
equivalent standard. Taxpayers can refer-
ence the USABC Battery Test Manual for
additional guidance.
(B) Modules with no battery cells. Tax-
payers must measure the capacity of a
module with no battery cells with a testing
procedure that complies with a national or
international standard published by a rec-
ognized standard setting organization. If
no such standard applies to a type of mod-
ule with no battery cells, taxpayers must
measure the capacity of such module as
the Secretary may prescribe in regulations
or other guidance.
(iii) Credit amount—(A) Modules
using battery cells. For a battery mod-
ule with cells, the credit amount is equal
to the product of $10 multiplied by the
capacity of such battery module, subject
to the limitation provided in paragraph
(e)(5) of this section. The capacity of
each battery module is expressed on a
kilowatt-hour basis.
(B) Modules with no battery cells. For
a battery module without cells, the credit
amount is equal to the product of $45
multiplied by the capacity of such bat-
tery module, subject to the limitation pro-
vided in paragraph (e)(5) of this section.
The capacity of each battery module is
expressed on a kilowatt-hour basis.
(5) Limitation on capacity of battery
cells and battery modules—(i) In general.
For purposes of paragraphs (e)(3)(iii) and
(e)(4)(iii) of this section, the capacity
determined with respect to a battery cell or
battery module must not exceed a capaci-
ty-to-power ratio of 100:1.
(ii) Capacity to power ratio. For pur-
poses of paragraph (e)(5)(i) of this sec-
tion, capacity-to-power ratio means,
with respect to a battery cell or battery
module, the ratio of the capacity of such
cell or module to the maximum discharge
amount of such cell or module.
(f) Phase out rule—(1) In general.
Except as provided in paragraph (f)(3)
of this section, in the case of any eligi-
ble component sold after December 31,
2029, the amount of the section 45X credit
determined with respect to such eligible
component must be equal to the product
of—
(i) The amount determined under this
section with respect to such eligible com-
ponent, multiplied by;
(ii) The phase out percentage under
paragraph (f)(2) of this section.
(2) Phase out percentages. The phase
out percentage is equal to 75 percent for
eligible components sold during calendar
year 2030; 50 percent for eligible com-
ponents sold during calendar year 2031;
25 percent for eligible components sold
during calendar year 2032, and zero per-
cent for eligible components sold after
calendar year 2032.
(3) Exception for applicable critical
minerals. The phase out rules described
in paragraphs (f)(1) and (2) of this section
apply to all eligible components except
applicable critical minerals.
(g) Severability. The provisions of
this section are separate and severable

