Final regulations expand options for determining GHG emissions

In brief

What happened?

The IRS and Treasury on January 3, 2025, published final regulations under Section 45V, the qualified clean hydrogen production credit. The final regulations apply for tax years beginning after December 26, 2023, the date of publication of proposed regulations.

Why is it relevant?

The regulations finalize guidance interpreting Section 45V, which was enacted by the Inflation Reduction Act of 2022. The final regulations generally adopt the proposed regulations with minor modifications and clarifications, but also make favorable changes that broaden the number of taxpayers eligible for the credit.

Action to consider

Significant changes in the final regulations include expanded rules for determining greenhouse gas emissions, including rules relating to carbon capture and sequestration and use of methane. Taxpayers should consider the impact these changes may have on their tax credit eligibility and applicable credit rates, and update tax credit models and forecasts.

For information on the proposed regulations, see the PwC Insights Proposed regulations provide rules on Section 45V credit eligibility, greenhouse gas emissions rate and Proposed regulations provide rules on Section 45V tax credit verification procedures, coordination with Section 48.