As governments and businesses around the world seek to reduce their carbon footprint and transition to cleaner energy sources, tax credits and incentives have emerged as a key tool to support the adoption of hydrogen fuel cells. This article will explore how three United States tax credits – fuel cell property credit, domestic content bonus credit, and Energy Community bonus credit – apply to hydrogen fuel cells.
Fuel Cell Property Credit
The fuel cell property credit is a federal tax credit in the U.S. that provides a financial incentive for purchasing and installing qualifying fuel cell property. This credit is available to both residential and commercial taxpayers. It is equal to 30 percent of the cost of the fuel cell system, up to a maximum credit of US$1,000 per kilowatt of capacity. To qualify for the credit, the fuel cell system must have a capacity of at least 0.5 kilowatts and an electricity-only generation efficiency of at least 30 percent.
Hydrogen fuel cells are eligible for the fuel cell property credit, provided they meet the eligibility criteria. This means that homeowners and businesses that purchase and install hydrogen fuel cell systems can claim a tax credit of up to 30% of the cost of the system, which can help offset the upfront cost of the technology.
Domestic Content Bonus Credit
The domestic content bonus credit is a federal tax credit that provides an additional financial incentive for purchasing and installing qualifying fuel cell property manufactured in the United States. This credit is equal to 30 percent of the cost of the fuel cell system, up to a maximum credit of US$1,500 per kilowatt of capacity.
Hydrogen fuel cells manufactured in the United States are eligible for the domestic content bonus credit, provided they also meet the fuel cell property credit eligibility criteria. This means that homeowners and businesses that purchase and install domestically manufactured hydrogen fuel cell systems can claim a tax credit of up to 60 percent of the cost of the system – 30 percent for the fuel cell property credit and an additional 30 percent for the domestic content bonus credit.
Energy Community Bonus Credit
The Energy Community bonus credit is a federal tax credit that provides an additional financial incentive for purchasing and installing qualifying fuel cell property installed in an energy community. An energy community is defined as a community that generates and distributes its own energy from renewable sources, such as solar, wind, and fuel cells. This credit is equal to 30 percent of the cost of the fuel cell system, up to a maximum credit of US$3,000 per kilowatt of capacity.
Hydrogen fuel cells installed in an energy community are eligible for the Energy Community bonus credit, provided they also meet the fuel cell property credit eligibility criteria. This means that homeowners and businesses that install hydrogen fuel cell systems in an energy community can claim a tax credit of up to 60 percent of the cost of the system – 30 percent for the fuel cell property credit and an additional 30 percent for the Energy Community bonus credit.
Tax Credit for Fuel Cells Requirements
It is important that businesses check with a trained tax professional. But in the meantime, here is a list of the requirements that businesses must meet to receive the tax credits for fuel cells:
- Tax credit must be claimed in the year in which the fuel cell property is placed in service
- Must be placed in service at sites within the United States or U.S. territories
- Must be new fuel cell systems
- Fuel cell systems must be rated at 500W or greater
- Fuel cell system must have an electricity-only generation efficiency greater than 30%
How to Claim the Tax Credit
These tax credits are available to businesses when certain criteria are met. To directly claim the tax credit, corporations must complete the following: Investment Tax Credit information page on the IRS website: https://www.irs.gov/instructions/i3468#en_US_2022_publink1000111767;
Refer to Energy Credit – Section 12e to 12l for qualified fuel cell credits and Section 12hh for other available energy credits
Look for and complete the IRS form 3468 to apply for tax credits for fuel cells at www.irs.gov/forms-pubs/form-3468-investment-credit-2
When complete, attach the 3486 fuel cell tax credit application form to the corporate tax return