IRS Form 7207 – The Advanced Manufacturing Production Credit (AMPC), also known as the Section 45X credit, is a key incentive introduced by the Inflation Reduction Act of 2022 to boost domestic manufacturing of clean energy components. This tax credit rewards U.S.-based producers for manufacturing and selling eligible items like solar panels, wind turbine parts, batteries, and critical minerals. If you’re a manufacturer looking to claim this credit, IRS Form 7207 is the essential tool for calculating and reporting it. In this article, we’ll break down what Form 7207 entails, eligibility requirements, credit rates, filing steps, and more to help you maximize your benefits.
What Is the Advanced Manufacturing Production Credit?
The AMPC is designed to encourage investment in U.S. manufacturing for renewable energy technologies. It provides a tax credit based on the production and sale of specific “eligible components” during the tax year. These components must be produced in the United States or its territories and sold to unrelated parties in the course of your trade or business. The credit was established to support the clean energy supply chain, covering everything from solar and wind components to battery materials and critical minerals.
Key highlights:
- Enacted by: Inflation Reduction Act of 2022 (IRA).
- Effective for: Components produced and sold after December 31, 2022.
- Phase-Out: Begins in 2030 for most components (75% in 2030, 50% in 2031, 25% in 2032, and 0% after 2032), with slight variations for critical minerals and no phase-out for some until later.
- Monetization Options: Eligible taxpayers can elect direct payment (refundable credit) or transfer the credit to third parties for cash under Sections 6417 and 6418.
This credit is uncapped, meaning there’s no limit on the total amount available, making it a powerful tool for scaling domestic production.
Who Is Eligible for the Section 45X Credit?
To qualify for the AMPC using Form 7207, you must meet these criteria:
- Production Location: All manufacturing must occur in the U.S. or its territories, including the continental shelf.
- Sale Requirements: Components must be sold to unrelated persons. Related-party sales may qualify with a special election and certification (Appendix B of Form 7207).
- Business Context: The production and sale must be part of your trade or business.
- Exclusions: No credit for components produced at facilities that claimed the Section 48C Advanced Energy Project Credit after August 16, 2022. Additionally, after July 4, 2025, credits are prohibited if involving certain foreign entities or material assistance from them.
Eligible taxpayers include corporations, partnerships, S corporations, estates, trusts, and certain tax-exempt entities (applicable entities under Section 6417). Pass-through entities report the credit on Schedule K-1, and partners/shareholders claim it on their returns.
For contract manufacturing, parties must agree in advance who claims the credit and submit a certification (Appendix A).
Eligible Components and Credit Rates
The credit amount varies by component type and is calculated using one of three methods: per-unit capacity (e.g., watts or kWh), per-unit size/weight (e.g., per kg or m²), or a percentage of production costs (typically 10%). Below is a breakdown of key categories and rates based on Section 45X(b).
Solar Energy Components
| Component | Definition | Credit Rate |
|---|---|---|
| Photovoltaic Cell | Smallest semiconductor unit converting light to electricity. | 4 cents × capacity (DC watts). |
| Photovoltaic Wafer | Thin semiconductor slice/layer (≥240 cm²) from polysilicon or thin film. | $12 per square meter. |
| Polymeric Backsheet | Insulating/protective layer on the back of a solar module. | 40 cents per square meter. |
| Solar Grade Polysilicon | Silicon purified to ≥99.999999% for photovoltaics. | $3 per kg. |
| Solar Module | Assembled photovoltaic cells in a protected unit ready for installation. | 7 cents × capacity (DC watts). |
| Torque Tube | Structural steel support for solar trackers. | 87 cents per kg. |
| Structural Fastener | Connector for solar tracker components. | 22 cents per kg. |
Wind Energy Components
| Component | Definition | Credit Rate |
|---|---|---|
| Blade | Airfoil converting wind to rotational energy. | 2 cents × turbine capacity (watts). |
| Nacelle | Housing for drivetrain and tower-top components (excludes blades/hub). | 5 cents × turbine capacity (watts). |
