Sec. 5. Clean hydrogen production credit
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Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by section 4, is amended by adding at the end the following new section: For purposes of section 38, the clean hydrogen production credit determined under this section for any taxable year beginning in the credit period with respect to a qualified hydrogen production facility of the taxpayer is an amount equal to the product of— the applicable percentage of an amount equal to 250 percent of the national average wholesale price of a kilogram of hydrogen in the calendar year which began 2 years prior to the calendar year in which such taxable year begins, and subject to paragraph (2), the amount of clean hydrogen produced at the qualified hydrogen production facility during such taxable year.
In the case of any clean hydrogen described in subsection (d)(1)(A)(ii), the amount determined under paragraph (1)(B) with respect to such clean hydrogen shall be equal to twice the amount otherwise determined under such paragraph. For purposes of subsection (a)(1)(A), the applicable percentage is— in the case of a tier 1 facility, 60 percent, in the case of a tier 2 facility, 45 percent, in the case of a tier 3 facility, 30 percent, in the case of a tier 4 facility, 15 percent, and in the case of any other facility, zero percent.
For purposes of this subsection— The term tier 1 facility means any qualified hydrogen production facility which produces clean hydrogen from a qualified production method for which the market penetration level for the calendar year preceding the calendar year in which construction or modification of such facility began is less than 0.75 percent. The term tier 2 facility has the same meaning given the term tier 1 facility under clause (i), except that at least 0.75 percent but less than 1.5 percent shall be substituted for less than 0.75 percent .
The term tier 3 facility has the same meaning given the term tier 1 facility under clause (i), except that at least 1.5 percent but less than 2.25 percent shall be substituted for less than 0.75 percent . The term tier 4 facility has the same meaning given the term tier 1 facility under clause (i), except that at least 2.25 percent but less than 3 percent shall be substituted for less than 0.75 percent . For purposes of this paragraph, the term market penetration level means, with respect to any calendar year, the amount equal to the greater of— the amount (expressed as a percentage) equal to the quotient of— subject to subsection (d)(1)(C), the total energy content (expressed in megawatt hours) of all clean hydrogen produced using the qualified production method by all qualified hydrogen production facilities (as defined in subsection (d)(2)(A), except that clause
(iii)of such subsection shall not apply) during such calendar year (as determined by the Secretary on the basis of data reported by the Energy Information Administration), divided by the total domestic power sector electricity production (expressed in megawatt hours) for such calendar year, or the amount determined under this subparagraph for the preceding calendar year. For purposes of determining the applicable tier for any qualified production method under subparagraph (B), such subparagraph shall be applied separately with respect to— any such method described in subparagraph
(A)of subsection (d)(3), and any such method described in subparagraph
(B)of such subsection. For purposes of this subsection, the determination as to whether a facility qualifies as a tier 1, 2, 3, or 4 facility shall be— made during the year in which construction or modification of such facility begins, based on the determinations included in the report described in section 45U(b)(2)(D)(i)(II) with respect to such calendar year, and contingent on the taxpayer maintaining a continuous program of construction or continuous efforts to advance towards completion of the facility. The Secretary shall, as part of the reports published pursuant to section 45U(b)(2)(D)(i) and in the same manner as described under such section, publish the applicable market penetration level and tier for each qualified production method which has been used to produce clean hydrogen by any qualified hydrogen production facility (as defined in subsection (d)(2)(A), except that clause
(iii)of such subsection shall not apply). For purposes of determining the amount applicable under subsection (a)(1)(A) with respect to any calendar year, the Secretary of Energy (in consultation with the Secretary) shall include in any report described in section 45U(b)(2)(D)(i) a determination with respect to the national average wholesale price of a kilogram of hydrogen during such calendar year. For purposes of this section, the credit period with respect to any qualified hydrogen production facility is— in the case of a facility described in subclause
(I)of subsection (d)(2)(A)(iii), the 10-year period beginning with the date the facility was originally placed in service, or in the case of a facility described in subclause
(II)of such subsection, the 10-year period beginning with the date that the property required to modify such facility is placed in service. In this section— The term clean hydrogen means hydrogen which, as determined based on a lifecycle analysis, is produced through a qualified production method for which the rate of the greenhouse gas emissions— is greater than zero and not greater than 2,500g CO2-e (as defined in section 45U(d)(5)) per kilogram of hydrogen produced, or is equal to or less than zero. In the case of any hydrogen produced from a qualified production method described in paragraph (3)(A)— if such method uses electricity generated from a renewable energy resource (as defined in section 403 of the Renewable Energy Resources Act of 1980 ( 42 U.S.C. 7372 )) or nuclear power, such hydrogen shall be deemed to be clean hydrogen described in subparagraph (A)(ii), or if such method uses electricity generated from a source that emits greenhouse gases during production, any such emissions which are released into the atmosphere during such production shall be included for purposes of determining the rate of the greenhouse gas emissions under subparagraph (A). In the case of any hydrogen produced— through the use of fossil fuels or through the use of electricity which is generated through combustion of a fossil fuel, or using a method described in paragraph (3)(B), subparagraph
