Foley Hoag LLP: Treasury and IRS Introduce Proposed Regulations for Hydrogen Production Tax Credit (Section 45V) under the Inflation Reduction Act

Reimagining the Hydrogen Production Tax Credit Regulations

Reimagining the Hydrogen Production Tax Credit Regulations

Key Takeaways

The proposed Hydrogen Production Tax Credit (“PTC”) (Section 45V) regulations offer the first significant guidance regarding how this major public investment in domestic clean hydrogen production will be administered. The proposed regulations will likely not be finalized for several months, and comments are due by February 26, 2024. Stakeholder comments will be critical to developing effective and durable regulations that support the growth of the domestic clean hydrogen industry.


On December 22, 2023, the Department of Treasury and Internal Revenue Service (IRS) proposed new regulations for the Inflation Reduction Act’s (IRA) Hydrogen Production Tax Credit (PTC), also known as Section 45V. The Hydrogen PTC represents one of the most significant public investments in low-carbon hydrogen anywhere in the world. It was meant to jumpstart an emerging domestic clean hydrogen industry to displace fossil fuels in many difficult-to-decarbonize industries. The White House has estimated that hydrogen could end up supplying energy to up to one fifth of the U.S. economy.

Proposed Regulations and Comment Period

While the proposed regulations offer the first significant glimpse into the government’s plans for implementing the Hydrogen PTC, there is still time before these regulations are finalized. December 26, 2023, marked the beginning of a 60-day comment period on the proposed regulations. Comments are due by February 26, 2024. A public hearing will then be held on March 25, 2024, with requests to speak and topic outlines due to the agency by March 4, 2024. It is crucial for stakeholders to provide valuable input during this comment period.


The Hydrogen PTC creates a 10-year credit for domestically produced clean hydrogen. To qualify for the credits, clean hydrogen must achieve specific carbon intensity thresholds. The proposed regulations address concerns related to producing hydrogen without increasing greenhouse gas emissions and how to credit hydrogen derived from different sources. The regulations incorporate the “three pillars” for producing electrolytic hydrogen, which aim to tie it closely to renewable or low-emission electricity generation.

Lifecycle GHG Emissions of Hydrogen Production Pathways and 45VH2-GREET

One of the significant questions regarding the Hydrogen PTC is how the IRS determines whether hydrogen meets the mandated lifecycle GHG emissions thresholds. The proposed regulations introduce the 45VH2-GREET model, developed by the Department of Energy (DOE), for determining lifecycle GHG emissions. This model accounts for eight specific hydrogen feedstock and production process combinations. Taxpayers using different pathways must apply for an “emissions value” with DOE and a “provisional emission rate” with Treasury/IRS.

Hydrogen Production Processes and Other Topics

The proposed regulations address various topics, including modified hydrogen production facilities, the interplay with other tax credits, the election between the Hydrogen PTC and the Section 48 Investment Tax Credit, an “anti-abuse” rule, and verification of qualified clean hydrogen production. The regulations do not cover hydrogen derived from renewable natural gas or fugitive methane, but additional regulations are forthcoming.

Analysis of the Proposed Regulations

The proposed regulations provide additional details on determining the lifecycle GHG emissions of hydrogen production. They rely on the GREET model and incorporate the 45VH2-GREET model for specific pathways. Taxpayers using different feedstocks or processes must obtain a provisional emissions rate. The process for obtaining this rate is still unclear, and further guidance will be provided by DOE. The proposed regulations also address administrative requirements for verifying and auditing hydrogen production processes.

Read More of this Story at – 2024-01-08 21:05:41

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