| Tower | Tubular or lattice structure supporting nacelle/rotor. | 3 cents × turbine capacity (watts). |
| Offshore Wind Foundation (Fixed) | Structure securing tower to seafloor (e.g., monopile). | 2 cents × turbine capacity (watts). |
| Offshore Wind Foundation (Floating) | Floating platform securing tower. | 4 cents × turbine capacity (watts). |
| Offshore Wind Vessel | Specialized vessel for offshore wind development/maintenance. | Varies; reported per vessel in Part III of Form 7207. |
Inverters
| Component | Definition | Credit Rate |
|---|---|---|
| Central Inverter | >1,000 kW for utility-scale. | 1.5 cents × capacity (AC watts). |
| Utility Inverter | ≥600V three-phase, >125 kW to ≤1,000 kW. | 2 cents × capacity (AC watts). |
| Commercial Inverter | 208/480/600/800V three-phase, ≥20 kW to ≤125 kW. | 6.5 cents × capacity (AC watts). |
| Residential Inverter | 120/240V single-phase, ≤20 kW. | 11 cents × capacity (AC watts). |
| Microinverter | Connects to one module, ≤650W. | 11 cents × capacity (AC watts). |
| Distributed Wind Inverter | ≤150 kW for certified distributed wind systems. | 11 cents × capacity (AC watts). |
Battery Components
| Component | Definition | Credit Rate |
|---|---|---|
| Electrode Active Material | Cathode/anode materials, foils, solvents, etc., for energy storage (certified via Appendix C). | 10% of production costs. |
| Battery Cell | Electrochemical cell (≥100 Wh/L density, ≥12 Wh, capacity-to-power ratio ≤100:1). | $35 × capacity (kWh). |
| Battery Module (with Cells) | Assembled modules ≥7 kWh (or ≥1 kWh for non-H2 vehicles), ratio ≤100:1. | $10 × capacity (kWh). |
| Battery Module (without Cells) | Similar to above but without cells. | $45 × capacity (kWh). |
Applicable Critical Minerals
These include 50+ minerals like aluminum, antimony, cobalt, lithium, and graphite, meeting specific purity thresholds (e.g., aluminum ≥99% purity). Metallurgical coal (for steel) qualifies at 2.5% of production costs until 2029. Credit: 10% of production costs (reported in Part IV; certified via Appendix C).
For integrated components sold after December 31, 2026, at least 65% of the secondary component’s direct material costs must come from U.S.-sourced items to qualify.
How to Calculate and Claim the Credit Using Form 7207?
Form 7207 is filed separately for each production facility. Here’s a step-by-step overview:
- Pre-Filing Registration: Required for direct payment or credit transfer. Register at IRS.gov/Register for Elective Payment or Transfer of Credits to get a registration number (Line 1).
- Facility Information (Part I): Provide address, description, coordinates, and check boxes for related-party elections or Section 48C overlaps.
- Eligible Components (Part II): Enter quantities sold and calculate credits per line (e.g., aggregate capacity for solar/wind/batteries).
- Special Parts: Use Part III for offshore wind vessels and Part IV for critical minerals.
- Pass-Through Credits (Line 7): Add credits from partnerships/S corps.
- Total Credit (Line 8): Sum all amounts; report on Form 3800 (General Business Credit).
- Attachments: Include certifications for contracts, related parties, and suppliers.
File with your tax return (e.g., Form 1120 for corporations, Form 990-T for exempt entities). Maintain detailed records of production, sales, and costs. For software like ProConnect Tax, Form 7207 generation starts in tax year 2023.
Example Calculation: A manufacturer sells 1,000 solar modules with 500W capacity each. Credit = 7 cents × (1,000 × 500) = $35,000 (before phase-out).
Recent Updates and Considerations for 2026
- Foreign Entity Restrictions: Effective after July 4, 2025, no credits if tied to prohibited foreign entities.
- Metallurgical Coal Addition: Now eligible as a critical mineral at 2.5% of costs.
- Integrated Components Rule: New 65% U.S. material cost threshold post-2026.
- Wind Components Termination: No credit after December 31, 2027.
Always check IRS.gov for the latest, as legislation like Public Law 119-21 has introduced changes.
How to Download IRS Form 7207?
To get started, download the official PDF: https://www.irs.gov/pub/irs-pdf/f7207.pdf. For instructions, visit IRS Form 7207 Instructions.
By leveraging the AMPC, manufacturers can reduce costs, enhance competitiveness, and contribute to America’s clean energy future. Consult a tax professional to ensure compliance and optimize your claims.