Bulletin No. 2024–3 437 January 16, 2024
from one another. If any provision of
this section is stayed or determined to be
invalid, it is the agencies’ intention that
the remaining provisions shall continue
in effect.
(h) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after [date of
publication of the final regulations in the
Federal Register].
§1.45X-4 Applicable critical minerals.
(a) In general. The term applicable
critical mineral means any of the miner-
als that are listed in section 45X(c)(6) and
defined in paragraph (b) of this section.
(b) Definitions—(1) Aluminum. The
term commodity-grade aluminum means
aluminum that has been produced directly
from aluminum described in paragraph (b)
(1)(i) or (ii) of this section and is in a form
that is sold on international commodity
exchanges. The term aluminum means
aluminum, including commodity-grade
aluminum, that is—
(i) Converted from bauxite to a min-
imum purity of 99 percent alumina by
mass; or
(ii) Purified to a minimum purity of
99.9 percent aluminum by mass.
(2) Antimony. The term antimony
means antimony that is—
(i) Converted to antimony trisulfide
concentrate with a minimum purity of 90
percent antimony trisulfide by mass; or
(ii) Purified to a minimum purity of
99.65 percent antimony by mass.
(3) Barite. The term barite means bar-
ite that is barium sulfate purified to a min-
imum purity of 80 percent barite by mass.
(4) Beryllium. The term beryllium
means beryllium that is—
(i) Converted to copper-beryllium mas-
ter alloy; or
(ii) Purified to a minimum purity of 99
percent beryllium by mass.
(5) Cerium. The term cerium means
cerium that is—
(i) Converted to cerium oxide that is
purified to a minimum purity of 99.9 per-
cent cerium oxide by mass; or
(ii) Purified to a minimum purity of 99
percent cerium by mass.
(6) Cesium. The term cesium means
cesium that is—
(i) Converted to cesium formate or
cesium carbonate; or
(ii) Purified to a minimum purity of 99
percent cesium by mass.
(7) Chromium. The term chromium
means chromium that is—
(i) Converted to ferrochromium con-
sisting of not less than 60 percent chro-
mium by mass; or
(ii) Purified to a minimum purity of 99
percent chromium by mass.
(8) Cobalt. The term cobalt means
cobalt that is—
(i) Converted to cobalt sulfate; or
(ii) Purified to a minimum purity of
99.6 percent cobalt by mass.
(9) Dysprosium. The term dysprosium
means dysprosium that is—
(i) Converted to not less than 99 per-
cent pure dysprosium iron alloy by mass;
or
(ii) Purified to a minimum purity of 99
percent dysprosium by mass.
(10) Europium. The term europium
means europium that is—
(i) Converted to europium oxide that is
purified to a minimum purity of 99.9 per-
cent europium oxide by mass; or
(ii) Purified to a minimum purity of 99
percent of europium by mass.
(11) Fluorspar. The term fluorspar
means fluorspar that is—
(i) Converted to fluorspar that is puri-
fied to a minimum purity of 97 percent
calcium fluoride by mass; or
(ii) Purified to a minimum purity of 99
percent fluorspar by mass.
(12) Gadolinium. The term gadolinium
means gadolinium that is—
(i) Converted to gadolinium oxide that
is purified to a minimum purity of 99.9
percent gadolinium oxide by mass; or
(ii) Purified to a minimum purity of 99
percent gadolinium by mass.
(13) Germanium. The term germanium
means germanium that is—
(i) Converted to germanium tetrachlo-
ride; or
(ii) Purified to a minimum purity of
99.99 percent germanium by mass.
(14) Graphite. The term graphite
means natural or synthetic graphite that is
purified to a minimum purity of 99.9 per-
cent graphitic carbon by mass. The term
99.9 percent graphitic carbon by mass
means graphite that is 99.9 percent carbon
by mass.
(15) Indium. The term indium means
indium that is—
(i) Converted to—
(A) Indium tin oxide; or
(B) Indium oxide that is purified to a
minimum purity of 99.9 percent indium
oxide by mass; or
(ii) Purified to a minimum purity of 99
percent indium by mass.
(16) Lithium. The term lithium means
lithium that is—
(i) Converted to lithium carbonate or
lithium hydroxide; or
(ii) Purified to a minimum purity of
99.9 percent lithium by mass.
(17) Manganese. The term manganese
means manganese that is—
(i) Converted to manganese sulphate;
or
(ii) Purified to a minimum purity of
99.7 percent manganese by mass.
(18) Neodymium. The term neodymium
means neodymium that is—
(i) Converted to neodymium-pra-
seodymium oxide that is purified to a
minimum purity of 99 percent neodymi-
um-praseodymium oxide by mass;
(ii) Converted to neodymium oxide that
is purified to a minimum purity of 99.5 per-
cent neodymium oxide by mass; or
(iii) Purified to a minimum purity of
99.9 percent neodymium by mass.
(19) Nickel. The term nickel means
nickel that is—
(i) Converted to nickel sulphate; or
(ii) Purified to a minimum purity of 99
percent nickel by mass.
(20) Niobium. The term niobium means
niobium that is—
(i) Converted to ferronibium; or
(ii) Purified to a minimum purity of 99
percent niobium by mass.
(21) Tellurium. The term tellurium
means tellurium that is—
(i) Converted to cadmium telluride; or
(ii) Purified to a minimum purity of 99
percent tellurium by mass.
(22) Tin. The term tin means tin that
purified to low alpha emitting tin that—
(i) Has a purity of greater than 99.99
percent by mass; and