(A)shall be applied with respect to such hydrogen on the basis of a lifecycle analysis. For purposes of subparagraph (A), with respect to hydrogen produced through a qualified production method, any such hydrogen which is released into the atmosphere during such production shall not be included for purposes of determining the rate of the greenhouse gas emissions under such subparagraph. For purposes of determining the rate of the greenhouse gas emissions under subparagraph (A), such subparagraph shall not apply with respect to any qualified carbon oxide (as defined in section 45Q(c)) captured using carbon capture equipment if such carbon oxide is disposed of, used, or utilized in a manner consistent with the requirements under section 45Q. In the case of hydrogen produced using a qualified production method described in clause (ii), for purposes of the application of subparagraph
(A)based on a lifecycle analysis with respect to such method, such subparagraph shall not apply with respect to— any upstream emissions, and any downstream emissions related to the compression, liquefaction, use, or transport of hydrogen subsequent to production. For purposes of determining the rate of the greenhouse gas emissions under subparagraph
(A)with respect to hydrogen produced using high-temperature electrolysis, such subparagraph shall apply with respect to any direct emissions resulting from the fuel source used to create heat to which clause
(iv)does not apply. For purposes of this clause, the term upstream emissions means the quantity of greenhouse gases, expressed in metric tons of CO2-e, emitted to the atmosphere resulting from the extraction, processing, transportation, financing, or other preparation of hydrogen for use. For purposes of subsection (b)(2)(B)(i)(I), the energy content of 1 kilogram of clean hydrogen shall be deemed to be equal to 33.6 kilowatt hours of energy. The term qualified hydrogen production facility means any facility— which is located in the United States or a possession of the United States (as such terms are used in section 638), which produces clean hydrogen using a qualified production method, and which is placed in service after the date of enactment of this section, or which— was originally placed in service before the date of enactment of this section and, prior to the modification described in item (bb), did not produce clean hydrogen, and after the date of enactment of this section, is modified to produce clean hydrogen, including— modification of a facility which, prior to such modification, produced hydrogen which did not satisfy the requirements under paragraph (1)(A), or for purposes of paragraph (1)(B)(iv), installation of carbon capture equipment. With respect to any taxable year, the term qualified hydrogen production facility shall not include— any facility which— produces electricity— which is taken into account for purposes of the credit allowed under section 45, 45J, or 45U for such taxable year or any previous taxable year, and which is used by such facility for the production of clean hydrogen, or for such taxable year or any previous taxable year, the basis of any property which is part of such facility is taken into account for purposes of the credit allowed under section 48, 48A, 48B, 48C, or 48D, any facility which receives electricity— from another facility for which a credit is allowed for such taxable year or any previous taxable year with respect to such electricity under section 45, 45J, or 45U, or from another facility or project for which, for such taxable year or any previous taxable year, the basis of any property which is part of such facility or project is taken into account for purposes of the credit allowed under section 48, 48A, 48B, 48C, or 48D, and which is used by such facility for the production of clean hydrogen, or any carbon capture equipment placed in service at a facility which is used to capture qualified carbon oxide which is taken into account in such taxable year or any previous taxable year for purposes of the credit allowed under section 45Q. With respect to any section described in clause (I), (II), or
(III)of clause (i), no credit shall be allowed under such section for any taxable year with respect to any property for which a credit is allowed under this section for such taxable year or any prior taxable year. The term qualified production method means— electrolysis, and any method not described in subparagraph (A). If, with respect to a credit allowed under subsection
(a)for any taxable year, the taxpayer elects the application of this subsection for such taxable year with respect to all (or any portion specified in such election) of such credit, the eligible project partner specified in such election, and not the taxpayer, shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof). For purposes of this subsection, the term eligible project partner means, with respect to any qualified hydrogen production facility, any person who— has an ownership interest in such facility, provided equipment for or services in the construction of such facility, provides electricity or feedstock for production of hydrogen at such facility, purchases hydrogen, or a direct product thereof, produced at such facility pursuant to a contract, or provides financing for such facility. For purposes of subparagraph (A)(v), any amount paid as consideration for a transfer described in paragraph
(1)shall not be treated as financing for a qualified hydrogen production facility. Rules similar to the rules of subparagraphs
(C)through
(I)of section 48D(d)(2) shall apply for purposes of this subsection. Rules similar to the rules of section 45U(e) shall apply for purposes of this section. Not later than 1 year after the date of the enactment of this section, the Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section. . Section 38(b) of the Internal Revenue Code of 1986, as amended by section 4(b), is amended by striking plus at the end of paragraph (33), by striking the period at the end of paragraph
(34)and inserting , plus , and by adding at the end the following new paragraph: the clean hydrogen production credit determined under section 45V(a). . The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by section 4(d), is amended by adding at the end the following new item: Sec. 45V. Clean hydrogen production. . The amendments made by this section shall apply to hydrogen produced in taxable years beginning after the date of the enactment of this Act.
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Sec. 5
Clean hydrogen production credit
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