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Investing in Clean Hydrogen

Clean hydrogen is a major component of President Biden’s plan to decarbonize the industrial
sector. In June 2021, the Department of Energy launched the Hydrogen Shot, an effort to
accelerate breakthroughs in hydrogen technology and cut the cost of clean hydrogen by 80
percent to $1 per kilogram in one decade. The Bipartisan Infrastructure Law included $9.5
billion for clean hydrogen initiatives, including $8 billion for Regional Clean Hydrogen Hubs
that will create jobs, markets, and infrastructure to expand use of clean hydrogen in the industrial
sector and beyond; $1 billion for a Clean Hydrogen Electrolysis Program to reduce the cost of
hydrogen produced from clean electricity; and $500 million for Clean Hydrogen Manufacturing
and Recycling Initiatives to support equipment manufacturing and strong domestic supply chains
for clean hydrogen.

Funding Overview

The Inflation Reduction Act creates a new Hydrogen Production Tax Credit to incentivize the
domestic production of clean hydrogen, which will make this emerging low-carbon fuel source
more cost-competitive and help the country meet the ambitious goals of the Hydrogen Shot.

The Hydrogen Production Tax Credit (45V) is eligible for direct pay. Section 13801 of the
Inflation Reduction Act, adding Section 6417 of the Internal Revenue Code, extends many of the
law’s tax incentives, including the 45V credit, to entities that generally do not benefit from
income tax credits, such as state, local, and Tribal governments and other tax-exempt entities.
Specifically, these entities can elect to receive these tax credits in the form of direct payments.
Certain businesses also can elect to receive the 45V tax credits in the form of direct payments.
The 45V tax credit also is transferable. Section 13801 adds Section 6418 of the Internal
Revenue Code and makes certain tax credits transferable. Taxpayers that are generally ineligible
for direct payment of credits may transfer all or a portion of certain credits to an unrelated party
in exchange for cash.

Programs Covered in This Chapter

IRA Tax
Agency Section Code Program Name
Section

Department of the Treasury 13204 45V Clean Hydrogen Production Tax Credit

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