January 16, 2024 438 Bulletin No. 2024–3
(ii) Possesses an alpha emission rate of
not greater than 0.01 counts per hour per
centimeter square.
(23) Tungsten. The term tungsten
means tungsten that is converted to ammo-
nium paratungstate or ferrotungsten.
(24) Vanadium. The term vanadium
means vanadium that is converted to fer-
rovanadium or vanadium pentoxide.
(25) Yttrium. The term yttrium means
yttrium that is—
(i) Converted to yttrium oxide that is
purified to a minimum purity of 99.999
percent yttrium oxide by mass; or
(ii) Purified to a minimum purity of
99.9 percent yttrium by mass.
(26) Other minerals. The following
minerals are also applicable critical min-
erals provided that such mineral is puri-
fied to a minimum purity of 99 percent by
mass:
(i) Arsenic.
(ii) Bismuth.
(iii) Erbium.
(iv) Gallium.
(v) Hafnium.
(vi) Holmium.
(vii) Iridium.
(viii) Lanthanum.
(ix) Lutetium.
(x) Magnesium.
(xi) Palladium.
(xii) Platium.
(xiii) Praseodymium.
(xiv) Rhodium.
(xv) Rubidium.
(xvi) Ruthemium.
(xvii) Samarium.
(xviii) Scandium.
(xix) Tantalum.
(xx) Terbium.
(xxi) Thulium.
(xxii) Titanium.
(xxiii) Ytterbium.
(xxiv) Zinc.
(xxv) Zirconium.
(c) Credit amount—(1) In general. For
any applicable critical mineral, the credit
amount is equal to 10 percent of the costs
incurred by the taxpayer with respect to
production of such mineral.
(2) Production processes for applica-
ble critical minerals—(i) Conversion. For
purposes of section 45X, the term con-
version means a chemical transformation
from one species to another.
(ii) Purification. For purposes of sec-
tion 45X, the term purification means
increasing the mass fraction of a certain
element.
(3) Production costs incurred. Costs
incurred by the taxpayer with respect
to the production of applicable critical
minerals includes all costs as defined in
§1.263A-1(e) that are paid or incurred
within the meaning of section 461 of
the Code by the taxpayer for the pro-
duction of an applicable critical mineral
only, except direct or indirect materials
costs as defined in §1.263A-1(e)(2)
(i)(A) and (e)(3)(ii)(E), respectively,
and any costs related to the extraction
of raw materials. Section 263A of the
Code and the regulations in this chap-
ter under section 263A apply solely to
identify the types of costs that are inclu-
dible in production costs incurred for
purposes of computing the amount of
the section 45X credit, but do not apply
for any other purpose, such as to deter-
mine whether a taxpayer is engaged in
production activities.
(4) Substantiation. The taxpayer must
document that an applicable critical min-
eral meets the requirements of section
45X(c)(6) with a certificate of analysis
provided by the taxpayer to the person
to which the taxpayer sold the applicable
critical mineral.
(d) Severability. The provisions of this
section are separate and severable from
one another. If any provision of this sec-
tion is stayed or determined to be invalid,
it is the agencies’ intention that the remain-
ing provisions shall continue in effect.
(e) Applicability date. This section
applies to eligible components for which
production is completed and sales occur
after December 31, 2022, and during a
taxable year ending on or after [date of
publication of the final regulations in the
Federal Register].
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register Decem-
ber 14, 2023, 8:45 a.m., and published in the issue
of the Federal Register for December 15, 2023, 88
FR 86844)

Bulletin No. 2024–3 i January 16, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

January 16, 2024 ii Bulletin No. 2024–3
Numerical Finding List
1
Bulletin 2024–3
Announcements:
2024-1, 2024-02 I.R.B. 363
2024-3, 2024-02 I.R.B. 364
Notices:
2024-1, 2024-02 I.R.B. 314
2024-2, 2024-02 I.R.B. 316
2024-3, 2024-02 I.R.B. 338
2024-4, 2024-02 I.R.B. 343
2024-5, 2024-02 I.R.B. 347
2024-6, 2024-02 I.R.B. 348
2024-7, 2024-02 I.R.B. 355
2024-8, 2024-02 I.R.B. 356
2024-9, 2024-02 I.R.B. 358
2024-11, 2024-02 I.R.B. 360
2024-10, 2024-03 I.R.B. 406
Proposed Regulations:
REG-118492-23, 2024-02 I.R.B. 366
REG-107423-23, 2024-03 I.R.B. 411
Revenue Procedures:
2024-1, 2024-01 I.R.B. 1
2024-2, 2024-01 I.R.B. 119
2024-3, 2024-01 I.R.B. 143
2024-4, 2024-01 I.R.B. 160
2024-5, 2024-01 I.R.B. 262
2024-7, 2024-01 I.R.B. 303
Revenue Rulings:
2024-1, 2024-02 I.R.B. 307
2024-2, 2024-02 I.R.B. 311
Treasury Decisions:
9984, 2024-03 I.R.B. 386
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 26, 2023.

Bulletin No. 2024–3 iii January 16, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–3
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 26, 2023.

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